SELMER INDUSTRIES INC, S-1, 1996-05-14

SELMER INDUSTRIES INC
S-1, 1996-05-14
HOUSEHOLD AUDIO & VIDEO EQUIPMENT

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 14, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

SELMER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 3931 35-1910745
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
Incorporation or Organization) Number)
</TABLE>

600 INDUSTRIAL PARKWAY
ELKHART, INDIANA 46516
(219) 522-1675

(Address, including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)

MICHAEL VICKREY
600 INDUSTRIAL PARKWAY
ELKHART, INDIANA 46516
(219) 522-1675

(Name, Address, including Zip Code, and Telephone Number,
including Area Code, of Agent for Service)
------------------------

WITH COPIES TO:

<TABLE>
<S> <C>
Eric H. Schunk, Esq. Bryant Edwards, Esq.
MILBANK, TWEED, HADLEY & McCLOY LATHAM & WATKINS
601 S. Figueroa Street, 30th Floor 633 W. Fifth Street, Suite 4000
Los Angeles, California 90017 Los Angeles, California 90071
(213) 892-4000 (213) 485-1234
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------

If any of the securities being registered on this form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED
MAXIMUM
AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OFFERING REGISTRATION
OF SECURITIES TO BE REGISTERED PRICE (1)(2)(3) FEE
<S> <C> <C>
Ordinary Common Stock, par value $0.001...................... $86,250,000 $29,742
<FN>
(1) Includes shares of Common Stock issuable upon exercise of the Underwriters'
over-allotment option.
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(o).
(3) The shares of Common Stock are not being registered for the purpose of sale
outside the United States.
</TABLE>

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
STEINWAY MUSICAL INSTRUMENTS, INC.
CROSS REFERENCE SHEET
Pursuant to Rule 404(a) of the Securities Act of 1933, as amended, and Item 501
of Regulation S-K

<TABLE>
<CAPTION>
ITEM NO. AND CAPTION IN FORM S-1 CAPTION OR LOCATION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Facing Page of Registration Statement; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................... Prospectus Summary; Risk Factors
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Outside Front Cover Page of Prospectus; Underwriting
6. Dilution............................................. Dilution
7. Selling Security Holders............................. Not Applicable
8. Plan of Distribution................................. Outside Front Cover Page of Prospectus; Underwriting
9. Description of Securities to be Registered........... Description of Capital Stock
10. Interests of Named Experts and Counsel............... Experts; Legal Matters
11. Information with Respect to the Registrant........... Prospectus Summary; Risk Factors; The Company;
Dividend Policy; Capitalization; Selected
Consolidated Financial Information; Pro Forma
Financial and other Data of the Company;
Management's Discussion and Analysis of Financial
Condition and Results of Operations; Business;
Management; Principal Stockholders; Description of
Certain Indebtedness; Shares Eligible for Future
Sale
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Not Applicable
</TABLE>

<PAGE>
EXPLANATORY NOTE

The name of the Registrant indicated on the initial page of this
Registration Statement differs from that given in the Prospectus. The name used
in the Prospectus gives effect to an amendment to the Registrant's Certificate
of Incorporation which the Registrant intends to file with the Secretary of
State of Delaware prior to the effective date of this Registration Statement.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED , 1996

SHARES
STEINWAY MUSICAL INSTRUMENTS, INC.
ORDINARY COMMON STOCK
-----------

All of the shares of Ordinary Common Stock offered hereby are being sold by
the Company. Of the shares of Ordinary Common Stock offered, shares
are being offered hereby in the United States and shares are being offered
in a concurrent international offering outside the United States. The initial
public offering price and the aggregate underwriting discount per share will be
identical for both offerings. See "Underwriting."

Each share of Ordinary Common Stock entitles its holder to one vote, and
each share of Class A Common Stock of the Company entitles its holder to 98
votes. All of the shares of Class A Common Stock are owned by Kyle Kirkland and
Dana Messina, Co-Chairmen of the Board of Directors of the Company. Immediately
after consummation of the Offering, Messrs. Kirkland and Messina will possess
% of the combined voting power of the Class A Common Stock and Ordinary
Common Stock. See "Risk Factors -- Control by Principal Stockholders."

Prior to this offering, there has been no public market for the Ordinary
Common Stock of the Company. It is currently estimated that the initial public
offering price per share of Ordinary Common Stock will be between $ and
$ . For factors to be considered in determining the initial public offering
price, see "Underwriting."

SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE ORDINARY COMMON STOCK.

Application has been made to list the Ordinary Common Stock on the New York
Stock Exchange under the symbol "LVB."
--------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------

<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING
OFFERING PRICE DISCOUNT (1) PROCEEDS TO COMPANY (2)
------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
Per Share........................ $ $ $
Total (3)........................ $ $ $
</TABLE>

- --------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting estimated expenses of payable by the Company.
(3) The Company has granted to the U.S. Underwriters an option for 30 days to
purchase up to an additional shares at the initial public offering
price per share, less the underwriters discount, solely to cover
over-allotments. Additionally, the Company has granted the International
Underwriters a similar option with respect to an additional shares as
part of a concurrent international offering. If such options are exercised
in full, the total initial public offering price, underwriting discount and
proceeds to the Company will be $ , $ and $ ,
respectively. See "Underwriting."

The shares offered hereby are offered severally by the U.S. Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject orders in whole or in part. It is expected that certificates for
the shares will be ready for delivery in New York, New York on or about
, 1996 against payment therefor in immediately available funds.
--------------

GOLDMAN, SACHS & CO. DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
--------------

The date of this Prospectus is , 1996.
<PAGE>
[PHOTOS TO COME]

The Company intends to furnish to its stockholders annual reports containing
audited financial statements and quarterly reports containing unaudited interim
financial information for the first three fiscal quarters of each fiscal year of
the Company.

IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE ORDINARY COMMON
STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY, AND
SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION, INCLUDING
"RISK FACTORS," AND FINANCIAL STATEMENTS AND NOTES THERETO CONTAINED ELSEWHERE
IN THIS PROSPECTUS. EXCEPT AS OTHERWISE SPECIFICALLY NOTED HEREIN, ALL OF THE
SHARE DATA WITH RESPECT TO THE ORDINARY COMMON STOCK AND THE CLASS A COMMON
STOCK (COLLECTIVELY, THE "COMMON STOCK") OF STEINWAY MUSICAL INSTRUMENTS, INC.
(THE "COMPANY") CONTAINED HEREIN GIVES EFFECT TO (I) THE CONVERSION OF THE
CONVERTIBLE PARTICIPATING PREFERRED STOCK INTO SHARES OF THE ORDINARY COMMON
STOCK, (II) THE EXERCISE OF ALL OUTSTANDING WARRANTS TO PURCHASE THE ORDINARY
COMMON STOCK AND (III) THE -FOR-1 STOCK SPLIT OF ALL OF THE COMPANY'S
OUTSTANDING SHARES OF COMMON STOCK. ALL REFERENCES TO THE COMPANY SHALL INCLUDE
ITS SUBSIDIARIES EXCEPT AS OTHERWISE SPECIFICALLY NOTED HEREIN. EXCEPT AS NOTED,
INFORMATION PRESENTED HEREIN ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT
OPTION WILL NOT BE EXERCISED.

THE COMPANY

The Company, through its subsidiaries Steinway Musical Properties, Inc.
("Steinway") and The Selmer Company, Inc. ("Selmer"), is one of the world's
leading manufacturers of musical instruments. Steinway produces the highest
quality piano in the world and has one of the most widely recognized and
prestigious brand names. For more than a century, the Steinway concert grand has
been the piano of choice for the world's greatest and most popular pianists,
including artists such as Vladimir Horowitz, George Gershwin and Billy Joel.
More than 90% of all concert piano performances worldwide were on Steinway grand
pianos during the 1995 concert season. Selmer is the leading domestic
manufacturer of band and orchestral instruments and related accessories,
including a complete line of brasswind, woodwind, percussion and stringed
instruments. SELMER PARIS saxophones, BACH trumpets and trombones and LUDWIG
snare drums are considered by many to be the finest such instruments in the
world. In 1995, Selmer's domestic market share was approximately 42% in advanced
and professional band instruments and 25% in beginner instruments. On a pro
forma combined basis for 1995, the Company's net sales and EBITDA (as defined
herein) were $233.7 million and $37.8 million, respectively.

Steinway concentrates on the high-end grand piano segment of the industry.
Steinway also offers vertical pianos as well as a mid-priced line of grand and
vertical pianos under the Boston brand name to provide dealers with a broader
product line. Steinway hand crafts its pianos in New York and Germany and sells
them through more than 200 independent piano dealers worldwide and five
Steinway-operated retail showrooms located in New York, New Jersey, London,
Hamburg and Berlin. In 1995, approximately 50% of Steinway's net sales were in
the United States, 37% in Europe and the remaining 13% primarily in Asia.

Selmer has the leading domestic market share in virtually all of its product
lines, with such widely recognized brand names as SELMER PARIS, BACH, GLAESEL,
WILLIAM LEWIS, LUDWIG and MUSSER. Selmer's products are made by highly skilled
craftsmen at manufacturing facilities in Indiana, North Carolina, Ohio and
Illinois, and sold through more than 1,600 independent dealers. Beginner
instruments accounted for 76% of Selmer's unit sales and 53% of instrument
revenues in 1995 with advanced and professional instruments representing the
balance. In 1995, 81% of Selmer's net sales were in the United States.

The Company acquired Selmer in August 1993 from an affiliate of Integrated
Resources, Inc., and Steinway in May 1995 (the "Steinway Acquisition") from John
and Robert Birmingham.

BUSINESS STRATEGY

3
<PAGE>
and 33.3%, respectively. During the same period, Steinway's net sales and EBITDA
have shown a cumulative improvement of 27.7% and 117.7%, respectively. On a pro
forma combined basis, net sales and EBITDA improved 15.1% and 11.5%,
respectively, for the first quarter of 1996 over the comparable period in 1995.
The Company intends to pursue the following strategic opportunities.

CAPITALIZE ON SELMER'S STRONG INDUSTRY DEMAND

The Company believes that the domestic demand for band and orchestral
instruments has increased significantly over the last few years as a result of
strong demographic trends and a heightened overall interest in music. Sales of
Selmer instruments have been generally resistant to macroeconomic cycles and are
strongly correlated to the number of school children in the United States. The
domestic student population is currently the largest it has been over the past
30 years and is expected to grow steadily over the next decade. During the past
two years, Selmer has been unable to manufacture enough instruments to satisfy
the demand for its products. Selmer has recently made investments to improve
production output and expand capacity, including hiring and training of
additional personnel and installation of state-of-the-art equipment. The Company
expects to benefit from increased production in 1996. For the first quarter of
1996, Selmer's net sales were up 17.0% with instrument unit volumes up 8.4%
compared to the first quarter of 1995.

INCREASE STEINWAY'S PENETRATION OF DOMESTIC MARKET

Steinway's share of the domestic grand piano market was approximately 7% in
1995. The Company believes there is a significant opportunity to better
penetrate the domestic market through improved selling and marketing techniques
and better training and selection of dealers. During the past two years,
Steinway has increased its focus on these efforts and has developed several new
initiatives. For example, dealer training material has been redesigned and
customized marketing campaigns have been developed for all dealers. In addition,
each market is reviewed periodically and rated relative to its size and
demographic potential. Underperforming markets are targeted and a comprehensive
plan is developed to improve performance. Largely as a result of these measures,
domestic unit sales of grand pianos increased 11% from 1994 to 1995 and 15% from
the first quarter of 1995 to the comparable period in 1996.

The institutional segment of the U.S. piano market, which includes music
schools, conservatories and universities, currently represents less than 10% of
Steinway's domestic sales. Until recently, many institutions have been reluctant
to purchase new pianos because of the high cost and their limited annual
budgets. The Company estimates that existing institutional pianos have an
average age of approximately 30 years and are, therefore, prime candidates for
replacement. In 1995, Steinway introduced a new marketing initiative, supported
by a unique third-party financing program, which enables institutions to
purchase pianos on a long-term installment basis at attractive financing terms.
The historically high resale value of Steinway pianos allows the third-party
lender to provide this attractive financing program. The Company believes that
this program will significantly enhance its institutional sales efforts. Since
its recent implementation, the program has helped generate additional
institutional sales, including the sale of over 80 pianos to two major U.S.
universities which had previously been using competitors' pianos.

PURSUE STRATEGIC ACQUISITIONS

The Company believes that the fragmented nature of the music industry
provides significant opportunities for acquisitions to further increase its
growth. The Company considers itself uniquely positioned to make strategic
acquisitions in complementary music-related businesses due to its market
leadership, broad distribution capabilities and history of successful
acquisitions. Several acquisition opportunities have been identified with
candidates that have attractive market shares and growth potential, as well as
other candidates whose manufacturing and distribution systems can be combined
with the Company's systems to achieve operating efficiencies. Currently, the
Company is at various stages of discussions with several potential acquisition
candidates.

4
<PAGE>
EXPLOIT INTERNATIONAL OPPORTUNITIES

The Company believes that Steinway is well positioned to benefit from
further economic recovery in Europe. Since 1992, the number of Steinway grand
pianos sold outside the United States has been relatively flat at approximately
900 units per year. However, for the 15 years prior to 1992, Steinway's foreign
operations sold approximately 1,200 to 1,400 grand pianos annually. The Company
believes this recent decline is primarily due to relatively weak economies in
Europe, particularly in its largest markets of Germany, Switzerland, France and
Italy. The Company believes that it has at least maintained its market share in
its foreign markets throughout this period and expects to benefit significantly
from a recovery of foreign sales to levels which more closely resemble
Steinway's higher historical experience.

In addition, the Company is exploring expansion opportunities for Steinway
beyond its traditional markets of North America and Western Europe. One of the
most attractive opportunities for Steinway lies in its continued expansion into
the Asian piano market. Steinway's current market share in Japan and Korea
combined is less than 1.0%, although these countries are two of the largest
piano markets in the world. Although the Steinway piano has an excellent
reputation in Asia and is the piano of choice in virtually every Japanese
concert venue, Steinway has not historically focused significant selling or
marketing efforts in these markets. The Company is reviewing these important
markets and is taking steps to improve Steinway's local distribution and
marketing capabilities.

Although Selmer's brand names are recognized worldwide, foreign sales have
historically represented less than 20% of Selmer's net sales, due largely to
manufacturing capacity limitations at its present facilities. The Company
believes that the European market presents significant opportunities for growth,
particularly in the professional segment. To target this market, the Company is
aggressively pursuing relationships with new dealers as well as utilizing the
existing Steinway dealer network.

IMPROVE MANUFACTURING EFFICIENCIES

The Company believes that Steinway and Selmer manufacture the highest
quality musical instruments in the world. The manufacturing processes of both
companies require a significant level of hand craftsmanship. A Steinway grand
piano contains more than 12,000 parts. At Selmer, the manufacturing process for
a typical instrument involves thousands of intricate and precise steps. The
Company believes that, over time, portions of the manufacturing processes for
Steinway and Selmer can be simplified or stream-lined to improve productivity
without compromising the quality and integrity of the finished product. The
Company has increased its capital expenditure budget for 1996 and 1997 to
approximately $5.0 million from $4.1 million in 1995 on a pro forma basis. The
majority of this spending is targeted for capacity expansion and manufacturing
quality and productivity improvements.

5
<PAGE>
THE OFFERING (1)

<TABLE>
<S> <C>
Ordinary Common Stock Offered:
U.S. Offering.............................
shares
International Offering....................
shares
------
Total...................................
shares
------
------
Common Stock to be outstanding after the
Offering...................................
shares of Ordinary Common Stock
shares of Class A Common Stock
------
Total shares outstanding
------
------
Use of Proceeds.............................
The estimated net proceeds to the Company of
$67.8 million will be used to reduce
indebtedness and for general corporate
purposes.
Proposed NYSE Symbol........................
"LVB"
</TABLE>

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(1) Assumes the Underwriters' over-allotment option is not exercised. If such
over-allotment is exercised, up to an additional shares will be issued
and sold by the Company.

6
<PAGE>
SUMMARY PRO FORMA FINANCIAL INFORMATION

The following pro forma financial information gives pro forma effect to (i)
the Steinway Acquisition, (ii) the sale by the Company of Ordinary Common Stock
in the Offering, (iii) a reduction in interest expense as a result of reduced
indebtedness upon application of the net proceeds of the Offering, (iv)
conversion of the Convertible Participating Preferred Stock into shares of
Ordinary Common Stock and (v) the exercise of all outstanding warrants to
purchase Ordinary Common Stock, in each case as if such transactions had
occurred on January 1, 1995. See "Use of Proceeds," "Capitalization," "Pro Forma
Condensed Consolidated Financial Information," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Description of
Capital Stock" and the Company's Consolidated Financial Statements.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED -----------------------------
DECEMBER 31, 1995 APRIL 1, 1995 MARCH 30, 1996
----------------- ------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
INFORMATION)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.................................................... $ 233,731 $ 59,983 $ 69,049
Gross profit (1)............................................. 74,357 19,354 21,720
Earnings from operations..................................... 25,761 6,841 8,168
Net income................................................... 4,486 1,243 2,642
Net income per share.........................................
Weighted average common and common equivalent shares
outstanding.................................................
OTHER FINANCIAL DATA:
EBITDA (1)(2)................................................ $ 37,845 $ 9,893 $ 11,036
Interest expense, net........................................ 12,740 3,184 3,019
Depreciation and amortization................................ 11,951 2,900 2,773
Capital expenditures......................................... 4,066 1,351 706
MARGINS:
Gross profit (1)............................................. 31.8% 32.3% 31.5%
EBITDA (1)(2)................................................ 16.2 16.5 16.0
BALANCE SHEET DATA (AT PERIOD END):
Cash......................................................... $ 8,129
Current assets............................................... 138,586
Total assets................................................. 265,307
Current liabilities.......................................... 41,356
Total debt................................................... 116,035
Stockholders' equity......................................... 69,704
</TABLE>

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(1) Gross profit and EBITDA for the year ended 1995 reflect positive adjustments
of $9,638 relating to purchase accounting adjustments to inventory for the
Steinway Acquisition in 1995.

(2) EBITDA represents earnings before depreciation and amortization, net
interest expense, other expenses (including certain management fees and bank
fees) and income tax expense (benefit), adjusted to exclude non-recurring
charges. While EBITDA should not be construed as a substitute for operating
income or a better indicator of liquidity than cash flow from operating
activities, which are determined in accordance with generally accepted
accounting principles, it is included herein to provide additional
information with respect to the ability of the Company to meet its future
debt service, capital expenditure and working capital requirements which the
Company believes certain investors find to be useful. EBITDA is not
necessarily a measure of the Company's ability to fund its cash needs.

7
<PAGE>
SUMMARY HISTORICAL FINANCIAL INFORMATION

<TABLE>
<CAPTION>
PREDECESSOR (1)
----------------------------------
YEAR ENDED
COMPANY
----------------------------------------------------------
PERIOD YEAR ENDED DECEMBER THREE MONTHS ENDED
DECEMBER 31, ---------------------- 31, ----------------------
---------------------- 1/1/93 - 8/11/93 - ---------------------- APRIL 1, MARCH 30,
1991 1992 8/10/93 12/31/93 1994 1995 (2) 1995 1996 (2)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............. $ 83,232 $ 85,895 $ 57,171 $ 34,339 $ 101,114 $ 189,805 $ 31,880 $ 69,049
Gross profit (3)...... 27,139 29,458 17,955 10,238 31,925 59,856 10,147 21,720
Earnings (loss) from
operations........... 7,993 9,233 5,520 (1,640) 12,472 13,102 4,681 8,107
Net income (loss)..... 766 2,343 1,405 (3,109) 2,922 (2,074) 1,948 1,581

OTHER FINANCIAL DATA:
EBITDA (3)(4)......... $ 13,128 $ 14,437 $ 8,522 $ 4,597 $ 16,638 $ 30,479 $ 5,500 $ 11,036
Interest expense,
net.................. 7,165 6,797 4,072 3,028 7,752 14,340 1,608 4,660
Depreciation and
amortization......... 4,715 4,385 2,704 1,199 3,198 7,739 819 2,773
Capital
expenditures......... 744 720 576 303 1,112 3,162 679 706

MARGINS:
Gross profit (3)...... 32.6% 34.3% 31.4% 29.8% 31.6% 31.5% 31.8% 31.5%
EBITDA (3)(4)......... 15.8 16.8 14.9 13.4 16.5 16.1 17.6 16.0

BALANCE SHEET DATA (AT
PERIOD END):
Cash.................. $ 473 $ 402 $ 716 $ 53 $ 380 $ 3,706 $ 1,210 $ 2,146
Current assets........ 54,671 55,712 69,563 56,736 56,265 132,380 55,287 132,603
Total assets.......... 85,649 82,785 95,349 88,970 85,524 263,796 84,601 260,370
Current liabilities... 8,870 9,519 9,907 10,174 13,388 41,767 14,909 41,356
Total debt............ 60,374 55,024 65,053 71,369 62,057 174,039 57,605 171,647
Partners'/Stockholders'
equity............... 14,537 16,626 17,999 4,226 7,253 5,828 9,261 6,440
</TABLE>

- ------------------------------
(1) On August 10, 1993, the Company purchased substantially all of the assets
and certain liabilities of The Selmer Company, L.P. (the "Predecessor"), a
wholly-owned subsidiary of Integrated Resources, Inc.

(2) The Company acquired Steinway in May 1995.

(3) Gross profit and EBITDA for the period August 11, 1993 to December 31, 1993
and the years ended 1994 and 1995 reflect positive adjustments of $4,754,
$264 and $9,638, respectively, relating to purchase accounting adjustments
to inventory for the Steinway Acquisition in 1995 and the acquisition of
Selmer in 1993.

(4) EBITDA represents earnings before depreciation and amortization, net
interest expense, other expenses (including certain management fees and
bank fees) and income tax expense (benefit), adjusted to exclude
non-recurring charges. While EBITDA should not be construed as a substitute
for operating income or a better indicator of liquidity than cash flow from
operating activities, which are determined in accordance with generally
accepted accounting principles, it is included herein to provide additional
information with respect to the ability of the Company to meet its future
debt service, capital expenditure and working capital requirements which
the Company believes certain investors find to be useful. EBITDA is not
necessarily a measure of the Company's ability to fund its cash needs.

8
<PAGE>
RISK FACTORS

THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT").
DISCUSSIONS CONTAINING SUCH FORWARD-LOOKING STATEMENTS MAY BE FOUND IN THE
MATERIAL SET FORTH UNDER "PROSPECTUS SUMMARY," "RISK FACTORS," "USE OF
PROCEEDS," "BUSINESS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- LIQUIDITY AND CAPITAL RESOURCES," "PRO
FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION" AND "SELECTED CONSOLIDATED
FINANCIAL INFORMATION," AS WELL AS WITHIN THIS PROSPECTUS GENERALLY. ALSO,
DOCUMENTS SUBSEQUENTLY FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE
COMMISSION (THE "COMMISSION") WILL CONTAIN FORWARD-LOOKING STATEMENTS. ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING
STATEMENTS AS A RESULT OF THE RISK FACTORS SET FORTH BELOW AND THE MATTERS SET
FORTH OR INCORPORATED IN THIS PROSPECTUS GENERALLY. THE COMPANY CAUTIONS THE
READER, HOWEVER, THAT THIS LIST OF FACTORS MAY NOT BE EXHAUSTIVE, PARTICULARLY
WITH RESPECT TO FUTURE FILINGS.

PROSPECTIVE PURCHASERS SHOULD CAREFULLY CONSIDER THE RISKS SET FORTH BELOW,
AS WELL AS OTHER INFORMATION SET FORTH IN THIS PROSPECTUS, PRIOR TO MAKING AN
INVESTMENT IN THE ORDINARY COMMON STOCK.

CERTAIN FINANCING CONSIDERATIONS; LEVERAGE

The Company has substantial indebtedness and debt service obligations. The
degree to which the Company is leveraged could have important consequences to
holders of Ordinary Common Stock, including without limitation the following:
(i) the Company's ability to obtain additional financing in the future for
working capital, capital expenditures, potential acquisitions or general
corporate purposes may be impaired; (ii) a substantial portion of the Company's
consolidated cash flow from operations must be dedicated to the payment of
interest on the indebtedness of the Company; (iii) the covenants and other
restrictions contained in the indenture (the "Indenture") governing the
Company's 11% Senior Subordinated Notes due 2005 and the Company's bank credit
facility (the "Bank Credit Facility") will limit the Company's ability to pay
dividends, borrow additional funds or dispose of assets; and (iv) the Company's
leverage may make it more vulnerable to further economic downturns and may limit
its ability to withstand competitive pressures. See "Capitalization," "Selected
Consolidated Financial Information," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Description of Certain
Indebtedness."

Based upon current levels of operation, the Company believes that cash flow
from operations, borrowings under the Bank Credit Facility and other sources of
liquidity will be adequate to meet the Company's anticipated requirements for
working capital, capital expenditures, interest payments and scheduled principal
payments. There can be no assurance, however, that the Company's business will
continue to generate cash flow from operations at or above current levels. If
the Company is unable to generate sufficient cash flow from operations in the
future, it may be required to refinance all or a portion of its existing debt,
raise additional funds through the sale of additional equity or debt securities
or assets, or obtain additional financing. There can be no assurance that any
such refinancing would be possible or that any additional financing could be
obtained on terms that are favorable or acceptable to the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

FOREIGN OPERATIONS

The Company manufactures, markets and distributes its products worldwide. As
a result, the Company's worldwide operations are subject to the risks normally
associated with foreign operations, including, but not limited to, the
disruption of markets, changes in export or import laws, restrictions on
currency exchange, currency exchange rate fluctuations and the modification or
introduction of other governmental policies with potentially adverse effects.
Significant increases in the value of the U.S. dollar and, in the case of
Steinway, the Deutsche Mark relative to currencies of certain foreign markets
could have an adverse effect on the Company's ability to compete in such foreign
markets and on the Company's cash flow from such markets.

9
<PAGE>
GROWTH THROUGH ACQUISITIONS

To expand its markets and diversify its business mix, the Company's business
strategy includes growth through acquisitions. Acquisitions can affect margins
because of increased overhead or expenses related to acquired businesses. There
can be no assurance that the Company will find suitable companies for
acquisition, that future acquisitions will be consummated on acceptable terms or
that any newly acquired companies will be successfully integrated into the
Company's operations. The Company may use Ordinary Common Stock (which could
result in dilution to the purchasers of the Ordinary Common Stock offered
hereby) or may incur additional long-term indebtedness or a combination thereof
for all or a portion of the consideration to be paid in future acquisitions.

COMPETITION

The markets in which the Company operates are competitive. Steinway competes
with companies such as Yamaha, Bechstein, Baldwin, Bosendorfer and Fazioli
Pianoforti SLR that produce and market pianos at the higher price points of the
piano market. Selmer competes with a number of domestic and foreign
manufacturers of musical instruments, including Yamaha, United Musical
Instruments and LeBlanc. There can be no assurance that the Company's products
will continue to compete successfully with other competitors, some of which may
have greater financial resources than the Company and may concentrate such
resources upon efforts to compete in the Company's markets.

SENSITIVITY TO ECONOMIC CONDITIONS

Steinway's business, which represented approximately 53% of the Company's
pro forma combined net sales in 1995, is highly sensitive to discretionary
consumer spending. Given the total number of grand pianos sold by Steinway in
any year (3,011 on average over the past 30 years), a decrease in a relatively
few number of units being sold can have a material impact on the Company's
business and operating results. As a result, Steinway's financial performance is
linked to general economic conditions and can be adversely affected by economic
downturns. In 1992, sales of Steinway grand pianos declined 24% and Steinway's
net sales declined by 12%, generally due to weaker economies in the United
States and Europe.

CONTROL BY PRINCIPAL STOCKHOLDERS

The Ordinary Common Stock entitles its holders to one vote per share on all
matters submitted generally to a vote of the Company's stockholders, while the
Company's Class A Common Stock entitles its holders to 98 votes per share.
Following the consummation of the Offering, Kyle Kirkland and Dana Messina will
have majority control of the Company through their ownership of 100% of the
Class A Common Stock and therefore will have the ability to control the election
of directors and the results of other matters submitted to a vote of
stockholders. Upon consummation of the Offering, Messrs. Kirkland and Messina
will control % of the voting power of the Common Stock even though they own
only % of the outstanding shares of Common Stock. Such concentration of
ownership, together with the anti-takeover effects of certain provisions in the
Delaware General Corporation Law and in the Company's Certificate of
Incorporation and Bylaws, may have the effect of delaying or preventing a change
in control of the Company. See "Principal Stockholders" and "Description of
Capital Stock."

COLLECTIVE BARGAINING AGREEMENTS

Substantially all of the Company's hourly employees are represented by
various union locals and are covered by collective bargaining agreements, which
have various expiration dates and must be renegotiated upon expiration. The
Company did experience a two-week work stoppage at one of its Selmer
manufacturing plants in 1994. The Company considers its employee relations to be
generally good. However, there can be no assurance that, upon the expiration of
any of the Company's collective bargaining agreements, the Company will be able
to negotiate new collective bargaining agreements on terms favorable to the
Company or that the Company's business operations will not be interrupted as a
result of labor disputes or difficulties or delays in the process of
renegotiating its collective

10
<PAGE>
bargaining agreements. Because the Company has collective bargaining agreements
expiring in November 1996, February 1997 and September 1997, there can be no
assurance that labor relations will not materially affect the Company's
operations.

ENVIRONMENTAL MATTERS

The Company is subject to various federal, state, local and foreign
environmental regulations. Selmer may be responsible for remediation at certain
sites, but Philips Electronics North America Corporation, a previous owner of
Selmer, has agreed to indemnify Selmer for any environmental damages relating to
periods prior to December 29, 1988. No assurance can be given that additional
environmental issues will not arise or that Philips will make its payments under
its indemnity agreement. Any such issues or failure by Philips to pay may have
an adverse effect on the Company's business. See "Business -- Environmental
Matters." To date, Philips has fully performed its obligations under the
indemnity agreement.

DEPENDENCE ON A LIMITED NUMBER OF MANUFACTURING FACILITIES

The Company's current manufacturing operations are concentrated in a limited
number of facilities. Since the Company is heavily dependent on all of its
manufacturing facilities, a disruption of the Company's manufacturing operations
would have a material adverse effect on the Company's business, financial
condition and results of operations. Such disruption could result from various
factors, including human error, government intervention or a natural disaster
such as fire, earthquake, extreme heat or flood.

LIMITATION ON DIVIDENDS

The Company does not anticipate paying any cash dividends in the foreseeable
future. The terms of the Bank Credit Facility and the Indenture restrict the
Company's ability to pay dividends or to make cash distributions on its capital
stock. Any future cash dividends will depend upon, among other things, the
Company's results of operations, financial condition, cash requirements and
other factors. See "Dividend Policy" and "Description of Certain Indebtedness."

DILUTION

Purchasers of the shares of Ordinary Common Stock offered hereby will
experience immediate and substantial dilution in the net tangible book value per
share of the Ordinary Common Stock. See "Dilution."

SHARES ELIGIBLE FOR FUTURE SALE; ISSUANCE OF ADDITIONAL SHARES

Sales of a substantial number of shares of Ordinary Common Stock in the
public market after the Offering, or the perception that such sales could occur,
could adversely affect the market price of the Ordinary Common Stock and the
Company's ability to raise capital through a subsequent offering of securities.
Of the shares of Common Stock to be outstanding after the Offering, the
shares to be sold in the Offering will be available for resale in the
public market without restriction immediately following the Offering if held by
holders who are not "affiliates" of the Company (as defined in the Securities
Act). The Company expects that of the remaining shares will be
subject to 180-day lock-up agreements with the Underwriters, and will thereafter
be available for resale subject to the quantity and manner of sale limitations
of Rule 144 under the Securities Act. In addition, certain holders of shares of
the Common Stock have the right to require the Company to register such shares
for resale under the Securities Act. In the event that additional shares of
Ordinary Common Stock are registered as a result of the exercise of such
registration rights, the prevailing market price for the Ordinary Common Stock
and the Company's ability to raise additional capital could be adversely
affected. See "Underwriting" and "Sales Eligible for Future Sale." Pursuant to
its Certificate of Incorporation, the Company has the authority to issue
additional shares of Common Stock and shares of one or more series of voting
preferred stock. The issuance of such shares could result in the dilution of the
voting power of the shares of Ordinary Common Stock purchased in the Offering.
See "Description of Capital Stock."

11
<PAGE>
ABSENCE OF PUBLIC MARKET

Prior to the Offering, there has been no public market for the Ordinary
Common Stock. Although application has been made to list the Ordinary Common
Stock on the New York Stock Exchange ("NYSE"), there can be no assurance as to
the development or liquidity of any trading market for the Ordinary Common Stock
or that investors in the Ordinary Common Stock will be able to resell their
shares at or above the initial public offering price. The initial public
offering price for the shares of Ordinary Common Stock will be determined
through negotiations between the Company and the Underwriters, and may not be
indicative of the market price of the Ordinary Common Stock after the Offering.
See "Underwriting."

12
<PAGE>
THE COMPANY

The Company, through its subsidiaries Steinway and Selmer, is one of the
world's leading manufacturers of musical instruments. Steinway produces the
highest quality piano in the world and has one of the most widely recognized and
prestigious brand names. For more than a century, the Steinway concert grand has
been the piano of choice for the world's greatest and most popular pianists,
including artists such as Vladimir Horowitz, George Gershwin and Billy Joel.
More than 90% of all concert piano performances worldwide were on Steinway grand
pianos during the 1995 concert season. Selmer is the leading domestic
manufacturer of band and orchestral instruments and related accessories,
including a complete line of brasswind, woodwind, percussion and stringed
instruments. SELMER PARIS saxophones, BACH trumpets and trombones and LUDWIG
snare drums are considered by many to be the finest such instruments in the
world. In 1995, Selmer's domestic market share was approximately 42% in advanced
and professional band instruments and 25% in beginner instruments.

The Company was incorporated in the state of Delaware in 1993, and changed
its name from Selmer Industries, Inc. to Steinway Musical Instruments, Inc. in
May 1996. The Company acquired Selmer in August 1993 and Steinway in May 1995.
The Company's executive offices are located at 600 Industrial Parkway, Elkhart,
Indiana, and its telephone number at that address is (219) 522-1675.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of
Ordinary Common Stock offered by the Company hereby are estimated to be $67.8
million ($78.3 million if the Underwriters' over-allotment is exercised in full)
based on an assumed initial public offering price of $ , after deducting
the underwriting discounts and commissions and estimated expenses of the
Offering. The net proceeds of the Offering will be used to repay approximately
$8.8 million of borrowings under the Bank Credit Facility (with a current
interest rate of approximately 9.0%), $44.5 million of 11.00% Senior Secured
Notes due 2000, and $10.0 million of 10.92% Senior Secured Notes due 2000 and to
pay prepayment premiums on such indebtedness of approximately $4.5 million. See
"Description of Certain Indebtedness." Pending such uses, the net proceeds of
the Offering will be invested in short-term, investment grade securities or
interest bearing accounts. The Company intends to use the remaining net
proceeds, after the repayment of existing indebtedness, for general corporate
purposes.

DIVIDEND POLICY

The Company has no plans to pay dividends on the Common Stock. The Company
presently intends to retain earnings to reduce outstanding indebtedness and to
fund the growth of the Company's business. The payment of any future dividends
will be determined by the Board of Directors in light of conditions then
existing, including the Company's results of operations, financial condition,
cash requirements, restrictions in financing agreements, business conditions and
other factors.

The Company is restricted by the terms of its outstanding debt and financing
agreements from paying cash dividends on its Common Stock, and may in the future
enter into loan or other agreements that restrict the payment of cash dividends
on the Common Stock. See "Description of Certain Indebtedness."

13
<PAGE>
DILUTION

The net tangible book deficiency of the Company at March 30, 1996 was
approximately $(56.9) million, or $[ ] per share of Common Stock. Net
tangible book deficiency per share is equal to the Company's total assets
excluding goodwill, trademarks and other intangible assets less its total
liabilities, divided by the number of shares of Common Stock outstanding
immediately prior to the Offering. After giving effect to the sale by the
Company of shares of Ordinary Common Stock in the Offering at an assumed
initial public offering price of $ per share, the pro forma net tangible
book value of the Company at March 30, 1996 would have been approximately $7.4
million, or $[ ] per share. This represents an immediate net tangible book
value dilution of $ per share to investors purchasing shares in the
Offering. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............. $ [ ]
Net tangible book deficiency at March 30, 1996............. [ ]
Increase in net tangible book value per share attributable
to the Offering........................................... [ ]
---------
Pro forma net tangible book value per share after the
Offering.................................................... [ ]
----------
Dilution per share to new investors.......................... $ [ ]
----------
----------
</TABLE>

The following table summarizes, on a pro forma basis as of March 30, 1996,
the difference between the number of shares of Common Stock held by the existing
stockholders and the pro forma historical net book value of the assets and
liabilities contributed by the existing stockholders, in the aggregate and on a
per share basis (assuming the conversion of all outstanding shares of Cumulative
Participating Preferred Stock into shares of Ordinary Common Stock and the
exercise of all outstanding warrants to purchase the Company's Ordinary Common
Stock), and the number of shares of Ordinary Common Stock purchased by the
investors in the Offering and the consideration paid, in the aggregate and on a
per share basis, by the investors purchasing shares of Ordinary Common Stock in
the Offering (assuming the sale of shares of Ordinary Common Stock by the
Company and after deducting underwriting discount and estimated Offering
expenses):

<TABLE>
<CAPTION>
SHARES ACQUIRED AMOUNT CONTRIBUTED AVERAGE
------------------------ --------------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ----------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders................... $ 7,965,000 10.5%
New investors........................... 67,750,000 89.5%
-------------- -----
Total............................... 100.0% $ 75,715,000 100.0%
----- -------------- -----
----- -------------- -----
</TABLE>

14
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company as of March
30, 1996 and such capitalization as adjusted to give effect to the conversion of
the Convertible Participating Preferred Stock into shares of Ordinary Common
Stock, the exercise of all outstanding warrants to purchase Ordinary Common
Stock, the sale by the Company of shares of Ordinary Common Stock in the
Offering and a reduction in indebtedness upon application of the net proceeds of
the Offering. This table should be read in conjunction with the Pro Forma
Condensed Consolidated Financial Information, the Selected Consolidated
Financial Information, and the Financial Statements of the Company and the Notes
thereto contained elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 30, 1996
------------------------
ACTUAL AS ADJUSTED
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash................................................................ $ 2,146 $ 8,129
----------- -----------
----------- -----------
Long-term debt, including current portion:
Senior debt....................................................... $ 2,722 $ --
11.00% Senior Secured Notes due 2000 (1).......................... 43,194 --
10.92% Senior Secured Notes due 2000 (1).......................... 9,696 --
11.00% Senior Subordinated Notes due 2005......................... 110,000 110,000
Notes payable and other indebtedness.............................. 6,035 6,035
----------- -----------
Total long-term debt............................................ 171,647 116,035
----------- -----------

Stockholders' equity:
Capital stock..................................................... 1 10
Additional paid-in capital (2).................................... 7,964 75,710
Retained earnings (1)............................................. (679) (5,170)
Accumulated translation adjustment................................ (846) (846)
----------- -----------
Total stockholders' equity (1)(2)............................... 6,440 69,704
----------- -----------
Total capitalization................................................ $ 178,087 $ 185,739
----------- -----------
----------- -----------
</TABLE>

- ------------------------
(1) In connection with the reduction in indebtedness upon application of a
portion of the net proceeds from the Offering, the Company will incur
prepayment penalties estimated to approximate $4.5 million which, together
with the write-off of related deferred offering costs and debt discounts,
will result in an extraordinary charge, net of tax, of approximately $4.5
million.

(2) As adjusted to reflect proceeds to the Company from the Offering and
exercise of warrants which are estimated to be net of underwriting discounts
and commissions and estimated Offering expenses totaling approximately $7.25
million.

15
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION

The unaudited pro forma condensed consolidated financial information for the
fiscal year ended December 31, 1995 and the three months ended April 1, 1995
present the Company's unaudited pro forma consolidated statements of operations
as if the Steinway Acquisition had occurred as of January 1, 1995. The unaudited
supplementary pro forma consolidated statements of operations for the periods
discussed above and for the three months ended March 30, 1996 give effect to the
Steinway Acquisition and to (i) a reduction in interest expense as a result of
reductions in indebtedness upon the application of the net proceeds of the
Offering, (ii) the conversion of the Convertible Participating Preferred Stock
into shares of Ordinary Common Stock and (iii) the exercise of all outstanding
warrants to purchase Ordinary Common Stock, as if all such transactions had
occurred as of January 1, 1995. The supplementary pro forma balance sheet data
as of March 30, 1996 gives effect to (i) the reduction in indebtedness upon
application of the net proceeds of the Offering, (ii) the conversion of the
Convertible Participating Preferred Stock into shares of Ordinary Common Stock,
and (iii) the exercise of all outstanding warrants to purchase Ordinary Common
Stock, as if all such transactions had occurred on March 30, 1996. The pro forma
and supplementary pro forma adjustments are based upon available information and
certain assumptions that management of the Company believes are reasonable. The
pro forma and supplementary pro forma financial information does not purport to
represent the results of operations of the Company which actually would have
occurred had the Steinway Acquisition and the Offering been consummated on
January 1, 1995. See "Use of Proceeds," "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Description of Capital Stock" and the Company's Consolidated Financial
Statements.

The pro forma financial data should be read in conjunction with the
financial statements of the Company and Notes thereto contained elsewhere in
this Prospectus.

16
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995

Operating expenses........ 19,445 28,486 907(2) 48,838 (242)(5) 48,596
---------- ---------- ------- ----------- ------- --------------
Earnings from operations.. 14,346 3,599 7,574 25,519 242 25,761
Other (income) expense:
Other income............ (561) (161) (722) (722)
Interest expense........ 9,150 7,235 3,861(3) 20,246 (6,784)(6) 13,462
---------- ---------- ------- ----------- ------- --------------
Other expense, net.... 8,589 7,074 3,861 19,524 (6,784) 12,740
---------- ---------- ------- ----------- ------- --------------
Income (loss) before
income taxes............. 5,757 (3,475) 3,713 5,995 7,026 13,021
Provision for income
taxes.................... 2,559 466 2,863(4) 5,888 2,647(4) 8,535
---------- ---------- ------- ----------- ------- --------------
Net income (loss)..... $ 3,198 $ (3,941) $ 850 $ 107 $ 4,379 $ 4,486
---------- ---------- ------- ----------- ------- --------------
---------- ---------- ------- ----------- ------- --------------
Net income per share...... $ 0.05
Weighted average common
and common equivalent
shares outstanding....... 2,008,750

OTHER FINANCIAL DATA:
EBITDA (8)................ $ 17,492 $ 19,792 $ 561(2) $ 37,845 $ 37,845
Depreciation and
amortization............. 3,146 6,555 2,250 (1)(2 11,951 11,951
Capital expenditures...... 1,679 2,387 4,066 4,066

MARGINS:
Gross profit.............. 31.0% 25.7% 31.8% 31.8%
EBITDA (8)................ 16.1 15.9 16.2 16.2
</TABLE>

See accompanying Notes to Pro Forma Condensed Consolidated Statements of
Operations.

17
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED APRIL 1, 1995

<TABLE>
<CAPTION>
SUPPLEMENTARY SUPPLEMENTARY
HISTORICAL HISTORICAL PRO FORMA PRO FORMA PRO FORMA PRO FORMA
SELMER STEINWAY ADJUSTMENTS COMBINED ADJUSTMENTS COMBINED
---------- ---------- -------------- ----------- -------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................... $ 31,880 $ 28,103 $ -- $ 59,983 $ -- $ 59,983
Cost of sales............... 21,733 18,210 686(1) 40,629 40,629
---------- ---------- ------- ----------- --------------
Gross profit............ 10,147 9,893 (686) 19,354 19,354
Operating expenses.......... 5,466 6,564 544(2) 12,574 (61)(5) 12,513
---------- ---------- ------- ----------- ------- --------------
Earnings (loss) from
operations................. 4,681 3,329 (1,230) 6,780 61 6,841
Other (income) expense:
Other income.............. (104) (90) -- (194) -- (194)
Interest expense.......... 1,712 920 2,333(3) 4,965 (1,587)(6) 3,378
---------- ---------- ------- ----------- ------- --------------
Other expense, net...... 1,608 830 2,333 4,771 (1,587) 3,184
---------- ---------- ------- ----------- ------- --------------
Income (loss) before income
taxes...................... 3,073 2,499 (3,563) 2,009 1,648 3,657
Provision (benefit) for
income taxes............... 1,125 1,564 (896)(4) 1,793 621(4) 2,414
---------- ---------- ------- ----------- ------- --------------
Net income (loss)....... $ 1,948 $ 935 $ (2,667) $ 216 $ 1,027 $ 1,243
---------- ---------- ------- ----------- ------- --------------
---------- ---------- ------- ----------- ------- --------------
Net income per share........ $ 0.11
Weighted average common and
common equivalent shares
outstanding................ 2,000,000

OTHER FINANCIAL DATA:
EBITDA (8).................. $ 5,500 $ 4,059 $ 334(2) $ 9,893 $ 9,893
Depreciation and
amortization............... 819 730 1,351 (1)(2 2,900 2,900
Capital expenditures........ 679 672 1,351 1,351

MARGINS:
Gross profit................ 31.8% 35.2% 32.3% 32.3%
EBITDA (8).................. 17.3 14.4 16.5 16.5
</TABLE>

See accompanying Notes to Pro Forma Condensed Consolidated Statements of
Operations.

18
<PAGE>
SUPPLEMENTARY PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 30, 1996

<TABLE>
<CAPTION>
SUPPLEMENTARY SUPPLEMENTARY
HISTORICAL PRO FORMA PRO FORMA
COMPANY ADJUSTMENTS COMBINED
--------------- -------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
INFORMATION)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales........................................ $ 69,049 $ -- $ 69,049
Cost of sales.................................... 47,329 -- 47,329
--------------- -------------- --------------
Gross profit................................. 21,720 -- 21,720
Operating expenses............................... 13,613 (61)(5) 13,552
--------------- -------------- --------------
Earnings from operations......................... 8,107 61 8,168
Other (income) expense:
Other income................................... (131) (131)
Interest expense............................... 4,791 (1,641)(6) 3,150
--------------- -------------- --------------
Other expense, net........................... 4,660 (1,641) 3,019
--------------- -------------- --------------
Income before income taxes....................... 3,447 1,702 5,149
Provision for income taxes....................... 1,866 641(4) 2,507
--------------- -------------- --------------
Net income................................... $ 1,581 $ 1,061 $ 2,642
--------------- -------------- --------------
--------------- -------------- --------------
Net income per share............................. $ 0.75
Weighted average common and common equivalent
shares outstanding.............................. 2,105,000
OTHER FINANCIAL DATA:
EBITDA (8)....................................... $ 11,036 $ 11,036
Depreciation and amortization.................... 2,773 2,773
Capital expenditures............................. 706 706
MARGINS:
Gross profit..................................... 31.5% 31.5%
EBITDA (8)....................................... 16.0 16.0
BALANCE SHEET DATA (AT PERIOD END):
Cash............................................. $ 2,146 $ 5,983 $ 8,129
Current assets................................... 132,603 5,983 138,586
Total assets..................................... 260,370 4,937 265,307
Current liabilities.............................. 41,356 41,356
Total debt....................................... 171,647 (55,612) 116,035
Stockholders' equity............................. 6,440 63,264 69,704
</TABLE>

See accompanying Notes to Pro Forma Condensed Consolidated Statements of
Operations.

19
<PAGE>
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS

(1) To reflect adjustments to cost of sales for the following:

<TABLE>
<CAPTION>
TWELVE MONTHS THREE MONTHS
ENDED DECEMBER ENDED APRIL
31, 1995 1, 1995
----------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Increase in inventory value upon application of purchase
accounting not reflective of future inventory costs........ $ (9,638)
Increased depreciation from write-up of plant and
equipment.................................................. 782 $ 474
Increased value of piano bank disposals..................... 375 212
------- -------------
$ (8,481) $ 686
------- -------------
------- -------------
</TABLE>

(2) To reflect adjustments to Steinway's operating expenses for the following:

<TABLE>
<CAPTION>
TWELVE MONTHS THREE MONTHS
ENDED DECEMBER ENDED APRIL
31, 1995 1, 1995
----------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Additional amortization expense, net........................ $ 1,343 $ 805
Additional depreciation expense............................. 125 73
Net administrative costs of Steinway eliminated as a result
of the Steinway Acquisition................................ (561) (334)
------- -------------
$ 907 $ 544
------- -------------
------- -------------
</TABLE>

(3) To reflect additional interest expense, net.

(4) To reflect the tax effect of pro forma or supplementary pro forma
adjustments.

(5) To reflect a reduction in amortization of deferred financing costs related
to indebtedness to be retired upon application of the net proceeds of the
Offering.

(6) To reflect a reduction in interest expense as a result of the reduction in
indebtedness upon application of the net proceeds of the Offering.

(7) To reflect (i) the conversion of the Convertible Participating Preferred
Stock into shares of Ordinary Common Stock, (ii) the exercise of all
outstanding warrants to purchase Ordinary Common Stock and (iii) the sale by
the Company of shares of Ordinary Common Stock in the Offering.

(8) EBITDA represents earnings before depreciation and amortization, net
interest expense, other expenses (including certain management fees and bank
fees) and income tax expense (benefit), adjusted to exclude non-recurring
charges. While EBITDA should not be construed as a substitute for operating
income or a better indicator of liquidity than cash flow from operating
activities, which are determined in accordance with generally accepted
accounting principles, it is included herein to provide additional
information with respect to the ability of the Company to meet its future
debt service, capital expenditure and working capital requirements which the
Company believes certain investors find to be useful. EBITDA is not
necessarily a measure of the Company's ability to fund its cash needs.

20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following table sets forth selected consolidated financial information
for the Company. The selected historical balance sheet data as of December 31,
1991, 1992, August 10, 1993, and December 31, 1993, 1994 and 1995, and the
selected operating data for the fiscal years ended December 31, 1991 and 1992,
the period January 1, 1993 through August 10, 1993, the period August 11, 1993
through December 31, 1993, and the fiscal years ended December 31, 1994 and 1995
are derived from the audited financial statements of the Company. The selected
historical financial data as of and for the three month periods ended April 1,
1995 and March 30, 1996 are unaudited but, in the opinion of management, include
all adjustments (consisting of only normal recurring adjustments) necessary for
the fair presentation of the financial data for such periods. The results for
such interim periods are not necessarily indicative of the results for the full
fiscal year. The table should be read in conjunction with the Consolidated
Financial Statements of the Company, including the Notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR (1)
-------------------------------
YEAR ENDED
COMPANY
--------------------------------------------
THREE
MONTHS
PERIOD YEAR ENDED DECEMBER ENDED
DECEMBER 31, ---------------------- 31, ---------
-------------------- 1/1/93 - 8/11/93 - -------------------- APRIL 1,
1991 1992 8/10/93 12/31/93 1994 1995 (2) 1995
--------- --------- --------- ----------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales......................................... $ 83,232 $ 85,895 $ 57,171 $ 34,339 $ 101,114 $ 189,805 $ 31,880
Cost of sales..................................... 56,093 56,437 39,216 28,855 69,453 139,587 21,733
--------- --------- --------- ----------- --------- --------- ---------
Gross profit (3).................................. 27,139 29,458 17,955 5,484 31,661 50,218 10,147

Operating expenses:
Sales and marketing............................. 9,325 9,772 6,570 4,116 11,328 21,001 3,570
Provision for doubtful accounts................. 1,800 1,600 919 157 655 797 250
General and administrative...................... 5,103 5,522 3,121 2,158 5,435 11,612 1,251
Amortization.................................... 2,498 2,512 1,527 409 1,067 3,041 282
Other expense................................... 420 819 298 284 704 665 113
--------- --------- --------- ----------- --------- --------- ---------
Total operating expenses.......................... 19,146 20,225 12,435 7,124 19,189 37,116 5,466
--------- --------- --------- ----------- --------- --------- ---------
Earnings (loss) from operations................... 7,993 9,233 5,520 (1,640) 12,472 13,102 4,681

Other (income) expense:
Other income, principally interest and late
charges........................................ (1,238) (829) (360) (226) (503) (583) (104)
Interest and amortization of debt discount...... 8,403 7,626 4,432 3,254 8,255 14,923 1,712
--------- --------- --------- ----------- --------- --------- ---------
Other expense, net................................ 7,165 6,797 4,072 3,028 7,752 14,340 1,608
--------- --------- --------- ----------- --------- --------- ---------
Income (loss) before income taxes................. 828 2,436 1,448 (4,668) 4,720 (1,238) 3,073
Provision (benefit) for income taxes.............. 62 93 43 (1,559) 1,798 836 1,125
--------- --------- --------- ----------- --------- --------- ---------
Net income (loss) before extraordinary item....... $ 766 $ 2,343 $ 1,405 $ (3,109) $ 2,922 $ (2,074) $ 1,948
--------- --------- --------- ----------- --------- --------- ---------
--------- --------- --------- ----------- --------- --------- ---------
Net income (loss) before extraordinary item per
share............................................ -- -- -- $ (5.87) $ 1.46 $ (3.85) $ 0.97
Weighted average common and common equivalent
shares outstanding............................... -- -- -- 530,000 2,000,000 538,750 2,000,000

OTHER FINANCIAL DATA:
Gross profit (3).................................. $ 27,139 $ 29,458 $ 17,955 $ 10,238 $ 31,925 $ 59,856 $ 10,147
EBITDA (3)(4)..................................... 13,128 14,437 8,522 4,597 16,638 30,479 5,500
Depreciation and amortization..................... 4,715 4,385 2,704 1,199 3,198 7,739 819
Capital expenditures.............................. 744 720 576 303 1,112 3,162 679

MARGINS:
Gross profit (3).................................. 32.6% 34.3% 31.4% 29.8 % 31.6% 31.5% 31.8%
EBITDA (3)(4)..................................... 15.8 16.8 14.9 13.4 16.5 16.1 17.3

BALANCE SHEET DATA (AT PERIOD END):
Cash.............................................. $ 473 $ 402 $ 716 $ 53 $ 380 $ 3,706 $ 1,210
Current assets.................................... 54,671 55,712 69,563 56,736 56,265 132,380 55,287
Total assets...................................... 85,649 82,785 95,349 88,970 85,524 263,796 84,601
Current liabilities............................... 8,870 9,519 9,907 10,174 13,388 41,767 14,909
Total debt........................................ 60,374 55,024 65,053 71,369 62,057 174,039 57,605
Partners'/Stockholders' equity.................... 14,537 16,626 17,999 4,226 7,253 5,828 9,261

MARCH 30,
1996 (2)
-----------

<S> <C>
INCOME STATEMENT DATA:
Net sales......................................... $ 69,049
Cost of sales..................................... 47,329
-----------
Gross profit (3).................................. 21,720
Operating expenses:
Sales and marketing............................. 8,272
Provision for doubtful accounts................. 229
General and administrative...................... 3,931
Amortization.................................... 1,100
Other expense................................... 81
-----------
Total operating expenses.......................... 13,613
-----------
Earnings (loss) from operations................... 8,107
Other (income) expense:
Other income, principally interest and late
charges........................................ (131)
Interest and amortization of debt discount...... 4,791
-----------
Other expense, net................................ 4,660
-----------
Income (loss) before income taxes................. 3,447
Provision (benefit) for income taxes.............. 1,866
-----------
Net income (loss) before extraordinary item....... $ 1,581
-----------
-----------
Net income (loss) before extraordinary item per
share............................................ $ 0.75
Weighted average common and common equivalent
shares outstanding............................... 2,105,000
OTHER FINANCIAL DATA:
Gross profit (3).................................. $ 21,720
EBITDA (3)(4)..................................... 11,036
Depreciation and amortization..................... 2,773
Capital expenditures.............................. 706
MARGINS:
Gross profit (3).................................. 31.5 %
EBITDA (3)(4)..................................... 16.0
BALANCE SHEET DATA (AT PERIOD END):
Cash.............................................. $ 2,146
Current assets.................................... 132,603
Total assets...................................... 260,370
Current liabilities............................... 41,356
Total debt........................................ 171,647
Partners'/Stockholders' equity.................... 6,440
</TABLE>

- ------------------------------
(1) On August 10, 1993, the Company purchased substantially all of the assets
and certain liabilities of the Predecessor.

(2) The Company acquired Steinway in May 1995.

(3) Gross profit and EBITDA under the captions "Other Financial Data" and
"Margins" for the period August 11, 1993 to December 31, 1993 and the years
ended 1994 and 1995 reflect positive adjustments of $4,754, $264 and $9,638,
respectively, relating to purchase accounting adjustments to inventory for
the acquisition of Selmer in 1993 and the Steinway Acquisition in 1995.

(4) EBITDA represents earnings before depreciation and amortization, net
interest expense, other expenses (including certain management fees and bank
fees) and income tax expense (benefit), adjusted to exclude non-recurring
charges. While EBITDA should not be construed as a substitute for operating
income or a better indicator of liquidity than cash flow from operating
activities, which are determined in accordance with generally accepted
accounting principles, it is included herein to provide additional
information with respect to the ability of the Company to meet its future
debt service, capital expenditure and working capital requirements which the
Company believes certain investors find to be useful. EBITDA is not
necessarily a measure of the Company's ability to fund its cash needs.

21
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF STEINWAY

The following table sets forth selected consolidated financial information
for Steinway. The selected historical balance sheet data as of and for each of
the five years in the period ended June 30, 1994 are derived from the audited
financial statements of Steinway. The selected historical financial data as of
and for the nine month periods ended March 31, 1994 and 1995 are unaudited but,
in the opinion of management, include all adjustments (consisting of only normal
recurring adjustments) necessary for the fair presentation of the financial data
for such periods. The results for such interim periods are not necessarily
indicative of the results for the full fiscal year. The table should be read in
conjunction with the Consolidated Financial Statements of Steinway, including
the Notes thereto, and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, ------------------------
----------------------------------------------------- MARCH 31, MARCH 31,
1990 1991 1992 1993 1994 1994 1995
--------- --------- --------- --------- --------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................ $ 92,037 $ 98,816 $ 89,240 $ 89,714 $ 101,896 $ 77,724 $ 93,539
Gross profit......................... 33,673 35,586 30,759 26,139 31,636 24,178 31,000
Operating income..................... 10,096 9,124 4,556 1,919 8,795 7,334 12,304
Income (loss) from continuing
operations.......................... 3,077 2,753 (2,930) (3,009) 2,487 1,940 4,430
Net income (loss) (1)................ 3,618 2,825 (10,335) (3,009) 3,115 1,940 4,430

OTHER DATA:
EBITDA (2)........................... $ 13,500 $ 13,535 $ 9,591 $ 6,067 $ 13,068 $ 10,243 $ 15,205
Non-recurring charges (3)............ 1,861 2,319 2,532 2,047 1,658 1,244 1,115
Interest expense, net................ 3,448 3,186 3,307 4,390 3,842 3,048 2,664
Depreciation and amortization (4).... 1,669 2,099 2,675 2,695 2,664 1,944 2,017
Capital expenditures (5)............. 2,451 1,889 1,936 1,237 1,145 838 1,569
Steinway grand pianos sold (in
units).............................. 3,558 3,282 2,648 2,245 2,569 2,027 2,248

MARGINS:
Gross profit......................... 36.6% 36.0% 34.5% 29.1% 31.0% 31.1% 33.1%
EBITDA (2)........................... 14.7 13.7 10.7 6.8 12.8 16.3 16.3

BALANCE SHEET DATA (AT PERIOD END):
Cash................................. $ 1,110 $ 664 $ 564 $ 1,606 $ 1,396 $ 1,197 $ 1,080
Current assets....................... 68,306 70,120 73,300 56,259 58,760 55,466 61,459
Total assets......................... 85,701 87,832 91,784 72,677 76,019 72,467 79,445
Current liabilities.................. 30,327 32,078 45,602 31,896 32,969 27,280 29,034
Total debt........................... 47,919 49,576 55,353 44,397 38,468 39,058 32,934
Redeemable equity.................... 3,614 4,227 1,471 1,000 270 1,092 510
Stockholders' equity................. 9,066 10,606 3,690 767 4,935 2,741 9,696
</TABLE>

- ------------------------------
(1) Net loss for the fiscal year ended June 30, 1992 includes loss from
discontinued operations of $7,405 as a result of Steinway's September 14,
1992 disposition of its Gemeinhardt Company, Inc. subsidiary.

(2) EBITDA represents earnings before depreciation and amortization, net
interest expense, other expenses (including certain management fees and bank
fees) and income tax expense (benefit), adjusted to exclude non-recurring
charges and charges related to previous ownership, which were eliminated.
While EBITDA should not be construed as a substitute for operating income or
a better indicator of liquidity than cash flow from operating activities,
which are determined in accordance with generally accepted accounting
principles, it is included herein to provide additional information with
respect to the ability of the Company to meet its future debt service,
capital expenditure and working capital requirements which management
believes certain investors find to be a useful tool for measuring the
ability to service debt. EBITDA is not necessarily a measure of the
Company's ability to fund its cash needs.

(3) Non-recurring charges represent certain costs and expenses primarily
consisting of certain executive compensation and benefits and office related
expenses of Steinway which, as a result of the Steinway Acquisition, have
been eliminated.

(4) Depreciation and amortization for the fiscal year ended June 30, 1994
excludes approximately $563 of amortization of deferred financing costs
written off pursuant to a debt refinancing effected in April 1994.

(5) Capital expenditures of Steinway exclude expenditures for additions to the
Concert and Artist Piano Bank. See "Business -- Sales and Marketing."

22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

The following discussion provides an assessment of the results of operations
and liquidity and capital resources for the Company and should be read in
conjunction with the Consolidated Financial Statements of the Company and the
Notes thereto included elsewhere in this Prospectus. All references to years are
to fiscal years, and all note references are to the accompanying Notes to the
Company's Consolidated Financial Statements. The Company's fiscal year ends on
December 31 and, prior to the Steinway Acquisition, Steinway's fiscal year ended
on June 30.

THE COMPANY

OVERVIEW

The Company, through its subsidiaries Steinway and Selmer, is one of the
world's leading manufacturers of musical instruments. Since 1993, Selmer's net
sales and EBITDA have shown a cumulative improvement of 19.0% and 33.3%,
respectively. During the same period, Steinway's net sales and EBITDA have shown
a cumulative improvement of 27.7% and 117.7%, respectively. The Company believes
that these operating performance improvements have resulted from implementation
of the Company's strategy to capitalize on its strong brand names and leading
market positions.

Steinway's piano sales are influenced by general economic conditions in the
United States and Europe, demographic trends and general interest in music and
the arts. Steinway's operating results are primarily influenced by grand piano
sales. Given the total number of grand pianos sold by Steinway in any year
(3,011 on average over the past 30 years), a decrease in a relatively few number
of units being sold can have a material impact on the Company's business and
operating results. Domestic grand piano unit sales have increased 42.3% from
1992 to 1995, largely attributable to the economic recovery in the United States
as well as increased selling and marketing efforts. Grand piano unit sales to
international markets have decreased by 3.5% over the same period primarily as a
result
of the weakness of the European economies. In 1995, approximately 50% of
Steinway's net sales were in the United States, 37% in Europe and the remaining
13% primarily in Asia.

Selmer is the largest domestic manufacturer of band and orchestral
instruments and related accessories, including a complete line of brasswind,
woodwind, percussion and stringed instruments used by student, amateur and
professional musicians. Beginner instruments accounted for 76% of Selmer's units
sales and 53% of instrument revenues in 1995 with advanced and professional
instruments representing the balance.

Sales of student instruments are influenced primarily by trends in school
enrollment and general interest in music and the arts. The school instrument
business is generally resistant to macroeconomic cycles and strongly correlated
to the number of school children in the United States, which is expected to grow
steadily over the next ten years.

Selmer's instrument unit sales have grown an average of 4% a year, and net
sales have grown an average of 9% a year, since 1993. This unit and net sales
growth is the result of management's efforts to improve Selmer's manufacturing
and sales capabilities as well as an increase in student enrollment and the
level of interest in music. In addition, management has increased production to
meet the increasing demand for its products.

Although the Company cannot accurately predict the precise effect of
inflation on its operations, it does not believe that inflation has had a
material effect on net sales or results of operations in recent years. Net sales
to customers outside the United States represent approximately 38% of
consolidated net sales, with Steinway's net sales accounting for over 77% of
these international sales. A significant portion of Steinway's net international
sales originate from its German manufacturing facility, resulting in net sales,
cost of sales and related operating expenses denominated in Deutsche Marks.
While currency translation has affected international net sales, cost of sales
and related operating expenses,

23
<PAGE>
it has not had a material impact on operating income. The Company utilizes
financial instruments such as forward exchange contracts and currency options to
reduce the impact of exchange rate fluctuations on firm and anticipated cash
flow exposures and certain assets and liabilities denominated in currencies
other than the functional currency. The Company does not purchase currency
related financial instruments for purposes other than exchange rate risk
management.

RESULTS OF OPERATIONS

The results of operations for the period beginning January 1, 1993 and
ending August 10, 1993, during which the Company was owned by an affiliate of
Integrated Resources, Inc., and for the period beginning August 11, 1993 and
ending December 31, 1993, during which the Company was owned by its current
owners, have been combined for comparative purposes.

On May 25, 1995, the Company acquired Steinway for approximately $104.0
million. The Steinway Acquisition was effected pursuant to a Merger Agreement
dated as of April 11, 1995. The Steinway Acquisition is being accounted for as a
purchase for financial reporting purposes. The Consolidated Financial Statements
of the Company as of and for the year ending December 31, 1995 include the
effects of the Steinway Acquisition as well as the results of operations for
Steinway for the period May 25, 1995 to December 31, 1995.

The following table is derived from the Company's Consolidated Statements of
Operations for the periods indicated and presents the results of operations as a
percentage of net sales:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------
YEAR ENDED DECEMBER 31, APRIL 1,
------------------------------------- APRIL 1, 1995 MARCH 30,
1993 1994 1995 1995 PRO FORMA 1996
----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.................................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales (1).......................... 69.2 68.4 68.5 68.2 67.7 68.5
----- ----- ----- ----- ----- -----
Gross profit (1)......................... 30.8 31.6 31.5 31.8 32.3 31.5
Total operating expenses................... 21.4 19.0 19.6 17.1 21.0 19.7
----- ----- ----- ----- ----- -----
Earnings from operations (1)............. 9.4% 12.6% 11.9% 14.7% 11.3% 11.7%
</TABLE>

- ------------------------
(1) Gross profit and earnings from operations for the years ended 1993, 1994 and
1995 reflect positive adjustments of $4,754, $264 and $9,638, respectively,
relating to purchase accounting adjustments to inventory for the acquisition
of Selmer in 1993 and the Steinway Acquisition in 1995.

THREE MONTHS ENDED MARCH 30, 1996 COMPARED TO THREE MONTHS ENDED APRIL 1,
1995

NET SALES -- Net sales increased by $37.2 million (116.6%) to $69.0 million
in the first quarter of 1996. The Steinway Acquisition contributed $31.8 million
in net sales to the first quarter of 1996. On a pro forma basis, net sales
increased $9.1 million (15.1%) reflecting both unit growth and price
realization. Selmer's net sales increased by 17% due to both unit volume growth
and price realization. Instrument unit volumes were up 8.4% resulting primarily
from strong industry demand and increased production. On a pro forma basis, net
sales increased $9.1 million (15.1%) reflecting strong growth at Selmer and
increased contribution from Steinway, primarily as a result of a 15% increase in
domestic unit sales of grand pianos.

GROSS PROFIT -- Gross profit increased by $11.6 million (114.1%) to $21.7
million in the first quarter of 1996. Steinway contributed $9.6 million of gross
profit. On a pro forma basis, gross profit improved $2.4 million (12.2%), with
gross profit margins declining from 32.3% to 31.5% due to product mix changes.

24
<PAGE>
OPERATING EXPENSES -- Operating expenses increased by $8.1 million (149.0%)
to $13.6 million in the first quarter of 1996. Steinway operating expenses were
$7.6 million for the quarter. On a pro forma basis, operating expenses increased
$1.0 million (8.3%); however, operating expenses as a percentage of net sales
decreased from 21.0% to 19.7%.

EARNINGS FROM OPERATIONS -- Earnings from operations increased by $3.4
million (73.2%) to $8.1 million in the first quarter of 1996. Steinway
contributed $2.0 million of operating income during the period. On a pro forma
basis, earnings from operations increased $1.3 million (19.6%), primarily due to
earnings on the increased net sales and a decrease in operating expenses as a
percentage of sales.

NET INTEREST EXPENSE -- Net interest expense increased by $3.1 million
(189.8%) to $4.7 million in the first quarter of 1996 primarily due to higher
outstanding long-term debt balances relating to the Steinway Acquisition. On a
pro forma basis, net interest expense decreased $.1 million (2.3%), primarily
due to lower outstanding debt balances.

1995 COMPARED TO 1994

NET SALES -- Net sales increased by $88.7 million (87.7%) to $189.8 million
in 1995. Steinway's net sales contributed $80.9 million during the period May
25, 1995 to December 31, 1995. Selmer's net sales increased by $7.8 million
(7.7%) as compared to 1994. This increase can be attributed to price realization
and modest unit volume increases experienced by most divisions.

GROSS PROFIT -- Gross profit increased by $27.9 million (87.5%) to $59.9
million in 1995 after positive adjustments of $9.6 million and $0.3 million in
1995 and 1994, respectively, relating to purchase accounting adjustments to
inventory. Selmer gross profits increased by $1.9 million (5.8%) to $33.8
million. Steinway contributed $26.1 million of gross profit. Gross profit as a
percentage of net sales remained essentially unchanged.

OPERATING EXPENSES -- Operating expenses increased by $17.9 million (93.4%)
to $37.1 million in 1995. Steinway operating expenses were $17.7 million for the
period. Selmer operating expenses increased $0.2 million (1.3%) to $19.4
million, but decreased as a percentage of net sales from 19.0% in 1994 to 17.9%
in 1995.

EARNINGS FROM OPERATIONS -- Earnings from operations (excluding charges
incurred by the Company in the amounts of $9.6 million and $0.2 million in 1995
and 1994, respectively, relating to the purchase accounting adjustments to
inventory) increased by $10.0 million (78.6%) to $22.7 million. Steinway
operating income was $8.4 million for the period. Selmer operating income
increased by $1.6 million (12.6%) to $14.3 million, primarily due to the
earnings on the increased sales and minimal increases in operating expenses.

NET INTEREST EXPENSE -- Net interest expense increased by $6.6 million
(85.0%) to $14.3 million in 1995 due to the higher outstanding long-term debt
relating to the Steinway Acquisition.

1994 COMPARED TO 1993

NET SALES -- Net sales increased by $9.6 million (10.5%) to $101.1 million
in 1994. Virtually all of Selmer's product lines increased due to strong
industry demand. Unit sales volume increases ranged from 4.4% for band
instruments to 11.5% for acoustic percussion instruments.

GROSS PROFIT -- Gross profit increased by $3.7 million (13.1%) to $31.9
million in 1994, after positive adjustments of $0.2 million and $4.8 million in
1994 and 1993, respectively, relating to purchase accounting adjustments to
inventory. Gross profit as a percentage of net sales increased from 30.8% in
1993 to 31.6% in 1994. The increase resulted primarily from overall price
appreciation exceeding cost increases.

OPERATING EXPENSES -- Operating expenses decreased $0.4 million (1.9%) to
$19.2 million in 1994. This decrease was attributable to a $0.9 million
reduction in amortization expenses due to the higher amortization expense
incurred prior to the acquisition of Selmer in 1993. The provision for

25
<PAGE>
doubtful accounts was reduced by $0.4 million in 1994. These decreases were
offset by an increase in sales and marketing expenses of $0.6 million (6.0%), to
$11.3 million relating to incentive programs directly associated with customer
purchases.

EARNINGS FROM OPERATIONS -- Earnings from operations (excluding charges
incurred by the Company in the amounts of $0.2 million and $4.8 million in 1994
and 1993, respectively, relating to the purchase accounting adjustments to
inventory) increased $4.1 million (47.5%) to $12.7 million as a result of the
increased sales for the year.

NET INTEREST EXPENSE -- Net interest expense increased by $0.7 million
(9.2%) to $7.8 million in 1994 due to higher outstanding debt balances.

LIQUIDITY AND CAPITAL RESOURCES

The Company has relied primarily upon cash provided by operations,
supplemented as necessary by seasonal borrowings under its working capital line,
to finance its operations, repay long-term indebtedness and fund capital
expenditures. Cash provided by operations was $6.7 million in 1995, $11.0
million in 1994 and $6.5 million for the combined periods in 1993.

Capital expenditures in 1995, 1994 and 1993 were $3.2 million, $1.1 million
and $0.9 million, respectively. These capital expenditures were used primarily
for the purchase of new machinery and building improvements. The Company expects
to increase its level of capital expenditures to approximately $5.0 million in
each of 1996 and 1997 in order to modernize, expand and renovate its facilities.

Like most of its competitors, Selmer sells band instruments almost entirely
on credit. These programs create large working capital requirements during the
year when band instrument receivable balances reach highs of approximately $50.0
million in August and September, and lows of approximately $20.0 million in
January and February. The financing programs, intended to assist dealers with
the seasonality inherent in the industry and to facilitate the rent-to-own
programs offered to students by many retailers, also allow Selmer to match its
production and delivery schedules. Selmer offers the following two forms of
financing to qualified band instrument dealers:

(i) RECEIVABLE DATING: Purchases made from January through September
have payment due in October. Purchases made from October through December
have payment due in January. Customers are offered discounts for early
payment.

(ii) NOTE RECEIVABLE FINANCING: Qualified dealers may convert open
accounts to a note payable to Selmer. The note program is offered in January
and October, and coincides with the receivable dating program. The note
receivable is secured by dealer inventories and receivables. The majority of
Selmer's notes receivable are purchased by a third-party financial
institution, on a full recourse basis. Selmer's current arrangement, which
allows the financial institution to purchase, at its option, up to an
aggregate of $15.0 million of notes receivable per year, expires in 1997.
Net notes receivable sales generated approximately $13.0 million and $12.0
million in cash in 1995 and 1994, respectively.

Unlike many of its competitors in the piano industry, Steinway does not
provide extended financing arrangements to its dealers. To facilitate long-term
financing required by some dealers, Steinway has arranged for financing through
a third-party provider which generally involves no guarantee by Steinway.

The Bank Credit Facility was restated on May 25, 1995, and provides the
Company with a potential borrowing capacity of up to $60.0 million, based on
eligible accounts receivable and inventory. Borrowings are secured by a first
lien on the Company's domestic inventory, receivables, a first lien on
Steinway's fixed assets and a second lien on Selmer's fixed assets. As of March
30, 1996, $2.7 million was outstanding, and availability was approximately $51.7
million. The Bank Credit Facility bears interest, at the option of the Company,
at (i) the higher of the prime rate or the federal

26
<PAGE>
funds rate plus 0.5% on any day, plus 1.5%, or (ii) the Eurodollar rate plus
3.0%, and expires March 31, 2000. Open account loans with foreign banks also
provide for borrowings by Steinway's foreign subsidiaries of up to 20 million
Deutsche Marks (approximately $ million as of the date hereof).

At March 30, 1996, the Company's outstanding long-term indebtedness amounted
to $171.6 million. Such long-term indebtedness consists of $110 million of
11.00% Senior Subordinated Notes due 2005, $43.2 million of 11.00% Senior
Secured Notes due 2000, $9.7 million of 10.92% Senior Secured Notes due 2000,
and $6.0 million of notes payable to foreign banks. Cash interest paid during
the three months ended April 1, 1995 and March 30, 1996 was $271,000 and
$189,000, respectively, and during fiscal 1993, 1994 and 1995 was $6.5 million,
$8.0 million and $13.4 million, respectively. The net proceeds of the Offering
will be used to repay and defease the 11.00% Senior Secured Notes due 2000 and
the 10.92% Senior Secured Notes due 2000. See "Use of Proceeds." The Company's
debt agreements contain restrictive covenants that place certain restrictions on
the Company, including restrictions to the Company's ability to make investments
in other entities or to pay cash dividends. See "Description of Certain
Indebtedness."

The Company believes that cash on hand, together with cash flow anticipated
from operations and available borrowings under the Bank Credit Facility, will be
adequate to meet debt service requirements, fund continuing capital requirements
and satisfy working capital and general corporate needs through the next twelve
months.

The Company may need to raise additional funds through public or private
debt or equity financing in order to take advantage of opportunities that may
become available to the Company, including more rapid expansion and acquisition
of businesses or products.

NEW ACCOUNTING PRONOUNCEMENTS

In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," which the Company adopted effective January 1996. SFAS No. 121 is not
expected to have a material effect on the Company's net income or financial
position. In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation." SFAS No. 123 requires expanded disclosures of
stock-based compensation arrangements with employees and encourages (but does
not require) compensation cost to be measured based on the fair value of the
equity instrument awarded. Companies are permitted, however, to continue to
apply Accounting Principles Board ("APB") Opinion No. 25 which recognizes
compensation cost based on the intrinsic value of the equity instrument awarded.
The Company adopted SFAS No. 123 effective January 1, 1996 and intends to
account for employee stock-based compensation arrangements under APB Opinion No.
25.

STEINWAY

RESULTS OF OPERATIONS

The following table is derived from Steinway's Statements of Operations for
the periods indicated and presents the results of operations as a percentage of
net sales:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE NINE MONTHS ENDED
30, --------------------------
------------------------ MARCH 31, MARCH 31,
1993 1994 1994 1995
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales........................................... 70.9 69.0 68.9 66.9
----- ----- ----- -----
Gross profit.......................................... 29.1 31.0 31.1 33.1
Operating expenses...................................... 27.0 22.4 21.7 20.0
Operating income...................................... 2.1% 8.6% 9.4% 13.2%
</TABLE>

27
<PAGE>
NINE MONTHS ENDED MARCH 31, 1995 COMPARED TO NINE MONTHS ENDED MARCH 31,
1994

NET SALES -- Net sales increased by $15.8 million (20.3%) to $93.5 million
for the nine months ended March 31, 1995. Steinway's strong recovery continued
through the nine months ended March 31, 1995. This increase was principally
attributable to an increase in units sold of 369 (8.9%). In addition, revenues
were favorably affected by increases in selling prices, both at the wholesale
and retail levels and the strengthening of the Deutsche Mark relative to the
dollar.

GROSS PROFIT -- Gross profit for the nine months ended March 31, 1995
increased by $6.8 million (28.2%) to $31.0 million, and gross profit margins
improved to 33.1% from 31.1% for the comparable period in 1994. These
improvements reflect both the sales volume increase and improved absorption of
production overhead as activity in the manufacturing plants continued to
increase to meet higher demand.

OPERATING EXPENSES -- Selling, general and administrative ("SG&A") expenses
increased by $1.9 million (11.0%) to $18.7 million for the nine months ended
March 31, 1995. This increase is attributable to, and consistent with, the
higher level of sales activity and the strengthening of the Deutsche Mark. As a
percentage of sales, SG&A expenses decreased to 20.0% from 21.7% .

OPERATING INCOME -- The increase in sales volume, improved production
efficiency and continued cost containment resulted in an increase in operating
income of $5.0 million (67.8%) to $12.3 million for the nine month period ended
March 31, 1995.

NET INTEREST EXPENSE -- Net interest expense decreased by $0.4 million
(12.6%) to $2.7 million principally due to Steinway's reduction in amounts
outstanding under its revolving credit lines with cash generated by operations.

FISCAL YEAR JUNE 30, 1994 COMPARED TO FISCAL YEAR JUNE 30, 1993

NET SALES -- Net sales increased by $12.2 million (13.6%) to $101.9 million
in fiscal 1994. The continued economic recovery in the United States and, to a
lesser extent, Europe contributed to an increase in unit sales. Domestic grand
piano sales increased by 270 units (18.8%) to 1,709 units in fiscal 1994.
Foreign grand piano sales increased by 54 units (6.7%) to 860 units in fiscal
1994. Steinway's Boston piano line also contributed to this positive trend.

GROSS PROFIT -- In fiscal 1994, gross profit improved by $5.5 million
(21.0%) to $31.6 million. The gross margin improved to 31.0% from 29.1% in
fiscal 1993. These performance indicators, which substantially exceed the
improvement at the sales level, reflect the positive impact of cost reduction
programs implemented in fiscal 1992 and fiscal 1993 as well as the increased
manufacturing efficiency associated with the higher production volume.

OPERATING EXPENSES -- SG&A expenses (which in 1993 included a pension
curtailment gain of $1.1 million and restructuring charges of $0.8 million)
decreased by $1.4 million (5.7%) in fiscal 1994 despite the significant increase
in sales.

OPERATING INCOME -- The impact of cost reduction programs implemented during
fiscal 1992 and fiscal 1993, as well as the continued economic recovery,
contributed to a tremendous improvement in operating profits, which increased by
$6.9 million (358%) to $8.8 million in fiscal 1994. These improved results were
achieved even as unit sales remained well below traditional levels. The total
grand piano unit sales for fiscal 1994 of 2,572 was only 76.3% of Steinway's
30-year average of 3,011.

NET INTEREST EXPENSE -- Net interest expense decreased by $0.5 million
(12.5%) to $3.8 million in fiscal 1994 principally due to Steinway's reduction
in amounts outstanding under its revolving credit lines with cash generated by
operations.

28
<PAGE>
BUSINESS

GENERAL

The Company acquired Selmer in August 1993 from an affiliate of Integrated
Resources, Inc., and Steinway in May 1995 from John and Robert Birmingham.

HISTORY

STEINWAY. Steinway & Sons was founded in 1853 by Henry Engelhard Steinway
and his three sons. Steinway's superior instruments and aggressive marketing
efforts resulted in rapid expansion. By 1860, Steinway was the world's largest
piano manufacturer with 350 employees and a weekly production of thirty square
and five grand pianos. In 1875, the Steinways established a showroom and concert
hall in London and, in 1880, a factory in Hamburg, Germany. In 1928, Steinway's
current foreign manufacturing facility was opened in Hamburg.

Steinway's global success and fame was symbolized by the 1925 opening of a
new Steinway Hall on West 57th Street in New York. In 1972, the Steinway family
sold their piano business to an affiliate of the Columbia Broadcasting System
television network ("CBS"), but remained intimately involved with the management
of the operations. In 1985, CBS sold Steinway to John and Robert Birmingham. In
May 1995, the Company acquired Steinway from the Birmingham brothers.

SELMER. In 1885, Henri Selmer, a renowned French clarinetist, founded Henri
Selmer et Cie ("Selmer Paris"), a French musical instrument manufacturer.
Alexander Selmer, Henri's brother, began to use clarinets manufactured by Selmer
Paris in symphony performances throughout France and America. After receiving
many inquiries and requests for the clarinets, Alexander opened a retail shop in
New York to sell musical instruments. Alexander returned to Paris and left the
American Selmer concern to an employee, George Bundy. Mr. Bundy directed the
firm until his death in 1951 and grew Selmer into a leading manufacturer and
importer of musical instruments and related merchandise.

29
<PAGE>
Through a number of selected acquisitions and internal growth, Selmer has
expanded into a full-line musical instrument manufacturer. In 1978, Selmer
acquired Glaesel Stringed Instrument Service, Inc., a manufacturer and
distributor of violins, cellos and stringed basses. In 1981, Selmer acquired
Ludwig Industries, a leading drum manufacturer, and Musser, its orchestral
percussion division. In 1993, the Company purchased Selmer's assets from an
affiliate of Integrated Resources, Inc. In 1995, Selmer acquired the assets of
William Lewis & Son, a manufacturer of orchestral stringed instruments, from
Gemeinhardt Company, Incorporated.

BUSINESS STRATEGY

The Company believes that there are significant opportunities in the
Steinway and Selmer businesses which were not fully pursued by the previous
owners. The Company's strategy is to capitalize on its strong brand names and
leading market positions to grow sales and profitability. From 1993 to 1995,
Selmer's net sales and EBITDA have shown a cumulative improvement of 19.0% and
33.3%, respectively. During the same period, Steinway's net sales and EBITDA
have shown a cumulative improvement of 27.7% and 117.7%, respectively. On a pro
forma combined basis, net sales and EBITDA improved 15.1% and 11.5%,
respectively, for the first quarter of 1996 over the comparable period in 1995.
The Company intends to pursue the following strategic opportunities.

CAPITALIZE ON SELMER'S STRONG INDUSTRY DEMAND

INCREASE STEINWAY'S PENETRATION OF DOMESTIC MARKET

30
<PAGE>
institutional sales efforts. Since its recent implementation, the program has
helped generate additional institutional sales, including the sale of over 80
pianos to two major U.S. universities which had previously been using
competitors' pianos.

PURSUE STRATEGIC ACQUISITIONS

EXPLOIT INTERNATIONAL OPPORTUNITIES

IMPROVE MANUFACTURING EFFICIENCIES

31
<PAGE>
PRODUCTS

STEINWAY. Steinway concentrates on the high-end grand piano segment of the
industry. Steinway also offers vertical pianos as well as a mid-priced line of
grand and vertical pianos under the Boston brand name to provide dealers with a
broader product line. Steinway pianos differ from all others in design
specifications, materials used and assembly process. All of Steinway's patented
designs and innovations, referred to in the piano industry as "The Steinway
System," contribute to the unique sound and quality of the Steinway piano.

GRAND PIANOS. Grand pianos historically have accounted for the bulk of
Steinway's production. Steinway offers eight models of the grand piano that
range in length from 155 cm (5'1") for a baby grand to 274 cm (9') for the
largest concert-style piano. The smaller grands are sold to both individual and
institutional customers, while the concert grands are sold primarily to
institutions. Grand pianos are at the premium end of the piano market in terms
of quality and price, with the Steinway grands dominating the high end of the
market with retail prices generally ranging from $27,600 to $101,200 in the
United States.

Over the past 30 years, Steinway has sold an average of 3,011 grand pianos
per year, with 1,805 units sold in the United States and 1,206 units sold in
foreign markets. The following table shows the Steinway grand piano units sold
per year for the past thirty years.

HISTORICAL STEINWAY GRAND PIANO UNIT SALES FOR YEARS 1966-1995
<TABLE>
<CAPTION>
1966-1975 1976-1985
- --------------------------------------------- ---------------------------------------------
CALENDAR CALENDAR
YEAR U.S. FOREIGN TOTAL YEAR U.S. FOREIGN TOTAL
- ---------- --------- ----------- --------- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1966 1,770 1,056 2,826 1976 1,908 1,241 3,149
1967 1,603 1,043 2,646 1977 1,590 1,372 2,962
1968 1,932 1,250 3,182 1978 1,819 1,334 3,153
1969 1,806 1,163 2,969 1979 1,815 1,357 3,172
1970 1,470 1,142 2,612 1980 1,897 1,349 3,246
1971 1,540 1,173 2,713 1981 2,041 1,394 3,435
1972 1,809 1,212 3,021 1982 1,677 1,141 2,818
1973 1,919 1,131 3,050 1983 2,036 1,263 3,299
1974 2,001 937 2,938 1984 1,876 1,340 3,216
1975 1,875 1,160 3,035 1985 1,337 1,291 2,628
--------- ----- --------- --------- ----- ---------
Average 1,773 1,127 2,899 Average 1,800 1,308 3,108

<CAPTION>
1986-1995
- -----------------------------------------------
CALENDAR CALENDAR
YEAR YEAR U.S. FOREIGN TOTAL
- ------------ --------- ----------- ---------
<S> <C> <C> <C>
1966 1986 1,763 1,369 3,132
1967 1987 2,144 1,237 3,381
1968 1988 2,144 1,283 3,427
1969 1989 2,096 1,385 3,481
1970 1990 2,117 1,459 3,576
1971 1991 1,550 1,438 2,988
1972 1992 1,344 917 2,261
1973 1993 1,631 887 2,518
1974 1994 1,720 978 2,698
1975 1995 1,912 885 2,797
--------- ----- ---------
Average Average 1,842 1,184 3,026
</TABLE>

VERTICAL PIANOS. Steinway produces vertical pianos primarily to offer its
dealers a complete line of pianos and to satisfy the needs of institutions and
other customers who are constrained by space limitations but unwilling to
compromise on quality. Steinway's four models of vertical pianos range in height
from 114 cm (45") to 132 cm (52").

THE BOSTON PIANO LINE. In October 1991, Steinway introduced the Boston
piano, a complete line of grand and vertical pianos designed by Steinway and
manufactured by a Japanese manufacturer to provide Steinway dealers with pianos
priced in the high end of the middle range of the piano market. The line
provides dealers with an opportunity to realize better margins in the mid-market
price range while capturing sales that would have otherwise gone to a
competitor. The product line increases Steinway's business with its dealers,
making Steinway the dealers' primary supplier in many instances. Furthermore,
because historically 75% of Steinway customers have previously owned a piano,
the Boston piano is expected to provide an entry-level product for future
Steinway grand piano customers. The Boston line is comprised of nine upright and
grand piano models, with retail prices ranging from $4,995 to $33,310.

32
<PAGE>
SERVICES. Steinway provides restoration services and sells piano parts from
its New York, London, Berlin and Hamburg locations. Steinway also provides
tuning and regulating services. Restoration, repair, tuning and regulating
services are important because they lead to potential new customers. In 1995,
restoration services and piano parts accounted for approximately 7% of revenue,
with gross margins of approximately 29%. As a result of the quality of its
restorations and repairs, the demand for restoration of existing Steinways has
increased.

SELMER. Selmer produces and distributes a wide variety of musical
instruments and related products through its four operating divisions.

SELMER DIVISION manufactures brasswind and woodwind instruments, including
clarinets, flutes, piccolos, trumpets, cornets, trombones, saxophones, oboes and
bassoons. The division also manufactures mouthpieces and distributes accessories
such as oils, lubricants, polishes, stands, batons, sax straps, mutes and reeds.
The division's products are manufactured under the SELMER, BACH, BUNDY and
SIGNET brand names and are sold to student, amateur and professional musicians.
Products sold to professional musicians are often customized to meet specific
design options or sound characteristics. The Company believes that
specialization of products helps Selmer maintain a competitive edge in quality
and product design.

Selmer owns the exclusive U.S. distribution rights for SELMER PARIS
products. The SELMER PARIS saxophone is generally considered to be one of the
best in the world. SELMER PARIS, in turn, has exclusive distribution rights to
Selmer's woodwind and brasswind products in France. Selmer expects to renew the
99 year SELMER PARIS distribution rights agreement when it expires in 1998.
SELMER PARIS products represented approximately 7% of Selmer's net sales in
1995. While the extension of these distribution rights is expected, the Company
believes that the failure to extend such rights would not have a material
adverse effect on Selmer's operating results.

LUDWIG/MUSSER DIVISION manufactures acoustical and tuned percussion
instruments, including outfit drums, marching drums, concert drums, marimbas,
xylophones, vibraphones, orchestra bells, chimes, mallets and accessories. This
division manufactures its products in Monroe, North Carolina and La Grange,
Illinois under the LUDWIG and MUSSER brand names. LUDWIG is considered a leading
brand name in drums and MUSSER has the dominant market share of tuned percussion
products.

GLAESEL/WILLIAM LEWIS DIVISION manufactures and distributes stringed
instruments, including violins, violas, cellos and basses, and accessories such
as bridges, covers, mutes, pads, chin rests, rosins, strings, bows, cases and
instrument care products. Components are primarily imported from several
European and Asian suppliers and are assembled at the factory in Cleveland,
Ohio.

VINCENT BACH INTERNATIONAL, LTD. ("VBI"), located in London, England, is a
wholly-owned subsidiary of Selmer. VBI distributes Selmer's products, in
addition to other products that do not compete directly with Selmer's products,
in the United Kingdom. Selmer also exports products to Europe and other parts of
the world under its trademark name of VINCENT BACH INTERNATIONAL.

CUSTOMERS

STEINWAY. Steinway's core customer base consists of professional artists
and amateur pianists, as well as institutions such as concert halls,
conservatories, colleges, universities and music schools. Customers purchase
Steinway pianos either through one of the Company's five retail stores or
through independently owned dealerships. Over 90% of Steinway piano sales in the
United States are to individuals. In other countries, sales to individuals are a
smaller percentage and represent an opportunity for further market penetration.
For example, sales to individuals represent less than 60% of sales in Germany.
Steinway pianos primarily are purchased by affluent individuals with incomes in
excess of $100,000 per year. The typical customer is over 45 years old and has a
serious interest in music. Steinway's largest dealer accounted for approximately
8% of sales in 1995, while the top 15 accounts represented 28% of sales.

33
<PAGE>
The Company believes there is a significant opportunity to better penetrate
the domestic market through improved selling and marketing techniques and better
training and selection of dealers. During the past two years, Steinway has
increased its focus on these efforts and has developed several new initiatives.
For example, dealer training material has been redesigned and customized
marketing campaigns have been developed for all dealers. In addition, each
market is reviewed periodically and rated relative to its size and demographic
potential. Underperforming markets are targeted and a comprehensive plan is
developed to improve performance. For example, the Chicago market was targeted
for a remedial action plan in 1993 that included increased promotional
activities and a change in dealer location. Largely as a result of these
measures, Chicago's sales volume doubled by 1995.

SELMER. Historically, a majority of Selmer's net sales has been to students
in elementary and high school. Traditionally, students join school bands or
orchestras at age 10 or 11 and learn on beginner level instruments. After
several years, they progress to an advanced or professional level instrument. In
addition, certain large instruments typically are purchased directly by school
systems. Selmer also sells to professional players. Selmer's customers include
over 1,600 musical instrument dealers. Selmer's largest customer accounted for
approximately 4% of sales in 1995, while the top 15 accounts represented
approximately 26% of sales.

SALES AND MARKETING

STEINWAY. Steinway distributes its products primarily on a wholesale basis
through over 200 select dealers and distributors around the globe. The New York
manufacturing facility supplies dealers in North and Latin America, while the
Hamburg plant manufactures pianos for sale through dealers and distributors in
Europe, Africa and Asia. The New York manufacturing facility manufactured
approximately 67% of Steinway pianos sold in 1995.

Steinway operates five retail stores in New York, New Jersey, London,
Hamburg and Berlin. Steinway's West 57th Street store in New York City, known as
Steinway Hall, is one of the largest and most famous piano stores in the world.

In 1995, approximately 90% of Steinway unit sales were sold on a wholesale
basis, with the remaining 10% being sold directly by Steinway at one of its five
company-owned retail locations. According to industry statistics, Steinway's
domestic market share of the grand piano market was approximately 7% in 1995.

Dealers are attracted to Steinway for several reasons. A Steinway dealership
carries with it an elevated status because the dealer represents the best piano
available in the industry. Further, Steinway pianos attract premium customers
and command higher profit margins than the instruments of other manufacturers.
The Company believes that a Steinway dealership tends to be the most profitable
in any given market. Steinway's "Partnership Program" provides a mutual
commitment between Steinway and its dealers. Dealers are assigned significant
exclusive sales territories, provided extensive sales training and unique
pre-scripted promotional materials. In turn, dealers must carry a representative
level of inventory, support Steinway's concert and artist activities and
actively promote Steinway as the world's premier piano.

NORTH AND LATIN AMERICA: Steinway pianos are sold by dealers in 45
states across the United States. The major markets for Steinway pianos are
in and around major metropolitan areas. The two largest regions in terms of
sales are California and New York, which together accounted for
approximately 29% of domestic wholesale revenue in 1995. Recognizing that
the emerging markets in Latin America may continue to grow, Steinway has
recently added dealers in Brazil and Argentina.

EUROPE: Germany, Switzerland, France, the United Kingdom and Italy
account for the greatest percentage of sales outside the Americas. Steinway
grand pianos are also sold in other

34
<PAGE>
European countries. As in the United States, Steinway is widely recognized
in Europe as the highest quality piano and dominates the top segment of the
market. The largest European markets for Steinway pianos in 1995 were
Germany and Switzerland.

ASIA: Japan and Korea are two of the largest piano markets in the
world. The largest market for Steinway pianos in Asia today is Japan, where
Steinway recently positioned a full-time employee to head the Asian
marketing efforts. Steinway grand pianos are also sold in most other East
Asian countries, many of which may present attractive growth opportunities.

STEINWAY ARTISTS. The most effective form of marketing for Steinway is the
endorsement by world class pianists who voluntarily select the Steinway piano.
Unlike many of its competitors, Steinway does not pay artists to endorse its
instruments. Indeed, to become a "Steinway Artist" a pianist must not only meet
certain performance and professional criteria, he or she must first own a
Steinway piano. The Steinway Artist roster currently exceeds over 1,000 of the
world's finest pianists. Steinway Artists play only on a Steinway. In turn, they
have access to the Piano Bank described below. For years Steinway has
successfully used artist endorsements to form marketing programs. Those ongoing
programs have helped solidify brand-name recognition by the general public as
well as clearly demonstrate that Steinway pianos surpass all other brands in
quality. In addition, various promotional events have been organized to maintain
and strengthen public awareness of the superiority of the Steinway piano.

THE CONCERT AND ARTIST PIANO BANK. Virtually all major venues throughout
the world own a Steinway piano. However, to ensure all pianists, and especially
Steinway Artists, have a broad selection of instruments to meet each
individual's touch and tonal preferences, Steinway maintains the famed Concert
and Artist Piano Bank (the "Piano Bank"). The Piano Bank includes approximately
330 instruments worldwide. Of these instruments, approximately 275 are located
in the United States. In New York City, the Steinway concert department has
approximately 86 concert grands available for various occasions. The balance of
the domestic-based pianos are leased to dealers around the country who actively
support the Steinway Artists program. In addition to promoting Steinway's name
in the music industry, the Piano Bank provides Steinway with feedback on the
quality and performance of the instruments from its most critical customer, the
professional pianist. Since the average age of the instruments in the Piano Bank
is approximately 3.3 years, Steinway receives continuous feedback on recently
produced instruments. Generally, the Piano Bank instruments are sold after five
years and are replaced with new pianos.

INSTITUTIONAL SALES. Many musical institutions and music teachers have
chosen to endorse Steinway pianos. For example, The Juilliard School in New York
uses Steinway pianos exclusively and currently has more than 200 of these pianos
in use. Nevertheless, in the United States, such sales to institutions
historically have represented only a small percentage of Steinway's business.
Colleges and universities have been reluctant to purchase new pianos because of
the high cost and their limited annual budgets. The Company estimates that
existing institutional pianos have an average age of approximately 30 years and
are, therefore, prime candidates for replacement. In 1995, Steinway introduced a
new marketing initiative, supported by a unique third-party financing program,
which enables institutions to purchase pianos on a long-term installment basis
at attractive financing terms. The historically high resale value of Steinway
pianos allows the third-party lender to provide this attractive financing
program. The Company believes that this program will significantly enhance its
institutional sales efforts. Since its recent implementation, the program has
helped generate additional institutional sales, including the sale of over 80
pianos to two major U.S. universities which had previously been using
competitors' pianos.

LIMITED EDITIONS. In 1993 Steinway introduced its first limited edition of
280 pianos commemorating its 140th anniversary. These pianos featured unique
case designs and finishes. The success of the anniversary edition lead to the
production of a second limited edition of 146 pianos in 1995

35
<PAGE>
featuring historic Steinway case designs and decals. Both limited editions were
sold out in a matter of days, providing premium margin sales for Steinway and
further product differentiation for its dealers. Steinway intends to introduce
similar limited editions in the future at appropriate time intervals.

DISTRIBUTION, SALES AND MARKETING OF THE BOSTON PIANO LINE. The Boston
piano line is targeted toward the high end of the mid-market segment of the
market. The line was introduced to provide a broader product offering for
dealers and provide an entry-level product for future Steinway grand piano
customers, since historically 75% of Steinway customers have previously owned a
piano. With certain limited exceptions, Steinway allows only Steinway dealers to
carry the Boston piano line and thus ensures that the pianos will be marketed as
a complementary product line. Increased traffic generated by the Boston piano
creates current and future customers for Steinway. The introduction of a
lower-priced alternative has not negatively impacted the sales of other Steinway
pianos. The Boston piano line profits from the "spillover" effect created by the
marketing efforts supporting Steinway's main product lines.

SELMER. Selmer has 18 domestic district sales managers who, in addition to
their retail music distribution responsibilities, form relationships with high
school and college band directors within their territories. Each sales manager
is required to make scheduled calls to educators and professionals. The local
dealer or distributor is typically responsible for making direct selling efforts
to an individual school and is often a designated supplier for such school.
School band and orchestra directors refer students to the designated dealer for
the purchase of instruments. Students are normally offered rent-to-own
arrangements with payments averaging from $20 to $40 a month over a one- to
two-year period. Typically only larger instruments such as tubas and stringed
basses are purchased by schools.

Selmer supports dealers through incentive programs, advertising and
promotional activities. Trade shows, print media, direct mail and personal sales
calls are the primary methods of reaching customers. Selmer actively advertises
in consumer trade magazines. In addition, Selmer executives attend several trade
shows a year, including the two largest in Anaheim, California and Frankfurt,
Germany. Selmer also provides educational materials and up-to-date instrument
catalogs to educators in the band, orchestral and percussion fields.

In 1995, Selmer's domestic market share was approximately 42% in advanced
and professional band instruments and 25% in beginner instruments.

MUSICAL INSTRUMENT INDUSTRY

PIANOS. In 1995, approximately 50% of Steinway's total sales were in the
United States and 37% were in Europe. The Company believes that the high-end
niche of the piano market occupied by Steinway is stable in the United States
and Western Europe, and significant growth is possible in both Asia and Latin
America.

The Company believes that since piano sales tend to follow general economic
trends, an upswing in the piano industry can be expected to occur as the general
economy continues to improve. The Company further believes that the high end of
the grand piano market generally lags behind the rest of the market in both the
downturn and recovery phases of the industry cycle.

Vertical piano sales have been impacted not only by the general economic
recession, but also by the increase in competition stemming from electronic
alternatives to the vertical piano and lower-cost and smaller grand pianos mass
produced by Asian manufacturers. Since only a small percentage of Steinway's
profits are derived from sales of vertical pianos, the Company believes this
trend will not have a material adverse effect on Steinway's operating results.

36
<PAGE>
UNITED STATES. In 1995, the musical instrument industry in the United
States generated retail sales of approximately $5.5 billion. Meanwhile, the
acoustic piano industry, which represents approximately 11% of the total musical
instrument industry, had retail sales of $598 million in 1995, up 7% from 1994
which included an 11% increase for grand pianos over five feet in length.
Sixty-one percent of this increase was attributable to grand piano sales.

During the period from 1991 to 1995, total dollar sales of grand pianos
increased at an average annual rate of 7.3% from $287.8 million to $371.8
million, whereas vertical piano dollar sales increased during such period at an
average annual rate of only 1.5%. For Steinway, this market differential between
verticals versus grands is significant, as the vast majority of Steinway's net
sales is attributable to grand pianos.

FOREIGN MARKETS. Korea, China and Japan are the three largest piano markets
in the world. Steinway's strongest international markets outside the Americas
are Germany, Japan, Switzerland, France, the United Kingdom and Italy.

BAND AND ORCHESTRAL INSTRUMENTS. Selmer believes that the band and
orchestral instrument industry has historically been impacted more by
demographic trends than by macroeconomic cycles. Since 1984, both student
enrollment (grades K through 12) and school expenditures have increased
steadily. The U.S. Department of Education projects that student enrollment is
expected to grow steadily over the next decade. The following table shows the
relationship between domestic industry unit sales for the years indicated and
the number of live births in the United States 11 years prior.

RELATIONSHIP BETWEEN LIVE BIRTHS 11 YEARS PRIOR AND BAND INDUSTRY UNITS
(IN THOUSANDS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
UNITS LIVE BIRTHS
<S> <C> <C> <C>
1974 595 1974 4098
1975 503 1975 4027
1976 497 1976 3760
1977 472 1977 3606
1978 472 1978 3521
1979 478 1979 3502
1980 462 1980 3600
1981 494 1981 3731
1982 462 1982 3556
1983 443 1983 3258
1984 363 1984 3137
1985 365 1985 3160
1986 371 1986 3144
1987 449 1987 3168
1988 475 1988 3327
1989 456 1989 3329
1990 441 1990 3468
1991 437 1991 3623
1992 429 1992 3645
1993 465 1993 3690
1994 465 1994 3616
1995 475 1995 3697
1996 3749
1997 3731
1998 3829
1999 3914
2000 4022
2001 4179
</TABLE>

The band and orchestral instrument industry experienced moderate sales
declines starting in the mid to late 1970s, which Selmer believes were primarily
due to a reduction in the number of students enrolled in grades 4 through 12.
The Company estimates that there are approximately 25,000 high schools with one
or more bands. Historically, approximately 1 in 10 ten-year-olds in the United
States has played a band or orchestral instrument.

37
<PAGE>
Sales improvements have also been caused by recent cultural and social
trends. The Company believes that parents are encouraging their children to
pursue musical instruments as a response to recent studies that show
participation in music programs increase a student's ability to excel in other
aspects of their education (e.g., college entrance test scores). Additionally,
many school band directors are promoting band programs as social organizations
rather than the first step of intensive music study.

PRODUCTION PROCESS

STEINWAY. The manufacturing process of a Steinway piano is an exercise in
diligence and precision. Much of the construction of a finished piano is
performed by hand. A Steinway grand piano consists of approximately 12,000
parts, each of them carefully made, shaped and inspected. The manufacturing
process takes up to nine months and primarily involves the fabrication and
assembly of piano components by skilled workers, each of whom has his or her own
area of specialization. At the end of this process, each piano is tuned, voiced
and regulated to achieve the high standard of sound that customers have come to
expect from a Steinway piano.

SELMER. Selmer's manufacturing process involves a large number of tasks
performed by skilled craftsmen. Employees perform welding, forming, drilling and
polishing applications throughout the process. Selmer maintains a fairly
constant production schedule, minimizing labor disruptions and keeping inventory
relatively stable. Selmer's Ludwig/Musser Division primarily assembles
percussion parts and components purchased from both domestic and foreign
suppliers. Stringed instruments, except cellos (which Selmer manufactures), are
assembled and finished at the Glaesel/William Lewis Division with unfinished
components imported from Europe and Asia.

Raw materials for use in the production of the Company's instruments are
purchased predominately in the United States.

LABOR

As of March 30, 1996, the Company employed 1,945 people, consisting of 1,443
hourly and 502 salaried employees. Of the 1,945 employees, 1,507 are employed in
the United States and the remaining 438 are employed in Europe. At the New York
manufacturing and retail facilities, all employees except executives,
supervisory employees and clerical, administrative and retail sales department
employees are organized under Local 102 of the United Furniture Workers/IUE,
AFL/CIO. The current labor agreement covering domestic employees expires on
September 30, 1997. In Hamburg, manufacturing employees are represented by the
workers' council, Gewerkschaft Holz und Kunststoff, which negotiates on their
behalf. In Germany, Steinway participates in a consortium with other local
manufacturers in similar industries, primarily woodworking, to negotiate labor
rates. Wage increases tend to track those of the major unions in Germany.
Steinway's current contract covering salaries and wages for hourly German
employees is negotiated annually. Many of the Company's craftsmen are second or
third generation employees of Steinway. The United Auto Workers and the United
Brotherhood of Carpenters represent 670 members of the Company's workforce. The
Company has experienced only one labor strike which lasted for 10 days in March
1994 and involved 415 hourly employees. The Company's collective bargaining
agreements expire in November 1996, February 1997 and September 1997. The
Company believes that its relationship with its employees is generally good.

38
<PAGE>
PROPERTIES

The Company owns most of its manufacturing and warehousing facilities.
Substantially all of the domestic real estate has been pledged to secure the
Company's debt. The Company believes its facilities to be in good operating
condition. The following table lists the Company's owned and leased facilities.

<TABLE>
<CAPTION>
APPROXIMATE
FLOOR SPACE
(SQUARE
LOCATION OWNED/LEASED FEET) USE
- ----------------------- ------------- ------------ -----------------------------------------------------------
<S> <C> <C> <C>
New York, NY Owned 449,900 Piano manufacturing; restoration center; parts sales;
sales; research and development; executive offices;
training
Leased 38,750 Steinway Hall retail store/showroom; Piano Bank for the New
York City metropolitan area
Hamburg, Germany Owned 220,660 Piano manufacturing; executive offices; training
Leased 11,300 Steinway Haus retail store/showroom
Elkhart, IN Owned 144,000 Brasswind manufacturing
Owned 77,000 Woodwind manufacturing
Owned 75,000 Warehouse
Owned 25,000 Executive offices
LaGrange, IL Owned 46,000 Percussion instrument manufacturing
Leased 18,000 Timpani production
Monroe, NC Leased 44,000 Drum warehouse
Leased 42,000 Drum assembly
Leased 40,000 Case assembly
Leased 21,000 Drum woodshop
Cleveland, OH Leased 35,000 Stringed instrument manufacturing
London, England Leased 20,000 Vincent Bach International
Leased 9,580 Steinway Hall retail store/showroom
Leased 5,780 Piano repair/restoration
Berlin, Germany Leased 5,650 Steinway Haus retail store/showroom
Paramus, NJ Leased 4,200 Steinway Hall West retail store
</TABLE>

PATENTS AND TRADEMARKS

The Company has several trademarks and patents effective in the United
States and in several foreign countries for varying lengths of time, including
the trademarks STEINWAY, STEINWAY & SONS, the Lyre symbol, STEINWAY THE
INSTRUMENT OF THE IMMORTALS, BOSTON, DESIGNED BY STEINWAY, SELMER, BACH, BUNDY,
SIGNET, WILLIAM LEWIS, LUDWIG and MUSSER. Steinway has pioneered the development
of the modern piano with over 125 patents granted since its founding. Several of
the Company's patents remain in force, with additional patents pending. The
Company considers its various trademarks and patents to be important and
valuable assets.

COMPETITION

STEINWAY. In general, the piano market in which Steinway operates is
competitive; however, the level of competition Steinway faces depends to a large
extent on the market definition. While there are many makers of pianos, both
domestically and abroad, only a few compete directly with Steinway. Steinway
holds a unique position at the top end of the market for grand and vertical
pianos, both in terms of quality and price. Other manufacturers of higher priced
pianos include Yamaha, Bechstein, Baldwin, Bosendorfer and Fazioli Pianoforti
SLR. However, these manufacturers' instruments are generally not considered
comparable in quality to the Steinway piano.

39
<PAGE>
Because of the potential savings associated with buying a used instrument,
as well as the durability of the Steinway piano, a relatively large market for
used Steinways exists. It is difficult to estimate the significance of used
piano sales, since most are conducted in the private aftermarket. The Company,
however, believes that used Steinway pianos provide the most significant
competition in its market segment. To capitalize on this segment, Steinway has
recently increased its emphasis on both its restoration services and the
procurement, refurbishment and sale of used Steinway pianos.

SELMER. A number of domestic and foreign manufacturers compete in the
musical instrument industry. Other manufacturers of band and orchestral
instruments include Yamaha, United Musical Instruments and LeBlanc. However,
Selmer is the largest domestic producer of band and orchestral instruments and
enjoys leading market shares in many of its product lines. New entrants have
difficulty competing with Selmer due to the long learning curve inherent in the
production of musical instruments, cost of tooling, significant capital
requirements, lack of name-brand recognition and an effective distribution
system.

ENVIRONMENTAL MATTERS

The Company is subject to compliance with various federal, state, local and
foreign environmental regulations. On August 9, 1993, Philips Electronics North
America Corporation ("Philips") agreed to continue to indemnify Selmer for any
and all losses, damages, liabilities and claims relating to environmental
matters resulting from certain activities of Philips occurring prior to December
29, 1988 (the "Environmental Indemnity Agreement"). To date, Philips has fully
performed its obligations under the Environmental Indemnity Agreement. The
Environmental Indemnity Agreement terminates on December 29, 2008.

Three unsettled matters covered by the Environmental Indemnity Agreement are
currently pending. For two of these sites, Philips has entered into Consent
Orders with the Environmental Protection Agency ("EPA") or the North Carolina
Department of Environment, Health and Natural Resources, as appropriate, whereby
Philips has agreed to pay required response costs. For the third site, the EPA
has notified Selmer it intends to carry out the final remediation remedy itself.
The EPA estimates that this remedy has a present net cost of approximately $12
million. Over 40 persons or entities have been named by the EPA as potentially
responsible parties at this site. This matter has been tendered to Philips
pursuant to the Environmental Indemnity Agreement. The potential liability of
the Company at any of these sites is affected by several factors including, but
not limited to, the method of remediation, the Company's portion of the
materials on the site relative to other named parties, the number of parties
participating and the financial capabilities of the other potentially
responsible parties once the relative share has been determined.

The matters discussed above and the Company's compliance with environmental
laws and regulations are not expected to have a material impact on the Company's
capital expenditures, earnings or competitive position. The Company has taken
several remedial and preventative steps to comply with federal and state
environmental regulations over the last 10 to 15 years. These measures have
included independent site assessments, installation of water treatment equipment
and installation of a hazardous material recycling system. The Company believes
that to the best of its knowledge, no further incident of contamination has
occurred since December 1988. No assurance can be given, however, that
additional environmental issues will not require additional, currently
unanticipated investigation, assessment or remediation expenditures or that
Philips will make payments that it is obligated to make under the Environmental
Indemnity Agreement.

LEGAL PROCEEDINGS

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

40
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY

Set forth below are the names, ages, positions and offices held and a brief
account of the business experience for each executive officer and director of
the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------- --- -------------------------------------------------------------------------
<S> <C> <C>
Kyle R. Kirkland 34 Co-Chairman of the Board
Dana D. Messina 34 Co-Chairman of the Board
Thomas Burzycki 52 President, Chief Executive Officer -- Selmer and Director
Bruce Stevens 53 President, Chief Executive Officer -- Steinway and Director
Dennis Hanson 41 Steinway Executive Vice President Finance and Administration and General
Counsel
Michael R. Vickrey 53 Selmer Executive Vice President, Finance and Chief Financial Officer
Thomas Kurrer 47 Managing Director, Steinway-Germany
Peter McMillan 38 Director
</TABLE>

KYLE R. KIRKLAND, CO-CHAIRMAN OF THE BOARD AND DIRECTOR. Mr. Kirkland has
been a principal of Kirkland Messina, Inc. since 1994. Mr. Kirkland was a Senior
Vice President of a Los Angeles-based investment bank from 1991 to 1994, where
he was responsible for its private placement financing activities. From 1990 to
1991, Mr. Kirkland was employed by Canyon Partners as a Vice President. From
1988 to 1990 he was employed by Drexel Burnham Lambert in its High Yield Bond
Department. Mr. Kirkland is also a director, at the request of certain
creditors, of International Airline Support Group, Inc.

DANA D. MESSINA, CO-CHAIRMAN OF THE BOARD AND DIRECTOR. Mr. Messina has
been a principal of Kirkland Messina, Inc. since 1994. Mr. Messina was a Senior
Vice President of a Los Angeles-based investment bank from 1990 to 1994, where
he was responsible for all of its corporate finance and merchant banking
activities. From 1987 to 1990, he was employed at Drexel Burnham Lambert in its
High Yield Bond Department.

THOMAS BURZYCKI, PRESIDENT, CHIEF EXECUTIVE OFFICER-SELMER AND
DIRECTOR. Mr. Burzycki joined Selmer in 1990 as President. From 1978 to 1990,
Mr. Burzycki held various financial and operational positions with United
Musical Instruments, including President from 1985 to 1990.

BRUCE STEVENS, PRESIDENT, CHIEF EXECUTIVE OFFICER-STEINWAY AND
DIRECTOR. Mr. Stevens was employed by the Polaroid Corporation for 18 years.
Mr. Stevens held various positions at Polaroid and in 1980 moved to Tokyo,
Japan, where he operated a $100 million subsidiary of Polaroid, eventually
returning to the United States as Director of Marketing for all of Polaroid's
international business. After leaving Polaroid in 1984, he became the President
of Robert Williams, Inc. He joined Steinway in 1985 when Steinway was acquired
from CBS. He has served on numerous industry and music education committees.

DENNIS HANSON, STEINWAY EXECUTIVE VICE PRESIDENT FINANCE AND ADMINISTRATION
AND GENERAL COUNSEL. Mr. Hanson serves as Steinway's Chief Financial Officer as
well as the Company's General Counsel. Mr. Hanson started his career in public
accounting at Haskins and Sells in 1976. In 1980, he joined Computervision
Corporation, where he held various financial positions including Vice President
of Audit. He joined Steinway in 1988 as Vice President Finance and assumed
duties as General Counsel in 1993.

41
<PAGE>
MICHAEL R. VICKREY, SELMER EXECUTIVE VICE PRESIDENT FINANCE AND CHIEF
FINANCIAL OFFICER. Mr. Vickrey has been employed by Selmer since 1970. He has
held the positions of Controller, Accounting Manager, Cost Accounting Manager
and Regional Credit Manager. Prior to joining Selmer, Mr. Vickrey spent seven
years in the banking industry, specializing in commercial finance.

THOMAS KURRER, MANAGING DIRECTOR, STEINWAY-GERMANY. Mr. Kurrer was employed
by the German-American Chamber of Commerce in New York from 1976 to 1978.
Between 1978 and 1989, he held various positions of increasing responsibility
with the Otto Wolff-Group, a conglomerate of steel and machinery equipment
companies. Mr. Kurrer's last position with the Otto Wolff-Group was Managing
Director of Wirth Gmbh. Mr. Kurrer joined Steinway in 1989 as Managing Director
of the Hamburg facility.

PETER MCMILLAN, DIRECTOR. Mr. McMillan is Executive Vice President and
Chief Investment Officer of SunAmerica Investments Inc. As Chief Investment
Officer, Mr. McMillan has overall investment management responsibility for the
major asset classes in SunAmerica's portfolio, including government securities,
mortgage-backed securities, public and private bonds, and commercial and
residential mortgages. Mr. McMillan joined SunAmerica Investments Inc. in 1989
after managing the fixed-income portfolio for Aetna Life Insurance and Annuity
Company.

Each director of the Company is elected for a period of one year and serves
until his successor is duly elected and appointed.

EXECUTIVE COMPENSATION

The following table sets forth the annual compensation paid and accrued by
the Company for services rendered during the fiscal years ended December 31,
1995, 1994 and 1993 to (i) the Company's Chief Executive Officer and (ii) the
four other most highly compensated executive officers of the Company serving at
the end of the last completed fiscal year ("Named Executive Officer").

42
<PAGE>
SUMMARY COMPENSATION TABLE (1)(2)

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS COMPENSATION
- ---------------------------------------------------- ----------- ----------- ----------- -------------------
<S> <C> <C> <C> <C>
Kyle R. Kirkland.................................... 1995 $ 1 -- (3)
Co-Chairman of the Board 1994 $ 1 -- (3)
1993 $ 1 -- (3)
Dana D. Messina..................................... 1995 $ 1 -- (3)
Co-Chairman of the Board 1994 $ 1 -- (3)
1993 $ 1 -- (3)
Thomas Burzycki..................................... 1995 $ 268,000 $ 263,000
President and Chief Executive 1994 $ 268,000 $ 180,000
Officer -- Selmer 1993(4) $ 268,000 $ 82,000
Bruce Stevens ...................................... 1995(5) $ 340,000 $ 70,000
President and Chief Executive Officer -- Steinway
Dennis Hanson ...................................... 1995(5) $ 170,000 $ 100,000
Steinway Executive Vice President Finance and
Administration and General Counsel
Michael R. Vickrey.................................. 1995 $ 100,000 $ 112,000
Selmer Executive Vice President Finance 1994 $ 100,000 $ 70,000
and Chief Financial Officer 1993(4) $ 100,000 $ 45,000
Thomas Kurrer ...................................... 1995(5) $ 278,300 $ 135,043
Managing Director, Steinway-Germany
</TABLE>

- ------------------------
(1) The table does not include the cost for personal benefits made available by
the Company. However, no executive officer named in the Summary Compensation
Table received such compensation in excess of the lesser of $50,000 or 10%
of such officer's cash compensation, nor did all executive officers together
receive such other compensation in excess of the lesser of $50,000 times the
number of such executive officers or 10% of such officers' aggregate cash
compensation.

(2) The Company did not have any stock option or other long-term incentive plans
based on the performance of the Company during the periods reflected in the
Summary Compensation Table.

(3) Kyle Kirkland and Dana Messina received compensation indirectly pursuant to
the Selmer and Steinway Management Agreements which allowed, subject to
certain performance criteria, the payment of $400,000 in the aggregate. The
Selmer and Steinway Management Agreements have been replaced with agreements
which allow for a payment of $200,000 for each of Kyle Kirkland and Dana
Messina. See "Employment Contracts." In connection with the Offering,
Kirkland Messina, Inc., a company owned by Kyle Kirkland and Dana Messina,
will receive a fee of $ million for arranging, negotiating, obtaining bank
waivers and other required consents, financial and market analyses and other
similar consulting and investment banking services. See "Related Party
Agreements."

(4) Salary and bonus for 1993 reflect payments made by the Company after the
Company's acquisition of Selmer in August 1993 as well as payments made by
the Predecessor prior to that date.

(5) Salary and bonus for 1995 reflect payments made by the Company after the
Steinway Acquisition in May 1995 as well as payments made by Steinway prior
to that date.

43
<PAGE>
EMPLOYMENT CONTRACTS

Contemporaneous with the Offering, the Company will enter into an agreement
with Kyle Kirkland and Kirkland Messina, Inc. which will provide that until
December 31, 2006, unless earlier terminated in accordance with its terms, Mr.
Kirkland will serve as Co-Chairman of the Company. The consideration for such
services will be an annual payment of $200,000 subject to an annual cost of
living adjustment. In addition, Mr. Kirkland may be entitled to receive bonuses
and certain other employment benefits as determined by the Board of Directors in
its discretion. Mr. Kirkland will be required to devote his time to the Company
as may be reasonably required to discharge his obligations under the agreement
and otherwise will be permitted to render similar services to other companies.
Upon a Change of Control (as defined in the agreement), the contract will
terminate.

Contemporaneous with the Offering, the Company will enter into an agreement
with Dana Messina and Kirkland Messina, Inc. which will provide that until
December 31, 2006, unless earlier terminated in accordance with its terms, Mr.
Messina will serve as Co-Chairman of the Company. The consideration for such
services will be an annual payment of $200,000 subject to an annual cost of
living adjustment. In addition, Mr. Messina may be entitled to receive bonuses
and certain other employment benefits as determined by the Board of Directors in
its discretion. Mr. Messina will be required to devote his time to the Company
as may be reasonably required to discharge his obligations under the agreement
and otherwise will be permitted to render similar services to other companies.
Upon a Change of Control (as defined in the agreement), the contract will
terminate.

On June 22, 1993, the Company entered into an Employment Agreement with
Thomas Burzycki that became effective on August 11, 1993. Such agreement
provides that until December 31, 1996 unless affirmatively terminated, Mr.
Burzycki will serve as President of Selmer in consideration of an annual base
salary of $268,000 per year, which base salary may be increased following the
end of each year of service. In addition to a base salary, Mr. Burzycki is
eligible to receive bonuses and certain other employment benefits. Mr.
Burzycki's Employment Agreement provides that, in certain circumstances, the
Company is obligated to pay up to $550,000 to Mr. Burzycki upon termination of
his employment by Selmer.

On May 1, 1995, the Company entered into an Employment Agreement with Bruce
Stevens that provides that until December 31, 1996, Mr. Stevens will serve as
President and Chief Executive Officer of Steinway in consideration of an annual
base salary of $340,000 per year, which base salary may be increased following
the end of each year of service. In addition to a base salary, Mr. Stevens is
eligible to receive bonuses and certain other employment benefits. Mr. Stevens'
Employment Agreement provides that, in certain circumstances, the Company is
obligated to pay up to $340,000, plus the salary for the remainder of his term,
to Mr. Stevens upon termination of his employment by Steinway.

On May 1, 1995, the Company entered into an Employment Agreement with Dennis
Hanson that provides that until December 31, 1996, Mr. Hanson will serve as
General Counsel and Chief Financial Officer of Steinway in consideration of an
annual base salary of $170,000 per year, which base salary may be increased
following the end of each year of service. In addition to a base salary, Mr.
Hanson is eligible to receive bonuses and certain other employment benefits. Mr.
Hanson's Employment Agreement provides that, in certain circumstances, the
Company is obligated to pay up to $210,000, plus the salary for the remainder of
his term, to Mr. Hanson upon termination of his employment by Steinway.

On December 19, 1995, the Company entered into an Employment Agreement with
Michael Vickrey that provides that until December 31, 1996, Mr. Vickrey will
serve as Vice President and Chief Financial Officer of the Company in
consideration of an annual base salary of $100,000 per year, which base salary
may be increased following the end of each year of service. In addition to a
base salary, Mr. Vickrey is eligible to receive bonuses and certain other
employment benefits. Mr. Vickrey's Employment Agreement provides that, in
certain circumstances, the Company is obligated to pay $100,000, plus the salary
for the remainder of his term, to Mr. Vickrey upon termination of his employment
by the Company.

44
<PAGE>
As of May 8, 1989, Steinway entered into an Employment Agreement with Thomas
Kurrer that provides that Mr. Kurrer will serve as Managing Director of
Steinway's German operations in consideration of an annual base salary of
Deutsch Mark 300,000, which base salary may be increased following the end of
each year of service. In addition to a base salary, Mr. Kurrer is eligible to
receive bonuses and certain other employment benefits. The agreement
automatically renews every three years unless at least 12 months' notice is
given by either party.

RELATED PARTY AGREEMENTS

Selmer previously entered into a Management Agreement (the "Selmer
Management Agreement") with Kirkland Messina, Inc., a company owned by Kyle
Kirkland and Dana Messina, pursuant to which Selmer agreed to pay Kirkland
Messina, Inc. an aggregate of $250,000 per year to provide management and
consulting services, monitor the business of Selmer and conduct periodic reviews
of such business as reasonably requested by Selmer's board of directors, assist
in developing a long-term strategic plan and identify, review and analyze merger
and acquisition opportunities. In addition, the Company paid Kirkland Messina,
Inc. a one-time transaction and consulting fee of $750,000 in connection with
the Steinway Acquisition pursuant to an unwritten agreement for its services in
arranging and structuring the Steinway Merger Agreement, obtaining long-term
financing, negotiating the terms of the Bank Credit Facility and related
documents and providing financial and market analyses and other similar
consulting and investment banking services.

Steinway previously entered into a Management Agreement (the "Steinway
Management Agreement") with Kirkland Messina, Inc., pursuant to which Steinway
agreed to pay Kirkland Messina, Inc. up to an aggregate of $150,000 per year to
provide, among other things, management and consulting services similar to those
provided under the Selmer Management Agreement.

Upon consummation of the Offering, both of the Selmer and Steinway
Management Agreements will be terminated and replaced with the agreements
discussed above under "Employment Contracts."

In connection with the Offering, Kirkland Messina, Inc. will receive a fee
of $ million for arranging, negotiating and obtaining waivers and other
required consents and for providing financial and market analyses and other
similar consulting and investment banking services.

STOCK PLANS

Contemporaneous with the Offering, the Company will adopt the 1996 Stock
Plan. The total number of shares of Ordinary Common Stock subject to issuance
under the 1996 Stock Plan is , subject to adjustments as provided in the
1996 Stock Plan. The 1996 Stock Plan provides for the grant of stock options
(including incentive stock options as defined in Section 422 of the Internal
Revenue Code of 1986, as amended, and non-qualified stock options), stock
appreciation rights ("SARs") and other stock awards (including restricted stock
awards and stock bonuses) to employees of the Company, its subsidiaries,
affiliates or any consultant or advisor engaged by the Company who renders bona
fide services to the Company or the Company's subsidiaries or affiliates in
connection with their businesses; provided, that such services are not in
connection with the offer or sale of securities in a capital raising
transaction. Prior to the date when securities are first registered pursuant to
Section 12 of the Exchange Act, the 1996 Stock Plan will be administered by the
Company's Board of Directors. Upon registration, the 1996 Stock Plan will be
administered by the Compensation Committee of the Board of Directors (the
"Committee") which will be comprised of "disinterested persons" within the
meaning of Rule 16b-3 of the Exchange Act. Stock options may be granted by the
Committee on such terms, including vesting and payment forms, as it deems
appropriate in its discretion; provided, that no option may be exercised later
than ten years after its grant, and the purchase price for incentive stock
options and non-qualified stock options shall not be less than 100% and 85% of
the fair market value of the Ordinary Common Stock at the time of grant,
respectively. SARs may be granted by the Committee on such terms, including
payment forms, as the Committee deems appropriate, provided that a SAR granted
in connection with a stock option shall become exercisable and lapse according
to the same vesting schedule and lapse rules established for the stock option
(which

45
<PAGE>
shall not exceed ten years from the date of grant). A SAR shall not be
exercisable during the first six months of its term and only when the fair
market value of the underlying Ordinary Common Stock exceeds the SAR's exercise
price and is exercisable subject to any other conditions on exercise imposed by
the Committee. Unless terminated by the Board of Directors, the 1996 Stock Plan
continues for ten years from the date of adoption. Upon the occurrence of an
event constituting a change in control of the Company, in the sole discretion of
the Committee, all options, SARs and other awards will become immediately
exercisable in full for the remainder of their terms and restrictions on stock
granted pursuant to a restricted stock award will lapse. The Board of Directors
has authorized the grant of options to certain officers and key employees to
purchase an aggregate of [ ] shares of Ordinary Common Stock under the 1996
Stock Plan at the initial public offering price contingent upon the consummation
of the Offering.

Contemporaneous with the Offering, the Company will also adopt the 1996
Non-Employee Directors Stock Option Plan (the "Directors Plan"). A total of
[ ] shares of Ordinary Common Stock are available for grant under the
Directors Plan. The Directors Plan provides for the automatic grant to each of
the Company's non-employee directors of (i) an option to purchase [ ]
shares of Ordinary Common Stock on the date of such director's initial election
or appointment to the Board of Directors (the "Initial Grant") and (ii) an
option to purchase [ ] shares of Ordinary Common Stock on each anniversary
thereof on which the director remains on the Board of Directors (the "Annual
Grant"). The options will have an exercise price of 100% of the fair market
value of the Ordinary Common Stock on the date of grant and have a 10-year term.
Initial Grants become exercisable in two equal annual installments commencing on
the first anniversary of date of grant thereof and Annual Grants become fully
exercisable beginning on the first anniversary of the date of grant. Both
Initial and Annual Grants are subject to acceleration in the event of certain
corporate transactions. Any options which are vested at the time the optionee
ceases to be a director shall be exercisable for one year thereafter. Options
which are not vested automatically terminate in the event the optionee ceases to
be a director of the Company. Options which are vested on the date the optionee
ceases to be a director due to death or disability generally remain exercisable
thereafter for the earlier of five years or expiration. Upon the occurrence of
an event constituting a change in control of the Company, all then outstanding
options under the Directors Plan shall be cancelled. However, during the 30 day
period preceding the effective date of such transaction, all partly or wholly
unexercised options will be exercisable, including those not yet exercisable
pursuant to the vesting schedule. As of the date of this Prospectus, no options
have been granted under the Directors Plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During fiscal 1995, the Company's Board of Directors did not have a
compensation committee or other committee performing similar functions. All
compensation decisions concerning the Company's executive officers during fiscal
1995 were made by the entire Board of Directors.

46
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth as of March 30, 1996, certain information
regarding the beneficial ownership of voting securities of the Company by (i)
each person known by the Company to be the beneficial owner of more than 5% of
any class of the Company's voting securities, (ii) each of the directors and
named officers of the Company, and (iii) all executive officers and directors of
the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL
OWNERSHIP OF ORDINARY COMMON STOCK
--------------------------------------------------
BEFORE AFTER
OFFERING PERCENT OFFERING PERCENT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SunAmerica Life Insurance Company... 28.4%
1 SunAmerica Center
Los Angeles, CA 90067
John Hancock Mutual Life Insurance
Company............................ 28.2%
200 Clarendon Street
John Hancock Place, 57th Floor
Boston, Massachusetts 02117
Equitable Capital Private Income and
Equity Partnership II, L.P......... 10.6%
c/o Alliance Corporate Finance
Group Incorporated
1285 Avenue of the Americas, 19th
Floor
New York, New York 10019
Directors
Thomas T. Burzycki................ 3.6%
Kyle Kirkland (3)................. 3.2%
Dana D. Messina (3)............... 3.3%
Bruce Stevens..................... 1.6%
Peter McMillan (2)................ (2)
Other Executive Officers
Dennis Hanson..................... 0.8%
Michael R. Vickrey................ 2.6%
Thomas Kurrer..................... 0.8%
All directors and executive officers
as a group (8 persons) (2)(3)...... 15.9%

<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL
OWNERSHIP OF CLASS A COMMON STOCK (1)
-----------------------------------------
BEFORE AFTER
OFFERING PERCENT OFFERING PERCENT
-- ----------- ----------- -----------
<S> <C> <C> <C>
SunAmerica Life Insurance Company...-- -- -- --
1 SunAmerica Center
Los Angeles, CA 90067
John Hancock Mutual Life Insurance
Company............................-- -- -- --
200 Clarendon Street
John Hancock Place, 57th Floor
Boston, Massachusetts 02117
Equitable Capital Private Income and
Equity Partnership II, L.P.........-- -- -- --
c/o Alliance Corporate Finance
Group Incorporated
1285 Avenue of the Americas, 19th
Floor
New York, New York 10019
Directors
Thomas T. Burzycki................-- -- -- --
Kyle Kirkland (3)................. 47.5% 47.5%
Dana D. Messina (3)............... 52.5% 52.5%
Bruce Stevens.....................-- -- -- --
Peter McMillan (2)................
Other Executive Officers
Dennis Hanson.....................-- -- -- --
Michael R. Vickrey................-- -- -- --
Thomas Kurrer.....................
All directors and executive officers
as a group (8 persons) (2)(3)...... 100.0% 100.0%
</TABLE>

- ------------------------------
(1) Each share of Class A Common Stock has 98 votes. Each share of Ordinary
Common Stock has one vote.

(2) Mr. McMillan is Executive Vice President and Chief Investment Officer of
SunAmerica Investments, Inc. As Chief Investment Officer, Mr. McMillan has
overall investment management responsibility for the major asset classes in
SunAmerica's investment portfolio, including the shares owned by
SunAmerica Life Insurance Company. Mr. McMillan disclaims beneficial
ownership of such shares.

(3) Includes shares owned by Kirkland Messina, Inc., which may be deemed
to be beneficially owned by both Kyle Kirkland and Dana Messina.

47
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The following description of the capital stock of the Company and certain
provisions of the Company's Certificate of Incorporation (the "Certificate") and
Bylaws ("Bylaws") is a summary and is qualified in its entirety by the
provisions of the Certificate and Bylaws, copies of which have been filed as
exhibits to the Registration Statement of which this Prospectus is a part.

Upon completion of the Offering, the authorized capital stock of the Company
will consist of (i) 90,000,000 shares of Ordinary Common Stock, $.001 par value
per share, of which shares will be outstanding, (ii) 5,000,000 shares of
Class A Common Stock, $.001 par value per share, of which will be
outstanding and (iii) 5,000,000 shares of Preferred Stock, $.001 par value per
share ("Preferred Stock"), of which no shares will be outstanding.

ORDINARY COMMON STOCK AND CLASS A COMMON STOCK

The Certificate authorizes two classes of Common Stock designated as
Ordinary Common Stock and Class A Common Stock. With the exception of disparate
voting power, both classes of Common Stock are substantially identical.

Each share of Ordinary Common Stock and Class A Common Stock entitles the
record holder to one vote and 98 votes, respectively, at any meeting of
stockholders or in any action by written consent of stockholders in lieu of
meeting. The holders of Ordinary Common Stock and Class A Common Stock vote
together as a single class on all matters submitted to a vote of the
stockholders, except as otherwise provided by law. Neither the holders of
Ordinary Common Stock nor the holders of Class A Common Stock have cumulative
voting or preemptive rights.

Holders of Common Stock will be entitled to receive such dividends and other
distributions as may be declared by the Board of Directors out of assets or
funds of the Company legally available therefor after payment of any
preferential dividends on shares of Preferred Stock as provided in the
Certificate.

The holders of more than 50% of the Ordinary Common Stock and Preferred
Stock, voting as a class, must approve any proposal to amend the Bylaws of the
Company in a way that would affect the respective designations, rights or
preferences of holders of Ordinary Common Stock and Preferred Stock. Any
amendment, modification or waiver to the Certificate requires the approval of at
least 66 2/3% of the holders of each class of Common Stock adversely affected by
such action.

If at any time, any share of Class A Common Stock shall become owned by a
stockholder other than Dana Messina or Kyle Kirkland, or their affiliates, such
share of Class A Common Stock shall automatically convert into Ordinary Common
Stock on a share-per-share basis.

In the event of any liquidation, dissolution or winding up of the Company,
holders of Common Stock will be entitled to receive the assets and funds of the
Company available for distribution after payments to creditors and to holders of
any outstanding Preferred Stock, in proportion to the number of shares they
hold.

Application has been made to list the Ordinary Common Stock on the NYSE
under the symbol "LVB."

PREFERRED STOCK

The Board of Directors, without further action by the stockholders, may
issue shares of the Preferred Stock in one or more series and may fix or alter
the relative, participating, optional or other rights, preferences, privileges
and restrictions, including the voting rights, redemption provisions (including
sinking fund provisions), dividend rights, dividend rates, liquidation
preferences and conversion rights, and the description of and number of shares
constituting any wholly unissued series of Preferred Stock. The Board of
Directors, without further stockholder approval, can issue Preferred Stock with
voting and conversion rights that could adversely affect the voting power of the
holders of Common Stock. The Company currently has no plans to issue shares of
Preferred Stock

48
<PAGE>
and, upon completion of the Offering, no shares of Preferred Stock will be
outstanding. The issuance of Preferred Stock in certain circumstances may have
the effect of delaying or preventing a change of control of the Company without
further action by the stockholders, may discourage bids for the Company's Common
Stock at a premium over the market price of the Common Stock and may adversely
affect the market price and the voting and other rights of the holders of Common
Stock.

As of the date hereof, there are 1,000,000 shares of the Convertible
Participating Preferred Stock outstanding. Pursuant to the Certificate, upon
consummation of the Offering such Preferred Stock shall be automatically
converted into shares of Ordinary Common Stock.

DELAWARE LAW AND CERTAIN CORPORATE PROVISIONS

Upon the consummation of the Offering, the Company will be subject to the
provisions of Section 203 of the General Corporation Law ("GCL") of Delaware. In
general, this statute prohibits a publicly held Delaware corporation from
engaging under certain circumstances in any "business combination" with an
"interested stockholder," for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless (i)
prior to the date at which the stockholder became an interested stockholder the
Board of Directors approved either the business combination or the transaction
which resulted in the person becoming an interested stockholder, (ii) the
stockholder owned at least 85% of the outstanding voting stock of the
corporation (excluding shares held by directors who are officers or held in
certain employee stock plans) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, or (iii) the
business combination is approved by the Board of Directors and by 66 2/3% of the
outstanding voting stock of the corporation (excluding shares held by the
interested stockholder) at a meeting of stockholders (and not by written
consent) held on or subsequent to the date of the business combination. An
"interested stockholder" is a person who (x) owns 15% or more of the
corporation's voting stock or (y) is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting stock of
the corporation at any time within the prior three years. Section 203 defines a
"business combination" to include, without limitation, mergers, consolidations,
stock sales and asset based transactions and other transactions resulting in a
financial benefit to the interested stockholder.

LIMITATION OF LIABILITY AND INDEMNIFICATION

As permitted by the GCL, the Certificate provides that directors of the
Company shall not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) under Section 174 of the GCL or any amendment thereto or successor
provision thereto, (ii) for any breach of the director's duty of loyalty to the
Company or its stockholders, (iii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, or (iv) for
any transaction from which the director derives any improper personal benefit.
In addition, the Company's Bylaws provide for indemnification of the Company's
officers and directors to the fullest extent permitted under Delaware law.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed that in the opinion
of the Commission such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock will be Continental
Stock Transfer & Trust Company.

49
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS

BANK CREDIT FACILITY

The Bank Credit Facility with BNY Financial Corporation (the "Bank")
provides Steinway and Selmer (collectively, the "Borrowers" and, together with
the Company, the "Credit Parties") with a line of credit consisting of a
revolver and a term loan subfacility with aggregate commitments of $60.0
million. The principal terms of the Bank Credit Facility are described herein.
The information contained herein relating to the Bank Credit Facility is
qualified in its entirety by reference to the complete text of the documents
entered into in connection therewith, copies of which have been filed as
exhibits to the Registration Statement of which this Prospectus is a part.

The proceeds of the Bank Credit Facility may be used for the following
purposes by the Credit Parties: (i) general working capital needs; (ii) certain
capital expenditures; (iii) payment of administrative and legal expenses; (iv)
payment of capitalized and interest expenses; (v) repurchase of the Textron
Notes (as defined below); and (vi) limited repurchase of Senior Secured Notes
(as defined below). The final maturity of the Bank Credit Facility is March 31,
2000, with the amounts then outstanding to be paid in full on such date, unless
extended pursuant to mutual agreement by the parties thereto.

Borrowings under the Bank Credit Facility bear interest, at the option of
the Company, at (i) the higher of the prime rate or the federal funds rate plus
0.5% on any day, plus 1.5%, or (ii) the Eurodollar rate plus 3.0%. The Bank
Credit Facility is secured by a first lien on the inventory, receivables and
intangibles of Selmer and the domestic assets of Steinway and a second lien on
Selmer's fixed assets. Additionally, the Bank Credit Facility is guaranteed by
the Company and the Company's direct and indirect domestic subsidiaries.

Covenants contained in the Bank Credit Facility include (i) maintenance by
the Borrowers of a minimum consolidated net worth; (ii) maintenance by the
Borrowers of a minimum quick asset ratio, fixed charge coverage ratio and
interest coverage ratio; (iii) limitations on the creation of liens by the
Credit Parties; (iv) limitations on the Credit Parties' ability to make
investments; (vi) limitations on the Credit Parties' capital expenditures; (vii)
limitations on the Credit Parties' ability to pay dividends; (viii) limitations
on the Credit Parties ability to incur additional indebtedness; (ix) limitations
on transactions with affiliates of the Credit Parties; and (x) restrictions on
the transfer of assets by the Credit Parties.

Events of default include: (i) failure by the Borrowers to make any payment
of principal, interest or any other amount owing in respect of any obligation
under the Bank Credit Facility when due and payable; (ii) a representation or
warranty by a Credit Party proves to have been materially false or misleading
when made; (iii) failure by a Credit Party to furnish financial information when
due or to permit inspection of books or records; (iv) issuance of a notice of a
material lien or similar charge; (v) breach of certain of the covenants
contained in the Bank Credit Facility or any other agreement with the Bank; (vi)
any judgment rendered or judgment lien filed for an amount in excess of $500,000
against a Credit Party; (vii) application for the appointment of a receiver,
custodian, trustee or liquidator, an admission of inability to pay debts, a
general assignment for the benefit of creditors, or a commencement of a
voluntary case under the bankruptcy laws by a Credit Party; (viii) default under
any agreement, instrument or arrangement which has a material adverse effect on
the conditions or affairs of a Credit Party; (ix) termination or breach of
certain other documents or guarantees delivered in connection with the Bank
Credit Facility; (x) any change in control (as such event is defined in the Bank
Credit Facility); (xi) any offset by Philips of any amounts Philips owes
pursuant to the Environmental Indemnity Agreement or a default under such
agreement (see "Business -- Environmental Matters"); (xii) any failure by
Textron to purchase the Textron Notes pursuant to the Textron Note Purchase
Agreement (as defined below); (xiii) determination that any material provision
of the Bank Credit Facility or certain other related documents ceases to be
valid and binding on any Credit Party; and (xiv) any competition by Kyle
Kirkland or Dana Messina with a Credit Party.

50
<PAGE>
11% SENIOR SUBORDINATED NOTES DUE 2005

The Company's 11% Senior Subordinated Notes due 2005 (the "Notes") will
mature on May 15, 2005. As of March 30, 1996, there were $110.0 million of Notes
outstanding. Proceeds from the Notes were used to pay a portion of the cash
consideration payable in connection with the Steinway Acquisition and to repay
certain indebtedness of Steinway. The information contained herein relating to
the Notes is qualified in its entirety by reference to the complete text of the
documents entered into in connection therewith, copies of which have been filed
as exhibits to the Registration Statement of which this Prospectus is a part.

The Notes are general unsecured obligations of Selmer, subordinated in right
of payment to all senior debt (as such term is defined in the Indenture. The
Notes are guaranteed by the Company, Steinway and certain of Steinway's
subsidiaries (the "Guarantors"). The Notes have no mandatory redemption or
sinking fund payments until maturity. The Notes are redeemable at the option of
the Company beginning June 1, 2000 at 104.125%, with the redemption price
declining ratably each year thereafter to par on June 1, 2003.

The Indenture contains certain covenants including limitations on (i) the
incurrence by Selmer and its subsidiaries of additional indebtedness; (ii) the
ability of Selmer and its subsidiaries to pay dividends; (iii) transactions by
Selmer and its subsidiaries with affiliates; (iv) the retention of proceeds by
Selmer and its subsidiaries from the sales of assets; (v) the ability of Selmer
and its subsidiaries to incur certain liens; and (vi) Selmer's ability to
consolidate or merge with or into, or to transfer all or substantially all of
its assets, to another entity.

Events of default under the Indenture include (i) default in the payment of
interest on the Notes when due and payable, which default continues for 30 days;
(ii) default in the payment of the principal of or any applicable premium when
due and payable on the Notes; (iii) Selmer or any Guarantor fails to observe or
perform any covenant, condition, or agreement made pursuant to the Indenture of
the Notes, which failure remains uncurred after notice of such default is
provided to Selmer; (iv) default under any mortgage, indenture, or instrument
evidencing any indebtedness of Selmer or its subsidiaries; (v) failure by Selmer
or any of its subsidiaries to discharge within 60 days final judgments entered
by a court which in the aggregate exceed $5.0 million; (vi) any guarantee under
the Indenture or the Notes held by a judicial proceeding to be unenforceable or
invalid, or if any Guarantor defaults on, denies or disaffirms its obligations
under its guarantee; and (vii) certain events of bankruptcy or insolvency with
respect to Selmer or any of its subsidiaries.

SENIOR SECURED NOTES DUE 2000

The Company intends to use a portion of the net proceeds from the Offering
to redeem its 11.00% Senior Secured Notes due 2000 and 10.92% Senior Secured
Notes due 2000 (collectively, the "Senior Secured Notes"). See "Use of
Proceeds." As of March 30, 1996, there were $52.9 million of Senior Secured
Notes outstanding. The information contained herein relating to the Senior
Secured Notes is qualified in its entirety by reference to the complete text of
the documents entered into in connection therewith, copies of which have been
filed as exhibits to the Registration Statement of which this Prospectus is a
part.

Proceeds from the Senior Secured Notes were used to pay a portion of the
cash consideration payable in connection with the Company's acquisition of
Selmer in 1993. The indenture governing the Senior Secured Notes contains
certain covenants, similar to those contained in the Indenture relating to the
Notes. See "-- 11% Senior Subordinated Notes due 2005" above.

The Senior Secured Notes are redeemable at the option of the Company
beginning July 31, 1996. At any time on or after such date and upon 30 days'
notice, the Company may prepay the Senior Secured Notes at a redemption price
equal to the sum of 100% of the principal amount to be prepaid, together with
accrued and unpaid interest, plus a premium equal to the Make-Whole Amount (as
defined in the Senior Secured Notes). See "Capitalization." The Company intends
to send a notice of redemption to the holders of the Senior Secured Notes upon
consummation of the Offering.

51
<PAGE>
NOTES RECEIVABLE FINANCING

Certain of Selmer's dealers may convert their open accounts to Selmer into a
note receivable. The program divides the year into two periods commencing in
January and October, and dealers must elect to participate in the program in
advance at the beginning of each year. If dealers elect to participate in this
program with respect to purchases made from January through September, then the
initial payment on their notes receivable is due in October. Notes receivable
applicable to purchases made from October through December have their initial
payment due in February. The term of the notes receivable range from six to
twelve months, and bear interest at 3% to 5% over the prime rate. The notes
receivable are secured by the respective dealer's inventory. Substantially all
of the notes receivable are purchased by a third-party financial institution on
a recourse basis.

The notes receivable are currently being purchased by Textron pursuant to a
Master Note Purchase and Repurchase Agreement dated December 2, 1994 (the
"Textron Note Purchase Agreement") by and between the Company and Textron. The
Textron Note Purchase Agreement, which expires in December 1997, permits the
Company to sell and have outstanding up to $15.0 million of such notes
receivable to Textron (the "Textron Notes").

The Company may enter into other financing arrangements with its dealers
and/or other financial institutions in the future; however, there can be no
assurance that the Company will secure financing arrangements on the same terms
as currently exist under the Textron Note Purchase Agreement.

SHARES ELIGIBLE FOR FUTURE SALE

Immediately after consummation of the Offering, the Company will have
outstanding shares of Common Stock, including shares of Class A
Common Stock, assuming no exercise of the over-allotment option granted to the
Underwriters. Of these shares, the shares of Ordinary Common Stock sold in
the Offering (or a maximum of shares if the over-allotment option is
exercised in full) will be freely tradable without restrictions or further
registration under the Securities Act unless purchased by "affiliates" of the
Company (as that term is defined under Rule 144 of the Securities Act ("Rule
144")). The shares of Ordinary Common Stock held by
and the shares of Class A Common Stock held by will
be "restricted securities" as defined under the Securities Act, and may not be
sold in the absence of registration under the Securities Act other than pursuant
to Rule 144 or another applicable exemption from registration under the
Securities Act. As defined in Rule 144, an "affiliate" of an issuer is a person
that directly, or indirectly through the usage of one or more intermediaries,
controls, or is controlled by, or is under common control with, such issuer.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
restricted securities for at least two years, is entitled to sell within any
three-month period that number of shares that does not exceed the greater of (i)
one percent of the then outstanding shares of the Ordinary Common Stock or (ii)
the average weekly trading volume of the then outstanding securities for the
four weeks preceding each such sale. Sales under Rule 144 also are subject to
certain manner of sale restrictions and notice requirements, and to the
availability of current public information about the Company.

A person (or persons whose shares are aggregated) who is not deemed to have
been an affiliate of the Company at any time during 90 days immediately
preceding the sale and who has beneficially owned the shares proposed to be sold
for at least three years is entitled to sell such shares pursuant to Rule 144(k)
under the Securities Act without regard to the limitations described above. The
Commission has published a notice of rulemaking that, if adopted as proposed,
would shorten the two-year holding period under Rule 144 to one year and would
shorten the three-year holding period under Rule 144(k) to two years. If such
amendments are adopted, certain shares of Ordinary Common Stock may be sold
under Rule 144 immediately following the Offering. The Company cannot predict
whether such amendments will be adopted.

52
<PAGE>
The Company and certain of the Company's stockholders have agreed, subject
to certain exceptions, not to sell, offer to sell, grant any option (other than
pursuant to the Company's existing stock option plans) for the sale of or
otherwise dispose of any shares of Common Stock or securities convertible into
or exercisable or exchangeable for Common Stock (except for the shares offered
hereby) for a period of 180 days after the date of this Prospectus.

No prediction can be made as to the effect, if any, that future sales of
shares, or availability of shares for future sale, will have on the market price
of the Ordinary Common Stock prevailing from time to time. Sales of substantial
amounts of Ordinary Common Stock (including shares issued upon the exercise of
stock options), or the perception that such sales could occur, could adversely
affect prevailing market prices for the Ordinary Common Stock, with the result
that the Company's ability to raise additional capital in the equity markets
could be adversely affected.

In accordance with a registration rights agreement dated as of August 9,
1993 (the "Registration Rights Agreement"), the Company granted to certain
holders of outstanding Ordinary Common Stock, warrants exercisable into Ordinary
Common Stock and preferred stock convertible into Ordinary Common Stock the
right to require the Company to register such shares of Ordinary Common Stock
for resale under the Securities Act. Such holders have the right beginning 180
days after the closing of the Offering, to twice demand that the Company cause
all, or any portion, of those holders' shares to be registered for resale under
the Securities Act. In addition, such holders have the "piggyback" right to
require the Company to include their shares with other shares that may be
registered by the Company under the Securities Act.

In the event that additional shares of Ordinary Common Stock are registered
as a result of the exercise of either their demand or piggyback registration
rights pursuant to the Registration Rights Agreement, the prevailing market
price for the Ordinary Common Stock and the Company's ability to raise
additional capital could be adversely affected.

53
<PAGE>
CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS

The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Ordinary
Common Stock applicable to "Non-United States Holders." A "Non-United States
Holder" is any beneficial owner of Ordinary Common Stock that, for United States
federal income tax purposes, is a non-resident alien individual, a foreign
corporation, a foreign partnership or a non-resident fiduciary of a foreign
estate or trust as such terms are defined in the Internal Revenue Code of 1986,
as amended (the "Code"). This discussion is based on the Code and administrative
and judicial interpretations as of the date hereof, all of which are subject to
change either retroactively or prospectively. This discussion does not address
all aspects of United States federal income and estate taxation that may be
relevant to Non-United States Holders in light of their particular circumstances
and does not address any tax consequences arising under the laws of any state,
local or foreign taxing jurisdiction. Prospective investors are urged to consult
with their tax advisors regarding the United States federal, state and local
income and other tax consequences, and the non-United States tax consequences,
of owning and disposing of Ordinary Common Stock.

DIVIDENDS

Subject to the discussion below, any dividend paid to a Non-United States
Holder generally will be subject to United States withholding tax either at a
rate of 30% of the gross amount of the dividend or such lower rate as may be
specified by an applicable income tax treaty. For purposes of determining
whether tax is to be withheld at a 30% rate or at a reduced rate as specified by
an income tax treaty, the Company ordinarily will presume that dividends paid to
an address in a foreign country are paid to a resident of such country absent
knowledge that such presumption is not warranted. However, under proposed United
States Treasury regulations not currently in effect, a Non-United States Holder
would be required to file certain forms accompanied by a statement from a
competent authority of the treaty country in order to claim the benefits of a
tax treaty. Dividends paid to a holder with an address within the United States
generally will not be subject to withholding tax, unless the Company has actual
knowledge that the holder is a Non-United States Holder.

Dividends received by a Non-United States Holder that are effectively
connected with a United States trade or business conducted by such Non-United
States Holder are exempt from withholding tax. However, such effectively
connected dividends are subject to regular United States income tax in the same
manner as if the Non-United States Holder were a United States resident. A
Non-United States Holder may claim exemption from withholding under the
effectively connected income exception by filing Form 4224 (Statement Claiming
Exemption from Withholding of Tax on Income Effectively Connected With the
Conduct of Business in the United States) each year with the Company or its
paying agent prior to the payment of the dividends for such year. Effectively
connected dividends received by a corporate Non-United States Holder may be
subject to an additional "branch profits tax" at a rate of 30% (or such lower
rate as may be specified by an applicable tax treaty) of such corporate
Non-United States Holder's effectively connected earnings and profits, subject
to certain adjustments.

A Non-United States Holder eligible for a reduced rate of United States
withholding tax pursuant to a tax treaty may obtain a refund of any excess
amounts currently withheld by filing an appropriate claim for refund with the
United States Internal Revenue Service (the "IRS").

GAIN ON DISPOSITION OF ORDINARY COMMON STOCK

A Non-United States Holder generally will not be subject to United States
federal income tax with respect to a gain realized upon the sale or a
disposition of Ordinary Common Stock unless: (i) such gain is effectively
connected with a United States trade or business of the Non-United States
Holder, (ii) the Non-United States Holder is an individual who is present in the
United States for a period or periods aggregating 183 days or more during the
calendar year in which such sale or disposition occurs and certain other
conditions are met, or (iii) the Company is or has been a "United States real

54
<PAGE>
property holding corporation" for federal income tax purposes at any time within
the shorter of the five-year period preceding such disposition or such holder's
holding period and certain other conditions are met. The Company has determined
that it is not, has never been, and does not believe that it will become a
"United States real property holding corporation" for federal income tax
purposes. If a Non-United States Holder falls under clause (i) above, the
Non-United States holder will be taxed on the net gain derived from the sale
under regular graduated United States federal income tax rates (and, with
respect to corporate Non-United States Holders, may also be subject to the
branch profits tax described above). If an individual Non-United States Holder
falls under clause (ii) above, the Non-United States Holder generally will be
subject to a 30% tax on the gain derived from the sale, which gain may be offset
by United States capital losses recognized within the same taxable year of such
sale.

BACKUP WITHHOLDING AND INFORMATION REPORTING

Generally, the Company must report to the IRS the amount of dividends paid,
the name and address of the recipient, and the amount, if any, of tax withheld.
A similar report is sent to the holder. Pursuant to tax treaties or other
agreements, the IRS may make its reports available to tax authorities in the
recipient's country of residence.

Unless the Company has actual knowledge that a holder is a non-United States
person, dividends paid to a holder at an address within the United States may be
subject to backup withholding at a rate of 31% if the holder is not an exempt
recipient as defined in Treasury Regulation Section 1.6049-4(c)(1)(ii) (which
includes corporations) and fails to provide a correct taxpayer identification
number and other information to the Company. Backup withholding will generally
not apply to dividends paid to holders at an address outside the United States
(unless the Company has knowledge that the holder is a United States person.)

If the proceeds of the disposition of Ordinary Common Stock by a Non-United
States Holder are paid over, by or through a United States office of a broker,
the payment is subject to information reporting and to backup withholding at a
rate of 31% unless the disposing holder certifies as to its name, address and
status as a Non-United States Holder under penalties of perjury or otherwise
establishes an exemption. Generally, United States information reporting and
backup withholding will not apply to a payment of disposition proceeds if the
payment is made outside the United States through a non-United States office of
a non-United States broker. However, United States information reporting
requirements (but not backup withholding) will apply to a payment of disposition
proceeds outside the United States if (a) the payment is made through an office
outside the United States of a broker that is either (i) a United States person
for United States federal income tax purposes, (ii) a "controlled foreign
corporation" for United States federal income tax purposes or (iii) a foreign
person which derives 50% or more of its gross income for certain periods from
the conduct of a United States trade or business, and (b) the broker fails to
maintain documentary evidence in its files that the holder is a Non-United
States Holder and that certain conditions are met or that the holder otherwise
is entitled to an exemption.

Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to 31% backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the IRS.

ESTATE TAX

An individual Non-United States Holder who is treated as the owner of
Ordinary Common Stock at the time of his or her death or has made certain
lifetime transfers of an interest in Ordinary Common Stock will be required to
include the value of such Ordinary Common Stock in his or her gross estate for
United States federal estate tax purposes and may be subject to United States
federal estate tax, unless an applicable estate tax treaty provides otherwise.

The United States Treasury has recently issued proposed regulations
regarding the withholding and information reporting rules discussed above. In
general, the proposed regulations do not alter the

55
<PAGE>
substantive withholding and information reporting requirements but unify current
certification procedures and forms and clarify reliance standards. If finalized
in their current form, the proposed regulations would generally be effective for
payments made after December 31, 1997, subject to certain transition rules.

LEGAL MATTERS

Certain legal matters with respect to the Ordinary Common Stock have been
passed upon for the Company by Milbank, Tweed, Hadley & McCloy, Los Angeles,
California. Certain legal matters relating to the Offering will be passed upon
for the Underwriters by Latham & Watkins, Los Angeles, California.

EXPERTS

The consolidated financial statements of the Company as of December 31, 1994
and 1995 and for the period January 1, 1993 to August 10, 1993, the period
August 10, 1993 to December 31, 1993 and the years ended December 31, 1994 and
1995 and the consolidated financial statements of Steinway as of June 30, 1993
and 1994 and for each of the three years in the period ended June 30, 1994
included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports dated March 8, 1996 and
September 9, 1994, respectively, appearing herein and elsewhere in the
Registration Statement, and have been so included in reliance upon the reports
of such firm given upon their authority as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Ordinary Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement including the exhibits and schedules thereto. For further
information with respect to the Company or the Ordinary Common Stock, reference
is made to the Registration Statement and the schedules and exhibits filed as a
part thereof. Statements contained in this Prospectus regarding the contents of
any contract or any other document are necessarily summaries and each such
statement is qualified in its entirety by reference to the copy of such contract
or other document filed as an exhibit to the Registration Statement. In
addition, the Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith the Company files periodic reports and other information
with the Commission relating to its business, financial statements and other
matters. The Registration Statement and other information, including exhibits
thereto, may be inspected at the Commission's principal office in Washington,
D.C., and at the following regional offices of the Commission: Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and at Seven
World Trade Center, Suite 1300, New York, New York 10048. Copies of all or any
part thereof may be obtained from the Public Reference Section, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 upon payment
of the prescribed fees. Reports, proxy statements and other information
regarding the Company may also be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.

56
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY THE SELMER COMPANY, L.P.)
Independent Auditors' Report............................................................................. F-2
Consolidated Balance Sheets.............................................................................. F-3
Consolidated Statements of Operations.................................................................... F-4
Consolidated Statements of Partners' Equity.............................................................. F-5
Consolidated Statements of Stockholders' Equity.......................................................... F-6
Consolidated Statements of Cash Flows.................................................................... F-7
Notes to Consolidated Financial Statements............................................................... F-8
Condensed Consolidating Financial Statements............................................................. F-21

STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
Independent Auditor's Report............................................................................. F-27
Consolidated Balance Sheets.............................................................................. F-28
Consolidated Statements of Stockholders' Equity.......................................................... F-29
Consolidated Statements of Operations.................................................................... F-30
Consolidated Statements of Cash Flows.................................................................... F-31
Notes to Consolidated Financial Statements............................................................... F-32
Supplemental Condensed Consolidating Financial Statements................................................ F-41
</TABLE>

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Selmer Industries, Inc.
Elkhart, Indiana

We have audited the accompanying consolidated financial statements of Selmer
Industries, Inc. and subsidiaries (the "Successor") as of December 31, 1995 and
1994 and for the years ended December 31, 1995 and 1994 and the period from
August 10, 1993 to December 31, 1993, and of The Selmer Company, Inc. (formerly,
The Selmer Company, L.P.) and subsidiaries (the "Predecessor") for the period
from January 1, 1993 to August 10, 1993 listed in the table of contents. These
financial statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Selmer Industries, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for the years ended December 31, 1995, and 1994
and the period from August 10, 1993 to December 31, 1993, and the results of
operations and cash flows of The Selmer Company, L.P. and subsidiaries for the
period January 1, 1993 to August 10, 1993 in conformity with generally accepted
accounting principles.

As discussed in Note 1 to the financial statements, on August 10, 1993, the
net assets of the Predecessor were acquired in a transaction accounted for as a
purchase. Accordingly, the financial statements of the Successor reflect the
revaluation of the net assets at the date of acquisition, and the amounts
reported for the Successor are not comparable to the amounts shown for the
Predecessor in prior periods.

DELOITTE & TOUCHE LLP
Chicago, Illinois
March 8, 1996

F-2
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY THE SELMER COMPANY, L.P.)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995 AND MARCH 30, 1996

<TABLE>
<CAPTION>
MARCH 30,
DECEMBER 31, DECEMBER 31, 1996
1994 1995 (UNAUDITED)
------------ ------------ -----------
(DOLLARS IN THOUSANDS EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash................................................................. $ 380 $ 3,706 $ 2,146
Accounts, notes and leases receivable, net of allowance for bad debts
of $5,003, $6,281 and $6,599 in 1994, 1995 and 1996, respectively... 26,940 41,860 46,693
Inventories.......................................................... 26,807 79,063 76,189
Prepaid expenses and other current assets............................ 1,038 3,058 2,946
Deferred tax asset................................................... 1,100 4,693 4,629
------------ ------------ -----------
Total current assets................................................... 56,265 132,380 132,603
Property, plant and equipment, net..................................... 15,341 64,132 62,557
Other assets, net...................................................... 3,469 32,114 30,616
Cost in excess of fair value of net assets acquired, net of accumulated
amortization of $376, $1,024 and $1,243 in 1994, 1995 and 1996,
respectively.......................................................... 10,449 35,170 34,594
------------ ------------ -----------
TOTAL ASSETS........................................................... $ 85,524 $ 263,796 $ 260,370
------------ ------------ -----------
------------ ------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term debt.................. $ 2,306 $ 2,245
Accounts payable..................................................... $ 2,825 8,172 5,763
Other current liabilities............................................ 10,563 31,289 33,348
------------ ------------ -----------
Total current liabilities.............................................. 13,388 41,767 41,356
Long-term debt......................................................... 62,057 171,733 169,402
Deferred taxes......................................................... 500 29,452 28,463
Non-current pension liability.......................................... 2,326 15,016 14,709
------------ ------------ -----------
Total liabilities...................................................... 78,271 257,968 253,930
Commitments and Contingencies
Stockholders' equity:
Convertible, participating preferred stock, $.001 par value,
authorized 5,000,000 shares, 1,000,000 shares issued and
outstanding......................................................... 1 1 1
Class A Common Stock, $.001 par value, authorized 500,000 shares,
168,888 shares issued and outstanding............................... -- -- --
Common stock, $.001 par value, authorized 9,500,000 shares, issued
and outstanding -- 361,112 in 1994 and 466,112 shares in 1995 and
1996................................................................ -- -- --
Warrants, 470,000 common stock equivalents outstanding............... 2,335 2,335 2,335
Additional paid-in capital........................................... 4,999 5,629 5,629
Accumulated deficit.................................................. (187) (2,261) (679)
Accumulated translation adjustment................................... 105 124 (846)
------------ ------------ -----------
Total stockholders' equity......................................... 7,253 5,828 6,440
------------ ------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................. $ 85,524 $ 263,796 $ 260,370
------------ ------------ -----------
------------ ------------ -----------
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY THE SELMER COMPANY, L.P.)
CONSOLIDATED STATEMENTS OF OPERATIONS
PERIODS ENDED AUGUST 10, 1993 AND DECEMBER 31, 1993
YEARS ENDED DECEMBER 31, 1994 AND 1995 AND
PERIODS ENDED APRIL 1, 1995 AND MARCH 30, 1996

<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
----------- -------------------------------------- PERIOD PERIOD
PERIOD PERIOD YEAR ENDED YEAR ENDED 1/1/95 - 1/1/96 -
1/1/93 - 8/10/93 - DECEMBER 31, DECEMBER 31, 4/1/95 3/30/96
8/10/93 12/31/93 1994 1995 (UNAUDITED) (UNAUDITED)
----------- --------- ------------- ------------ ------------- -------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Net sales.............................. $ 57,171 $ 34,339 $ 101,114 $ 189,805 $ 31,880 $ 69,049
Cost of sales.......................... 39,216 28,855 69,453 139,587 21,733 47,329
----------- --------- ------------- ------------ ------------- -------------
Gross profit........................... 17,955 5,484 31,661 50,218 10,147 21,720
Operating Expenses:
Sales and marketing.................. 6,570 4,116 11,328 21,001 3,570 8,272
Provision for doubtful accounts...... 919 157 655 797 250 229
General and administrative........... 3,121 2,158 5,435 11,612 1,251 3,931
Amortization......................... 1,527 409 1,067 3,041 282 1,100
Other expense........................ 298 284 704 665 113 81
----------- --------- ------------- ------------ ------------- -------------
Total Operating Expenses............... 12,435 7,124 19,189 37,116 5,466 13,613
----------- --------- ------------- ------------ ------------- -------------
Earnings (loss) from operations........ 5,520 (1,640) 12,472 13,102 4,681 8,107
Other (income) expense:
Other income, principally interest
and late charges.................... (360) (226) (503) (583) (104) (131)
Interest and amortization of debt
discount............................ 4,432 3,254 8,255 14,923 1,712 4,791
----------- --------- ------------- ------------ ------------- -------------
Other expense, net..................... 4,072 3,028 7,752 14,340 1,608 4,660
----------- --------- ------------- ------------ ------------- -------------
Income (loss) before income taxes...... 1,448 (4,668) 4,720 (1,238) 3,073 3,447
Provision for (benefit of) income
taxes................................. 43 (1,559) 1,798 836 1,125 1,866
----------- --------- ------------- ------------ ------------- -------------
Net income (loss)...................... $ 1,405 $ (3,109) $ 2,922 $ (2,074) $ 1,948 $ 1,581
----------- --------- ------------- ------------ ------------- -------------
----------- --------- ------------- ------------ ------------- -------------
Net income (loss) per share............ $ (5.87) $ 1.46 $ (3.85) $ .97 $ .75
--------- ------------- ------------ ------------- -------------
--------- ------------- ------------ ------------- -------------
Weighted average common and common
equivalent shares outstanding......... 530,000 2,000,000 538,750 2,000,000 2,105,000
--------- ------------- ------------ ------------- -------------
--------- ------------- ------------ ------------- -------------
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY THE SELMER COMPANY, L.P.)
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
PERIOD ENDED AUGUST 10, 1993

<TABLE>
<CAPTION>
THE SELMER COMPANY, L.P. (PREDECESSOR)
-----------------------------------------------------------
ACCUMULATED
TRANSLATION PENSION
CAPITAL DEFICIT ADJUSTMENT LIABILITY TOTAL
--------- --------- ------------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1992............................. $ 22,366 $ (5,021) $ (260) $ (459) $ 16,626
Net income for the period.............................. 1,405 1,405
State tax withholdings................................. (108) (108)
Foreign currency translation adjustment................ (56) (56)
Recognition of additional minimum pension liability.... 132 132
--------- --------- ------ ----------- ---------
BALANCE, August 10, 1993............................... $ 22,258 $ (3,616) $ (316) $ (327) $ 17,999
--------- --------- ------ ----------- ---------
--------- --------- ------ ----------- ---------
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY THE SELMER COMPANY, L.P.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD ENDED DECEMBER 31, 1993,
THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND
THE (UNAUDITED) PERIOD ENDED MARCH 30, 1996

<TABLE>
<CAPTION>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES (SUCCESSOR)
---------------------------------------------------------------------------------
ADDITIONAL ACCUMULATED
PREFERRED COMMON PAID IN ACCUMULATED TRANSLATION
STOCK STOCK WARRANTS CAPITAL DEFICIT ADJUSTMENT
------------- ----------- ----------- ----------- ------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INITIAL STOCK ISSUANCE
August 10, 1993........................ $ 1 -- $ 2,335 $ 4,999
Net loss for the period.................. $ (3,109)
--
----- ----------- ----------- ------------ ------
BALANCE, December 31, 1993............... 1 -- 2,335 4,999 (3,109)
Net income for the year.................. 2,922
Foreign currency translation
adjustment.............................. $ 105
--
----- ----------- ----------- ------------ ------
BALANCE, December 31, 1994............... 1 -- 2,335 4,999 (187) 105
Net loss for the year.................... (2,074)
Foreign currency translation
adjustment.............................. 19
Issuance of 105,000 shares of common
stock................................... 630
--
----- ----------- ----------- ------------ ------
BALANCE, December 31, 1995............... 1 -- 2,335 5,629 (2,261) 124
Net income for the period (unaudited).... 1,581
Foreign currency translation adjustment
(unaudited)............................. (1) (970)
--
----- ----------- ----------- ------------ ------
BALANCE, March 30, 1996 (unaudited)...... $ 1 -- $ 2,335 $ 5,629 $ (679) $ (846)
--
--
----- ----------- ----------- ------------ ------
----- ----------- ----------- ------------ ------
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY THE SELMER COMPANY, L.P.)

CONSOLIDATED STATEMENTS OF CASH FLOWS
PERIODS ENDED AUGUST 10, 1993 AND DECEMBER 31, 1993
YEARS ENDED DECEMBER 31, 1994 AND 1995 AND
PERIODS ENDED APRIL 1, 1995 AND MARCH 30, 1996

<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
----------- ------------------------------------- PERIOD PERIOD
PERIOD PERIOD YEAR ENDED YEAR ENDED 1/1/95 - 1/1/96 -
1/1/93 - 8/10/93 - DECEMBER 31, DECEMBER 31, 4/1/95 3/30/96
8/10/93 12/31/93 1994 1995 (UNAUDITED) (UNAUDITED)
----------- --------- ------------ ------------ ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss)............................. $ 1,405 $ (3,109) $ 2,922 $ (2,074) $ 1,948 $ 1,581
Adjustments to reconcile net income (loss) to
net cash flows from operating activities:
Depreciation and amortization............... 2,704 1,199 3,198 7,739 819 2,773
Provision for doubtful accounts............. 919 157 655 766 250 176
Amortization of senior note discount........ -- 91 248 277 68 76
Deferred tax provision (benefit)............ -- (1,600) 1,000 (5,083) -- (582)
Other....................................... 424 3 14 93 -- --
Changes in operating assets and liabilities:
Accounts, notes and leases receivable..... (15,313) 12,947 (2,126) (4,172) (722) (5,274)
Inventories............................... 989 4,235 2,586 7,664 2,203 1,959
Prepaid expense and other current
assets................................... (81) 183 137 (701) 77 (200)
Accounts payable.......................... 766 (908) 1,170 1,354 1,316 (3,408)
Accrued expenses.......................... (378) 1,904 1,169 800 205 3,815
----------- --------- ------------ ------------ ----------- -----------
Net cash flows from operating activities.... (8,565) 15,102 10,973 6,663 6,164 916
Cash flows from investing activities
Capital expenditures.......................... (576) (303) (1,112) (3,162) (679) (706)
Proceeds from disposals of fixed assets....... 4 6 17 51 -- 12
Increase in other assets...................... (5) (5) (107) (1,801) (195) 595
Acquisition of Steinway Musical Properties,
Inc. (net of cash acquired).................. -- -- -- (102,790) -- --
Acquisition of The Selmer Company, L.P........ -- (94,111) -- -- -- --
----------- --------- ------------ ------------ ----------- -----------
Net cash flows from investing activities.... (577) (94,413) (1,202) (107,702) (874) (99)
Cash flows from financing activities
Borrowing under line of credit agreement...... 12,992 60,916 88,830 147,993 24,119 44,210
Repayments under line of credit agreement..... (3,372) (47,268) (97,958) (148,486) (28,639) (46,183)
Proceeds from issuance of long-term debt...... -- 57,630 -- 110,000 -- --
Proceeds from issuance of stock and
warrants..................................... -- 7,370 -- 630 -- --
Repayments of long-term debt.................. -- -- (421) (5,772) -- (269)
Other financing activities...................... (108) -- -- -- -- --
----------- --------- ------------ ------------ ----------- -----------
Net cash flows from financing activities.... 9,512 78,648 (9,549) 104,365 (4,520) (2,242)
Effects of foreign exchange rate changes on
cash........................................... (56) -- 105 -- 60 (135)
----------- --------- ------------ ------------ ----------- -----------
Increase (Decrease) in Cash..................... 314 (663) 327 3,326 830 (1,560)
Cash, beginning of period....................... 402 716 53 380 380 3,706
----------- --------- ------------ ------------ ----------- -----------
Cash, end of period............................. $ 716 $ 53 $ 380 $ 3,706 $ 1,210 $ 2,146
----------- --------- ------------ ------------ ----------- -----------
----------- --------- ------------ ------------ ----------- -----------
</TABLE>

See notes to consolidated financial statements.

F-7
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY THE SELMER COMPANY, L.P.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED AUGUST 10, 1993 AND DECEMBER 31, 1993
YEARS ENDED DECEMBER 31, 1994 AND 1995 AND
(UNAUDITED) PERIODS ENDED APRIL 1, 1995 AND MARCH 30, 1996
(DOLLARS IN THOUSANDS)

(1) NATURE OF BUSINESS
Selmer Industries, Inc. and subsidiaries (the "Company" or the "Successor")
is a major manufacturer and distributor of woodwind, brasswind, percussion and
string musical instruments, pianos and related accessories and services.

On August 10, 1993, Selmer Industries, Inc. purchased substantially all of
the assets and certain liabilities of The Selmer Company, L.P. (the
"Predecessor"), a wholly owned subsidiary of Integrated Resources, Inc.
("Integrated"), for $94.1 million, including fees and expenses. The Selmer
Company, L.P. was reorganized as The Selmer Company, Inc. ("Selmer").

On May 25, 1995, Selmer purchased the assets of Steinway Musical Properties,
Inc. and its wholly-owned subsidiaries ("Steinway") for approximately $104
million. The acquisition has been accounted for as a purchase for financial
reporting purposes.

The unaudited financial statements for the periods ended April 1, 1995 and
March 30, 1996 reflect all adjustments, all of which are of a normal recurring
nature, necessary in the opinion of management for a fair presentation of the
results for such interim periods and are not necessarily indicative of full-year
results.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles necessarily requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements of the
Company include the accounts of Selmer and its wholly-owned subsidiaries,
Steinway and Vincent Bach International, Ltd. ("VBI"). Significant intercompany
balances have been eliminated in consolidation.

REVENUE RECOGNITION -- Revenue is recognized at the date of shipment. The
Company provides for the estimated costs of warranties at the time of sale.

INCOME TAXES -- Income taxes are provided using an asset and liability
approach to financial accounting and reporting for income taxes. Deferred income
tax assets and liabilities are computed annually for differences between the
financial statement and tax bases of assets and liabilities that will result in
taxable or deductible amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense is
the tax payable or refundable for the period plus or minus the change during the
period in deferred tax assets and liabilities.

INVENTORIES -- Inventories are stated at the lower of cost, determined on a
first-in, first-out basis, or market. On August 10, 1993, Selmer inventories
were adjusted up by approximately $5,000 to reflect their fair market value. On
May 25, 1995, Steinway inventories were adjusted up by approximately $9,638 to
reflect their fair market value. Cost of sales for the period from August 10,
1993 to December 31, 1993 and the years ended December 31, 1994 and 1995
included $4,800, $200, and $9,638, respectively, of such adjustments.

F-8
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY THE SELMER COMPANY, L.P.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEPRECIATION AND AMORTIZATION -- Property, plant and equipment are recorded
at cost. Assets existing at the acquisition date were revalued to fair value at
that date. Depreciation has been computed using the straight-line method over
the estimated useful lives of the respective assets, which range from two to
thirty-one years. Leasehold improvements are amortized using the straight-line
method over the estimated useful lives of the improvements or the remaining term
of the respective lease, whichever is shorter.

Cost in excess of fair value acquired is amortized over 40 years. Trademarks
acquired are recorded at appraised value and are amortized over 10 years.
Deferred financing costs are amortized on a straight-line basis over the
repayment periods of the under-lying debt.

FOREIGN CURRENCY TRANSLATION -- Assets and liabilities of non-U.S.
operations are translated into U.S. dollars at year-end rates, and revenues and
expenses at average rates of exchange prevailing during the year. The resulting
translation adjustments are reported as a separate component of stockholders'
equity. Foreign currency transaction gains and losses are recognized in income
currently.

FOREIGN EXCHANGE CONTRACTS -- The Company enters into foreign exchange
contracts as a hedge against foreign currency transactions. Gains and losses
arising from fluctuations in exchange rates are recognized at the end of each
reporting period. Such gains and losses directly offset the foreign exchange
gains or losses associated with the hedged receivable or payable. Gains and
losses on foreign exchange contracts which exceed the related balance sheet or
firm purchase commitment exposure are included in foreign currency gain or loss
in the statement of operations.

INCOME (LOSS) PER COMMON SHARE -- Income (loss) per common share has been
computed using the weighted average number of common and common equivalent
shares outstanding.

RECLASSIFICATIONS -- Certain reclassifications of 1993 and 1994 amounts have
been made to conform to the financial statement classification adopted in 1995.

ENVIRONMENTAL MATTERS -- Potential environmental liabilities are accounted
for in accordance with Statement of Financial Accounting Standards No. 5,
"Accounting for Contingencies", which requires a liability to be recorded when
it is probable that a loss has been incurred and its amount can reasonably be
estimated.

NEW ACCOUNTING PRONOUNCEMENTS -- In March 1995, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of", which the Company must adopt by fiscal
year 1996. SFAS 121 is not expected to have a material effect on the Company's
net income or financial position. In October 1995, the FASB issued SFAS No. 123,
"Accounting for Stock-Based Compensation". The Company has no stock-based
compensation which meets the criteria for SFAS 123.

F-9
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY THE SELMER COMPANY, L.P.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(3) INVENTORIES
Inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31
-------------------- MARCH 30
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Raw materials.............................................. $ 3,383 $ 11,332 $ 11,104
Work in process............................................ 13,273 37,793 34,357
Finished goods............................................. 10,151 29,938 30,728
--------- --------- ---------
Total...................................................... $ 26,807 $ 79,063 $ 76,189
--------- --------- ---------
--------- --------- ---------
</TABLE>

(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
Land................................................................... $ 770 $ 18,296
Building and improvements.............................................. 5,636 19,949
Leasehold improvements................................................. 196 690
Machinery, equipment and tooling....................................... 9,235 16,612
Office furniture and fixtures.......................................... 2,085 4,191
Concert and artist and rental pianos................................... 11,087
Construction in progress............................................... 464 903
--------- ---------
18,386 71,728
Less accumulated depreciation and amortization......................... 3,045 7,596
--------- ---------
Total.................................................................. $ 15,341 $ 64,132
--------- ---------
--------- ---------
</TABLE>

(5) OTHER ASSETS
Other assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
Trademarks.............................................................. $ 22,548
Deferred financing cost................................................. $ 2,842 10,340
Other assets............................................................ 1,727 2,708
--------- ---------
4,569 35,596
Less accumulated amortization........................................... 1,100 3,482
--------- ---------
Total................................................................... $ 3,469 $ 32,114
--------- ---------
--------- ---------
</TABLE>

F-10
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY THE SELMER COMPANY, L.P.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(6) OTHER CURRENT LIABILITIES
Other current liabilities consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
Accrued payroll and related benefits................................... $ 3,930 $ 10,983
Current pension liability.............................................. 1,800 2,433
Accrued promotional expenses........................................... 2,340 2,357
Accrued warranty expense............................................... 2,175
Accrued taxes.......................................................... 892 3,980
Accrued interest....................................................... 208 1,541
Other accrued expenses................................................. 1,393 7,820
--------- ---------
Total.................................................................. $ 10,563 $ 31,289
--------- ---------
--------- ---------
</TABLE>

(7) INCOME TAXES
The components of the income tax expense (benefit) are as follows:

<TABLE>
<CAPTION>
PERIOD YEAR ENDED
8/10/93 - --------------------
12/31/93 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Federal:
Current.................................................... $ 600 $ 2,439
Deferred................................................... $ (1,284) 882 (1,684)
State and local:
Current.................................................... 11 41 574
Deferred................................................... (316) 108 (321)
Foreign:
Current.................................................... 30 167 2,906
Deferred................................................... (3,078)
--------- --------- ---------
Total........................................................ $ (1,559) $ 1,798 $ 836
--------- --------- ---------
--------- --------- ---------
</TABLE>

The Company's income tax (benefit) differed from the statutory federal rate
as follows:

<TABLE>
<CAPTION>
PERIOD YEAR ENDED
8/10/93 - --------------------
12/31/93 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Statutory rate applied to earnings before income taxes........ $ (1,587) $ 1,605 $ (433)
Increase (decrease) in income taxes resulting from:
Foreign income taxes........................................ 30 167 (172)
State income taxes.......................................... (305) 149 (49)
Valuation allowance on foreign tax credits.................. 1,277
Other....................................................... 303 (123) 213
--------- --------- ---------
Income tax (benefit).......................................... $ (1,559) $ 1,798 $ 836
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-11
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY THE SELMER COMPANY, L.P.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(7) INCOME TAXES (CONTINUED)
The components of net deferred taxes are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
--------- ----------
<S> <C> <C>
Deferred tax assets:
AMT credit carry-forward............................................ $ 350
Uniform capitalization adjustment to inventory...................... 336 $ 2,303
Allowance for doubtful accounts..................................... 300 1,406
Accrued expenses and other current assets and liabilities........... 579 2,709
Foreign tax credits................................................. 22,086
Other............................................................... 135 223
Valuation allowances................................................ (13,534)
--------- ----------
Total deferred tax assets......................................... 1,700 15,193

Deferred tax liabilities
Pension contributions............................................... (500) (1,759)
Fixed assets........................................................ (358) (23,488)
Intangibles......................................................... (232) (14,705)
Other............................................................... (10)
--------- ----------
Total deferred tax liabilities.................................... (1,100) (39,952)
--------- ----------
Net deferred taxes.................................................... $ 600 $ (24,759)
--------- ----------
--------- ----------
</TABLE>

Valuation allowances provided relate to excess foreign tax credits generated
over expected credit absorption. Of these valuation allowances, $12,257 were
recorded at the date of acquisition of Steinway. Should the related tax benefits
be recognized in the future, the effect of removing the valuation allowances
would generally be a decrease in goodwill. During 1995, these valuation
allowances increased by $1,277 due to the generation of deferred foreign tax
credits for which realization does not appear likely. Foreign tax credit
carryforwards expire in varying amounts through 2000.

F-12
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY THE SELMER COMPANY, L.P.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(8) NOTES PAYABLE AND LONG TERM DEBT
Notes payable and long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1995
--------- -----------
<S> <C> <C>
Senior Debt, bearing interest at prime plus 1 1/2% due March 31, 2000
(9.25% and 8.5%).................................................... $ 4,520 $ 4,439
Senior Secured Notes:
11% Notes, due June 30, 2000, net of unamortized discount of $1,644
and $1,418........................................................ 42,906 43,132
10.92% Notes, due June 30, 2000, net of unamortized discount of
$369 and $318..................................................... 9,631 9,682
11% Senior Subordinated Notes, due May 15, 2005...................... 110,000
10% Subordinated Notes, due July 31, 2001............................ 5,000
Note payable to a foreign bank, due in annual installments of of
principal and interest of DM 645 ($449 at the December 31, 1995
exchange rate) at an interest rate of 8.75% with the balance due in
September 2005...................................................... 2,874
Note payable to a foreign bank, due in quarterly installments of DM
250 ($174 at the December 31, 1995 exchange rate) through September
30, 1999, plus interest at 6.5%..................................... 2,611
Note payable to a foreign bank, due in monthly installments of DM 25
($17 at the December 31, 1995 exchange rate) through August 31,
1997, plus interest at 9.6%......................................... 348
Open account loan, payable on demand to a foreign bank............... 953
--------- -----------
Total................................................................ 62,057 174,039
Less current portion................................................. 2,306
--------- -----------
Long-term debt....................................................... $ 62,057 $ 171,733
--------- -----------
--------- -----------
</TABLE>

Scheduled maturities of long-term debt as of December 31, 1995 are as
follows:

<TABLE>
<CAPTION>
AMOUNT
-----------
<S> <C>
1996................................................................... $ 2,306
1997................................................................... 2,300
1998................................................................... 4,680
1999................................................................... 6,776
2000................................................................... 46,279
Thereafter............................................................. 111,698
-----------
Total.................................................................. $ 174,039
-----------
-----------
</TABLE>

The open account loan provides for borrowings by foreign subsidiaries of up
to DM 10,000 ($6,961 at the December 31, 1995 exchange rate) payable on demand,
of which up to DM 4,000 ($2,784 at the December 31, 1995 exchange rate) may be
drawn as a term loan for 30, 60, 90 or 180 days. Demand borrowings bear interest
at the rate of 8.25% and term borrowings bear interest at the Euromarket rate
plus 2%.

F-13
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY THE SELMER COMPANY, L.P.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(8) NOTES PAYABLE AND LONG TERM DEBT (CONTINUED)
In connection with the merger discussed in Note 17, the Company entered into
a restated and amended Senior Bank Credit Agreement. The restated agreement
provides for borrowings by Selmer and Steinway's domestic subsidiaries up to $60
million and extends the due date to March 31, 2000. Interest on the outstanding
balances accrues at the prime rate plus 1 1/2% or the Eurodollar rate plus 3%.
Borrowings are collateralized by domestic accounts receivable and inventory
balances, a first lien on Steinway's domestic fixed assets, and a second lien on
Selmer's fixed assets. The available balance is determined by eligible domestic
accounts receivable and inventory balances and was approximately $40.7 million
on December 31, 1995.

The Senior Secured Notes are secured by the fixed assets and common stock of
The Selmer Company, Inc. and mature on various dates from December 31, 1996
through June 30, 2000. The notes are guaranteed by Selmer Industries, Inc. In
connection with the merger discussed in Note 17, the Senior Secured Note
Indenture was amended to provide for the additional guarantee of the Senior
Notes by the Steinway Guarantors.

All of the Company's debt agreements contain certain financial covenants
which, among other things, require the maintenance of certain financial ratios
and net worth, place certain limitations on additional borrowings and capital
expenditures, and prohibit the payment of cash dividends. The Company is in
compliance with all such covenants.

(9) STOCKHOLDERS' EQUITY AND WARRANTS
Funding for the Company's acquisition discussed in Note 1 was provided in
part by the issuance of capital stock on August 10, 1993. Holders of the
Convertible Participating Preferred Stock are entitled to receive dividends
when, as and if declared by the Board of Directors out of funds legally
available for such purpose. The Company is restricted from paying dividends on
common stock unless dividends are made on the preferred stock in an amount equal
to the dividend payable upon conversion of each share of preferred stock. The
preferred stock has a liquidation value of $4.50 per share.

Each share of Class A Common Stock is entitled to 98 votes, and each share
of ordinary common stock is entitled to one vote. Holders of preferred stock are
entitled to a number of votes equal to the number of ordinary common shares into
which the preferred shares may be converted. Class A Common Stock shall
automatically convert to ordinary common stock if, at any time, the Class A
Common Stock is not owned by an original Class A holder.

The Company issued warrants in conjunction with the issuance of the Senior
Secured Notes on August 10, 1993. The warrants, which may be exercised after the
earlier of August 1, 1995, or change of control, entitle holders to purchase
470,000 shares of ordinary common stock at a purchase price of $0.01 per share.
The warrants expire on August 1, 2000.

The Company has the option to convert the preferred stock and to set a date
for exercising the warrants if a registered public offering of common stock
raising $15 million in the aggregate is made.

F-14
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY THE SELMER COMPANY, L.P.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(10) COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS -- The Company has entered into various operating leases
for certain facilities and equipment, some of which have noncancelable terms,
expiring at various times through 2016 with various renewal options. Minimum
lease payments under noncancelable leases for the years ending December 31, are
as follows:

<TABLE>
<CAPTION>
AMOUNT
---------
<S> <C>
1996..................................................................... $ 3,182
1997..................................................................... 2,970
1998..................................................................... 1,722
1999..................................................................... 860
2000..................................................................... 564
Thereafter............................................................... 2,742
---------
Total.................................................................... $ 12,040
---------
---------
</TABLE>

Rent expense was $622 for the period January 1, 1993 to August 10, 1993,
$344 for the period from August 10, 1993 to December 31, 1993, and $970 and
$2,202 for the years ended December 31, 1994 and 1995, respectively,

NOTES RECEIVABLE SOLD WITH RECOURSE -- The Company sells notes receivable on
a recourse basis to a commercial finance company under a three-year facility.
Pursuant to the terms of the facility, the commercial finance company may, at
its option, purchase at any one time up to an aggregate principal amount of $15
million of the Company's notes receivable. The Company received proceeds of
approximately $12.0 and $13.0 million from the sales of such notes for the years
ended December 31, 1994 and 1995, respectively. Approximately $6.8 and $7.5
million of these notes remain outstanding as of December 31, 1994 and 1995,
respectively.

ENVIRONMENTAL MATTERS -- Certain environmental matters are pending against
the Company, which might result in monetary damages, the amount of which, if
any, cannot be determined at the present time. Philips Electronics, a previous
owner of the Company, has agreed to hold the Company harmless from any financial
liability arising from these environmental matters which were pending as of
December 29, 1988. Management believes that these matters will not have a
material adverse impact on the Company's results of operations or financial
condition.

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

(11) RETIREMENT PLANS

DOMESTIC PLANS -- The Company has a noncontributory defined benefit pension
plan (the "Selmer Plan") in which all eligible employees may participate. On
December 31, 1995, Steinway's defined benefit pension plan was merged with the
Selmer Plan. The Company's funding policy is to contribute the minimum required
contribution for each plan year by the fifteenth day of the month following each
quarter plus the balance of the minimum required contribution for the plan year
by the following September 15.

F-15
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY THE SELMER COMPANY, L.P.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(11) RETIREMENT PLANS (CONTINUED)
The components of net pension expense are as follows:

<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
------------- ---------------------------------
PERIOD PERIOD YEAR ENDED
1/1/93 - 8/10/93 - --------------------
8/10/93 12/31/93 1994 1995
------------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Service cost -- benefits earned during the year... $ 237 $ 238 $ 803 $ 651
Interest cost on projected benefit obligation..... 310 182 605 739
Return on plan assets............................. (124) (53) (38) (993)
Net amortization.................................. 152 (172) 621
------ ----- --------- ---------
Net pension expense............................... $ 575 $ 367 $ 1,198 $ 1,018
------ ----- --------- ---------
------ ----- --------- ---------
</TABLE>

The funded status of the pension plan at December 31, 1994 and 1995 is as
follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
Accumulated benefit obligation (including vested benefit obligation of
approximately $6,486 and $12,983 at December 31, 1994 and 1995,
respectively).......................................................... $ 6,996 $ 13,841
--------- ---------
--------- ---------
Projected benefit obligation............................................ $ 7,499 $ 14,592
Plan assets at fair value............................................... 3,953 12,020
--------- ---------
Projected benefit obligation in excess of plan assets................... 3,546 2,572
Unrecognized net gain (loss)............................................ 1,423 (137)
Unrecognized prior service cost......................................... (843) (765)
Recognition of minimum liability........................................ 762
--------- ---------
Net accrued pension cost................................................ 4,126 2,432
Less amount currently payable........................................... 1,800 1,539
--------- ---------
Net accrued pension cost................................................ $ 2,326 $ 893
--------- ---------
--------- ---------
</TABLE>

The projected benefit obligation was determined using an assumed discount
rate of 8.5% and 7.5% in 1994 and 1995, respectively. The assumed long-term rate
of compensation increase was 4%. The assumed long-term rate of return on plan
assets was 8.5%.

The Company also sponsors 401(k) retirement savings plans for eligible
employees. Discretionary employer contributions, as determined annually by the
Board of Directors, are made to one these plans. The 1995 contribution
approximated $159.

The Company provides postretirement health care and life insurance benefits
to eligible hourly retirees and their dependents. The health care plan is
contributory, with retiree contributions adjusted every three years as part of a
union contract agreement. The plans are unfunded and the Company pays part of
the health care premium and the full amount of the life insurance cost.

Effective January 1, 1994 the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions". SFAS 106 requires
recognition, during employees' service with the Company, of the cost of their
retiree health and life insurance benefits.

F-16
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY THE SELMER COMPANY, L.P.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(11) RETIREMENT PLANS (CONTINUED)
In accordance with the Statement, the Company has elected to recognize this
change in accounting over a twenty-year period. The accumulated postretirement
benefit obligation was $1,004 at January 1, 1994.

Net postretirement benefit cost for 1994 and 1995 is as follows:

<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Service cost.................................................................. $ 35 $ 32
Interest cost................................................................. 71 79
Amortization of transition obligation......................................... 50 50
Net amortization and deferral................................................. (6)
--------- ---------
Net postretirement benefit cost............................................... $ 156 $ 155
--------- ---------
--------- ---------
</TABLE>

The adoption of SFAS No. 106 did not have a material effect on the Company's
1994 postretirement benefit cost. In prior years, the cost of providing these
benefits to retired employees was recognized as an expense primarily as premiums
were paid.

The following table sets forth the funded status of the Company's
postretirement benefit plans and accrued postretirement benefit cost reflected
in the Company's balance sheet at year end:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
Accumulated Postretirement Benefit Obligation:
Retirees................................................................. $ 314 $ 337
Active Employees......................................................... 596 750
--------- ---------
910 1,087
Unrecognized net obligation at date of adoption of SFAS No. 106............ (954) (904)
Unrecognized net gain...................................................... 164 52
--------- ---------
Accrued postretirement benefit cost........................................ $ 120 $ 235
--------- ---------
--------- ---------
</TABLE>

The annual assumed rate of increase in the per capita cost of covered health
care benefits is 10.5% for retirees under age 65 in 1996 and is assumed to
decrease gradually to 4.5% in 2008, and remain at that level thereafter.

The effect of increasing the assumed health care cost trend by 1 percentage
point in each year would increase the accumulated postretirement benefit
obligation as of December 31, 1995 by $52 and the aggregate of the service and
interest cost components of the net periodic postretirement benefit cost for the
year then ended by $7.

The discount rate used in determining the transition obligation as of
January 1 and the net periodic postretirement benefit cost was 7% and 8.5% in
1994 and 1995, respectively. The accumulated postretirement benefit obligation
was determined using an assumed discount rate of 8.5% and 7.5% in 1994 and 1995,
respectively.

FOREIGN PLANS -- The foreign divisions of the Company's Steinway subsidiary
have separate pension plans which provide retirement benefits for all hourly and
certain salaried employees. Unfunded accrued pension costs are included in
liabilities. The plans are funded in accordance with the requirements of
regulatory bodies governing each plan.

F-17
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY THE SELMER COMPANY, L.P.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(11) RETIREMENT PLANS (CONTINUED)
The components of net pension cost for the Company's foreign divisions are
as follows:

<TABLE>
<CAPTION>
1995
---------
<S> <C>
Service cost -- benefits earned during the period.................................... $ 240
Interest cost on projected benefit obligation........................................ 602
Return on plan assets................................................................ (199)
Net amortization and deferral........................................................ 102
---------
Net pension cost..................................................................... $ 745
---------
---------
</TABLE>

The following table sets forth the funded status and obligations of the
plans for the foreign divisions as of December 31, 1995:

<TABLE>
<CAPTION>
1995
---------
<S> <C>
Accumulated benefit obligation (including vested benefit obligation of
approximately $15,199 at December 31, 1995)....................................... $ 15,824
---------
---------
Projected benefit obligation....................................................... $ 17,222
Plan assets at fair value.......................................................... 2,323
---------
Projected benefit obligation in excess of plan assets.............................. 14,899
Unrecognized net gain.............................................................. 118
---------
Net accrued pension cost........................................................... 15,017
Less amount currently payable...................................................... 894
---------
Net accrued pension cost........................................................... $ 14,123
---------
---------
</TABLE>

The weighted average discount rates and rates of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7% and 3%, respectively. The expected
long-term rate of return on assets was 9%.

(12) FOREIGN EXCHANGE CONTRACTS
At December 31, 1995, the Company's German divisions, whose functional
currency is the deutsche mark, had forward contracts maturing at various dates
through August 1996 to purchase $1,486 as a hedge against intercompany
transactions with U.S. affiliates. In addition, the German divisions had forward
contracts maturing at various dates through March 1996 to sell 350 British
pounds sterling as a hedge against transactions with their London affiliate.

(13) SEGMENT INFORMATION
The Company operates in one industry segment, the manufacture and sale of
musical instruments. The following table sets forth information with respect to
the Company's foreign subsidiaries operating in the United Kingdom and Germany.

<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
----------- -------------------------------
PERIOD PERIOD YEAR ENDED
1/1/93 - 8/10/93 - --------------------
8/10/93 12/31/93 1994 1995
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Total assets.................................... $ 2,276 $ 2,884 $ 3,416 $ 86,370
Net sales....................................... 1,606 1,846 4,088 41,536
Earnings (loss) from operations................. 132 88 400 (294)
</TABLE>

F-18
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY THE SELMER COMPANY, L.P.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(13) SEGMENT INFORMATION (CONTINUED)
Export sales, excluding the above, were approximately $7,964 for the period
from January 1, 1993 to August 10, 1993, $6,588 for the period from August 10,
1993 to December 31, 1993, and $15,717 and $22,104 for the years ended December
31, 1994 and 1995, respectively,

(14) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
----------- -------------------------------
PERIOD PERIOD YEAR ENDED
1/1/93 - 8/10/93 - --------------------
8/10/93 12/31/93 1994 1995
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Interest paid................................... $ 3,445 $ 3,057 $ 8,025 $ 13,399
Income taxes paid............................... 0 73 470 5,532
</TABLE>

Cash flow information with respect to Selmer's acquisition of Steinway, as
discussed in Note 17, is as follows:

<TABLE>
<CAPTION>
1995
-----------
<S> <C>
Fair value of assets acquired.................................................... $ 183,003
Liabilities assumed.............................................................. (78,542)
Cash paid........................................................................ 104,461
</TABLE>

(15) DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS
The following disclosures of the estimated fair values of financial
instruments are made in accordance with the requirements of SFAS No. 107
"Disclosures about Fair Values of Financial Instruments". The estimated fair
values have been developed using appropriate methodologies; however,
considerable judgment is required to develop these estimates. Accordingly, the
estimates presented herein are not necessarily indicative of amounts that could
be realized in a current market exchange. Use of different assumptions or
methodologies could have a significant effect on these estimates.

<TABLE>
<CAPTION>
1994 1995
---------------------- ------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Financial assets
Cash...................................... $ 380 $ 380 $ 3,706 $ 3,706
Accounts, notes and leases receivable..... 26,940 26,940 41,860 41,860

Financial liabilities
Accounts payable.......................... 2,825 2,825 8,172 8,172
Notes payable and long term debt.......... 62,057 62,057 174,039 172,773
Foreign currency contracts................ 36 36
</TABLE>

The carrying amount of cash, accounts, notes and leases receivable, and
accounts payable approximate fair value because of the short maturity of these
instruments.

The estimated fair value of existing notes payable and long-term debt is
based on rates currently available to the Company for debt with similar terms
and remaining maturities.

The estimated fair value of foreign currency contracts (used for hedging
purposes) has been determined as the difference between the current spot rate
and the contract rate multiplied by the notional amount of the contract.

F-19
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY THE SELMER COMPANY, L.P.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(16) SUMMARIZED FINANCIAL INFORMATION
Selmer Industries, Inc. is a holding company whose only asset consists of
its investment in its wholly-owned subsidiary, The Selmer Company, Inc.
Summarized financial information for The Selmer Company, Inc. and subsidiaries
is as follows:

<TABLE>
<CAPTION>
PERIOD
-----------------------------------------------------------
APRIL 1, MARCH 30,
1993 1994 1995 1995 1996
--------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Current assets........................... $ 56,736 $ 56,265 $ 132,380 $ 55,287 $ 132,603
Total assets............................. 88,970 85,524 263,796 84,601 260,370
Current liabilities...................... 10,174 13,388 41,767 14,909 41,356
Stockholder's equity..................... 4,226 7,253 5,198 9,261 5,810
Total revenues........................... 34,339 101,114 189,805 31,880 69,049
Gross profit............................. 5,484 31,661 50,218 10,147 21,720
Net income (loss)........................ (3,109) 2,922 (2,074) 1,948 1,581
</TABLE>

(17) SUMMARY OF MERGER AND GUARANTEES
On May 25, 1995, Selmer acquired Steinway pursuant to an Agreement and Plan
of Merger dated as of April 11, 1995. The total purchase price of approximately
$104 million, including fees and expenses, was funded by Selmer's issuance of
$105 million of 11% Senior Subordinated Notes due 2005 and available cash
balances of the Company.

The following pro forma financial information gives effect to the
acquisition as if it had occurred as of January 1, 1994:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1994 1995
----------- -----------
<S> <C> <C>
Revenues............................................................ $ 215,097 $ 233,731
Net (loss).......................................................... (8,141) (89)
Net (loss) per share................................................ $ (15.36) $ (.17)
</TABLE>

Selmer's payment obligations under the Senior Subordinated Notes are fully
and unconditionally guaranteed on a joint and several basis by the Company as
Parent (the "Guarantor Parent"), and by Steinway and certain wholly-owned
subsidiaries of Steinway, each a direct or indirect wholly-owned subsidiary of
the Company and each a "Guarantor", (the "Guarantor Subsidiaries"). These
subsidiaries, together with the operating divisions of Selmer, represent all of
the operations of the Company conducted in the United States. The remaining
subsidiaries, which do not guarantee the Notes, represent foreign operations
(the "Non Guarantor Subsidiaries").

The following condensed consolidating supplementary data illustrates the
composition of the combined Guarantors. Separate complete financial statements
of the respective Guarantors would not provide additional material information
which would be useful in assessing the financial composition of the Guarantors.
No single Guarantor has any significant legal restrictions on the ability of
investors or creditors to obtain access to its assets in event of default on the
Guarantee other than its subordination to senior indebtedness.

Investments in subsidiaries are accounted for by the parent on the cost
method for purposes of the supplemental consolidating presentation. Earnings of
subsidiaries are therefore not reflected in the parent's investment accounts and
earnings. The principal elimination entries eliminate investments in
subsidiaries and intercompany balances and transactions.

F-20
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY THE SELMER COMPANY, L.P.)

CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1995

<TABLE>
<CAPTION>
NON
GUARANTOR GUARANTOR GUARANTOR
PARENT ISSUER SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ----------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash........................... $ 361 $ 1,626 $ 1,719 $ 3,706
Accounts, notes and leases
receivable, net............... 25,700 7,504 8,656 41,860
Inventories.................... 28,511 23,954 26,975 $ (377) 79,063
Prepaid expenses and other
current assets................ 1,108 1,006 944 3,058
Deferred tax asset............. 700 1,888 2,105 4,693
----------- ----------- ----------- ------------ ------------
Total current assets............. 56,380 35,978 40,399 (377) 132,380
Property, plant and equipment,
net............................. 14,642 28,077 21,413 64,132
Investment in subsidiaries....... $ 7,335 105,630 30,521 177 (143,663) --
Intercompany..................... 630 1,576 2,523 (4,729) --
Other assets, net................ 4,070 17,888 11,469 (1,313) 32,114
Cost in excess of fair value of
net assets acquired, net........ 10,179 12,079 12,912 35,170
----------- ----------- ----------- ----------- ------------ ------------
TOTAL ASSETS..................... $ 7,965 $ 192,477 $ 127,066 $ 86,370 $ (150,082) $ 263,796
----------- ----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ----------- ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current
portion of long-term debt..... $ 250 $ 2,056 $ 2,306
Accounts payable............... 3,085 $ 2,994 2,093 8,172
Other current liabilities...... 10,019 6,576 14,694 31,289
----------- ----------- ----------- ------------ ------------
Total current liabilities........ 13,354 9,570 18,843 41,767
Long-term debt................... 165,355 1,648 4,730 171,733
Intercompany..................... 630 80,000 4,099 $ (84,729) --
Deferred taxes................... 880 13,565 15,007 29,452
Non-current pension liability.... 2,206 14,123 (1,313) 15,016
----------- ----------- ----------- ------------ ------------
Total liabilities................ 182,425 104,783 56,802 (86,042) 257,968
Stockholders' equity............. $ 7,965 10,052 22,283 29,568 (64,040) 5,828
----------- ----------- ----------- ----------- ------------ ------------
Total............................ $ 7,965 $ 192,477 $ 127,066 $ 86,370 $ (150,082) $ 263,796
----------- ----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ----------- ------------ ------------
</TABLE>

F-21
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY THE SELMER COMPANY, L.P.)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995

Operating expenses:
Sales and marketing............ 11,172 5,911 4,078 (160) 21,001
Provision for doubtful
accounts...................... 566 47 184 797
General and administrative..... 5,332 2,805 3,475 11,612
Amortization................... 864 1,234 943 3,041
Other expense.................. 466 (188) 227 160 665
----------- ----------- ----------- ------------ ------------
Total operating expenses......... 18,400 9,809 8,907 -- 37,116
----------- ----------- ----------- ------------ ------------
Earnings (loss) from
operations...................... 14,311 (851) (294) (64) 13,102

Other (income) expense:
Other income................... (5,817) -- (89) 5,323 (583)
Interest expense............... 14,406 5,210 630 (5,323) 14,923
----------- ----------- ----------- ------------ ------------
Other expense, net............... 8,589 5,210 541 -- 14,340
----------- ----------- ----------- ------------ ------------
Income (loss) before income
taxes........................... 5,722 (6,061) (835) (64) (1,238)

Provision for (benefit of) income
taxes........................... 2,530 (2,014) 320 836
----------- ----------- ----------- ------------ ------------
Net income (loss)................ $ 3,192 $ (4,047) $ (1,155) $ (64) $ (2,074)
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
</TABLE>

F-22
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES
(FORMERLY THE SELMER COMPANY, L.P.)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
GUARANTOR GUARANTOR NON GUARANTOR
PARENT ISSUER SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- --------- ----------- ------------- --------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating
activities
Net income (loss)............... $ 3,192 $ (4,047) $ (1,155) $ (64) $ (2,074)
Adjustments to reconcile net
income (loss) to cash flows
from operating activities:
Depreciation and
amortization................. 3,146 2,650 1,943 7,739
Provision for doubtful
accounts..................... 566 -- 200 766
Amortization of senior note
discount..................... 277 -- -- 277
Deferred tax provision
(benefit).................... 780 (2,785) (3,078) (5,083)
Other......................... 52 71 (30) 93
Changes in operating assets
and liabilities:
Accounts, notes and leases
receivable................. (1,443) (1,100) (1,629) (4,172)
Inventories................. (2,475) 6,438 3,637 64 7,664
Prepaid expense and other
current assets............. (120) (587) 6 (701)
Accounts payable............ 596 323 435 1,354
Accrued expenses............ (404) (738) 1,942 800
--------- ----------- ------------- --- ------------
Net cash flows from operating
activities....................... 4,167 225 2,271 -- 6,663

Cash flows from investing
activities
Capital expenditures............ (1,639) (810) (713) (3,162)
Proceeds from disposals of fixed
assets......................... 3 11 37 51
Increase in other assets........ (1,196) (255) (350) (1,801)
Acquisition of Steinway Musical
Properties, Inc. (net of cash
acquired)...................... (104,461) 1,548 123 (102,790)
--------- ----------- ------------- --- ------------
Net cash flows from investing
activities....................... (107,293) 494 (903) -- (107,702)

Cash flows from financing
activities
Borrowing under line of credit
agreement...................... 105,187 42,441 365 147,993
Repayments under line of credit
agreement...................... (106,915) (41,571) (148,486)
Proceeds from issuance of long-
term debt...................... 110,000 110,000
Proceeds from issuance of
stock.......................... $ 630 630
Repayments of long-term debt.... (5,000) (772) (5,772)
Intercompany dividends.......... 1,500 (1,500) --
Intercompany.................... (630) 222 (1,463) 1,871 --
------ --------- ----------- ------------- --- ------------
Net cash flows from financing
activities....................... -- 103,494 907 (36) -- 104,365
Effect of exchange rate changes on
cash............................. --
Increase (decrease) in cash....... -- 368 1,626 1,332 -- 3,326
Cash, beginning of period......... (7) -- 387 380
------ --------- ----------- ------------- --- ------------
Cash, end of period............... $ -- $ 361 $ 1,626 $ 1,719 $ -- $ 3,706
------ --------- ----------- ------------- --- ------------
------ --------- ----------- ------------- --- ------------
</TABLE>

F-23
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS
MARCH 30, 1996

Property, plant and equipment,
net............................. 14,315 27,679 20,563 62,557
Investment in subsidiaries....... $ 7,335 105,630 30,521 178 (143,664) --
Intercompany..................... 630 1,508 3,245 (5,383)
Other assets, net................ 3,610 17,448 10,871 (1,313) 30,616
Cost in excess of fair value of
net assets acquired, net........ 10,111 12,003 12,480 34,594
----------- ----------- ----------- ----------- ------------ ------------
TOTAL ASSETS..................... $ 7,965 $ 193,292 $ 126,164 $ 83,785 $ (150,836) $ 260,370
----------- ----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ----------- ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current
portion of long-term debt..... $ 500 $ 1,745 $ 2,245
Accounts payable............... 2,386 $ 1,286 2,091 5,763
Other current liabilities...... 11,586 7,693 14,069 33,348
----------- ----------- ----------- ------------ ------------
Total current liabilities........ 14,472 8,979 17,905 41,356

Long-term debt................... 162,498 2,614 4,290 169,402
Intercompany..................... 630 80,000 4,753 $ (85,383) --
Deferred taxes................... 880 13,264 14,319 28,463
Non-current pension liability.... 2,206 13,816 (1,313) 14,709
----------- ----------- ----------- ------------ ------------
Total liabilities................ 180,686 104,857 55,083 (86,696) 253,930

Stockholders' equity............. $ 7,965 12,606 21,307 28,702 (64,140) 6,440
----------- ----------- ----------- ----------- ------------ ------------
Total............................ $ 7,965 $ 193,292 $ 126,164 $ 83,785 $ (150,836) $ 260,370
----------- ----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ----------- ------------ ------------
</TABLE>

F-24
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 30, 1996

Operating expenses:
Sales and marketing............. 3,901 2,337 2,074 (40) 8,272
Provision for doubtful
accounts....................... 176 27 26 229
General and administrative...... 1,332 1,254 1,345 3,931
Amortization.................... 200 518 382 1,100
Other expense................... 10 (92) 123 40 81
--------- ----------- ----------- ------------ ------------
Total operating expenses.......... 5,619 4,044 3,950 -- 13,613
--------- ----------- ----------- ------------ ------------
Earnings (loss) from operations... 6,363 679 1,164 (99) 8,107

Other (income) expense:
Other income.................... (2,320) -- (19) 2,208 (131)
Interest expense................ 4,611 2,154 234 (2,208) 4,791
--------- ----------- ----------- ------------ ------------
Other expense, net................ 2,291 2,154 215 -- 4,660
--------- ----------- ----------- ------------ ------------
Income (loss) before income
taxes............................ 4,072 (1,475) 949 (99) 3,447

Provision for (benefit of) income
taxes............................ 1,518 (498) 846 1,866
--------- ----------- ----------- ------------ ------------
Net income (loss)................. $ 2,554 $ (977) $ 103 $ (99) $ 1,581
--------- ----------- ----------- ------------ ------------
--------- ----------- ----------- ------------ ------------
</TABLE>

F-25
<PAGE>
SELMER INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 30, 1996

<TABLE>
<CAPTION>
GUARANTOR GUARANTOR NON GUARANTOR
PARENT ISSUER SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- --------- ------------- ------------- --------------- -------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss).................. $ 2,554 $ (977) $ 103 $ (50) $ 1,581
Adjustments to reconcile net income
(loss) to cash flows from
operating activities:
Depreciation and amortization.... 822 1,158 793 2,773
Provision for doubtful
accounts........................ 176 -- -- 176
Amortization of senior note
discount........................ 76 -- -- 76
Deferred tax benefit............. -- (303) (279) (582)
Changes in operating assets and
liabilities:
Accounts, notes and leases
receivable.................... (6,565) 1,299 (8) (5,274)
Inventories.................... 3,236 (387) (989) 50 1,959
Prepaid expense and other
current assets................ (333) 71 62 (200)
Accounts payable............... (699) (1,866) (843) (3,408)
Accrued expenses............... 1,567 1,276 972 3,815
--------- ------------- ------------- --- -------------
Net cash flows from operating
activities.......................... 834 271 (189) -- 916

Cash flows from investing activities
Capital expenditures............... (295) (333) (78) (706)
Proceeds from disposals of fixed
assets............................ -- 12 -- 12
(Increase) decrease in other
assets............................ 328 (1) 268 595
--------- ------------- ------------- --- -------------
Net cash flows from investing
activities.......................... 33 (322) 190 -- (99)

Cash flows from financing activities
Net borrowings (repayments) under
line of credit agreement.......... (2,683) 966 (256) (1,973)
Repayments of long-term debt....... -- -- (269) (269)
Intercompany....................... 68 (723) 655 --
----- --------- ------------- ------------- --- -------------
Net cash flows from financing
activities.......................... -- (2,615) 243 130 -- (2,242)

Effect of exchange rate changes on
cash................................ -- -- (135) (135)

Increase (decrease) in cash.......... -- (1,748) 192 (4) -- (1,560)
Cash, beginning of period............ 361 1,626 1,719 3,706
----- --------- ------------- ------------- --- -------------
Cash, end of period.................. $ -- $ (1,387) $ 1,818 $ 1,715 $ -- $ 2,146
----- --------- ------------- ------------- --- -------------
----- --------- ------------- ------------- --- -------------
</TABLE>

F-26
<PAGE>
INDEPENDENT AUDITORS' REPORT

Steinway Musical Properties, Inc.:

We have audited the accompanying consolidated balance sheets of Steinway
Musical Properties, Inc. and subsidiaries (the "Companies") as of June 30, 1993
and 1994 and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended June 30,
1994. These financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Companies at June 30, 1993
and 1994, and the results of their operations and their cash flows for each of
the three years in the period ended June 30, 1994 in conformity with generally
accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, in 1994 the
Companies changed their method of accounting for income taxes to conform with
Statement of Financial Accounting Standards No. 109.

Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The supplemental condensed
consolidating balance sheets as of June 30, 1993 and 1994, and the supplemental
condensed consolidating statements of operations and of cash flows for each of
the three years in the period ended June 30, 1994 are presented for purposes of
additional analysis and are not a required part of the basic consolidated
financial statements. This supplemental condensed consolidated information is
the responsibility of the Companies' management. Such condensed consolidating
information has been subjected to the auditing procedures applied in our audits
of the basic consolidated financial statements and, in our opinion, is fairly
stated in all material respects when considered in relation to the basic
consolidated financial statements taken as a whole.

DELOITTE & TOUCHE LLP
Boston, Massachusetts
September 9, 1994

F-27
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31,
JUNE 30, -----------
-------------------- 1995
NOTES 1993 1994 -----------
--------- --------- --------- (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash................................................................. $ 1,606 $ 1,396 $ 1,080
Short-term investments............................................... 1 1,054 3,089 1,018
Accounts receivable (less allowance for doubtful accounts and sales
returns of approximately $1,673, $1,610 and $1,615 in 1993, 1994 and
1995, respectively.................................................. 3 9,650 9,191 11,618
Inventory............................................................ 1,2,3 42,373 43,622 46,303
Prepaid expenses and other assets.................................... 1,576 1,462 1,440
--------- --------- -----------
Total current assets............................................... 56,259 58,760 61,459
--------- --------- -----------
Property, plant and equipment:
Land................................................................. 1,3 204 208 217
Building and improvements............................................ 8,400 10,322 11,184
Leasehold improvements............................................... 1,240 1,502 1,513
Equipment............................................................ 9,327 11,372 12,403
Furniture and fixtures............................................... 1,267 1,388 1,601
Concert and artist and rental pianos................................. 4,834 5,266 5,644
Construction in progress............................................. 384 145 820
--------- --------- -----------
Total.............................................................. 25,656 30,203 33,382
Less accumulated depreciation and amortization....................... (12,751) (17,440) (19,694)
--------- --------- -----------
Property, plant and equipment -- net............................... 12,905 12,763 13,688
Other assets:
Deferred financing costs -- net...................................... 1 935 1,974 1,600
Deferred pension costs -- net........................................ 7 1,276 1,108 1,278
Other noncurrent assets.............................................. 7 1,302 1,414 1,420
--------- --------- -----------
Total other assets................................................. 3,513 4,496 4,298
--------- --------- -----------
Total.................................................................. $ 72,677 $ 76,019 $ 79,445
--------- --------- -----------
--------- --------- -----------

<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C>
Current liabilities:
Notes payable........................................................ 3 $ 15,695 $ 11,470 $ 6,188
Current portion of long-term debt.................................... 3 1,767 1,619 1,764
Accounts payable and accrued expenses................................ 7 6,963 8,635 7,597
Income and other taxes payable....................................... 4 252 1,413 1,681
Accrued warranty..................................................... 1 1,125 1,625 1,901
Accrued compensation................................................. 6,083 7,168 8,864
Deferred income taxes................................................ 4 11 1,039 1,039
--------- --------- -----------
Total current liabilities.......................................... 31,896 32,969 29,034
--------- --------- -----------
Long-term debt......................................................... 3 26,934 25,379 24,982
--------- --------- -----------
Pension liability...................................................... 1,7 10,682 11,867 14,433
--------- --------- -----------
Deferred income taxes.................................................. 4 1,398 599 790
--------- --------- -----------
Redeemable common stock................................................ 6,11 1,000
--------- --------- -----------
Redeemable warrant capital............................................. 6 270 510
--------- --------- -----------
Stockholders' equity: 6
Common stock; $0.01 par value; 300,000 shares authorized; 429,600 and
600 shares issued in 1993, 1994 and 1995, respectively..............
Additional paid-in capital........................................... 1,002 2,002 2,002
Retained earnings (deficit).......................................... (209) 2,906 7,096
Cumulative translation adjustments................................... 1 (26) 313 884
Treasury stock (171 shares at cost).................................. 6 (286) (286)
--------- --------- -----------
Total stockholders' equity......................................... 767 4,935 9,696
--------- --------- -----------
Total.................................................................. $ 72,677 $ 76,019 $ 79,445
--------- --------- -----------
--------- --------- -----------
</TABLE>

See Notes to Consolidated Financial Statements.

F-28
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED CUMULATIVE
------------------------ PAID-IN EARNINGS TRANSLATION TREASURY
NOTES SHARES AMOUNT CAPITAL (DEFICIT) ADJUSTMENTS STOCK
--------- ----------- ----------- ----------- ---------- ------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 1, 1991................. 429 $ 1,002 $ 9,908 $ (304)
Net Loss............................ (10,335)
Reduction of redemption value of
redeemable common stock............ 11 2,756
Translation adjustments............. 663
--- ----- ----------- ---------- ------ -----------
BALANCE, JUNE 30, 1992................ 429 1,002 2,329 359
Net Loss............................ (3,009)
Reduction of redemption value of
redeemable common stock............ 11 471
Translation adjustments............. (385)
--- ----- ----------- ---------- ------ -----------
BALANCE, JUNE 30, 1993................ 429 1,002 (209) (26)
Net income.......................... 3,115
Purchase of treasury stock.......... 6,11 171 1,000 (286)
Translation adjustments............. 339
--- ----- ----------- ---------- ------ -----------
BALANCE, JUNE 30, 1994................ 600 2,002 2,906 313 $ (286)
Unaudited:
Net income.......................... 4,430
Accretion to redeemable warrant
redemption value................... 6 (240)
Translation adjustments............. 571
--- ----- ----------- ---------- ------ -----------
BALANCE, MARCH 31, 1995
(Unaudited)......................... 600 $ $ 2,002 $ 7,096 $ 884 $ (286)
--- ----- ----------- ---------- ------ -----------
--- ----- ----------- ---------- ------ -----------

TOTAL
----------

<S> <C>
BALANCE, JULY 1, 1991................. $ 10,606
Net Loss............................ (10,335)
Reduction of redemption value of
redeemable common stock............ 2,756
Translation adjustments............. 663
----------
BALANCE, JUNE 30, 1992................ 3,690
Net Loss............................ (3,009)
Reduction of redemption value of
redeemable common stock............ 471
Translation adjustments............. (385)
----------
BALANCE, JUNE 30, 1993................ 767
Net income.......................... 3,115
Purchase of treasury stock.......... 714
Translation adjustments............. 339
----------
BALANCE, JUNE 30, 1994................ 4,935
Unaudited:
Net income.......................... 4,430
Accretion to redeemable warrant
redemption value................... (240)
Translation adjustments............. 571
----------
BALANCE, MARCH 31, 1995
(Unaudited)......................... $ 9,696
----------
----------
</TABLE>

F-29
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH
YEAR ENDED JUNE 30, 31,
----------------------------------------- ------------------------
NOTES 1992 1993 1994 1994 1995
--------- -------------- ------------ ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net sales.................................. 1 $ 89,240 $ 89,714 $ 101,896 $ 77,724 $ 93,539
Cost of sales.............................. 58,481 63,575 70,260 53,546 62,539
-------------- ------------ ----------- ----------- -----------
Gross profit............................... 30,759 26,139 31,636 24,178 31,000
Selling, general and administrative
expenses.................................. (26,203) (24,469) (22,841) (16,844) (18,696)
Pension curtailment gain................... 7 1,083
Restructuring charges...................... 9 (834)
-------------- ------------ ----------- ----------- -----------
Operating income........................... 4,556 1,919 8,795 7,334 12,304
-------------- ------------ ----------- ----------- -----------
Other income (expense):
Interest income.......................... 338 365 293 173 209
Interest expense......................... 3 (3,646) (4,755) (4,134) (3,221) (2,873)
Foreign currency transaction gain
(loss).................................. 1,8 54 (294) (80) 68 20
Other.................................... (225) (300) 30 (347) (251)
-------------- ------------ ----------- ----------- -----------
Total.................................. (3,479) (4,984) (3,891) (3,327) (2,895)
-------------- ------------ ----------- ----------- -----------
Income (loss) before income taxes and
extraordinary item........................ 1,077 (3,065) 4,904 4,007 9,409
Provision for (benefit of) income taxes.... 4 4,007 (56) 2,417 2,067 4,979
-------------- ------------ ----------- ----------- -----------
Income (loss) before extraordinary item.... (2,930) (3,009) 2,487 1,940 4,430
Extraordinary item (net of taxes of
$123)..................................... 6 628
-------------- ------------ ----------- ----------- -----------
Discontinued operations:................... 10
Income from operations................... 11
Loss on sale of discontinued
operations.............................. (7,416)
-------------- ------------ ----------- ----------- -----------
Net income (loss).......................... $ (10,335) $ (3,009) $ 3,115 $ 1,940 $ 4,430
-------------- ------------ ----------- ----------- -----------
-------------- ------------ ----------- ----------- -----------
Income (loss) per common share:............ 1
Income (loss before extraordinary item
and discontinued operations............. $ (4,883.33) $ (5,015.00) $ 4,215.25 $ 3,233.33 $ 7,981.98
Extraordinary item....................... 1,064.41
Discontinued operations.................. (12,341.67)
-------------- ------------ ----------- ----------- -----------
Net income (loss)........................ $ (17,225.00) $ (5,015.00) $ 5,279.66 $ 3,233.33 $ 7,981.98
-------------- ------------ ----------- ----------- -----------
-------------- ------------ ----------- ----------- -----------
Weighted average common and common
equivalent shares outstanding........... 600 600 590 600 555
-------------- ------------ ----------- ----------- -----------
-------------- ------------ ----------- ----------- -----------
</TABLE>

F-30
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
---------------------------------- --------------------
1992 1993 1994 1994 1995
---------- ---------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................... $ (10,335) $ (3,009) $ 3,115 $ 1,940 $ 4,430
Adjustments to reconcile net income (loss) to cash
provided by (used in) operating activities:
Depreciation and amortization...................... 3,102 2,695 3,227 1,944 2,017
Loss (gain) on sales of property................... 102 (61) (54)
Deferred income taxes.............................. (1,403) (11) 366 114 (610)
Unrealized foreign exchange loss (gain)............ (669) 904 (168) (147) 328
Pension curtailment gain........................... (1,083)
Loss on sale of subsidiary......................... 6,283
Extraordinary gain................................. (751)
Increase (decrease) in cash from:
Accounts receivable.............................. 245 2,116 530 (1,140) (1,324)
Inventory........................................ (7,466) 2,281 272 3,769 421
Prepaid expenses and other assets................ (66) 501 (42) (265) (170)
Deferred financing costs......................... (82) (130) (2,337) (1,422)
Accounts payable and accrued expenses............ 1,150 416 2,552 1,297 (524)
Income and other taxes payable................... 2,325 (1,526) 1,094 1,345 56
Increase in pension liability.................... 1,397 736 633 50 495
---------- ---------- ---------- --------- ---------
Cash provided by (used in) operating
activities.................................... (5,417) 3,829 8,437 7,485 5,119
---------- ---------- ---------- --------- ---------
Cash flows from investing activities:
Sale (purchase) of short-term investments............ 3,659 (1,144) (1,839) (1,144) 2,294
Proceeds from sales of property, plant and
equipment........................................... 917 1,078 905 686 431
Proceeds from sale of subsidiary..................... 10,593
Purchase of property, plant and equipment............ (3,677) (2,469) (2,502) (1,660) (2,217)
---------- ---------- ---------- --------- ---------
Cash provided by (used in) investing
activities.................................... 899 8,058 (3,436) (2,118) 508
---------- ---------- ---------- --------- ---------
Cash flows from financing activities:
Net (repayment of) proceeds from notes payable....... 5,749 (8,827) (4,279) (5,697) (5,347)
Repayment of long-term debt.......................... (1,652) (2,029) (12,789) (1200) (1,248)
Issuance of long-term debt........................... 11,730 1,552
Issuance of redeemable warrants...................... 270
Purchase of treasury stock........................... (286)
---------- ---------- ---------- --------- ---------
Cash provided by (used in) financing
activities.................................... 4,097 (10,856) (5,354) (5,345) (6,595)
---------- ---------- ---------- --------- ---------
Effect of exchange rate changes on cash.............. 321 11 143 (431) 652
---------- ---------- ---------- --------- ---------
Increase (decrease) in cash.......................... (100) 1,042 (210) (409) (316)
Cash, beginning of period............................ 664 564 1,606 1,606 1,396
---------- ---------- ---------- --------- ---------
Cash, end of period.................................. $ 564 $ 1,606 $ 1,396 $ 1,197 $ 1,080
---------- ---------- ---------- --------- ---------
---------- ---------- ---------- --------- ---------
</TABLE>

F-31
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (DOLLARS IN
THOUSANDS)

BUSINESS -- Steinway Musical Properties, Inc. (the "Company") designs,
develops, manufactures and markets musical instruments.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF CONSOLIDATION -- The consolidated financial statements include the
accounts of Steinway Musical Properties, Inc. and its wholly-owned subsidiaries:

Steinway, Inc.
Steinway & Sons
Boston Piano Company, Inc.
Boston Piano GmbH

All significant intercompany accounts and transactions have been eliminated
in consolidation.

INCOME TAXES -- Effective July 1, 1993, the Company changed its method of
accounting for income taxes prospectively to conform with Statement of Financial
Accounting Standards No. 109 ("SFAS No. 109"). SFAS No. 109 requires the
recognition of deferred tax liabilities and assets for the future tax
consequences of temporary differences between the financial reporting and tax
bases of existing assets and liabilities. In addition, future tax benefits, such
as net operating loss and foreign tax credit carryforwards are recognized to the
extent realization of such benefits is more likely than not (see Note 4). The
cumulative effect of this change on retained earnings at the beginning of the
year and the impact on net income for the year ended June 30, 1994 were
immaterial.

REVENUE RECOGNITION -- Revenue is generally recognized when products are
shipped. The Company generally warrants its products against defects for five
years and provides for the estimated costs of such warranties at the time of
sale.

UNAUDITED INTERIM FINANCIAL INFORMATION -- The interim financial statements
as of March 31, 1995 and for the nine-month periods ended March 31, 1994 and
1995 are unaudited. In the opinion of management, the unaudited financial
statements include all adjustments necessary, consisting solely of normal
recurring accruals, for a fair presentation of such information. The
consolidated results of operations for the nine-month periods ended March 31,
1994 and 1995 are not necessarily indicative of the results that would be
expected for a full year.

CASH FLOW INFORMATION -- Supplemental disclosures of cash flow information:

<TABLE>
<CAPTION>
1993 1994
--------- ---------
<S> <C> <C>
Cash paid for interest................................................... $ 4,876 $ 4,488
Cash paid for income taxes............................................... 1,762.... 1,130
</TABLE>

INVENTORY -- Inventory is stated at the lower of cost, using the FIFO
method, or market.

PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment are recorded
at cost. Depreciation is provided based on the estimated useful lives of the
assets (two to fifteen years) using the straight-line method. For income tax
purposes, depreciation is computed using accelerated and straight-line methods.
Leasehold improvements are amortized using the straight-line method over the
estimated useful lives of the improvements or the remaining term of the
respective lease, whichever is shorter.

DEFERRED FINANCING COSTS -- Costs related to obtaining debt financing have
been deferred and are being amortized over the approximate repayment period of
the related debt. Accumulated amortization amounted to approximately $2,688 and
$3,324 at June 30, 1993 and 1994, respectively.

F-32
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(1) BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (DOLLARS IN
THOUSANDS) (CONTINUED)
FOREIGN CURRENCY TRANSLATION -- Assets and liabilities of non-U.S.
operations are translated into U.S. dollars at year-end rates, and revenues and
expenses at average rates of exchange prevailing during the year. The resulting
translation adjustments are reported as a separate component of stockholders'
equity. Foreign currency transaction gains and losses are recognized in income
currently.

SHORT-TERM INVESTMENTS -- Short-term investments are comprised of interest
bearing bank time deposits. These deposits are stated at cost, which
approximates market.

INCOME (LOSS) PER COMMON SHARE -- Income (loss) per common share has been
computed using the weighted average number of common and common equivalent
shares outstanding.

(2) INVENTORY
At June 30, 1993 and 1994 and March 31, 1995 (unaudited), inventory
consisted of the following:

<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Raw materials.............................................. $ 4,879 $ 5,592 $ 5,764
Work-in-process............................................ 20,727 22,027 22,626
Finished goods............................................. 16,767 16,003 17,913
--------- --------- ---------
Total.................................................. $ 42,373 $ 43,622 $ 46,303
--------- --------- ---------
--------- --------- ---------
</TABLE>

(3) NOTES PAYABLE AND LONG TERM DEBT

NOTES PAYABLE -- Notes payable at June 30, 1993 and 1994 consisted of the
following:

<TABLE>
<CAPTION>
1993 1994
--------- ---------
<S> <C> <C>
Revolving loan facility................................................ $ 15,340 $ 10,132
Open account loan...................................................... 355 1,338
--------- ---------
Total.............................................................. $ 15,695 $ 11,470
--------- ---------
--------- ---------
</TABLE>

The revolving loan facility (the "Facility") provides for borrowings by
domestic subsidiaries of up to $18,000 ($19,000 at June 30, 1993) payable on
demand. Interest on the first $5,000 of the Facility is fixed at 10.25% through
May 6, 1996; interest on the balance is at 1% over the bank's base interest rate
(8.25% at June 30, 1994). There is a commitment fee associated with the Facility
of 0.5% per year on the average daily unused portion.

The open account loan provides for borrowings by foreign subsidiaries of up
to deutsche mark (DM) 11,500 ($7,249 at the June 30, 1994 exchange rate) payable
on demand, of which up to DM 4,000 ($2,521 at the June 30, 1994 exchange rate)
may be drawn as a term loan for 30, 60, 90 or 180 days. Demand borrowings bear
interest at the rate of 9.25% and term borrowings bear interest at the
Euromarket rate plus 2%.

F-33
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(3) NOTES PAYABLE AND LONG TERM DEBT (CONTINUED)
The Company and its foreign subsidiaries have guaranteed payment of
borrowings under the Facility. In addition, borrowings under the Facility in
excess of $14,000 are guaranteed by certain stockholders of the Company. The
Facility and the open account loan are periodically reviewed by the banks and
are generally subject to withdrawal at their discretion.

LONG-TERM DEBT

Long-term debt at June 30, 1993 and 1994 consisted of the following:

<TABLE>
<CAPTION>
1993 1994
--------- ---------
<S> <C> <C>
Notes payable to a domestic bank. Interest payments are due monthly at the bank's
prime rate plus 2% (9.25% at June 30, 1994). Principal is due in monthly
installments of $52 through October 1, 1996 and a final payment of $7,031 on
November 1, 1996................................................................ $ 9,115 $ 8,489
Note payable to a foreign bank, due in annual installments of principal and
interest of DM 645 ($407 at the June 30, 1994 exchange rate) at an interest rate
of 8.9% with the balance due in September 2005.................................. 2,776 2,843
Note payable to a foreign bank, due in quarterly installments of DM 250 ($158 at
the June 30, 1994 exchange rate) through September 30, 1999, plus interest at
6.5%............................................................................ 3,806 3,309
Notes payable to a foreign bank, due in monthly installments of DM 25 ($16 at the
June 30, 1994 exchange rate) through August 31, 1997, plus interest at 9.6%..... 732 599
Subordinated note payable to a warrant-holder, (net of discount of $206, see Note
6), due in installments of $2,400 on April 13, 2000 and April 13, 2001 and a
final payment of $3,200 due April 13, 2002, plus interest payable quarterly on
the last day of March, June, September and December currently at 6%............. 7,794
Subordinated notes payable, (net of discount of $523, see Note 6). Interest
payments are due monthly at the bank's base rate plus 2.5% (9.75% at June 30,
1994). Principal is due on October 25, 1996..................................... 3,947
Senior subordinated note payable to CBS, Inc. at an interest rate of 11%......... 5,000
Deferred interest on senior subordinated note.................................... 210
Subordinated note payable to a stockholder, at an interest rate of 15%........... 7,000
Other debt, due in various monthly installments through 1994, plus interest at
12%............................................................................. 62 17
--------- ---------
Tota1............................................................................ 28,701 26,998
Less current portion............................................................. 1,767 1,619
--------- ---------
Long-term debt................................................................... $ 26,934 $ 25,379
--------- ---------
--------- ---------
</TABLE>

The subordinated note payable to a warrant-holder currently bears interest
at 6%. The interest rate increases to 8% in the second year and 14% thereafter.
An effective rate of interest of 11.2% has been used to calculate interest
expense in the consolidated statement of operations.

F-34
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(3) NOTES PAYABLE AND LONG TERM DEBT (CONTINUED)
Borrowings under the revolving loan facility, the open account loan and the
various long-term loan agreements are secured by accounts receivable, inventory,
property, plant and equipment, patents and trademarks and common stock of the
subsidiaries. The loan agreements contain certain covenants which, among other
things, require the maintenance of ratios of current assets to current
liabilities of 1.5 to 1; a minimum capital base (which includes subordinated
debt) of $8,500; a ratio of liabilities to capital base of not greater than 5.75
to 1; and a debt service ratio of not less than 1 to 1.

Principal payments on long-term debt are due as follows:

<TABLE>
<CAPTION>
YEAR ENDING JUNE 30:
- ---------------------------------------------------------------------------------------------
<S> <C>
1995......................................................................................... $ 1,619
1996......................................................................................... 1,616
1997......................................................................................... 12,193
1998......................................................................................... 865
1999......................................................................................... 851
Thereafter................................................................................... 9,854
---------
Total...................................................................................... $ 26,998
---------
---------
</TABLE>

(4) INCOME TAXES
The provision for (benefit of) income taxes is approximately as follows:

<TABLE>
<CAPTION>
1992 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
Domestic:
Current................................................................ $ 80 $ 1,106
Deferred............................................................... (305)
Foreign:
Current................................................................ 5,382 $ (368) 1,452
Deferred............................................................... (1,455) 312 164
--------- --------- ---------
Total.................................................................... $ 4,007 $ (56) $ 2,417
--------- --------- ---------
--------- --------- ---------
</TABLE>

The differences between the provision for (benefit of) income taxes and
income taxes computed using the U.S. federal income tax rate, computed using the
provisions of APB 11 in 1992 and 1993 and SFAS No. 109 in 1994, were as follows:

<TABLE>
<CAPTION>
1992 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
Amount computed using the statutory rate................................ $ 366 $ (1,042) $ 1,667
Increase (reduction) of taxes resulting from:
Foreign income taxes (net of benefit)................................. 3,537 (56) 880
State income taxes (net of benefit)................................... 146
Expenses not deductible for income tax purposes....................... 24 13 29
Other................................................................... 80
U.S. tax benefit for which realization (has been) is not assured........ 1,029 (305)
--------- --------- ---------
Provision for (benefit of) income taxes................................. $ 4,007 $ (56) $ 2,417
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-35
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(4) INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at June 30, 1994 are presented
below:

<TABLE>
<S> <C>
DOMESTIC
Current Assets:
Accounts receivable, principally due to allowances for doubtful accounts
and returns............................................................. $ 494
Inventories, principally due to costs capitalized for tax but not for
book.................................................................... 534
Accrued expenses, principally due to costs not currently deductible...... 2,400
---------
Total current assets................................................... 3,428
---------
Current Liabilities:
Prepaid expenses deducted for tax........................................ (185)
---------
Total current tax assets -- net........................................ 3,243
Less valuation reserves.................................................. (3,243)
---------
Current deferred taxes -- domestic....................................... $
---------
---------
Long-term Assets:
Property and equipment, principally due to different lives............... $ 696
Net operating loss carryforwards, state level (expiring through 2008).... 917
Foreign tax credit carryforwards (expiring through 1998)................. 7,458
---------
Total long-term assets................................................. 9,071
---------
Long-term Liabilities:
Pension asset, principally due to excess tax deductions.................. (525)
---------
Total long-term assets -- net.......................................... 8,546
Less valuation reserves.................................................. (8,546)
---------
Long-term deferred taxes -- domestic..................................... $
---------
---------
FOREIGN
Current Liabilities:
Inventories, principally due to costs capitalized for book but not for
tax..................................................................... $ (565)
Accrued expenses, principally due to costs deducted for tax, not book.... (474)
---------
Total current liabilities -- foreign................................... $ (1,039)
---------
---------
Long-term Assets:
Accrued expenses, principally pension accruals........................... $ 70
---------
Long-term Liabilities:
Property and equipment, principally due to different lives............... (669)
---------
Net long-term liabilities -- foreign..................................... $ (599)
---------
---------
</TABLE>

Valuation allowances are provided against temporary deductible differences
and tax credits which are not more likely than not to be realized. During 1994,
the net reduction of the valuation allowance approximated $2,127 of which $305
was recorded as a reduction of the income tax provision.

(5) LEASE COMMITMENTS
The Company leases real estate and equipment under operating leases expiring
through 2016 with various renewal options.

F-36
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(5) LEASE COMMITMENTS (CONTINUED)
Minimum lease payments under noncancellable operating leases are as follows:

<TABLE>
<CAPTION>
YEAR ENDING JUNE 30:
- -----------------------------------------------------------------------------------
<S> <C>
1995............................................................................... $ 2,469
1996............................................................................... 2,345
1997............................................................................... 2,227
1998............................................................................... 1,895
1999............................................................................... 567
Thereafter......................................................................... 2,730
---------
Total............................................................................ $ 12,233
---------
---------
</TABLE>

Rent expense under all operating leases was approximately $2,403, $2,372 and
$2,338 for 1992, 1993 and 1994, respectively.

(6) FINANCING ACTIVITIES
During 1994, the Company completed a refinancing of its subordinated debt. A
certain portion of this debt was extinguished at a discount from the face value
of the note. The gain arising from the discount has been included as an
extraordinary item on the income statement after deducting related expenses and
the associated tax provision. Also included in this transaction was the
acquisition by the Company of 171 shares of redeemable common. The new
subordinated notes (see Note 4) were issued with detachable warrants to purchase
common stock initially equal to 22.731% of the Company on a fully diluted and as
converted basis. The warrants have a term of ten years and an exercise price of
$.01 per share. The percentage ownership is subject to increase to 23.954% on
April 13, 1997 and 27.036% on April 13, 1999 should certain defined "Triggering
Events" (a qualified public offering, a qualified business combination or a
qualified asset sale) not have occurred by those dates. The proceeds received
from the issuance of the subordinated notes and associated warrants were
allocated between the debt and equity securities based on the value established
for the treasury stock acquired in the same series of refinancing transactions.
This value has been recognized on the balance sheet by recording a discount on
the related notes payable and increasing the additional paid-in capital by a
corresponding amount. The warrants are also subject to redemption at fair market
value commencing the earlier of April 13, 1999 or a change in control of the
Company. The warrants will be accreted to redemption value each reporting period
using the current estimate of the redemption price in such a way as to
approximate the interest method.

(7) PENSION PLANS

DOMESTIC PLANS -- The Company has a defined-benefit, trusteed pension plan
which provides retirement benefits for substantially all of its non-union
domestic employees. The plan benefits were originally based on the employee's
compensation, the number of years of service and age at retirement. The Company
funds the minimum amount required by the Internal Revenue Service.

Effective June 30, 1993, the Company amended the primary benefit formula of
the Plan to freeze both the final average salary and years of service components
of a participant's benefit calculation at their June 30, 1993 levels. This
amendment resulted in a curtailment gain of $1,083 for 1993 creating a prepaid
pension asset included in other non-current assets on the balance sheet.

F-37
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(7) PENSION PLANS (CONTINUED)
The components of domestic net pension cost are as follows:

<TABLE>
<CAPTION>
1992 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
Service cost benefits earned during the period.................... $ 314 $ 265 $ 17
Interest cost on projected benefit obligation..................... 302 334 243
Return on plan assets............................................. (255) (314) (353)
Amortization of unrecognized prior service cost................... (3)
--------- --------- ---------
Net pension (income) expense...................................... $ 361 $ 282 $ (93)
--------- --------- ---------
--------- --------- ---------
</TABLE>

The following table sets forth the domestic plan's funded status and
obligations as of June 30, 1993 and 1994:

<TABLE>
<CAPTION>
1993 1994
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation -- vested................................ $ 2,988 $ 3,046
--------- ---------
--------- ---------
Projected benefit obligation............................................ $ (2,988) $ (3,046)
Plan assets at fair value, primarily stocks, bonds and U.S. Government
securities............................................................. 4,065 4,447
Unrecognized net gain................................................... (231)
--------- ---------
Pension asset at June 30................................................ $ 1,077 $ 1,170
--------- ---------
--------- ---------
</TABLE>

The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation and the expected long-term rate of
return on assets was 8.5% for both years.

The Company also maintains a 401(k) retirement savings plan for its
non-union domestic employees. Effective for the year ended June 30, 1994 the
401(k) plan was amended to allow discretionary employer contributions. The
Company contribution to this plan is determined annually by the Board of
Directors. The 1994 contribution approximated $301.

FOREIGN PLANS -- The German branch of the Company's Steinway & Sons'
subsidiary has an unfunded pension plan which provides retirement benefits for
all hourly and certain salaried employees. Unfunded accrued pension costs are
included in liabilities at June 30, 1993 and 1994. In compliance with German
Labor rulings and with the provisions of SFAS No. 87, the branch has included in
its calculation of benefit obligations and pension expense those salaried
employees not formally admitted to the plan. The benefit determination method in
force bases benefits for employees on a career average earnings approach.

The Company's United Kingdom branch has a separate defined benefit pension
plan covering substantially all of its employees. Both employees and the branch
contribute to the plan. The benefit determination method in force bases benefits
for employees on the three highest yearly salaries during an employee's last ten
working years. The branch funds the plan in accordance with the requirements of
regulatory bodies in the United Kingdom.

F-38
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(7) PENSION PLANS (CONTINUED)
The components of net pension cost for the Company's foreign branches is as
follows:

<TABLE>
<CAPTION>
1992 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
Service cost benefits earned during the period................. $ 365 $ 348 $ 344
Interest cost on projected benefit obligation.................. 1,065 1,119 1,013
Actual return on plan assets................................... (153) (168) (157)
Net amortization and deferral.................................. 217 218 204
--------- --------- ---------
Net pension cost............................................... $ 1,494 $ 1,517 $ 1,404
--------- --------- ---------
--------- --------- ---------
</TABLE>

The following table sets forth the funded status and obligations of the
plans for the foreign branches as of June 30, 1993 and 1994:

<TABLE>
<CAPTION>
1993 1994
---------- ----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits of $12,035
and $13,123, respectively........................................... $ 13,099 $ 14,440
---------- ----------
---------- ----------
Projected benefit obligation......................................... $ (13,848) $ (15,263)
Plan assets at fair value, principally consisting of units in a life
assurance fund and cash............................................. 1,727 1,787
Unrecognized prior service cost arising from plan amendment at June
30, 1989 being recognized over 15 years............................. (1,110) (1,069)
Unrecognized net gain from past experience different from that
assumed............................................................. 355 346
Unrecognized net obligation at July 1, 1987 being recognized over 15
years............................................................... 2,753 2,634
Adjustment required to recognize minimum liability................... (1,276) (1,108)
---------- ----------
Unfunded accrued pension cost included in pension liability.......... (11,399) (12,673)
Less amount currently payable and included in accrued expenses....... 716 806
---------- ----------
Pension liability at June 30......................................... $ (10,683) $ (11,867)
---------- ----------
---------- ----------
</TABLE>

The range of weighted average discount rates and rates of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were from 7.0% to 7.5% and from 3.0% to 4.0%,
respectively. The expected long-term rate of return on assets was 9.0% for both
years.

(8) FOREIGN EXCHANGE CONTRACTS
At June 30, 1994, the Company's German branch, whose functional currency is
the deutsche mark, had forward contracts maturing at various dates through
December, 1995 to purchase $3,800.

(9) RESTRUCTURING
During the year ended June 30, 1993, the Company implemented a comprehensive
cost reduction program in order to position itself for maximum profitability
during the anticipated economic recovery. This program included the streamlining
of corporate and divisional administrative functions, revisions to the Company's
domestic pension plan (see Note 7) and a conversion from a self-insured to a set
premium domestic health insurance plan. Costs associated with resulting employee
severance, office relocation and consolidation as well as expenditures for
previous debt restructuring efforts were accrued at year end in 1993 and
included in restructuring charges on the income statement.

F-39
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(10) DISCONTINUED OPERATIONS
In September 1992, the Company sold its investment in the common stock of
Gemeinhardt Company, Inc., a wholly owned subsidiary engaged in the manufacture
of band instruments such as flutes and piccolos. In accordance with the purchase
and sale agreement, certain intangible assets were not transferred pursuant to
the sale. Such assets have been written off and included in the loss on the
sale. Net sales for Gemeinhardt Company, Inc. were $14,138 for 1992.

The loss on the sale of Gemeinhardt Company, Inc. includes a loss from
operations of $615 for the period subsequent to the decision to sell Gemeinhardt
Company, Inc.

(11) REDEEMABLE COMMON STOCK
The 171 shares of redeemable common stock were initially recorded at fair
value at the date of issuance. The shares were redeemable, after September 1991,
at a price equal to the greater of the Company's fully diluted book value per
share or the appraised value per share. Redemption was at the option of either
the stockholder or the Company. Each year, the Company transferred the
difference between fully diluted book value per share (which represented the
Company's best estimate of redemption value at the time) between stockholders'
equity and redeemable common stock.

In connection with the refinancing of the Company's subordinated debt (see
Note 6), the Company repurchased the entire amount outstanding of the redeemable
common stock.

(12) SEGMENT INFORMATION
The Company operates in one industry segment, the manufacture and sale of
musical instruments, chiefly high-quality grand pianos. The following tables set
forth the geographic segments in which the Company operates:
<TABLE>
<CAPTION>
1992 U.S. EUROPE ELIM. CONSOL
- -------------------------------------------------------- --------- --------- --------- -----------
<S> <C> <C> <C> <C>
Revenues................................................ $ 36,239 $ 53,001 $ $ 89,240
Income (loss) before extraordinary item and discontinued
operations............................................. (5,077) 2,147 (2,930)
Assets.................................................. 49,008 42,776 91,784

1993 U.S. EUROPE ELIM. CONSOL
- -------------------------------------------------------- --------- --------- --------- -----------
<S> <C> <C> <C> <C>
Revenues................................................ $ 47,041 $ 47,967 $ (5,294) $ 89,714
Income (loss) before extraordinary item................. (2,714) (268) (27) (3,009)
Assets.................................................. 37,505 35,254 (82) 72,677
<CAPTION>

1994 U.S. EUROPE ELIM. CONSOL
- -------------------------------------------------------- --------- --------- --------- -----------
<S> <C> <C> <C> <C>
Revenues................................................ $ 57,180 $ 47,522 $ (2,806) $ 101,896
Income before extraordinary item........................ 613 1,946 (72) 2,487
Assets.................................................. 39,139 37,035 (155) 76,019
</TABLE>

Intersegment sales activity is accounted for at sales price, less a
discount. Intersegment geographic sales and related costs are eliminated from
the statement of operations in consolidation, and the profit remaining in unsold
inventory acquired through intersegment sales is eliminated from the balance
sheet and the statement of operations in consolidation. Intersegment sales above
principally reflect sales by the Company's U.S. Boston Piano subsidiary to its
German Boston Piano subsidiary.

(13) SALE OF COMPANY (UNAUDITED)
On April 11, 1995, the Company entered into an agreement to merge with The
Selmer Company, Inc. The merger is expected to be consummated in May 1995.

F-40
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS
JUNE 30, 1993

Current assets:
Cash............................................... $ 797 $ 809 $ 1,606
Short-term investments............................. 1,054 1,054
Accounts receivable -- net......................... 5,580 4,070 9,650
Inventory.......................................... 21,383 21,220 $ (230) 42,373
Prepaid expenses and other assets.................. $ 255 186 1,010 125 1,576
---------- ----------- ----------- ------------ ------------
Total current assets............................. 255 27,946 28,163 (105) 56,259
---------- ----------- ----------- ------------ ------------
Property, plant and equipment -- net................. 78 7,692 5,135 12,905
---------- ----------- ----------- ------------ ------------
Other assets -- net.................................. 182 1,230 1,809 292 3,513
---------- ----------- ----------- ------------ ------------
Total................................................ $ 515 $ 36,868 $ 35,107 $ 187 $ 72,677
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------

LIABILITIES AND
STOCKHOLDERS' EQUITY

Current liabilities:
Notes payable...................................... $ 24 $ 15,316 $ 355 $ 15,695
Current portion of long-term debt.................. 37 672 1,058 1,767
Accounts payable and accrued expenses.............. 1,327 4,186 8,658 14,171
Income and other taxes payable..................... (306) 249 $ 309 252
Deferred income taxes.............................. 11 11
---------- ----------- ----------- ------------ ------------
Total current liabilities........................ 1,093 20,174 10,320 309 31,896
Long-term debt....................................... 7,110 12,004 10,020 (2,200) 26,934
Pension liability.................................... 10,682 10,682
Deferred income taxes................................ 1,398 1,398
Intercompany payables (receivables).................. (11,614) 8,730 684 2,200
Redeemable common stock.............................. 1,000 1,000
Stockholders' equity................................. 2,926 (4,040) 2,003 (122) 767
---------- ----------- ----------- ------------ ------------
Total................................................ $ 515 $ 36,868 $ 35,107 $ 187 $ 72,677
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------
</TABLE>

F-41
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS
JUNE 30, 1994

Current assets:
Cash.......................................... $ 968 $ 428 $ 1,396
Short-term investments........................ 3,089 3,089
Accounts receivable -- net.................... 5,790 3,401 9,191
Inventory..................................... 21,741 22,264 $ (383) 43,622
Prepaid expenses and other assets............. $ 594 308 560 1,462
---------- ----------- ----------- ------------ ------------
Total current assets........................ 594 28,807 29,742 (383) 58,760
---------- ----------- ----------- ------------ ------------
Property, plant and equipment -- net............ 86 7,344 5,333 12,763
---------- ----------- ----------- ------------ ------------
Other assets -- net............................. 274 2,073 1,857 292 4,496
---------- ----------- ----------- ------------ ------------
Total........................................... $ 954 $ 38,224 $ 36,932 $ (91) $ 76,019
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------

LIABILITIES AND
STOCKHOLDERS' EQUITY

Current liabilities:
Notes payable............................... $ 270 $ 9,862 $ 1,338 $ 11,470
Current portion of long-term debt........... 642 977 1,619
Accounts payable and accrued expenses......... 965 6,622 9,841 17,428
Income and other taxes payable................ 216 1,197 1,413
Deferred income taxes......................... 1,039 1,039
---------- ----------- ----------- ------------
Total current liabilities................... 1,451 17,126 14,392 32,969
Long-term debt.................................. 7,794 11,812 9,758 $ (3,985) 25,379
Pension liability............................... 11,867 11,867
Deferred income taxes........................... 599 599
Intercompany payables (receivables)............. (13,351) 12,197 (3,014) 4,168
Redeemable warrant capital...................... 270 270
Stockholders' equity............................ 4,790 (2,911) 3,330 (274) 4,935
---------- ----------- ----------- ------------ ------------
Total........................................... $ 954 $ 38,224 $ 36,932 $ (91) $ 76,019
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------
</TABLE>

F-42
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS
MARCH 31, 1995
(UNAUDITED)

Current assets:
Cash.......................................... $ 315 $ 765 $ 1,080
Short-term investments........................ 1,018 1,018
Accounts receivable -- net.................... 5,604 6,014 11,618
Inventory..................................... 22,531 24,003 $ (231) 46,303
Prepaid expenses and other assets............. $ 541 118 781 1,440
---------- ----------- ----------- ------------ ------------
Total current assets........................ 541 28,568 32,581 (231) 61,459
---------- ----------- ----------- ------------ ------------
Property, plant and equipment -- net............ 107 7,509 6,072 13,688
---------- ----------- ----------- ------------ ------------
Other assets -- net............................. 275 1,797 1,934 292 4,298
---------- ----------- ----------- ------------ ------------
Total........................................... $ 923 $ 37,874 $ 40,587 $ 61 $ 79,445
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------

LIABILITIES AND
STOCKHOLDERS' EQUITY

Current liabilities:
Notes payable................................. $ 194 $ 5,670 $ 324 $ 6,188
Current portion of long-term debt............. 625 1,139 1,764
Accounts payable and accrued expenses......... 752 5,712 11,898 18,362
Income and other taxes payable................ (2,777) 2,560 1,898 1,681
Deferred income taxes......................... 1,039 1,039
---------- ----------- ----------- ------------ ------------
Total current liabilities................... (1,831) 14,567 16,298 29,034
Long-term debt.................................. 7,826 11,351 9,790 $ (3,985) 24,982
Pension liability............................... 74 14,359 14,433
Deferred income taxes........................... 790 790
Intercompany payables (receivables)............. (14,632) 12,933 (2,470) 4,169
Redeemable warrant capital...................... 510 510
Stockholders' equity............................ 9,050 (1,051) 1,820 (123) 9,696
---------- ----------- ----------- ------------ ------------
Total........................................... $ 923 $ 37,874 $ 40,587 $ 61 $ 79,445
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------
</TABLE>

F-43
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
YEAR ENDED JUNE 30, 1992

<TABLE>
<CAPTION>
NON
GUARANTOR GUARANTOR GUARANTOR DISCONTINUED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS OPERATIONS CONSOLIDATED
---------- ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales............................... $ 36,495 $ 55,678 $ (2,933) $ 89,240
Cost of sales........................... 25,142 36,128 (2,789) 58,481
----------- ----------- ------------ ------------
Gross profit............................ 11,353 19,550 (144) 30,759
Selling, general and administrative
expenses............................... $ (4,025) (11,385) (11,166) 373 (26,203)
---------- ----------- ----------- ------------ ------------
Operating income (loss)................. (4,025) (32) 8,384 229 4,556
---------- ----------- ----------- ------------ ------------
Other income (expense)
Interest income....................... 38 545 (245) 338
Interest expense...................... (2,455) (1,436) 245 (3,646)
Intercompany fees..................... 4,211 (1,436) (1,516) (1,259)
Foreign currency transaction gain
(loss)............................... 18 36 54
Other................................. (186) (193) 154 (225)
---------- ----------- ----------- ------------ ------------
Total............................... 4,043 (4,046) (2,217) (1,259) (3,479)
---------- ----------- ----------- ------------ ------------
Income (loss) from continuing
operations before provision for
income taxes......................... 18 (4,078) 6,167 (1,030) 1,077
Provision for (benefit of) income
taxes................................ 80 3,927 4,007
---------- ----------- ----------- ------------ ------------
Income (loss) from continuing
operations............................. (62) (4,078) 2,240 (1,030) (2,930)
Discontinued operations:
(Loss) income of operations........... 356 $ (345) 11
Loss on sale of discontinued
operations........................... 530 (7,946) (7,416)
---------- ----------- ----------- ------------ ------------ ------------
Net income (loss) before intercompany
dividends.............................. (62) (4,078) 2,240 (144) (7,946) (7,416)
Intercompany dividends.................. 6,831 (6,831)
---------- ----------- ----------- ------------ ------------ ------------
Net income (loss)..................... $ 6,769 $ (4,078) $ (4,591) $ (144) $ (8,291) $ (10,335)
---------- ----------- ----------- ------------ ------------ ------------
---------- ----------- ----------- ------------ ------------ ------------
</TABLE>

F-44
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
YEAR ENDED JUNE 30, 1993

<TABLE>
<CAPTION>
NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales....................................... $ 47,545 $ 50,838 $ (8,669) $ 89,714
Cost of sales................................... 34,336 37,821 (8,582) 63,575
----------- ----------- ------------ ------------
Gross profit.................................... 13,209 13,017 (87) 26,139
Selling, general and administrative expenses.... $ (3,151) (10,989) (10,796) 467 (24,469)
Pension curtailment gain........................ 383 700 1,083
Restructuring charges........................... (639) (195) (834)
----------- ----------- ----------- ------------ ------------
Operating income (loss)......................... (3,407) 2,725 2,221 380 1,919
----------- ----------- ----------- ------------ ------------
Other income (expense)
Interest income............................... 128 8 246 (17) 365
Interest expense.............................. (3,012) (1,760) 17 (4,755)
Intercompany fees............................. 2,938 (1,546) (925) (467)
Foreign currency transaction gain (loss)...... (8) (286) (294)
Other......................................... 190 (664) 174 (300)
----------- ----------- ----------- ------------ ------------
Total....................................... 3,248 (5,214) (2,551) (467) (4,984)
----------- ----------- ----------- ------------ ------------
Income (loss) before provision for income
taxes.......................................... (159) (2,489) (330) (87) (3,065)
Provision for (benefit of) income taxes......... (56) (56)
----------- ----------- ----------- ------------ ------------
Net income (loss) before intercompany
dividends...................................... (159) (2,489) (274) (87) (3,009)
Intercompany dividends..........................
----------- ----------- ----------- ------------ ------------
Net income (loss)............................... $ (159) $ (2,489) $ (274) $ (87) $ (3,009)
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
</TABLE>

F-45
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
YEAR ENDED JUNE 30, 1994

<TABLE>
<CAPTION>
NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales....................................... $ 57,528 $ 49,673 $ (5,305) $ 101,896
Cost of sales................................... 40,704 34,708 (5,152) 70,260
----------- ----------- ------------ ------------
Gross profit.................................... 16,824 14,965 (153) 31,636
Selling, general and administrative expenses.... $ (2,832) (10,785) (9,612) 388 (22,841)
----------- ----------- ----------- ------------ ------------
Operating income (loss)......................... (2,832) 6,039 5,353 235 8,795
----------- ----------- ----------- ------------ ------------
Other income (expense)
Interest income............................... 337 (44) 293
Interest expense.............................. (2,762) (1,416) 44 (4,134)
Intercompany fees............................. 2,821 (1,433) (999) (389)
Foreign currency transaction gain (loss)...... 46 (126) (80)
Other......................................... 11 (438) 457 30
----------- ----------- ----------- ------------ ------------
Total....................................... 2,832 (4,587) (1,747) (389) (3,891)
----------- ----------- ----------- ------------ ------------
Income (loss) before income taxes and
extraordinary item and intercompany
dividends.................................... 1,452 3,606 (154) 4,904
Provision for (benefit of) income taxes....... 801 1,616 2,417
----------- ----------- ----------- ------------ ------------
Income (loss) before extraordinary item and
intercompany dividends......................... 651 1,990 (154) 2,487
Extraordinary item (net of taxes of $123,000)... 480 148 628
----------- ----------- ----------- ------------ ------------
Net income (loss) before intercompany
dividends...................................... 1,131 2,138 (154) 3,115
Intercompany dividends.......................... 1,150 (1,150)
----------- ----------- ----------- ------------ ------------
Net income...................................... $ 1,150 $ 1,131 $ 988 $ (154) $ 3,115
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
</TABLE>

F-46
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
NINE MONTHS ENDED MARCH 31, 1994
(UNAUDITED)

<TABLE>
<CAPTION>
NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales....................................... $ 42,853 $ 38,901 $ (4,030) $ 77,724
Cost of sales................................... 30,499 27,034 (3,987) 53,546
----------- ----------- ------------ ------------
Gross profit.................................... 12,354 11,867 (43) 24,178
Selling, general and administrative expenses.... $ (1,783) (7,879) (7,472) 290 (16,844)
----------- ----------- ----------- ------------ ------------
Operating income (loss)......................... (1,783) 4,475 4,395 247 7,334
----------- ----------- ----------- ------------ ------------
Other income (expense)
Interest income............................... 191 (18) 173
Interest expense.............................. (2,147) (1,092) 18 (3,221)
Intercompany fees............................. 1,781 (833) (658) (290)
Foreign currency transaction gain (loss)...... 73 (5) 68
Other......................................... 2 (420) 71 (347)
----------- ----------- ----------- ------------ ------------
Total....................................... 1,783 (3,327) (1,493) (290) (3,327)
----------- ----------- ----------- ------------ ------------
Income (loss) before provision for income taxes
and intercompany dividends..................... 1,148 2,902 (43) 4,007
Provision for (benefit of) income taxes......... 349 1,718 2,067
----------- ----------- ----------- ------------ ------------
Net income (loss) before intercompany
dividends...................................... 799 1,184 (43) 1,940
Intercompany dividends.......................... 1,150 (1,150)
----------- ----------- ----------- ------------ ------------
Net income (loss)............................... $ 1,150 $ 799 $ 34 $ (43) $ 1,940
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
</TABLE>

F-47
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
NINE MONTHS ENDED MARCH 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
NON
GUARANTOR GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales....................................... $ 49,996 $ 48,422 $ (4,879) $ 93,539
Cost of sales................................... 35,128 32,440 (5,029) 62,539
----------- ----------- ------------ ------------
Gross profit.................................... 14,868 15,982 150 31,000
Selling, general and administrative expenses.... $ (2,095) (8,509) (8,632) 540 (18,696)
----------- ----------- ----------- ------------ ------------
Operating income (loss)......................... (2,095) 6,359 7,350 690 12,304
----------- ----------- ----------- ------------ ------------
Other income (expense)
Interest income............................... 282 (73) 209
Interest expense.............................. (1,863) (1,083) 73 (2,873)
Intercompany fees............................. 2,095 (1,025) (530) (540)
Foreign currency transaction gain (loss)...... 150 (130) 20
Other......................................... (310) 59 (251)
----------- ----------- ----------- ------------ ------------
Total....................................... 2,095 (3,048) (1,402) (540) (2,895)
----------- ----------- ----------- ------------ ------------
Income (loss) before provision for income
taxes and intercompany dividends............. 3,311 5,948 150 9,409
Provision for (benefit of) income taxes....... 1,452 3,527 4,979
----------- ----------- ----------- ------------ ------------
Net income (loss) before intercompany
dividends.................................... 1,859 2,421 150 4,430
Intercompany dividends........................ 4,500 (4,500)
----------- ----------- ----------- ------------ ------------
Net income (loss)............................. $ 4,500 $ 1,859 $ (2,079) $ 150 $ 4,430
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
</TABLE>

F-48
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
YEAR ENDED JUNE 30, 1992

<TABLE>
<CAPTION>
GUARANTOR GUARANTOR NONGUARANTOR DISCONTINUED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS OPERATIONS CONSOLIDATED
----------- ------------- ------------- --------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)................ $ 6,769 $ (4,078) $ (4,591) $ (144) $ (8,291) $ (10,335)
Adjustments to reconcile net
income (loss) to cash provided
by (used in) operating
activities:
Depreciation and
amortization.................. 161 1,475 1,039 427 3,102
Loss (gain) on sales of
property...................... 102 102
Deferred income taxes.......... (1,403) (1,403)
Unrealized foreign exchange
loss (gain)................... (669) (669)
Loss on sale of subsidiary..... 6,283 6,283
Increase (decrease) in cash
from:
Accounts receivable.......... 409 (710) (356) 902 245
Inventory.................... (3,577) (4,317) 144 284 (7,466)
Prepaid expenses and other
assets...................... (133) (33) 37 63 (66)
Deferred financing costs..... (81) (1) (82)
Accounts payable and accrued
expenses.................... (132) 1,171 127 (16) 1,150
Income and other taxes
payable..................... (721) 452 2,584 10 2,325
Increase in pension
liability................... 1,397 1,397
Intercompany................. (6,200) 3,293 (209) 187 2,929
----------- ------------- ------------- ------ ------------- ------------
Cash provided by (used in)
operating activities...... 153 (2,088) (6,259) 187 2,590 (5,417)
----------- ------------- ------------- ------ ------------- ------------
Cash flows from investing
activities:
Sale (purchase of short-term
investments..................... 3,659 3,659
Proceeds from sales of property,
plant and equipment............. 807 110 917
Purchase of property, plant and
equipment....................... (206) (2,327) (1,233) 186 (97) (3,677)
----------- ------------- ------------- ------ ------------- ------------
Cash provided by (used in)
investing activities...... (206) (1,520) 2,536 186 (97) 899
----------- ------------- ------------- ------ ------------- ------------
Cash flows from financing
activities:
Net proceeds from (repayment of)
notes payable................... 90 4,654 3,684 (186) (2,493) 5,749
Repayment of long term debt...... (37) (876) (739) (1,652)
----------- ------------- ------------- ------ ------------- ------------
Cash provided by (used in)
financing activities...... 53 3, 778 2,945 (186) (2,493) 4,097
----------- ------------- ------------- ------ ------------- ------------
Effect of exchange rate changes on
cash.............................. 508 (187) 321
----------- ------------- ------------- ------ ------------- ------------
Increase (decrease) in cash........ 170 (270) (100)
Cash, beginning of period.......... 79 585 664
----------- ------------- ------------- ------ ------------- ------------
----------- ------------- ------------- ------ ------------- ------------
Cash, end of period................ $ $ 249 $ 315 $ $ $ 564
----------- ------------- ------------- ------ ------------- ------------
----------- ------------- ------------- ------ ------------- ------------
</TABLE>

F-49
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
YEAR ENDED JUNE 30, 1993

<TABLE>
<CAPTION>
GUARANTOR GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------- ------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).............................. $ (159) $ (2,489) $ (274) $ (87) $ (3,009)
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating
activities:
Depreciation and amortization................ 79 1,599 1,017 2,695
Loss (gain) on sales of property............. (132) 71 (61)
Deferred income taxes........................ (11) (11)
Unrealized foreign exchange loss (gain)...... 904 904
Pension curtailment gain..................... (383) (700) (1,083)
Loss on sale of subsidiary...................
Extraordinary gain...........................
Increase (decrease) in cash from:
Accounts receivable........................ (829) 2,945 2,116
Inventory.................................. 1,378 817 86 2,281
Prepaid expenses and other assets.......... 108 267 126 501
Deferred financing costs................... (130) (130)
Accounts payable and accrued expenses...... 162 576 (322) 416
Income and other taxes payable............. (3) (260) (1,263) (1,526)
Increase in pension liability.............. 736 736
Intercompany............................... (9,906) 8,111 2,309 (514)
----------- ------------- ------------- ------ ------------
Cash provided by (used in) operating
activities.............................. (10,234) 7,523 7,055 (515) 3,829
----------- ------------- ------------- ------ ------------
Cash flows from investing activities:
Sale (purchase) of short-term investments...... (1,144) (1,144)
Proceeds from sales of property, plant and
equipment..................................... 318 668 92 1,078
Proceeds from sale of subsidiary............... 10,214 78 301 10,593
Purchase of property, plant and equipment...... (20) (1,667) (782) (2,469)
----------- ------------- ------------- ------ ------------
Cash provided by (used in) investing
activities.............................. 10,512 (921) (1,834) 301 8,058
----------- ------------- ------------- ------ ------------
Cash flows from financing activities:
Net proceeds from (repayment of) notes
payable....................................... (241) (4,832) (3,754) (8,827)
Repayment of long term debt.................... (37) (1,222) (770) (2,029)
----------- ------------- ------------- ------ ------------
Cash provided by (used in) financing
activities.............................. (278) (6,054) (4,524) (10,856)
----------- ------------- ------------- ------ ------------
Effect of exchange rate changes on cash.......... (203) 214 11
----------- ------------- ------------- ------ ------------
Increase (decrease) in cash...................... 548 494 1,042
Cash, beginning of period........................ 249 315 564
----------- ------------- ------------- ------ ------------
----------- ------------- ------------- ------ ------------
Cash, end of period.............................. $ $ 797 $ 809 $ $ 1,606
----------- ------------- ------------- ------ ------------
----------- ------------- ------------- ------ ------------
</TABLE>

F-50
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
YEAR ENDED JUNE 30, 1994

<TABLE>
<CAPTION>
GUARANTOR GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------- ------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).............................. $ 1,150 $ 1,131 $ 988 $ (154) $ 3,115
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating
activities:
Depreciation and amortization................ 44 2,256 991 (64) 3,227
Loss (gain) on sales of property............. (133) 79 (54)
Deferred income taxes........................ 10 105 126 125 366
Unrealized foreign exchange loss (gain)...... (168) (168)
Extraordinary gain........................... (566) (249) 64 (751)
Increase (decrease) in cash from:
Accounts receivable........................ (21) (230) 781 530
Inventory.................................. (360) 479 153 272
Prepaid expenses and other assets.......... (430) (207) 595 (42)
Deferred financing costs................... (1,932) (405) (2,337)
Accounts payable and accrued expenses...... (363) 2,437 478 2,552
Income and other taxes payable............. (117) 640 880 (309) 1,094
Increase in pension liability.............. 633 633
Intercompany............................... (1,042) 2,771 (1,739) 10
----------- ------------- ------------- ------ ------------
Cash provided by (used in) operating
activities (902) 6,045 3,469 (175) 8,437
----------- ------------- ------------- ------ ------------
Cash flows from investing activities:
Sale (purchase) of short-term investments...... (1,839) (1,839)
Proceeds from sales of property, plant and
equipment..................................... 150 726 29 905
Purchase of property, plant and equipment...... (60) (1,677) (765) (2,502)
----------- ------------- ------------- ------ ------------
Cash provided by (used in) investing
activities.............................. 90 (951) (2,575) (3,436)
----------- ------------- ------------- ------ ------------
Cash flows from financing activities:
Net proceeds from (repayment of) notes
payable....................................... 245 (5,453) 929 (4,279)
Repayment of long-term debt.................... (7,147) (3,470) (2,172) (12,789)
Issuance of long-term debt..................... 7,785 3,945 11,730
Issuance of redeemable warrants................ 215 55 270
Purchase of treasury stock..................... (286) (286)
----------- ------------- ------------- ------ ------------
Cash provided by (used in) financing
activities.............................. 812 (4,923) (1,243) (5,354)
----------- ------------- ------------- ------ ------------
Effect of exchange rate changes on cash.......... (32) 175 143
----------- ------------- ------------- ------ ------------
Increase (decrease) in cash...................... 171 (381) (210)
Cash, beginning of period........................ 797 809 1,606
----------- ------------- ------------- ------ ------------
Cash, end of period.............................. $ $ 968 $ 428 $ $ 1,396
----------- ------------- ------------- ------ ------------
----------- ------------- ------------- ------ ------------
</TABLE>

F-51
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1994
(UNAUDITED)

<TABLE>
<CAPTION>
GUARANTOR GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------- ------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).............................. $ 1,150 $ 799 $ 34 $ (43) $ 1,940
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating
activities:
Depreciation and amortization................ 24 1,222 698 1,944
Deferred income taxes........................ 10 105 (1) 114
Unrealized foreign exchange loss (gain)...... (147) (147)
Increase (decrease) in cash from:
Accounts receivable........................ (997) (143) (1,140)
Inventory.................................. 1,807 1,962 3,769
Prepaid expenses and other assets.......... (569) (217) 521 (265)
Deferred financing costs................... (1,295) (127) (1,422)
Accounts payable and accrued expenses...... (638) 1,335 600 1,297
Income and other taxes payable............. (399) 349 1,395 1,345
Increase in pension liability.............. 50 50
Intercompany............................... (1,728) 4,964 (3,548) 312
----------- ------------- ------------- ------ ------------
Cash provided by (used in) operating
activities.............................. (2,150) 8,072 1,294 269 7,485
----------- ------------- ------------- ------ ------------
Cash flows from investing activities:
Sale (purchase) of short-term investments...... (1,144) (1,144)
Proceeds from sales of property, plant and
equipment..................................... 8 581 97 686
Purchase of property, plant and equipment...... (45) (1,201) (414) (1,660)
----------- ------------- ------------- ------ ------------
Cash provided by (used in) investing
activities.............................. (37) (620) (1,461) (2,118)
----------- ------------- ------------- ------ ------------
Cash flows from financing activities:
Net proceeds from (repayment of) notes
payable....................................... 635 (6,691) 359 (5,697)
Repayment of long-term debt.................... (504) (696) (1,200)
Issuance of long-term debt..................... 1,552 1,552
----------- ------------- ------------- ------ ------------
Cash provided by (used in) financing
activities.............................. 2,187 (7,195) (337) (5,345)
----------- ------------- ------------- ------ ------------
Effect of exchange rate changes on cash.......... (162) (269) (431)
----------- ------------- ------------- ------ ------------
Increase (decrease) in cash...................... 257 (666) (409)
Cash, beginning of period........................ 797 809 1,606
----------- ------------- ------------- ------ ------------
Cash, end of period.............................. $ $ 1,054 $ 143 $ $ 1,197
----------- ------------- ------------- ------ ------------
----------- ------------- ------------- ------ ------------
</TABLE>

F-52
<PAGE>
STEINWAY MUSICAL PROPERTIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
GUARANTOR GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).............................. $ 4,500 $ 1,859 $ (2,079) $ 150 $ 4,430
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating
activities:
Depreciation and amortization................ 60 1,217 740 2,017
Deferred income taxes........................ (610) (610)
Unrealized foreign exchange loss (gain)...... 328 328
Increase (decrease) in cash from:
Accounts receivable........................ 21 239 (1,584) (1,324)
Inventory.................................. (790) 1,361 (150) 421
Prepaid expenses and other assets.......... 30 137 (337) (170)
Accounts payable and accrued expenses...... (213) (837) 526 (524)
Income and other taxes payable............. (1,895) 1,462 489 56
Increase in pension liability.............. 495 495
Intercompany............................... (2,379) 1,836 940 (397)
----------- ------------- ------------- ------ -------------
Cash provided by (used in) operating
activities.............................. 124 5,123 269 (397) 5,119
----------- ------------- ------------- ------ -------------
Cash flows from investing activities:
Sale (purchase) of short-term investments...... 2,294 2,294
Proceeds from sales of property, plant and
equipment..................................... (6) 262 175 431
Purchase of property, plant and equipment...... (42) (1,360) (815) (2,217)
----------- ------------- ------------- ------ -------------
Cash provided by (used in) investing
activities.............................. (48) (1,098) 1,654 508
----------- ------------- ------------- ------ -------------
Cash flows from financing activities:
Net proceeds from (repayment of) notes
payable....................................... (76) (4,192) (1,079) (5,347)
Repayment of long-term debt.................... (486) (762) (1,248)
----------- ------------- ------------- ------ -------------
Cash provided by (used in) financing
activities.............................. (76) (4,678) (1,841) (6,595)
----------- ------------- ------------- ------ -------------
Effect of exchange rate changes on cash.......... 255 397 652
----------- ------------- ------------- ------ -------------
Increase (decrease) in cash...................... (653) 337 (316)
Cash, beginning of period........................ 968 428 1,396
----------- ------------- ------------- ------ -------------
----------- ------------- ------------- ------ -------------
Cash, end of period.............................. $ $ 315 $ 765 $ $ 1,080
----------- ------------- ------------- ------ -------------
----------- ------------- ------------- ------ -------------
</TABLE>

F-53
<PAGE>
UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the U.S. Underwriters named below, and
each of such U.S. Underwriters, for whom Goldman, Sachs & Co. and Donaldson,
Lufkin & Jenrette Securities Corporation are acting as representatives, has
severally agreed to purchase from the Company, the respective number of shares
of Ordinary Common Stock set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
ORDINARY
COMMON
UNDERWRITER STOCK
- ------------------------------------------------------------------------------------------------------ -----------
<S> <C>
Goldman, Sachs & Co...................................................................................
Donaldson, Lufkin & Jenrette Securities Corporation...................................................
-----------
Total.............................................................................................
-----------
-----------
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.

The U.S. Underwriters propose to offer the shares of Ordinary Common Stock
in part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus and in part to certain securities dealers at
such price less a concession of $ per share. The U.S. Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Ordinary Common Stock are
released for sale to the public, the offering price and other selling terms may
from time to time be varied by the representatives.

The Company has entered into an underwriting agreement (the "International
Underwriting Agreement") with the underwriters of the international offering
(the "International Underwriters") providing for the concurrent offer and sale
of shares of Ordinary Common Stock in an international offering outside
the United States. The offering price and aggregate underwriting discounts and
commissions per share for the two offerings are identical. The closing of the
offering made hereby is a condition to the closing of the international
offering, and vice versa. The representatives of the International Underwriters
are Goldman Sachs International and Donaldson, Lufkin & Jenrette Securities
Corporation.

Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution of
the shares offered hereby and subject to certain exceptions, it will offer, sell
or deliver the shares of Ordinary Common Stock, directly or indirectly, only in
the United States of America (including the States and the District of
Columbia), its territories, its possessions and other areas subject to its
jurisdiction (the "United States") and to U.S. persons, which term shall mean,
for purposes of this paragraph: (a) any individual who is a resident of the
United States or (b) any corporation, partnership or other entity organized in
or under the laws of the United States or any political subdivision thereof and
whose office most directly involved with the purchase is located in the United
States. Each of the International Underwriters has agreed pursuant to the
Agreement Between that, as a part of the distribution of the shares offered as a
part of the international offering, and subject to certain exceptions, it will
(i) not, directly or indirectly, offer, sell or deliver shares of Ordinary
Common Stock (a) in the United States or to any U.S. persons or (b) to any
person who it believes intends to reoffer, resell or deliver the shares in the
United States or to any U.S. persons, and (ii) cause any dealer to whom it may
sell such shares at any concession to agree to observe a similar restriction.

Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Ordinary Common Stock as may be mutually agreed. The price of any shares so sold
shall be the initial public offering price, less an amount not greater than the
selling concession.

U-1
<PAGE>
The Company has granted the U.S. Underwriters an option exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of
additional shares of Ordinary Common Stock solely to cover over-allotments, if
any. If the U.S. Underwriters exercise their over-allotment option, the U.S.
Underwriters have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof that the number of shares to be
purchased by each of them, as shown in the foregoing table, bears to the
shares of Ordinary Common Stock offered. The Company has granted the
International Underwriters a similar option to purchase up to an aggregate of
additional shares of Ordinary Common Stock.

The Company has agreed that, during the period beginning from the date of
the Prospectus and continuing to and including the date 180 days after the date
of the Prospectus, it will not offer, sell, contract to sell or otherwise
dispose of any securities of the Company (other than pursuant to stock option
plans existing, or on the conversion or exchange of convertible or exchangeable
securities outstanding, on the date of this Prospectus) which are substantially
similar to the shares of the Ordinary Common Stock or which are convertible or
exchangeable into securities which are substantially similar to the Ordinary
Common Stock without the prior written consent of the representatives, except
for the shares of Ordinary Common Stock offered in connection with the
concurrent U.S. and international offerings.

This Prospectus may be used by underwriters and dealers in connection with
offers and sales of the Ordinary Common Stock, including shares initially sold
in the international offering to persons located in the United States.

The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares of
Ordinary Common Stock offered by them.

Prior to the Offering, there has been no public market for the shares. The
initial public offering price will be negotiated among the Company and the
representatives of the U.S. Underwriters and the International Underwriters.
Among the factors to be considered in determining the initial public offering
price of the Ordinary Common Stock, in addition to prevailing market conditions,
will be the Company's historical performance, estimates of the business
potential and earnings prospects of the Company, an assessment of the Company's
management and the consideration of the above factors in relation to market
valuation of companies in related businesses.

Application has been made to list the Ordinary Common Stock on the NYSE
under the symbol "LVB." In order to meet one of the requirements for listing the
Ordinary Common Stock on the NYSE, the Underwriters have undertaken to sell lots
of 100 or more sheets to a minimum of 2,000 beneficial holders.

The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act.

U-2
<PAGE>
[PHOTOS TO COME]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 9
The Company............................................................... 13
Use of Proceeds........................................................... 13
Dividend Policy........................................................... 13
Dilution.................................................................. 14
Capitalization............................................................ 15
Pro Forma Condensed Consolidated Financial Information.................... 16
Selected Consolidated Financial Information............................... 21
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 23
Business.................................................................. 29
Management................................................................ 41
Principal Stockholders.................................................... 47
Description of Capital Stock.............................................. 48
Description of Certain Indebtedness....................................... 50
Shares Eligible for Future Sale........................................... 52
Certain United States Tax Consequences to Non-United States Holders....... 56
Legal Matters............................................................. 58
Experts................................................................... 58
Additional Information.................................................... 58
Index to Consolidated Financial Statements................................ F-1
Underwriting.............................................................. U-1
</TABLE>

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

THROUGH AND INCLUDING , 1996 (THE 25TH DAY AFTER THE DATE OF
THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE ORDINARY COMMON
STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

STEINWAY MUSICAL
INSTRUMENTS, INC.

ORDINARY COMMON STOCK

-----------

PROSPECTUS

-----------

GOLDMAN, SACHS & CO.

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

REPRESENTATIVES OF THE UNDERWRITERS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following is an itemization of all estimated expenses incurred or
expected to be incurred by the Registrant in connection with the issuance and
distribution of the securities being registered hereby, other than underwriting
discounts and commissions.

<TABLE>
<CAPTION>
ITEM AMOUNT*
- ----------------------------------------------------------------- -----------
<S> <C>
SEC Registration Fee............................................. $ 29,742
NASD Filing Fee.................................................. 9,125
NYSE Listing Fee................................................. 62,450
Blue Sky Filing Fees and Expenses................................ 15,000
Printing and Engraving Costs..................................... 125,000
Transfer Agent Fees.............................................. 1,000
Legal Fees and Expenses.......................................... 150,000
Accounting Fees and Expenses..................................... 150,000
Miscellaneous.................................................... 57,683
-----------
Total........................................................ $ 600,000
-----------
-----------
</TABLE>

- ------------------------
*All amounts are estimated except for the SEC Registration Fee, the NASD Filing
Fee and the NYSE Listing Fee.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

As permitted by Sections 102 and 145 of the Delaware General Corporation
Law, the Registrant's certificate of incorporation eliminates a director's
personal liability for monetary damages to the Registrant and its stockholders
arising from a breach or alleged breach of a director's fiduciary duty except
for liability under Section 174 of the Delaware General Corporation Law or
liability for any breach of the director's duty of loyalty to the Registrant or
its stockholders, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law or for any transaction in
which the director derived an improper personal benefit. Article Sixth of the
Registrant's certificate of incorporation eliminates the rights of the
Registrant and its stockholders (through stockholders' derivative suits on
behalf of the Registrant) to recover monetary damages against a director for
breach of fiduciary duty as a director (including breaches resulting form
negligent or grossly negligent behavior) except in the situations described
above.

The Registrant's bylaws provide for indemnification of officers, directors,
employees and agents of the Registrant (the "Indemnitees"). Under the bylaws,
the Registrant must indemnify an Indemnitee to the fullest extent permitted by
applicable law for losses and expenses incurred in connection with actions in
which the Indemnitee is involved by reason of having been an officer, director,
employee or agent of the Registrant. The Registrant is also obligated to advance
expenses an Indemnitee may incur in connection with such actions before any
resolution of the action.

The Registrant also maintains directors' and officers' liability insurance.

In addition, the Underwriting Agreement provides for indemnification by the
Underwriters of the Registrant, its directors and officers against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act").

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

On August 9, 1993, the Registrant issued the following securities to certain
institutional investors as consideration to purchase substantially all of the
assets and assume substantially all of the liabilities of The Selmer Company,
L.P.: (a) senior secured notes in the aggregate principal amount of $55 million;
(b) convertible participating preferred stock, $.001 par value per share, in the
amount of

II-1
<PAGE>
1,000,000 shares; and (c) ordinary common stock, $.001 par value per share,
("Ordinary Common Stock") in the amount of 42,222 shares. These issuances were
exempt from registration under the Act pursuant to Section 4(2) as transactions
not involving any public offering.

On August 9, 1993, the Registrant issued an aggregate of 168,890 shares of
Ordinary Common Stock to a limited number of the Registrant's directors and to
certain employees of Dabney/Resnick, Inc. at a purchase price per share of
$1.18142. Executive officers of the Registrant were also issued an aggregate of
150,000 shares of Ordinary Common Stock at a purchase price per share of
$0.3333. These issuances were exempt from registration under the Act pursuant to
Section 4(2) as transactions not involving any public offering.

On August 9, 1993, the Registrant issued 84,444 shares of Class A Common
Stock to each of Kyle Kirkland and Dana Messina at a purchase price per share of
$1.18142. This issuance was exempt from registration under the Act pursuant to
Section 4(2) as a transaction not involving any public offering.

On December 6, 1995, the Registrant issued an aggregate of 105,000 shares of
Ordinary Common Stock to certain management employees of Steinway Musical
Properties, Inc. at a purchase price per share of $6.00. This issuance was
exempt from registration under the Act pursuant to Section 4(2) as a transaction
not involving any public offering.

Prior to the closing of the Offering, the Registrant intends to consummate a
stock split on its Class A Common Stock and Ordinary Common Stock. The issuance
of additional shares pursuant to such action will be deemed to be exempt from
registration under Section 3(a)(9) of the Act.

ITEM 16. EXHIBITS

(a) Exhibits

<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Restated Certificate of Incorporation of Registrant
3.2 Corrected Amendment to Restated Certificate of Incorporation of
Registrant
3.3 Form of Amendment to Restated Certificate of Incorporation of
Registrant
3.4 Bylaws of Registrant
4.1 Specimen Certificate*
4.2 Indenture, dated as of August 9, 1993 among The Selmer Company, Inc.,
Selmer Industries, Inc. and IBJ Schroder Bank & Trust Company, as
trustee including the Forms of Notes and the Guarantee thereon (1)
4.3 Supplemental Indenture, dated as of May 25, 1995 among The Selmer
Company, Inc., Selmer Industries, Inc. and IBJ Schroder Bank & Trust
Company, as trustee (4)
4.4 Guarantee and Pledge Agreement, dated as of August 9, 1993, between
Selmer Industries, Inc. and IBJ Schroder Bank & Trust Company, as
trustee (1)
4.5 Security Agreement, dated as of August 9, 1993, among The Selmer
Company, Inc. and IBJ Schroder Bank & Trust Company, as trustee (1)
4.6 Security Agreement, dated as of August 9, 1993, among Selmer
Industries, Inc. and IBJ Schroder Bank & Trust Company, as trustee
(1)
4.7 Intercreditor Agreement, dated as of August 9, 1993, between BNY
Financial Corporation and IBJ Schroder Bank & Trust Company, as
trustee (1)
4.8 Open-end Mortgage, Deed of Trust, Leasehold Mortgage, Leasehold Deed
of Trust, Assignment of Rents, Security Agreement, Financing
Statement and Fixture Filing, dated August 9, 1993, by and from The
Selmer Company, Inc. to IBJ Schroder Bank & Trust Company, as
trustee, relating to each of the Indiana, Illinois, Ohio, and North
Carolina properties (1)
</TABLE>

II-2
<PAGE>
<TABLE>
<C> <S>
4.9 Amended and Restated Revolving Credit, Term Loan and Security
Agreement, dated as of May 25, 1995, by and between The Selmer
Company, Inc., Selmer Industries, Inc., Steinway Musical Properties,
Inc., Steinway, Inc., Boston Piano Company, Inc. and BNY Financial
Corporation, including a list of Exhibits and Schedules thereto (5)
4.10 Subordination Agreement, dated as of August 9, 1993, among The Selmer
Company, Inc., IBJ Schroder Bank & Trust Company, as trustee, BNY
Financial Corporation and Philips Electronics North America
Corporation (1)
4.11 Registration Rights Agreement, dated as of August 9, 1993, among
Selmer Industries, Inc. and the purchasers of certain equity
securities (1)
4.12 Indenture, dated as of May 25, 1995, among The Selmer Company, Inc.,
Selmer Industries, Inc., Steinway Musical Properties, Inc., Steinway,
Inc., Boston Piano Company, Inc. and American Bank National
Association, as trustee, including the forms of Notes and the
Guarantee thereon (4)
4.13 Exchange Registration Rights Agreement, dated as of May 25, 1995, by
and among The Selmer Company, Inc., Selmer Corporation, Inc.,
Steinway Musical Properties, Inc., Steinway, Inc., Boston Piano
Company, Inc. and Donaldson, Lufkin & Jenrette Securities Corporation
(4)
5.1 Opinion of Milbank, Tweed, Hadley & McCloy*
10.1 Employment Agreement, dated as of June 22, 1993, between The Selmer
Company, Inc. and Thomas Burzycki (1)
10.2 Employment Agreement, dated as of December 19, 1995, between The
Selmer Company, Inc. and Michael R. Vickrey (6)
10.3 Employment Agreement, dated May 8, 1989, between Steinway Musical
Properties, Inc. and Thomas Kurrer (5)
10.4 Employment Agreement, dated May 1, 1995, between Steinway Musical
Properties, Inc. and Bruce Stevens (5)
10.5 Employment Agreement, dated May 1, 1995, between Steinway Musical
Properties, Inc. and Dennis Hanson (5)
10.6 Agreement dated May , 1996 between the Registrant, Kirkland Messina,
Inc. and Dana Messina*
10.7 Agreement dated May , 1996 between the Registrant, Kirkland Messina,
Inc. and Kyle Kirkland*
10.8 Management Agreement, dated as of August 9, 1993, by and between The
Selmer Company, Inc., Dana Messina and Kyle Kirkland (1)
10.9 Management Agreement, dated as of May 25, 1995, by and between
Steinway Musical Properties, Inc., Dana Messina and Kyle Kirkland
10.10 Environmental Indemnification and Non-Competition Agreement, dated as
of August 9, 1993, between The Selmer Company, Inc. and Philips
Electronics North American Corporation (1)
10.11 Unsecured Environmental Indemnification Agreement, dated as of August
9, 1993, between The Selmer Company, Inc., Selmer Industries, Inc.
and IBJ Schroder Bank & Trust Company, as trustee (1)
10.12 Securityholders Agreement, dated as of August 9, 1993, among Selmer
Industries, Inc. and certain equity holders of Selmer Industries,
Inc. (1)
10.13 Master Note Purchase and Repurchase Agreement, dated December 4, 1994,
by and between Textron Financial Corporation and The Selmer Company,
Inc. (3)
</TABLE>

II-3
<PAGE>
<TABLE>
<C> <S>
10.14 Distribution Agreement, dated November 1, 1952, by and between H. & A.
Selmer, Inc. and Henri Selmer & Cie (1)
10.15 Asset Purchase Agreement, dated as of June 25, 1993, by and between
The Selmer Company, Inc., The Selmer Company, L.P. and Vincent Bach
International, Ltd. (2)
10.16 1996 Stock Plan of the Registrant*
10.17 1996 Non-Employee Directors Stock Option Plan of the Registrant*
21.1 List of Subsidiaries of Registrant
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Milbank, Tweed, Hadley & McCloy (included in Exhibit 5.1)*
24.1 Power of Attorney (appears on page II-6)
</TABLE>

- ------------------------
* To be filed by amendment.

(1) Previously filed with the Commission on February 8, 1994 as an exhibit to
the Registrant's Registration Statement on Form S-1.

(2) Previously filed with the Commission on April 28, 1994 as an exhibit to the
Registrant's Amendment No. 1 to Registration Statement on Form S-1.

(3) Previously filed with the Commission on March 30, 1995 as an exhibit to the
Registrant's Annual Report on Form 10-K.

(4) Previously filed with the Commission on June 7, 1995 as an exhibit to the
Registrant's Current Report on Form 8-K.

(5) Previously filed with the Commission on June 7, 1995 as an exhibit to the
Registrant's Registration Statement on Form S-4.

(6) Previously filed with the Commission on March 27, 1996 as an exhibit to the
Registrant's Annual Report on Form 10-K.

(b) Financial Statements and Schedules
None.

ITEM 17. UNDERTAKINGS

(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

II-4
<PAGE>
(c) The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial BONA FIDE offering thereof.

II-5
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California, on this 13th day of May, 1996.

SELMER INDUSTRIES, INC.

By: THOMAS BURZYCKI
-----------------------------------------
Thomas Burzycki
PRESIDENT AND CHIEF EXECUTIVE OFFICER

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Kyle R. Kirkland, Dana D. Messina, Thomas
Burzycki, Bruce Stevens, Dennis Hanson and Michael R. Vickrey and each of them,
his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution for him and in his name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof and the
registrant hereby confers like authority on its behalf.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on this 13th day of May, 1996.

<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------- ----------------------------
<C> <S>
Director, President and
THOMAS BURZYCKI Chief Executive Officer
---------------------------------------- (Principal Executive
Thomas Burzycki Officer)

Vice President and Chief
MICHAEL R. VICKREY Financial Officer
---------------------------------------- (Principal Financial and
Michael R. Vickrey Accounting Officer)

KYLE R. KIRKLAND
---------------------------------------- Director
Kyle R. Kirkland

DANA D. MESSINA
---------------------------------------- Director
Dana D. Messina

BRUCE STEVENS
---------------------------------------- Director
Bruce Stevens

PETER MCMILLAN
---------------------------------------- Director
Peter McMillan
</TABLE>

II-6

<PAGE>

STEINWAY MUSICAL INSTRUMENTS, INC.
ORDINARY COMMON STOCK

UNDERWRITING AGREEMENT
(U.S. VERSION)

May ___, 1996
Goldman, Sachs & Co.,
Donaldson, Lufkin & Jenrette Securities Corporation
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004

Ladies and Gentlemen:

Steinway Musical Instruments, Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of _________ shares (the "Firm Shares") and, at the election of the
Underwriters, up to _______ additional shares (the "Optional Shares") of
Ordinary Common Stock ("Stock") of the Company (the Firm Shares and the Optional
Shares that the Underwriters elect to purchase pursuant to Section 2 hereof
being collectively called the "Shares").

It is understood and agreed to by all parties that the Company is
concurrently entering into an agreement (the "International Underwriting
Agreement") providing for the sale by the Company of up to a total of _______
shares of Stock (the "International Shares"), including the over-allotment
option thereunder, through arrangements with certain underwriters outside the
United States (the "International Underwriters"), for whom Goldman Sachs
International, Donaldson, Lufkin & Jenrette Securities Corporation and CS First
Boston Limited, are acting as lead managers. Anything herein or therein to the
contrary notwithstanding, the respective closings under this Agreement and
the International Agreement are hereby expressly made conditional on one
another. The Underwriters hereunder and the International Underwriters are
simultaneously entering into an Agreement between U.S. and International
Underwriting Syndicates (the "Agreement between Syndicates") which provides,
among other things, for the transfer of shares of Stock between the two
syndicates. Two forms of prospectus are to be used in connection with the
offering and sale of shares of Stock contemplated by the foregoing, one
relating to the Shares hereunder and the other relating to the International
Shares. The latter form of prospectus will be identical to the former except
for certain substitute pages. Except as used in Sections 2, 3, 4, 9 and 11
herein, and except as the context may otherwise require, references
hereinafter to the Shares shall include all the shares of Stock which may be
sold pursuant to either this Agreement or the International Underwriting
Agreement, and references herein to any prospectus whether in preliminary or
final form, and whether as amended or supplemented, shall include both the
U.S. and the international versions thereof.

<PAGE>

1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:

(a) A registration statement on Form S-1 (File No. 333-....)(the
"Initial Registration Statement") in respect of the Shares has been filed
with the Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement and any post-effective amendment thereto, each in
the form heretofore delivered to you, and, excluding exhibits thereto, to
you for each of the other Underwriters, have been declared effective by the
Commission in such form; other than a registration statement, if any,
increasing the size of the offering (a "Rule 462(b) Registration
Statement"), filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended, (the "Act"), which became effective upon filing, no other
document with respect to the Initial Registration Statement (other than
pre-effective amendments thereto) has heretofore been filed with the
Commission; and no stop order suspending the effectiveness of the Initial
Registration Statement, any post-effective amendment thereto or the Rule
462(b) Registration Statement, if any, has been issued and no proceeding
for that purpose has been initiated or threatened by the Commission (any
preliminary prospectus included in the Initial Registration Statement or
filed with the Commission pursuant to Rule 424(a) of the rules and
regulations of the Commission under the Act, is hereinafter called a
"Preliminary Prospectus"; the various parts of the Initial Registration
Statement and the Rule 462(b) Registration Statement, if any, including all
exhibits thereto and including the information contained in the form of
final prospectus filed with the Commission pursuant to Rule 424(b) under
the Act in accordance with Section 5(a) hereof and deemed by virtue of Rule
430A under the Act to be part of the Initial Registration Statement at the
time it was declared effective or such part of the Rule 462(b) Registration
Statement, if any, became or hereafter becomes effective, each as amended
at the time such part of the registration statement became effective, are
hereinafter collectively called the "Registration Statement"; and such
final prospectus, in the form first filed pursuant to Rule 424(b) under the
Act, is hereinafter called the "Prospectus;")

(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
Goldman, Sachs & Co. expressly for use therein;

(c) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the rules and regulations of the Commission thereunder and do
not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; PROVIDED, HOWEVER, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
by an Underwriter through Goldman, Sachs & Co. expressly for use therein;

(d) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included in the
Prospectus any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus; and, since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the capital
stock or any change in the short-term or long-term debt of the Company or
any of its subsidiaries, taken as a whole, in an amount greater than
$22,000,000, or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, taken as a whole, otherwise
than as set forth or contemplated in the Prospectus (a "Material Adverse
Effect");

<PAGE>

(e) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or
such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries in a manner which results in a Material
Adverse Effect ; and any real property and buildings held under lease by
the Company and its subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as do not have a Material
Adverse Effect;

(f) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the state of Delaware,
with power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of good standing in New York, New Jersey,
Indiana, Illinois, North Carolina and Ohio and such states are the only
states in which it owns or leases properties or conducts any business so as
to require such qualification, and is subject to no material liability or
disability by reason of the failure to be so qualified in any other
jurisdiction; and each subsidiary of the Company has been duly incorporated
and is validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation;

(g) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable and conform to the description of the Stock contained in the
Prospectus; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable and (except for directors' qualifying
shares and except as set forth in the Prospectus) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims;

(h) The Shares to be issued and sold by the Company to the Underwriters
hereunder and under the International Underwriting Agreement have been duly
and validly authorized and, when issued and delivered against payment
therefor as provided herein and in the International Underwriting
Agreement, will be duly and validly issued and fully paid and
non-assessable and will conform to the description of the Stock contained
in the Prospectus;

(i) The issue and sale of the Shares by the Company hereunder and
under the International Underwriting Agreement and the compliance by the
Company with all of the provisions of this Agreement and the International
Underwriting Agreement and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its subsidiaries is
a party or by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of its
subsidiaries is subject which will have a Material Adverse Effect, nor will
such action result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any statute or any order, rule
or regulation of any court or

<PAGE>

governmental agency or body having jurisdiction over the Company or any of
its subsidiaries or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required for the issue and sale of
the Shares or the consummation by the Company of the transactions
contemplated by this Agreement and the International Underwriting
Agreement, except the registration under the Act of the Shares and such
consents, approvals, authorizations, registrations or qualifications as may
be required under state or foreign securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by the
Underwriters and the International Underwriters;

(j) Neither the Company nor any of its subsidiaries is (i) in
violation of its Certificate of Incorporation or By-laws or (ii) in default
in the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of trust,
loan agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound, which default
would have a Material Adverse Effect;

(k) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock, under the caption "Certain United States
Tax Consequences to Non-United States Holders" and under the caption
"Underwriting", insofar as they purport to describe the provisions of the
laws and documents referred to therein, are accurate, complete and fair;

(l) Other than as set forth or contemplated in the Prospectus, there
are no legal or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any property of the Company
or any of its subsidiaries is the subject which, if determined adversely to
the Company or any of its subsidiaries, would individually or in the
aggregate have a Material Adverse Effect; and, to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;

(m) The Company is not and, after giving effect to the offering and
sale of the Shares, will not be an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");

(n) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes;

(o) Deloitte & Touche LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;

(p) Neither the Company nor any of its subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), which might result in any Material Adverse Effect;

(q) The Company and each of its subsidiaries has such permits,
licenses, franchises

<PAGE>

and authorizations of governmental or regulatory authorities ("permits"),
including, without limitation, under any applicable Environmental Laws, as
are necessary to own, lease and operate its respective properties and to
conduct its business except to the extent the failure to hold such permits
would not, singly or in the aggregate, have a Material Adverse Effect; the
Company and each of its subsidiaries has fulfilled and performed all of its
material obligations with respect to such permits and no event has occurred
which allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of the
rights of the holder of any such permit; and, except as described in the
Prospectus, such permits contain no restrictions that are materially
burdensome to the Company and any of its subsidiaries taken as a whole;

(r) Each of the Company and the subsidiaries owns or possesses the
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names (collectively, the "Intellectual
Property") presently employed by them in connection with the businesses now
operated by them, except where such failure to own or possess would not
have a Material Adverse Effect, and none of the Company nor any of the
subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to the foregoing which, singly or in
the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect. To the Company's
knowledge, the use of such Intellectual Property in connection with the
business and operations of the Company and the subsidiaries does not
infringe on the rights of any person;

(s) Each of the Company and each of its subsidiaries maintains
insurance covering its properties, operations, personnel and business.
Such insurance insures against such losses and risks as are adequate in
accordance with industry practice to protect the Company and its
subsidiaries and their businesses. Neither the Company nor any subsidiary
has received notice from any insurer or agent of such insurer that
substantial capital improvements or other expenditures will have to be made
in order to continue such insurance. All such insurance is outstanding and
duly in force on the date hereof and will be outstanding and duly in force
on each Time of Delivery (defined below);

(t) All material tax returns required to be filed by the Company and
each of its subsidiaries in any jurisdiction have been filed, other than
those filings being contested in good faith, and all material taxes,
including withholding taxes, penalties and interest, assessments, fees and
other charges due pursuant to such returns or pursuant to any assessment
received by the Company or any of its subsidiaries have been paid, other
than those being contested in good faith and for which adequate reserves
have been provided; and

(u) The Company has identified to its counsel each indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of the property
or assets of the Company or any of its subsidiaries is subject which is
material to the Company and its subsidiaries taken as a whole.

2. Subject to the terms and conditions herein set forth, (a) the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly,

<PAGE>

to purchase from the Company, at a purchase price per share of $...............,
the number of Firm Shares set forth opposite the name of such Underwriter in
Schedule I hereto and (b) in the event and to the extent that the Underwriters
shall exercise the election to purchase Optional Shares as provided below, the
Company agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
the purchase price per share set forth in clause (a) of this Section 2, that
portion of the number of Optional Shares as to which such election shall have
been exercised (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying such number of Optional Shares by a fraction, the
numerator of which is the maximum number of Optional Shares which such
Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of Optional Shares that all of the Underwriters are entitled to purchase
hereunder.

The Company hereby grants to the Underwriters the right to purchase at
their election up to _______ Optional Shares, at the purchase price per share
set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company,
given within a period of 30 calendar days after the date of this Agreement,
setting forth the aggregate number of Optional Shares to be purchased and the
date on which such Optional Shares are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery (as defined in Section 4
hereof) or, unless you and the Company otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.

3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.

4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered
in such names as Goldman, Sachs & Co. may request upon at least
forty-eight hours' prior notice to the Company, shall be delivered by
or on behalf of the Company to Goldman, Sachs & Co., for the account
of such Underwriter, against payment by or on behalf of such
Underwriter of the purchase price therefor by certified or official
bank check or checks, payable to the order of the Company in Federal
(same day) funds. The Company will cause the certificates
representing the Shares to be made available for checking and
packaging at least twenty-four hours prior to the Time of Delivery (as
defined below) at the office of Goldman, Sachs & Co., 85 Broad Street,
New York, New York 10004 (the "Designated Office"). The time and date
of such delivery and payment shall be, with respect to the Firm
Shares, 9:30 a.m., New York City time, on ............., 1996 or such
other time and date as Goldman, Sachs & Co. and the Company may agree
upon in writing, and, with respect to the Optional Shares, 9:30 a.m.,
New York time, on the date specified by Goldman, Sachs & Co. in the
written notice given by Goldman, Sachs & Co. of the Underwriters'
election to purchase such Optional Shares, or such other time and date
as Goldman, Sachs & Co. and the Company may agree upon in writing.
Such time and date for delivery of the Firm Shares is herein called
the "First Time of Delivery", such time and date for delivery of the
Optional Shares, if not the First Time of Delivery, is herein called
the "Second Time of Delivery", and each such time and date for
delivery is herein called a "Time of Delivery".

(b) The documents to be delivered at each Time of Delivery by or on
behalf of the

<PAGE>

parties hereto pursuant to Section 7 hereof, including the cross receipt
for the Shares and any additional documents requested by the Underwriters
pursuant to Section 7(k) hereof, will be delivered at the offices of Latham
& Watkins, 633 W. Fifth Street, Suite 4000, Los Angeles, CA 90071 (the
"Closing Location"), and the Shares will be delivered at the Designated
Office, all at such Time of Delivery. A meeting will be held at the
Closing Location at .......p.m., New York City time, on the New York
Business Day next preceding such Time of Delivery, at which meeting the
final drafts of the documents to be delivered pursuant to the preceding
sentence will be available for review by the parties hereto. For the
purposes of this Section 4, "New York Business Day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.

5. The Company agrees with each of the Underwriters:

(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you promptly after reasonable
notice thereof; to advise you, promptly after it receives notice thereof,
of the time when any amendment to the Registration Statement has been filed
or becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish you with copies thereof; to advise
you, promptly after it receives notice thereof, of the issuance by the
Commission of any stop order or of any order preventing or suspending the
use of any Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose, or of
any request by the Commission for the amending or supplementing of the
Registration Statement or Prospectus or for additional information; and, in
the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus or
suspending any such qualification, promptly to use its best efforts to
obtain the withdrawal of such order;

(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;

(c) Prior to 10:00 a.m., New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to
furnish the Underwriters with copies of the Prospectus in New York City in
such quantities as you may reasonably request, and, if the delivery of a
prospectus is legally required at any time prior to the expiration of nine
months after the time of issue of the Prospectus in connection with the
offering or sale of the Shares and if at such time any event shall have
occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made when

<PAGE>

such Prospectus is delivered, not misleading, or, if for any other reason
it shall be necessary during such period to amend or supplement the
Prospectus in order to comply with the Act, to notify you and upon your
request to prepare and furnish without charge to each Underwriter and to
any dealer in securities as many copies as you may from time to time
reasonably request of an amended Prospectus or a supplement to the
Prospectus which will correct such statement or omission or effect such
compliance, and in case any Underwriter is required to deliver a prospectus
in connection with sales of any of the Shares at any time nine months or
more after the time of issue of the Prospectus, upon your request but at
the expense of such Underwriter, to prepare and deliver to such Underwriter
as many copies as you may request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Act;

(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations thereunder (including, at the option of the Company,
Rule 158);

(e) During the period beginning from the date hereof and continuing
to and including the date 180 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder and under the International Underwriting Agreement, any
securities of the Company that are substantially similar to the Shares,
including but not limited to any securities that are convertible into or
exchangeable for, or that represent the right to receive, Stock or any such
substantially similar securities (other than pursuant to stock option plans
existing on, or upon the conversion or exchange of convertible or
exchangeable securities outstanding as of, the date of this Agreement),
without the prior written consent of Goldman, Sachs & Co.;

(f) To furnish to its stockholders as soon as practicable after the
end of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flows of the Company
and its consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter
ending after the effective date of the Registration Statement),
consolidated summary financial information of the Company and its
subsidiaries for such quarter in reasonable detail;

(g) (i) During a period of the shorter of five years from the
effective date of the Registration Statement or the period during which the
Company is subject to reporting requirements under the Exchange Act, to
furnish to you, upon your written and reasonable request, copies of all
reports or other communications (financial or other) furnished to
stockholders, and as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed; and (ii) during a period of two years from the effective
date of the Registration Statment, to furnish to you, upon your written and
reasonable request, such additional information concerning the business and
financial condition of the Company (such financial statements to be on a
consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its stockholders
generally or to the Commission) provided that responding to

<PAGE>

such request does not involve unreasonable expense on the part of the
Company;

(h) To use the net proceeds received by it from the sale of the
Shares pursuant to this Agreement and the International Underwriting
Agreement in the manner specified in the Prospectus under the caption "Use
of Proceeds";

(i) To use its best efforts to list, subject to notice of issuance,
the Shares on the New York Stock Exchange (the "Exchange")

(j) To file with the Commission such reports on Form SR as may be
required by Rule 463 under the Act.

6. The Company covenants and agrees with the several Underwriters that
the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the reasonable cost of duplicating
any Agreement among Underwriters, this Agreement, the International Underwriting
Agreement, the Agreement between Syndicates, the Selling Agreement, the Blue Sky
Memorandum, and closing documents (including compilations thereof) and any other
documents customarily used in connection with the offering, purchase, sale and
delivery of the Shares; (iii) all expenses in connection with the qualification
of the Shares for offering and sale under state securities laws as provided in
Section 5(b) hereof, including the reasonable fees and disbursements of counsel
for the Underwriters in connection with such qualification and in connection
with the Blue Sky survey; provided that such fees of counsel shall not exceed
$10,000; (iv) all fees and expenses in connection with listing the Shares on the
New York Stock Exchange; (v) the filing fees incident to securing any required
review by the National Association of Securities Dealers, Inc. of the terms of
the sale of the Shares; (vi) the cost of preparing stock certificates; (vii) the
cost and charges of any transfer agent or registrar; and (viii) all other costs
and expenses incident to the performance of its obligations hereunder which are
not otherwise specifically provided for in this Section. It is understood,
however, that, except as provided in this Section, and Sections 8 and 11 hereof,
the Underwriters will pay all of their own costs and expenses, including the
fees of their counsel, stock transfer taxes on resale of any of the Shares by
them, and any advertising expenses connected with any offers they may make.

7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional conditions:

(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with Section
5(a) hereof; no stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no proceeding for
that purpose shall have been initiated or threatened by the Commission; and
all requests for additional information on the part of the Commission shall
have been complied with to your reasonable satisfaction;

<PAGE>

(b) Latham & Watkins, counsel for the Underwriters, shall have
furnished to you such opinion or opinions (a draft of which each such
opinion is attached as Annex II(a) hereto), dated such Time of Delivery,
with respect to the matters covered in paragraphs (i), (ii), (vi), (ix),
(x) and (xi) of subsection (c) below as well as such other related matters
as you may reasonably request, and such counsel shall have received such
papers and information as they may reasonably request to enable them to
pass upon such matters;

(c) Milbank, Tweed, Hadley & McCloy, counsel for the Company, shall
have furnished to you their written opinion (a draft of each such opinion
is attached as Annex II(b) hereto), dated such Time of Delivery, in form
and substance satisfactory to you, to the effect that:

(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the state
of Delaware, with corporate power and authority to own its properties
and conduct its business as described in the Prospectus;

(ii) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of
the Company (including the Shares being delivered at such Time of
Delivery) have been duly and validly authorized and issued and are
fully paid and nonassessable; and the Shares conform to the
description of the Stock contained in the Prospectus;

(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of New York, New Jersey, Indiana, Illinois, North
Carolina, and Ohio;

(iv) Each subsidiary of the Company has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation; and all of the issued
shares of capital stock of each such subsidiary have been duly and
validly authorized and issued, are fully paid and non-assessable, and
(except for directors' qualifying shares and except as otherwise set
forth in the Prospectus) are owned directly or indirectly by the
Company, and to the best knowledge of such counsel, after reasonable
investigation, such shares are free and clear of all liens,
encumbrances, equities or claims (such counsel being entitled to rely
in respect of the opinion in this clause upon opinions of local
counsel and in respect to matters of fact upon certificates of
officers of the Company or its subsidiaries, provided that such
counsel shall state that they believe that both you and they are
justified in relying upon such opinions and certificates);

(v) To the best of such counsel's knowledge and other than as
set forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is
a party or of which any property of the Company or any of its
subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the
aggregate have a material adverse effect on the current or future
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries taken as a whole; and,
to the best of such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or

<PAGE>

threatened by others;

(vi) This Agreement and the International Underwriting
Agreement have been duly authorized, executed and delivered by the
Company;

(vii) The issue and sale of the Shares being delivered at such
Time of Delivery by the Company and the compliance by the Company with
all of the provisions of this Agreement and the International
Underwriting Agreement and the consummation of the transactions herein
and therein contemplated will not conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument identified as material by the Company
to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is
subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the
Company or any statute or any order, rule or regulation known to such
counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties;

(viii) No consent, approval, authorization, order, registration
or qualification of or with any such court or governmental agency or
body is required for the issue and sale of the Shares or the
consummation by the Company of the transactions contemplated by this
Agreement and the International Underwriting Agreement, except the
registration under the Act of the Shares, and such consents,
approvals, authorizations, registrations or qualifications as may be
required under state or foreign securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by the
Underwriters and the International Underwriters;

(ix) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock, under the caption
"Certain United States Tax Consequences to Non-United States Holders",
and under the caption "Underwriting", insofar as they purport to
describe the provisions of the laws and documents referred to therein,
are accurate, complete and fair;

(x) The Company is not an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in
the Investment Company Act;

(xi) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior
to such Time of Delivery (other than the financial and statistical
data, financial statements and related schedules therein, as to which
such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Act and the rules and
regulations thereunder, although they do not assume any responsibility
for the accuracy, completeness or fairness of the statements contained
in the Registration Statement or the Prospectus, except for those
referred to in the opinion in subsection (xi) of this Section 7(c);
they have no reason to believe that, as of its effective date, the
Registration Statement or any further amendment thereto made

<PAGE>

by the Company prior to such Time of Delivery (other than financial
data and the financial statements and related statements and related
schedules therein, as to which such counsel need express no opinion)
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or that, as of its date, the
Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than financial data and
the financial statements and related schedules therein, as to which
such counsel need express no opinion) contained an untrue statement of
a material fact or omitted to state a material fact necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading or that, as of such Time of Delivery,
either the Registration Statement or the Prospectus or any further
amendment or supplement thereto made by the Company prior to such Time
of Delivery (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion) contains an
untrue statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and they do
not know of any amendment to the Registration Statement required to be
filed or of any contracts or other documents of a character required
to be filed as an exhibit to the Registration Statement or required to
be described in the Registration Statement or the Prospectus which are
not filed or described as required;

In rendering such opinion, such counsel may state that they
express no opinion as to the laws of any jurisdiction outside the
United States.

(d) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of
any post-effective amendment to the Registration Statement filed subsequent
to the date of this Agreement and also at each Time of Delivery, Deloitte &
Touche LLP shall have furnished to you a letter or letters, dated the
respective dates of delivery thereof, in form and substance satisfactory to
you, to the effect set forth in Annex I hereto (the executed copy of the
letter delivered prior to the execution of this Agreement is attached as
Annex 1(a) hereto and a draft of the form of letter to be delivered on the
effective date of any post-effective amendment to the Registration
Statement and as of each Time of Delivery is attached as Annex I(b)
hereto);

(e)(i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus,
and (ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock or any
change in the short-term or long-term debt of the Company or any of its
subsidiaries, taken as a whole, in an amount greater than $22,000,000, or
any change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in Clause (i)
or (ii), is in the judgment of the Representatives so material and adverse
as to make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares

<PAGE>

being delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus;

(f) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities or preferred
stock by any "nationally recognized statistical rating organization", as
that term is defined by the Commission for purposes of Rule 436(g)(2) under
the Act, and (ii) no such organization shall have publicly announced that
it has under surveillance or review, with possible negative implications,
its rating of any of the Company's debt securities or preferred stock;

(g) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange (ii) a suspension or
material limitation in trading in the Company's securities on the New York
Stock Exchange (iii) a general moratorium on commercial banking activities
declared by either Federal or New York or California State authorities; or
(iv) the outbreak or escalation of hostilities involving the United States
or the declaration by the United States of a national emergency or war, if
the effect of any such event specified in this Clause (iv) in the judgment
of the Representatives makes it impracticable or inadvisable to proceed
with the public offering or the delivery of the Shares being delivered at
such Time of Delivery on the terms and in the manner contemplated in the
Prospectus;

(h) The Shares to be sold at such Time of Delivery shall have been
duly listed, subject to notice of issuance, on the Exchange;

(i) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from each of the persons set forth in the
section entitled "Principal Stockholders" in the Prospectus substantially
to the effect set forth in Subsection 5(e) hereof in form and substance
satisfactory to you and shall have used its best efforts to have obtained
such an agreement from all stockholders of the Company;

(j) The Company shall have complied with the provisions of Section
5(c) hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement; and

(k) The Company shall have furnished or caused to be furnished to you
at such Time of Delivery certificates of officers of the Company reasonably
satisfactory to you as to the accuracy of the representations and
warranties of the Company herein at and as of such Time of Delivery, as to
the performance by the Company of all of its obligations hereunder to be
performed at or prior to such Time of Delivery, as to the matters set forth
in subsections (a) and (e) of this Section and as to such other matters as
you may reasonably request.

8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to
which such Underwriter may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment
or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending
any such action or claim as such expenses are incurred; PROVIDED, HOWEVER,
that the Company shall not be

<PAGE>

liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Goldman,
Sachs & Co. expressly for use therein.

(b) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Prospectus, the Registration Statement or
the Prospectus, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance
upon and in conformity with written information furnished to the Company by
such Underwriter through Goldman, Sachs & Co. expressly for use therein;
and will reimburse the Company for any legal or other expenses reasonably
incurred by the Company in connection with investigating or defending any
such action or claim as such expenses are incurred.

(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof. The omission so
to notify the indemnifying party shall relieve the indemnifying party from
any liability which it may have to any indemnified party under subsections
(a) or (b), but shall not otherwise relieve such party of liability
hereunder. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party under such subsection
for any legal expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the written consent of the indemnified
party, effect the settlement or compromise of, or consent to the entry of
any judgment with respect to, any pending or threatened action or claim in
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to
such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act,
by or on behalf of any indemnified party.

(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in

<PAGE>

respect of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Shares. If, however,
the allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give the
notice required under subsection (c) above, then each indemnifying party
shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company on the one hand and the
Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions
in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one
hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Shares
purchased under this Agreement (before deducting expenses) received by the
Company bear to the total underwriting discounts and commissions received
by the Underwriters with respect to the Shares purchased under this
Agreement, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates
to information supplied by the Company on the one hand or the Underwriters
on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The Company and the Underwriters agree that it would not be just
and equitable if contributions pursuant to this subsection (d) were
determined by PRO RATA allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which
does not take account of the equitable considerations referred to above in
this subsection (d). The amount paid or payable by an indemnified party as
a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (d) shall be deemed
to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of
any damages which such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (d) to contribute are several
in proportion to their respective underwriting obligations and not joint.

(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls any Underwriter within the meaning of the Act; and the obligations
of the Underwriters under this Section 8 shall be in addition to any
liability which the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of
the Company (including any person who, with his or her consent, is named in
the Registration Statement as about to become a director of the Company)
and to each person, if any, who controls the Company

<PAGE>

within the meaning of the Act.

9. (a) If any Underwriter shall default in its obligation to
purchase the Shares which it has agreed to purchase hereunder at a Time of
Delivery, you may in your discretion arrange for you or another party or
other parties to purchase such Shares on the terms contained herein. If
within thirty-six hours after such default by any Underwriter you do not
arrange for the purchase of such Shares, then the Company shall be entitled
to a further period of thirty-six hours within which to procure another
party or other parties satisfactory to you to purchase such Shares on such
terms. In the event that, within the respective prescribed periods, you
notify the Company that you have so arranged for the purchase of such
Shares, or the Company notifies you that it has so arranged for the
purchase of such Shares, you or the Company shall have the right to
postpone such Time of Delivery for a period of not more than seven days, in
order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby
be made necessary. The term "Underwriter" as used in this Agreement shall
include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to
such Shares.

(b) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the
Company as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed one-eleventh of the
aggregate number of all the Shares to be purchased at such Time of
Delivery, then the Company shall have the right to require each
non-defaulting Underwriter to purchase the number of Shares which such
Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro
rata share (based on the number of Shares which such Underwriter agreed to
purchase hereunder) of the Shares of such defaulting Underwriter or
Underwriters for which such arrangements have not been made; but nothing
herein shall relieve a defaulting Underwriter from liability for its
default.

(c) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the
Company as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased exceeds one-eleventh of the aggregate
number of all the Shares to be purchased at such Time of Delivery, or if
the Company shall not exercise the right described in subsection (b) above
to require non-defaulting Underwriters to purchase Shares of a defaulting
Underwriter or Underwriters, then this Agreement (or, with respect to the
Second Time of Delivery, the obligations of the Underwriters to purchase
and of the Company to sell the Optional Shares) shall thereupon terminate,
without liability on the part of any non-defaulting Underwriter or the
Company, except for the expenses to be borne by the Company and the
Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall
relieve a defaulting Underwriter from liability for its default.

10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment

<PAGE>

for the Shares.

11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company shall not then be under any liability to any Underwriter except as
provided in Sections 6 and 8 hereof; but, if for any other reason, any Shares
are not delivered by or on behalf of the Company as provided herein, the Company
will reimburse the Underwriters through you for all out-of-pocket expenses
approved in writing by you, including fees and disbursements of counsel,
reasonably incurred by the Underwriters in making preparations for the purchase,
sale and delivery of the Shares not so delivered, but the Company shall then be
under no further liability to any Underwriter in respect of the Shares not so
delivered except as provided in Sections 6 and 8 hereof.

12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.

All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company by you upon
request. Any such statements, requests, notices or agreements shall take effect
at the time of receipt thereof.

13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and, to the extent provided in Sections 8 and
10 hereof, the officers and directors of the Company and each person who
controls the Company or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.

14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.

15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.

16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.

<PAGE>

If the foregoing is in accordance with your understanding, please sign and
return to us five (5) counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement between each of the Underwriters and
the Company. It is understood that your acceptance of this letter on behalf of
each of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters (U.S. Version), the form of which shall be
submitted to the Company for examination upon request, but without warranty on
your part as to the authority of the signers thereof.

Very truly yours,
Steinway Musical Instruments, Inc.

By:
Name:
Title:
Accepted as of the date hereof:

Goldman, Sachs & Co.
Donaldson, Lufkin & Jenrette
Securities Corporation

By:. . . . . . . . . . . . . . . . . . .
(Goldman, Sachs & Co.)

<PAGE>

SCHEDULE I

<TABLE>
<CAPTION>
NUMBER OF
OPTIONAL SHARES
TOTAL NUMBER OF TO BE PURCHASED
FIRM SHARES TO IF MAXIMUM OP-
Underwriter BE PURCHASED TION EXERCISED
-----------
<S> <C> <C>
Goldman, Sachs & Co.

Donaldson, Lufkin & Jenrette Securities Corporation

..........................................
[NAMES OF OTHER UNDERWRITERS]

Total. . . . . . . . . . . . . . . . . . . . . . -------- --------
-------- --------
</TABLE>

<PAGE>

EXHIBIT 3.1

RESTATED CERTIFICATE OF INCORPORATION

SELMER INDUSTRIES INC.

The name of the corporation is Selmer Industries, Inc. The date of filing
of its original Certificate of Incorporation with the Secretary of State was
July 8, 1993, and it was originally incorporated under the name of Selmer
Industries, Inc. This Restated Certificate of Incorporation restates and
integrates and further amends the Certificate of Incorporation of this
corporation. This Restated Certificate of Incorporation was duly adopted by
the Board of Directors in accordance with Sections 241 and 245 of the General
Corporation Law of the State of Delaware.

FIRST: The name of the corporation is Selmer Industries, Inc. (the
"COMPANY").

SECOND: The address of the registered office of the Company in the State
of Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington,
Delaware 19801, County of New Castle. The name of its registered agent at
such address is The Corporation Trust Company.

THIRD: The purpose of the Company is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.

FOURTH: The total number of shares of capital stock that the Company
shall have authority to issue is 15,000,000, divided into 5,000,000 shares of
Convertible Participating Preferred Stock, par value $0.001 per share
("PREFERRED STOCK"), and 10,000,000 shares of Common Stock, par value $0.001
per share ("COMMON STOCK"). The Company is authorized to issue two classes of
Common Stock, designated respectively as Class A Common Stock ("CLASS A
COMMON STOCK") and Ordinary Common Stock ("ORDINARY COMMON STOCK"). The total
number of shares of Class A Common Stock that the Company shall have
authority to issue is 500,000, and the total number of shares of Ordinary
Common Stock that the Company shall have authority to issue is 9,500,000.

FIFTH: The express terms and provisions of the various classes of stock
are as follows:

A. DEFINITIONS. The following terms shall have the following meanings,
which meanings shall be equally applicable to the singular and plural forms
of such terms:

"AFFILIATE" means, with respect to a specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified

<PAGE>

Person. For 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.

"AVAILABLE FUNDS" means the amount, for the purposes of SECTION C.1(d)
of paragraph FIFTH hereof, permitted to be paid as dividends on the Preferred
Stock under the laws of the State of Delaware.

"BANKRUPTCY LAW" means title 11 of the U.S. Code or any similar
federal or state law for the relief of debtors.

"BOARD OF DIRECTORS" means the board of directors of the Company.

"BUSINESS DAY" means any day that is not a Saturday or a Sunday or a
public holiday or a day on which banks are required or permitted to close
under the laws of the States of California, New York or Indiana.

"CHANGE IN CONTROL" means any time that the Management Group does not
have, either directly or through wholly-owned subsidiaries, both of the
following: (i) either (A) the ability to elect a majority of the Board of
Directors, or (B) voting control of at least 50.1% of the Voting Stock of the
Company; and (ii) ownership of shares of the Class A Common Stock equal to or
greater than 80% of the shares of Class A Common Stock that the Management
Group owns as of August 15, 1993; PROVIDED, HOWEVER, that any decrease in the
number of shares of Class A Common Stock as a result of any sale or other
disposition in connection with the death or permanent disability of any
individual in the Management Group shall not be deemed a Change in Control
for purposes of this CLAUSE (ii) (and any such holder's shares shall be
deemed to be held by such holder for purposes of calculating the percentage
of Class A Common Stock owned by the Management Group for purposes of this
CLAUSE (ii)).

"CLASS A COMMON STOCK" has the meaning ascribed to such term in
paragraph FOURTH hereof.

"COMMON STOCK" has the meaning ascribed to such term in paragraph
FOURTH hereof.

"CONVERSION RATIO" has the meaning ascribed to such term in
SECTION C.4(a) of paragraph FIFTH hereof.

"COMPANY" has the meaning ascribed to such term in paragraph FIRST
hereof.

-2-
<PAGE>

"FAIR MARKET VALUE" means, with respect to the Preferred Stock, the
fair market value per share of Preferred Stock, which shall be reasonably
determined by the Board of Directors as of a date which is within fifteen
days of the date as of which the determination is to be made. In the event
that, within five days after any holder of Preferred Stock shall have
received notice of the valuation by the Board of Directors, such holder gives
the Company notice that such holder disagrees with such valuation, then the
fair market value of the Preferred Stock shall be determined by a nationally
recognized investment banking firm, at the Company's expense, such firm to be
chosen by the holder and the Company. If there shall be a dispute as to the
selection of such investment banking firm, such firm shall be appointed by
the American Arbitration Association upon application by the Company or the
holder. The Company and the holder shall be afforded adequate opportunities
to discuss said appraisal with the investment banking firm.

"JUNIOR SECURITY" means any equity security of any kind which the
Company has issued or shall at any time issue or be authorized to issue
other than the Preferred Stock.

"LIQUIDATION VALUE" of any Preferred Share as of any particular date
means an amount equal to $4.50.

"MANAGEMENT GROUP" means Kyle Kirkland and Dana Messina.

"NASDAQ" has the meaning ascribed to such term in SECTION C.4(f)(3) of
paragraph FIFTH hereof.

"ORDINARY COMMON SHARE" means one share of Ordinary Common Stock.

"ORDINARY COMMON STOCK" has the meaning ascribed to such term in
paragraph FOURTH hereof.

"ORIGINAL CLASS A HOLDERS" means Dana Messina and Kyle Kirkland.

"PREEMPTIVE LIMITATION" has the meaning ascribed to such term in
SECTION C.5 of paragraph FIFTH hereof.

"PREFERRED SHARE" has the meaning ascribed to such term in SECTION C
of paragraph FIFTH hereof.

"PREFERRED STOCK" has the meaning ascribed to such term in paragraph
FOURTH hereof.

"SECURITIES ACT" means the Securities Act of 1933, as amended.

-3-
<PAGE>

"SECURITIES PURCHASE AGREEMENT" means the Securities Purchase
Agreement among the Company, Symphony Industries, Inc., a Delaware
corporation, as guarantor, and the purchasers listed on Schedule I thereto,
as the same may be modified or amended from time to time.

"SECURITYHOLDERS AGREEMENT" means the Securityholders Agreement among
the Company and the holders of the Common Stock, Preferred Stock and Warrants
listed on the signature pages thereto, as the same may be modified or amended
from time to time.

"SUBSIDIARY" means any corporation at least a majority of the Voting
Stock of which is, at the time as of which any determination is being made,
owned by the Company either directly or indirectly through one or more
Subsidiaries.

"VOTING STOCK" means any shares of stock of any corporation having
general voting power in electing the board of directors of such corporation
(whether or not stock of any other class or classes has or might have
voting power by reason of the occurrence of any contingency).

"WARRANTS" means the Warrants issued by the Company, exercisable into
shares of its Ordinary Common Stock.

B. COMMON STOCK; DIVIDENDS AND DISTRIBUTIONS. Subject to SECTION C.1 of
this paragraph, the holders of the Common Stock shall be entitled to the
payment of dividends when and as declared by the Board of Directors out of
funds legally available therefor, after payment of preferential dividends on
the shares of Preferred Stock as set forth below.

C. PREFERRED STOCK. The designations, rights, preferences, privileges,
restrictions and other matters related to the shares of Preferred Stock
(which are collectively referred to herein as the "PREFERRED SHARES" and
individually as a "PREFERRED SHARE") are as follows:

1. DIVIDENDS.

(a) GENERAL DIVIDEND OBLIGATION. The holders of Preferred Stock
shall be entitled to receive dividends when, as and if declared by the Board
of Directors out of funds legally available for such purpose. The Board of
Directors shall fix a record date for the determination of holders of
Preferred Stock entitled to receive payment of a dividend declared thereon,
which record date shall be not more than 60 days prior to the date fixed for
the payment thereof. The Company shall not pay dividends on or make any other
distribution on Common Stock unless simultaneously therewith dividends are
paid, or a distribution is made on the Preferred Stock in an amount such that
the holders of Preferred Stock shall be entitled to receive

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<PAGE>

in respect of each share of Preferred Stock an amount equal to the amount of
the dividend payable or the distribution made in respect of each share of
Common Stock multiplied by the number of shares of Common Stock issuable upon
conversion of each share of Preferred Stock.

(b) DISTRIBUTION OF PARTIAL DIVIDEND PAYMENTS. If at any time
the Company shall pay less than the total amount of dividends then declared
on the Preferred Stock, such payment shall be distributed amount the holders of
the Preferred Stock in proportion to the respective amounts of unpaid
accruals on their Preferred Stock.

(c) CERTAIN PAYMENTS RESTRICTED. Except as expressly permitted
under the Securityholders Agreement, so long as any Preferred Stock shall
remain outstanding, no Junior Security of the Company shall be, directly or
indirectly, acquired or redeemed by the Company. No dividend shall be declared
or paid, nor shall any distribution be made, upon any Junior Security unless
(i) all accrued and unpaid dividends and required distributions upon or
redemptions of the Preferred Stock shall have first been paid or satisfied
and (ii) the Company shall concurrently with such payment or distribution pay
a dividend or make a distribution on each share of Preferred Stock as
provided in SECTION C.1(a) of this paragraph FIFTH.

(d) DIVIDEND PAYABLE FROM CERTAIN FUNDS. Notwithstanding the
provisions of SECTIONS C.1(a), (b) AND (c) of this paragraph FIFTH, the
Company shall not declare or pay or set apart any amount for payment of the
cash portion of the dividends or make any other cash distribution on the
Preferred Stock in excess of Available Funds.

2. LIQUIDATION. Upon any liquidation (complete or partial),
dissolution or winding up of the Company, whether voluntary or involuntary,
the holders of the Preferred Stock shall be entitled, before any distribution
or payment is made upon any Junior Security, to be paid out of the assets of
the Company available for distribution to its stockholders, an amount in cash
equal to the aggregate Liquidation Value of all Preferred Stock outstanding,
and the holders of the Preferred Stock shall not be entitled to any further
payment. If upon such liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the assets of the Company to be distributed
among the holders of the Preferred Stock shall be insufficient to permit
payment to the holders of the Preferred Stock of the amount which they are
entitled to be paid as aforesaid, then such assets of the Company shall be
distributed to the holders of the Preferred Stock ratably based upon the
aggregate Liquidation Value of the Preferred Stock held by them. Upon any
such liquidation, dissolution or winding up of the Company, after the holders
of the Preferred Stock shall have been paid in full the amounts to which they
shall be entitled, the

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<PAGE>

remaining assets of the Company, if any, may be distributed to the holders of
any Junior Security of the Company. Written notice of such liquidation,
dissolution or winding up, stating a payment date, the amount of the payment
and the place where the amounts distributable shall be payable, shall be
mailed by certified or registered mail, return receipt requested, not less
than 60 days prior to the payment date stated therein, to each record holder
of Preferred Stock at the address for such record holder shown on the
Company's records. Neither the consolidation or merger of the Company into or
with any other corporation or corporations, nor the sale or transfer by the
Company of all or any part of its assets, nor the reduction of the capital
stock of the Company, shall be deemed to be a liquidation, dissolution or
winding up of the Company within the meaning of any of the provisions of this
SECTION C.2.

3. REDEMPTIONS. The Company shall neither redeem nor otherwise
acquire any Preferred Stock except as expressly authorized herein.

4. CONVERSION.

(a) CONVERSION AT OPTION OF HOLDER; CONVERSION RATIO. Each share
of Preferred Stock shall be convertible, without the payment of any
additional consideration by the holder thereof and at the option of the holder
thereof, at any time after the date of issuance of such share, at the office
of the Company or any transfer agent for the Preferred Stock, into shares of
Ordinary Common Stock based upon an initial conversion ratio of one share of
Preferred Stock for one share of Ordinary Common Stock (as adjusted from time
to time, the "CONVERSION RATIO").

(b) CONVERSION AT OPTION OF THE COMPANY. Each share of Preferred
Stock shall be convertible, at the option of the Company and without the
payment of any additional consideration by the Company, into Ordinary Common
Stock at a rate equal to the Conversion Ratio upon the date of the closing of
a firm commitment underwritten public offering pursuant to an effective
registration statement covering the public offering of shares of Common Stock
for the account of the Company with an aggregate offering price, when added
to the aggregate offering prices of all past such offerings, of $15,000,000
or more (in the event of such offering, the person(s) entitled to receive the
Ordinary Common Stock issuable upon such conversion of the Preferred Stock
shall not be deemed to have converted such Preferred Stock until immediately
prior to the closing of such offering).

(c) DIVIDEND REQUIREMENT. Each person who holds of record
Preferred Stock immediately prior to a conversion under either SECTION C.4(a)
or C.4(b) of this paragraph shall be entitled to all dividends which have
been declared but unpaid

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<PAGE>

prior to the time of such conversion. Such dividends shall be paid to all
such holders within 30 days of such conversion.

(d) PROCEDURE. Any Preferred Shares required to be converted
into Ordinary Common Stock under SECTION C.4(b) of this paragraph FIFTH shall
e automatically deemed to be so converted upon the closing referred to in
such section, and, upon written notice of such closing and request from the
Company, any holder of such Preferred Shares shall surrender any certificates
for shares of Preferred Stock held by such holder. The Company shall, as soon
as practicable thereafter, issue and deliver to such holder a certificate or
certificates for the number of shares of Ordinary Common Stock to which such
holder shall be entitled as set forth in this Restated Certificate of
Incorporation.

In order to exercise the conversion privilege provided in
SECTION C.4(a), the holder of any Preferred Shares to be converted shall
present and surrender the certificate or certificates representing such
shares during usual business hours at the office or agency maintained by the
Company for the transfer of the Preferred Shares and shall give written
notice to the Company at such office or agency that the holder elects to
convert the Preferred Shares represented by such certificate or certificates,
to the extent specified in such notice. Such notice shall also state the name
or names (with addresses) in which the certificate or certificates for shares
of Ordinary Common Stock which shall be issuable on such conversion shall be
issued.

If required by the Company, any certificate for the Preferred
Shares surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Company, duly executed by the holder of
such shares or his or her duly authorized representative. As promptly as
practicable after the receipt of such notice and the surrender of the
certificate or certificates representing such Preferred Shares as aforesaid,
the Company shall issue and shall deliver at such office or agency to such
holder, or on his or her written order, a certificate or certificates for the
number of full shares of Ordinary Common Stock issuable upon the conversion
of such Preferred Shares in accordance with the provisions of this SECTION C.4
and any fractional interest in respect of a share of Ordinary Common Stock
arising upon such conversion shall be settled as provided below. If a
certificate for Preferred Shares shall be surrendered for conversion of only
a part of the shares represented thereby, the Company shall deliver at such
office or agency, to or upon the written order of the holder thereof, a
certificate or certificates for the number of Preferred Shares represented by
such surrendered certificate which are not being converted. Each conversion
of Preferred Shares shall be deemed to have been effected on the date on
which such notice shall have been received by the officer or agency
maintained by the Company

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<PAGE>

for such purpose and the certificate or certificates representing such
Preferred Shares shall have been surrendered (subject to receipt by such
office or agency within thirty days thereafter of any required instruments of
transfer as aforesaid), and the person or persons in whose name or names any
certificate or certificates for shares Ordinary Common Stock shall be
issuable upon such conversion shall be deemed to have become on said date the
holder or holders of record of the shares represented thereby; PROVIDED,
HOWEVER, that if the transfer books of the Company for Ordinary Common Stock
shall be, in the ordinary course of business, closed on said date, the
Company shall not be required to issue any shares on such conversion until
the date on which such transfer books shall be reopened and such person or
persons shall not be deemed to have become the holder or holders of record of
such Ordinary Common Shares until the date on which such transfer books shall
be reopened, but such conversion shall nevertheless be effected when such
transfer books shall be reopened as of the date on which such certificate or
certificates representing such shares shall have been surrendered to the
Company and any required instruments of transfer and notices have been
received by the Company as aforesaid.

(e) FRACTIONAL INTEREST. If any fractional interest in a share
of Ordinary Common Stock would be deliverable upon conversion of any
Preferred Share under either SECTION C.4(a) or C.4(b), the Company shall, at
its option, either issue fractional shares of Ordinary Common Stock or pay in
cash an amount equal to the current Fair Market Value of such fractional
interest.

(f) ANTI-DILUTION. The Conversion Ratio shall be subject to
adjustment from time to time as follows:

(1) If the Company shall, after the issuance of Preferred
Stock: (i) subdivide its outstanding shares of Ordinary Common
Stock; (ii) combine its outstanding shares of Ordinary Common
Stock into a smaller number of shares; or (iii) reclassify its
outstanding shares of Ordinary Common Stock, the conversion
privilege and the Conversion Ratio in effect immediately prior
to such action shall be adjusted so that the holder of any share
of Preferred Stock thereafter surrendered for conversion shall
be entitled to receive the number of shares of Ordinary Common
Stock of the Company which such Holder would have owned
immediately following such action had such share been converted
immediately prior thereto. Such adjustment shall become
effective immediately after the record date in the case of a
dividend and shall become effective immediately after the
effective date in the case of a subdivision, combination or
reclassification.

(2) If the Company shall, after the issuance of its Preferred
Stock, issue rights or warrants to all holders of its Ordinary
Common Stock currently entitling them to

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<PAGE>

subscribe for or purchase shares of Ordinary Common Stock at a
price per share less than the current market price per share (as
determined pursuant to CLAUSE (3) below) on the record date
referred to below, the Conversion Ratio shall be adjusted so
that the same shall equal the ratio determined by multiplying
the Conversion Ratio in effect immediately prior to the date of
issuance of such rights or warrants by a fraction, the numerator
of which shall be the number of shares which the aggregate
offering price of such rights and warrants plus the aggregate
exercise price, if any, of such rights and warrants would
purchase at such current market price, and the denominator of
which shall be the number of additional shares of Ordinary
Common Stock offered for subscription or purchase. Such
adjustment shall become effective immediately after the record
date of the determination of stockholders entitled to receive
such rights or warrants. If all of the shares of Ordinary Common
Stock subject to such rights and warrants have not been issued
when such rights or warrants expire, then the Conversion Ratio
shall promptly be readjusted to the Conversion Ratio which would
then be in effect had the adjustment upon the issuance of such
rights or warrants been made on the basis of the actual number
of shares of Ordinary Common Stock issued upon the exercise of
such rights or warrants.

(3) For the purpose of any computation under CLAUSE (2)
hereof, the current market price per share of the Ordinary
Common Stock on any date shall be deemed to be the average of
the daily closing prices for the thirty consecutive trading days
selected by the Company commencing not more than forty-five days
before the day in question. The closing price for each day shall
be the last reported sale price regular way or, if no such
reported sale takes place on such day, the average of the
reported closing "bid" and "asked" quotation regular way per
share, in either case on the principal national securities
exchange on which the Ordinary Common Stock is listed or
admitted to trading, or, if not listed or admitted to trading on
any national securities exchange, on the National Association of
Securities Dealers Automated Quotation System (the "NASDAQ") or,
if not quoted on the NASDAQ, the average of the highest "bid"
and lowest "asked" prices as quoted on, in order of preference,
the National Quotation Bureau "pink sheets" or quotation sheets
of registered market makers or by a similar organization
selected from time to time by the Company for such purpose, or
if not so available, the fair market price as determined by the
Board of Directors (whose determination shall be conclusive)
and described in an officers' certificate signed by the chief
executive officer of the Company. For purposes of this CLAUSE (3),
the term "trading day" shall not include any day on which
securities are not traded on such exchange or in such market.

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<PAGE>

(4) No adjustment in the Conversion Ratio shall be required
unless such adjustment would require an increase or decrease of
at least one percent in such ratio; PROVIDED, HOWEVER, that any
adjustment which by reason of this CLAUSE (4) is not required to
be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this CLAUSE (4)
shall be made to the nearest one-hundredth of a share.

(5) If either of the following shall occur, namely: (i) any
consolidation or merger to which the Company is a party, other
than a consolidation or a merger in which the Company is the
surviving corporation and which does not result in any
reclassification of, or change (other than a change in par value
or from par value to no par value or from no par value to par
value, as a result of a subdivision or combination) in,
outstanding shares of the Ordinary Common Stock; or (ii) any
sale or conveyance to another corporation of the assets of the
Company as an entirety or substantially as an entirety; then it
shall be a condition to the consummation of such consolidation,
merger, sale or conveyance that the Company, or such successor
or purchasing corporation, as the case may be, shall execute and
deliver an agreement providing that the holder of any Preferred
Shares then outstanding shall have the right to convert such
shares into the kind and amount of securities or cash or other
assets receivable upon such consolidation, merger, sale or
conveyance by a holder of the number of shares of Ordinary
Common Stock issuable upon conversion of such shares immediately
prior to such consolidation, merger, sale or conveyance. Such
agreement shall provide for adjustment which shall be as nearly
equivalent as may be practicable to the adjustments provided for
in CLAUSES (1), (2), (3) AND (4) above. The provisions of this
CLAUSE (5) shall similarly apply to successive consolidations,
mergers, sales or conveyances.

(6) Upon any conversion of Preferred Stock into
shares of Ordinary Common Stock pursuant to this SECTION 4, no
adjustment with respect to dividends on the Ordinary Common
Stock shall be made, and only those dividends shall be payable
on shares of Ordinary Common Stock issued upon such conversion
as may be declared and may be payable to holders of record of
shares of Ordinary Common Stock on or after such conversion date.

(7) All Preferred Shares or portions thereof
surrendered for conversion shall, on the conversion thereof, no
longer be deemed to be outstanding and all rights with respect
to such shares, including the rights, if any, to receive notices
and to vote, shall forthwith cease and terminate, except only
the right of the holder thereof to

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<PAGE>

receive shares of Ordinary Common Stock in exchange therefor.

(8) The issuance of certificates for shares of Ordinary Common
Stock upon the conversion of Preferred Stock shall be made
without charge to the converting holder for any issue tax
imposed on the Company in respect of such issuance. The Company
shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and
delivery of stock in a name other than that of the holder of any
certificate representing Preferred Stock being converted, and
the Company shall not be required to issue or deliver any such
stock certificate unless and until the person or persons
requesting the issuance thereof shall have paid to the Company
the amount of any such tax or shall have established to the
satisfaction of the Company that such tax has been paid.

(9) The Company shall at all times reserve and keep available
out of the aggregate of its authorized but unissued stock or its
issued stock held in its treasury, or both, for the purpose of
effecting the conversion of the Preferred Stock, such number of
its duly authorized shares of Ordinary Common Stock as shall
from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock; and if at any time such
number of shares of Ordinary Common Stock shall not be
sufficient to effect the conversion of all outstanding shares of
Preferred Stock, the Company will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its
authorized, but unissued Ordinary Common Stock or otherwise
acquire such number of shares as shall be sufficient for such
purposes.

(10) If, at any time while any Preferred Shares are outstanding:

(i) the Company shall declare a dividend (or any other
distribution) on its Ordinary Common Stock, other than in
cash;

(ii) the Company shall authorize the issuance to all
holders of its Ordinary Common Stock of rights or warrants
to subscribe for or purchase shares of its Ordinary Common
Stock or of any other subscription rights or warrants;

(iii) the Company shall reclassify the Ordinary Common
Stock (other than a subdivision or combination thereof) or
enter into an agreement for the consolidation or merger of
the Company for which approval or any stockholders of the
Company is

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<PAGE>

required, or enter into an agreement for the sale or transfer of
all or substantially all of the assets of the Company; or

(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;

then, in any such case, the Company shall cause to be filed at
the office or agency maintained for the purpose of conversion of
the Preferred Stock, and shall cause to be mailed to the
registered holders of shares of Preferred Stock, at their last
addresses as they shall appear upon the registry books, at least
30 days prior to the applicable record date hereinafter
specified, a notice stating: (x) the date on which a record is
to be taken for the purpose of such dividend, distribution,
rights or warrants, or, if a record is not to be taken, the
date as of which the holders of Ordinary Common Stock of record
to be entitled to such dividend, distribution, rights or
warrants are to be determined; or (y) the date on which any such
reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become
effective, and the date of which it is expected that holders of
Ordinary Common Stock of record shall be entitled to exchange
their Ordinary Common Stock for securities or other property, if
any, deliverable upon such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up.
The failure to give or receive the notice required by this
CLAUSE (10) or any defect therein shall not affect the legality
or validity of any such dividend, distribution, right or warrant
or other action.

(g) AUTOMATIC CONVERSION OF CLASS A COMMON STOCK. If, at any
time, any share of Class A Common Stock shall not be owned by any of the
Original Class A Holders or any Affiliate controlled by such Original Class A
Holders, such share of Class A Common Stock shall automatically convert to
Ordinary Common Stock for one share of Ordinary Common Stock. Any holder of
Class A Common Stock required to convert the same into Ordinary Common Stock
under this subsection shall, upon written request from the Company, surrender
any certificates for shares of Class A Common Stock held by such holder. The
Company shall, as soon as practicable thereafter, issue and deliver to such
holder a certificate or certificates for the number of shares of Ordinary
Common Stock to which such holder shall be entitled as set forth above.

5. PREEMPTIVE RIGHTS. Holders of Preferred Stock shall have the
right to purchase capital stock of the Company, in an amount not to exceed
the Preemptive Limitation described below, that is issued by the Company
pursuant to future private offerings of equity securities on the same terms
and conditions

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<PAGE>

as such stock is proposed to be issued by the Board of Directors. As used
herein, the "PREEMPTIVE LIMITATION" shall mean the maximum number of shares
that a holder of Preferred Stock may purchase in future private equity
offerings by the Company, and is equal to the PRODUCT OF (a) the number of
shares of Ordinary Common Stock that such holder would own if all of such
holder's shares of Preferred Stock were converted DIVIDED BY the total number
of shares of Preferred Stock and Common Stock of the Company on a fully
diluted basis, and (b) the number of shares issued by the Company in such
future offering. The right of such holders of Preferred Stock to purchase
stock of the Company under this SECTION C.5 shall not arise in cases of
conversion of the Preferred Stock or upon the exercise of any warrants or
options outstanding on the date of the Securities Purchase Agreement, nor
shall such right include any equity constituting up to 7.5% of the
fully-diluted Common Stock if such Common Stock is issued to the management
of the Company under a bonus or incentive plan. The original Preferred
Stockholders and their successors and transferees shall continue to have
these preemptive rights until the date of the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
covering the public offering of shares of Common Stock for the account of the
Company with an aggregate offering price of $15,000,000 or more.

D. VOTING RIGHTS.

1. NUMBER OF DIRECTORS. The Board of Directors shall consist of
no less than three and no more than nine directors, such number to be fixed
from time to time by a vote at a meeting or by written consent of the holders
of stock entitled to vote on the election of directors, or by a resolution of
the Board of Directors passed by a majority of the whole Board of Directors.

2. [Reserved]

3. VOTING RIGHTS OF PREFERRED. Except as provided in SECTION D.3
AND D.4 of this paragraph FIFTH or as may be otherwise provided herein or by
law, each holder of Preferred Stock shall have full voting rights and powers
equal to the voting rights and powers of the holders of Common Stock, shall
be entitled to notice of any meeting of stockholders in accordance with the
Bylaws of the Company and shall be entitled to vote as a class together with
holders of Common Stock with respect to any question upon which holders of
Stock have the right to vote.

4. NUMBER OF VOTES.

(a) COMMON STOCK. Each holder of shares of Class A Common
Stock shall be entitled to a number of votes equal to the number of shares of
Class A Common Stock held by such holder multiplied by 98, and each holder of
shares of Ordinary

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<PAGE>

Common Stock shall be entitled to a number of votes equal to the number of
shares of Ordinary Common Stock held by such holder.

(b) PREFERRED STOCK. Each holder of Preferred Stock shall be
entitled to a number of votes equal to the number of Ordinary Common Shares
into which all of the Preferred Shares held by such holder are convertible as
of the date of determination.

(c) VOTING AS A CLASS. The Class A Common Stock, the
Ordinary Common Stock and the Preferred Common Stock shall vote together,
without distinction between classes, except as set forth herein or in the
Securityholders Agreement.

E. GENERAL.

1. RESTRICTIONS.

(a) CREATION OF CERTAIN STOCK. So long as any Preferred
Stock shall be outstanding, the Company shall not create any class or series
of stock ranking, as to parity, payment or dividends, voting rights or
liquidation preference, equal or prior to the Preferred Stock.

(b) CERTAIN OTHER ACTIONS PROHIBITED. The holders of more
than 50% of the Preferred Stock and Ordinary Common Stock (voting as a
class), respectively, must approve any proposal to amend the Bylaws of the
Company if such amendment would adversely affect the respective designations,
rights or preferences, as applicable, of holders of Preferred Stock or
Ordinary Common Stock. The holders of 100% of the Preferred Stock must
approve any proposal to amend this Restated Certificate of Incorporation or
the Bylaws of the Company if such amendment would result in a change in the
liquidation value of the Preferred Stock. The Board of Directors must
unanimously approve any resolution calling for the Company to, within the
meaning of any Bankruptcy Law, (i) commence a voluntary case, (ii) consent to
the entry of an order for relief against it in an involuntary case, or (iii)
consent to the appointment of a custodian for all or substantially all of the
property of the Company. So long as any Preferred Stock shall be outstanding,
the Company shall not (i) file any directors' resolutions pursuant to the
laws of the State of Delaware, if such action would adversely affect any of
the powers, preferences or rights of the holders of Preferred Stock, or (ii)
be a party to or enter into any agreement which would by its terms prohibit
or in any way restrict the Company from declaring or paying dividends on, or
redeeming, the Preferred Stock, or performing any other obligation to the
holders of the Preferred Stock imposed on the Company by its Certificate of
Incorporation.

2. NONASSESSABLE STOCK. The Preferred Stock and Common Stock
shall be nonassessable.

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<PAGE>

3. CLOSING OF BOOKS. The Company will not close its books
against the transfer of any Preferred Stock or Common Stock.

4. REGISTRATION OF TRANSFER. The Company shall keep at its
principal office (or such other place as the Company reasonably designates) a
register for the registration of Preferred Stock and Common Stock. Upon the
surrender of any certificate representing Preferred Stock or Common Stock at
such place, the Company shall, at the request of the registered holder of
such certificate, execute and deliver a new certificate or certificates in
exchange therefor representing in the aggregate the number of shares of
Preferred Stock or Common Stock, as the case may be, represented by the
surrendered certificate (and the Company forthwith shall cancel such
surrendered certificate), subject to the requirements of applicable
securities laws. Each such new certificate shall be registered in such name
and shall represent such number of shares of Preferred Stock or Common Stock,
as the case may be, as shall be requested by the holder of the surrendered
certificate and shall be substantially identical in form to the certificate.
The issuance of new certificates shall be made without charge to the holders
of the surrendered certificates for any issuance tax in respect thereof or
other cost incurred by the Company in connection with such issuance; PROVIDED
that the Company shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of (i) the holder of the surrendered
certificate or (ii) any institutional affiliate of such holder.

5. REPLACEMENT. Upon receipt of evidence reasonably satisfactory
to the Company (an affidavit of the registered holder, without bond, shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation
of any certificate evidencing one or more shares of Preferred Stock or Common
Stock and, in the case of loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Company (provided that if the
registered holder is an institution, its own agreement of indemnity shall be
satisfactory), or, in the case of mutilation, upon surrender of such
certificate, the Company shall (at its expense) execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
shares of Preferred Stock or Common Stock, as the case may be, represented by
such lost, stolen, destroyed or mutilated certificate and dated the date of
such lost, stolen, destroyed or mutilated certificate.

6. AMENDMENT AND WAIVER.

(a) Without limiting SECTION E(1)(b), no amendment,
modification or waiver of any provision hereof shall be binding or effective
without the prior approval of the holders of at least 66-2/3% of the
outstanding shares of each class of

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<PAGE>

Common Stock or Preferred Stock that is adversely affected by such amendment,
modification or waiver.

(b) No amendment, modification or waiver of any provision
hereof shall extend to or affect any obligation not expressly amended,
modified or waived or impair any right consequent thereon. No course of
dealing, and no failure to exercise or delay in exercising any right, remedy,
power or privilege hereunder, shall operate as a waiver, amendment or
modification of any provision of this Restated Certificate of Incorporation.

7. CORPORATE GOVERNANCE. Except as expressly permitted herein,
and until the date of a closing of a firm commitment underwritten public
offering pursuant to an effective registration statement covering the public
offering of equity shares of the Company with an aggregate offering price of
at least $15,000,000, so long as any Preferred Stock or Ordinary Common Stock
shall remain outstanding, the Company shall not, without the approval of the
holders of at least 66-2/3% of the shares of Ordinary Common Stock
represented by (i) the outstanding Ordinary Common Shares and (ii) the
Ordinary Common Shares into which the outstanding Preferred Shares are
convertible, do, or permit any Subsidiary to do, any of the following:

(a) directly or indirectly, declare or pay any dividends or
make any distributions upon any of the outstanding capital stock of the
Company or a Subsidiary;

(b) except as provided in the Securityholders Agreement,
directly or indirectly, redeem, purchase or otherwise acquire any of its
capital stock (except capital stock held by employees of the Company),
including any options, warrants or rights to acquire any of its securities,
or any security exercisable or exchangeable for or convertible into any of
its capital stock, directly or indirectly;

(c) authorize, issue or enter into any agreement, including,
without limitation, options, warrants or other rights, providing for the
issuance or sale (contingent or otherwise) of any equity securities or any
notes or debt securities containing equity features (including, without
limitation, any notes or debt securities convertible into or exchangeable for
equity securities, or containing provisions that set or provide a mandatory
formula for determining, directly or indirectly, the participation in
earnings and profits, or options, warrants or rights to acquire securities
exchangeable or exercisable for any such securities) of the Company or any
Subsidiary, other than (i) issuances of securities pursuant to employee
benefit plans, management incentive plans or employment agreements with
officers of the Company or any Subsidiary and (ii) issuances of securities in
connection with the initial registration with the Securities

-16-

<PAGE>

and Exchange Commission of a public offering of securities of the Company

(d) make any loans or advances to, or guarantee any
indebtedness for the benefit of, any person, other than in the ordinary
course of business; PROVIDED that, any loans or advances made by the Company
or any Subsidiary to facilitate sales by the Company are deemed to be loans
or advances made in the ordinary course of business for purposes of this
SECTION 7(d);

(e) merge or consolidate with or into any person;

(f) sell, lease, transfer or otherwise dispose of in any
transaction or series of related transactions, more than $10,000,000 of any
of the Company's or any Subsidiary's properties or assets (other than sales
of inventory in the ordinary course of business); purchase in any transaction
or series of related transactions, any property, assets or securities (other
than in the ordinary course of business) having a fair market value in excess
of $10,000,000, or enter into any contract, agreement, understanding or
transaction of any kind or nature whatsoever with respect to any of the
foregoing;

(g) liquidate or dissolve or effect a recapitalization or
reorganization in any form of transaction;

(h) supplement, modify, amend, rescind, alter or restate in
any manner the Certificate of Incorporation of the Company or any Subsidiary
as in effect on the date hereof or the By-Laws of the Company or any
Subsidiary;

(i) increase or decrease the number of individuals that
constitute the Board of Directors;

(j) create an employee benefit or bonus plan (including stock
or phantom stock plans), or enter into any new employment or consulting
contracts, except (i) contracts that are terminable at will without penalty
to the Company or contracts that provide for aggregate payments not in excess
of $500,000 per year and (ii) those certain Employment Agreements dated June
22, 1993, between the Company and each of Thomas Burzycki, Michael Vickrey
and Vincent McBryde;

(k) issue any shares of capital stock whether of the same
series as, or of a different series from, the Common Stock or, in the case of
any Subsidiary, its then existing capital stock;

(l) change the compensation, benefits or other perquisites
received by any of the Company's or any Subsidiary's employees outside the
ordinary course of business;

-17-
<PAGE>

(m) form any subsidiaries, partnerships or joint ventures, or
purchase or otherwise acquire any of the capital stock of, or any other
ownership interest in, or any assets or obligations of, any person;

(n) change the Company's independent certified public
accountants to be any other independent certified public accountants other
than the following:

Arthur Andersen
Coopers & Lybrand
Deloitte & Touche
Ernst & Young
KPMG Peat Marwick
Price Waterhouse;

(o) engage in any business or investment activities other
than those necessary for, incident to, connected with, or arising out its
principal activities involving the musical instrument industry; or

(p) make any payment to or investment in, or enter into any
transaction with, or modify, amend or waive any agreement with, any of its
Affiliates, including without limitation the purchase, sale or exchange of
property or the rendering of any service, except on terms comparable to those
generally available on an arm's-length basis in equivalent transactions with
third parties, as evidenced by a resolution of the Board of Directors adopted
in good faith to that effect.

8. COPIES OF DOCUMENTS. The Company shall at all times maintain
at its principal executive office copies of the Securities Purchase Agreement
and the Securityholders Agreement and shall provide copies thereof to its
stockholders upon request and without charge.

SIXTH: A director of the Company shall not be personally liable
to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived
any improper personal benefit. If the Delaware General Corporation Law is
amended after the date of the filing of this Restated Certificate of
Incorporation to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director of the
Company shall be eliminated or limited to the fullest extent permitted by the
Delaware General Corporation Law, as so amended. No repeal or modification
of this paragraph SIXTH shall apply to or have any effect on the liability or
alleged liability of any

-18-
<PAGE>

director of the Company for or with respect to any acts or omissions of such
director occurring prior to such repeal or modification.

SEVENTH: To the fullest extent authorized by law, the Board of
Directors, acting on behalf of the Company, shall indemnify or advance costs
of defense, or commit the Company to indemnify or advance costs of defense in
the future, to any person who is made, or threatened to be made, a party to
an action, suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise (including an action, suit or proceeding by or in
the right of the Company) by reason of the fact that the person is or was a
director, officer, employee or agent of the Company or a fiduciary within the
meaning of the Employee Retirement Income Security Act of 1974 with respect
to any employee benefit plan of the Company, or serves or served at the
request of the Company as a director, officer, partner, trustee, agent or
employee, or fiduciary of an employee benefit plan, of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise.
This paragraph shall not be deemed exclusive of any other provision for
indemnification of directors, officers, fiduciaries, employees or agents that
may be included in any statute, bylaw, resolution of stockholders or
directors, agreement or otherwise, either as to action in any official
capacity or action in another capacity while holding office.

SELMER INDUSTRIES, INC.

By: /s/ Dana Messina
---------------------
Dana Messina
President

By: /s/ Jeffrey Serota
---------------------
Jeffrey Serota
Assistant Secretary

<PAGE>
CORRECTED CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION
OF
SELMER INDUSTRIES, INC.

SELMER INDUSTRIES, INC., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"),
pursuant to Section 103(f) of the General Corporation Law of the State of
Delaware, does hereby certify that:

FIRST: The Certificate of Amendment of Restated Certificate of
Incorporation of the Corporation which was filed with the Secretary of State of
Delaware on May 24, 1995 was an inaccurate record of the corporate action
therein referred to.

SECOND: Said Certificate of Amendment of Restated Certificate of
Incorporation is incorrect in that it inadvertently stated "$105,000,000" in the
third line of the definition of "SENIOR SUBORDINATED NOTES" in Section A of
Article FIFTH instead of "$110,000,000."

THIRD: The entire Certificate of Amendment of Restated Certificate of
Incorporation of the Corporation in corrected form shall be as follows:

CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION
OF
SELMER INDUSTRIES, INC.

SELMER INDUSTRIES, INC., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify that:

<PAGE>

SECOND: The Board of Directors of the Corporation has duly adopted
resolutions setting forth a proposed amendment to the Restated Certificate of
Incorporation of the Corporation, declaring said amendment to be advisable and
resolving that written consents of stockholders entitled to vote thereon be
solicited in accordance with Section 228 of the General Corporation Law of the
State of Delaware for consideration thereof. The resolution setting forth the
proposed amendment to the Restated Certificate of Incorporation of the
Corporation is as follows:

RESOLVED, that the Restated Certificate of Incorporation of the
Corporation shall be amended as follows:

(A) Add the following definitions to Section A of Article FIFTH:

"GUARANTEES" means the unconditional guarantees of any indebtedness of
the Company or its subsidiaries by (i) the Company, Steinway, Steinway,
Inc., a Delaware corporation and wholly owned subsidiary of Steinway, and
Boston Piano Company, Inc., a Massachusetts corporation and wholly owned
subsidiary of Steinway and (ii) any other Subsidiary that executes a
Guarantee in accordance with the provisions of the documents governing the
Company's or its subsidiaries indebtedness, and their respective successors
and assigns.

"MERGER" means the merger of Piano Acquisition Corp. with and into
Steinway with Steinway becoming the surviving corporation and a wholly
owned subsidiary of The Selmer Company pursuant to the Merger Agreement.

"MERGER AGREEMENT" means the Agreement and Plan of Merger dated as of
April 11, 1995 by and among The Selmer Company, Piano Acquisition Corp. and
Steinway.

"PIANO ACQUISITION CORP." means Piano Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of The Selmer Company.

"SENIOR SUBORDINATED NOTES" means the 11% Senior Subordinated Notes
due 2005 in aggregate principal amount up to $110,000,000 issued pursuant
to the Indenture dated as of

- 2 -

<PAGE>

May 25, 1995 among The Selmer Company, the guarantors thereunder and
American Bank National Association, as Trustee.

"STEINWAY" means Steinway Musical Properties, Inc., a Massachusetts
corporation.

"THE SELMER COMPANY" means The Selmer Company, Inc., a Delaware
corporation and wholly owned subsidiary of the Company.

(B) Amend and restate in its entirety the penultimate sentence of Section
C.5 of Article FIFTH to read as follows:

The right of such holders of Preferred Stock to purchase stock of the
Company under this SECTION C.5 shall not arise in cases of conversion of
the Preferred Stock or upon the exercise of any warrants or options
outstanding on the date of the Securities Purchase Agreement, nor shall
such right include any equity constituting up to 15% of the fully-diluted
Common Stock if such Common Stock is issued to the management of the
Company or any Subsidiary under a bonus or incentive plan.

(d) except for the Guarantees, make any loans or advances to, or guarantee
any indebtedness for the benefit of, any person, other than in the ordinary
course of business; PROVIDED that, any loans or advances made by the
Company or any Subsidiary to facilitate sales by the Company are deemed to
be loans or advances made in the ordinary course of business for purposes
of this SECTION 7(d);

(D) Amend and restate in its entirety Section E.7(e) of Article FIFTH to
read as follows:

(e) merge or consolidate with or into any person, other than in connection
with the Merger, and except that any Subsidiary may merge or consolidate
with or into the Company or any other Subsidiary so long as the Company or
a Subsidiary shall be the continuing corporation;

- 3 -

<PAGE>

(E) Amend and restate in its entirety Section E.7(f) of Article FIFTH to
read as follows:

(f) sell, lease, transfer or otherwise dispose of in any transaction or
series of related transactions, more than $10,000,000 of any of the
Company's or any Subsidiary's properties or assets (other than sales of
inventory in the ordinary course of business); except for the acquisition
of Steinway pursuant to the Merger Agreement, purchase in any transaction
or series of related transactions, any property, assets or securities
(other than in the ordinary course of business) having a fair market value
in excess of $10,000,000, or enter into any contract, agreement,
understanding or transaction of any kind or nature whatsoever with respect
to any of the foregoing, other than the Merger Agreement and any documents
or agreements in connection therewith;

(F) Amend and restate in its entirety Section E.7(m) of Article FIFTH to
read as follows:

(m) form any subsidiaries, other than Piano Acquisition Corp.,
partnerships or joint ventures, or purchase or otherwise acquire any of the
capital stock of, or any other ownership interest in, or any assets or
obligations of, any person, other than Steinway and its subsidiaries
pursuant to the Merger Agreement;

(G) Amend and restate in its entirety Section E.7(j)(ii) of Article FIFTH
to read as follows:

(ii) those certain Employment Agreements between the Company and each of
Thomas Burzycki, Michael Vickrey and Vincent McBryde and those certain
Employment Agreement between Steinway and each of Bruce Stevens, Dennis
Hanson and Thomas Kurrer.

(H) Add a paragraph to be inserted after Section E.7(p) of Article FIFTH
and before Section E.8 of Article FIFTH to read as follows:

- 4 -

<PAGE>

Notwithstanding anything to the contrary in this Restated Certificate
of Incorporation, no provision shall prohibit or restrict or be deemed
violated as a result of the consummation of the Merger pursuant to the
Merger Agreement, the issuance of the Senior Subordinated Notes and the
Guarantees and the performance of the obligations in connection therewith,
or any of the transactions in connection with the foregoing.

THIRD: Thereafter, pursuant to resolution of the Board of Directors
of the Corporation, written consent of stockholders representing the necessary
number of shares as required by statute has been given in accordance with
Section 228 of the General Corporation Law of the State of Delaware to authorize
said amendment, and written notice has been given as provided in said Section
228 of the General Corporation Law of the State of Delaware.

FOURTH: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.

FIFTH: Pursuant to Section 103 of the Delaware General Corporation
Law, the effective date of this amendment to the Corporation's Restated
Certificate of Incorporation shall be the close of business on May 24, 1995.

- 5 -

<PAGE>

IN WITNESS WHEREOF, Selmer Industries, Inc. has caused this
Certificate to be signed and attested by its duly authorized officers, this 24th
day of May, 1995.

SELMER INDUSTRIES, INC.

By ____________________________
Name: Dana D. Messina
Title: Executive Vice
President

ATTEST:

______________________________
By: Kyle R. Kirkland
Title: Secretary

- 6 -

<PAGE>
FORM OF
CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION
OF
SELMER INDUSTRIES, INC.

SELMER INDUSTRIES, INC., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify that:

FIRST: The original Certificate of Incorporation of the Corporation
was filed with the Secretary of State of Delaware on July 8, 1993 under the name
Selmer Industries, Inc. On August 3, 1993, the Corporation filed a Restated
Certificate of Incorporation with the Secretary of State of Delaware. On May
24, 1995, the Corporation filed a Certificate of Amendment of Restated
Certificate of Incorporation with the Secretary of State of Delaware. On
May 25, 1995, the Corporation filed a Corrected Certificate of Amendment of
Restated Certificate of Incorporation with the Secretary of State of Delaware.

SECOND: The Board of Directors of the Corporation has duly adopted
resolutions setting forth a proposed amendment to the Restated Certificate of
Incorporation of the Corporation, as amended (the "Restated Certificate"),
declaring said amendment to be advisable and resolving that written consents of
stockholders entitled to vote thereon be solicited in accordance with Section
242 of the General Corporation Law of the State of Delaware for consideration
thereof. The resolution setting forth the proposed amendment to the Restated
Certificate of the Corporation is as follows:

RESOLVED, that the Restated Certificate of the Corporation shall be
amended as follows:

(A) Amend and restate in its entirety paragraph FIRST to read as follows:

The name of the corporation is Steinway Musical Instruments, Inc. (the
"COMPANY").

(B) Amend and restate in its entirety paragraph FOURTH to read as follows:

<PAGE>

The presently authorized Common Stock (as defined below) of the
Company is hereby split on the basis of _____ shares for each share of
Common Stock outstanding. The Company shall pay in cash the fair value (as
determined in good faith by the Board of Directors) of fractions of each
share of Common Stock issuable as a result of such stock split. The total
number of shares of capital stock that the Company shall have authority to
issue is 100,000,000, divided into 5,000,000 shares of Convertible
Participating Preferred Stock, par value $0.001 per share ("PREFERRED
STOCK"), and 95,000,000 shares of Common Stock, par value $0.001 per share
("COMMON STOCK"). The Company is authorized to issue two classes of Common
Stock, designated respectively as Class A Common Stock ("CLASS A COMMON
STOCK") and Ordinary Common Stock ("ORDINARY COMMON STOCK"). The total
number of shares of Class A Common Stock that the Company shall have
authority to issue is 5,000,000 and the total number of shares of Ordinary
Common Stock that the Company shall have authority to issue is 90,000,000.

(C) Upon the later to occur of (i) the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
covering the public offering of shares of Common Stock for the account of the
Company with an aggregate offering price of $15,000,000 or more or (ii) the
conversion of all of the outstanding Convertible Participating Preferred Stock
of the Company pursuant to paragraph FIFTH, Section C.(4)(b) hereof, the
following amendments shall take effect and modify the Restated Certificate:

1. Amend and restate in its entirety paragraph FOURTH to read as
follows:

The total number of shares of capital stock that the Company shall
have authority to issue is 100,000,000 divided into 5,000,000 shares of
Preferred Stock, par value $0.001 per share ("PREFERRED STOCK"), and
95,000,000 shares of Common Stock, par value $0.001 per share ("COMMON
STOCK"). The Company is authorized to issue two classes of Common Stock,
designated respectively as Class A Common Stock ("CLASS A COMMON STOCK")
and Ordinary Common Stock ("ORDINARY COMMON STOCK"). The total number of
shares of Class A Common Stock that the Company shall have authority to
issue is 5,000,000 and the total number of shares of

- 2 -

<PAGE>

Ordinary Common Stock that the Company shall have authority to issue is
90,000,000.

2. Delete Section A of Paragraph FIFTH in its entirety.

3. Amend and restate in its entirety Section B of paragraph FIFTH to
read as follows:

B. COMMON STOCK.

1. DIVIDENDS AND DISTRIBUTIONS. Subject to SECTION C of
this paragraph, the holders of Common Stock shall be
entitled to the payment of dividends when and as declared by
the Board of Directors out of funds legally available
therefor, after payment of such dividends on the shares of
Preferred Stock as set forth in SECTION C below.

2. AUTOMATIC CONVERSION OF CLASS A COMMON STOCK. If, at
any time, any share of Class A Common Stock shall not be
owned by either Kyle Kirkland or Dana Messina, either
directly or through wholly-owned subsidiaries, such share of
Class A Common Stock shall automatically convert to Ordinary
Common Stock based on the conversion ratio of one share of
Class A Common Stock for one share of Ordinary Common Stock.
Any holder of Class A Common Stock required to convert the
same into Ordinary Common Stock under this subsection shall,
upon written request from the Company, surrender any
certificates for shares of Class A Common Stock held by such
holder. The Company shall, as soon as practicable
thereafter, issue and deliver to such holder a certificate
or certificates for the number of shares of Ordinary Common
Stock to which such holder shall be entitled as set forth
herein.

4. Amend and restate Section C of paragraph FIFTH to read as
follows:

- 3 -

<PAGE>

Shares of Preferred Stock may be issued from time to time in one
or more series. The Board of Directors of the Company is hereby
expressly authorized to establish and designate one or more series of
the Preferred Stock from time to time, to fix the number of shares
constituting such series, and to fix the designations, the terms of
any sinking fund, rights upon liquidation, winding up or dissolution
and the powers, preferences, qualifications, limitations, conversion,
redemption, special voting, dividend and other rights of the shares of
each such series and the variations of the relative powers, rights and
preferences, qualifications, limitations and restrictions as between
such series, and to increase and to decrease (but not below the number
of shares of such series then outstanding) the number of shares
constituting each such series. Such determinations may be fixed by a
resolution or resolutions adopted by the Board of Directors. The
Common Stock shall be subject to the express terms of any series of
the Preferred Stock issued and outstanding pursuant to this Restated
Certificate of Incorporation. Upon any liquidation, dissolution or
winding up of the Company, after payment in full of all creditors of
the Company, and after the holders of any series of Preferred Stock
issued and outstanding at the time shall have been paid in full the
amounts, if any, to which they shall be entitled, the remaining assets
of the Company may be distributed pro rata to the holders of the
shares of Common Stock.

5. Delete Section D.(2) of paragraph FIFTH in its entirety.

6. Amend and restate Section D.(3) of paragraph FIFTH in its
entirety to read as follows:

VOTING RIGHTS OF PREFERRED. Each holder of Preferred Stock shall
have such voting rights as provided for by resolution or resolutions
adopted by the Board of Directors.

7. Delete Section D.(4)(b) of paragraph FIFTH in its entirety.

- 4 -

<PAGE>

8. Amend and restate Section D.(4)(c) of paragraph FIFTH in its
entirety to read as follows:

VOTING AS A CLASS. The Class A Common Stock and the Ordinary
Common Stock shall vote together, without distinction between classes,
except as set forth herein or by resolution or resolutions adopted by
the Board of Directors.

9. Delete Section E.(1) of paragraph FIFTH in its entirety.

10. Delete Section E.(6)(a) of paragraph FIFTH in its entirety.

11. Delete Section E.(7) of paragraph FIFTH in its entirety.

12. Delete Section E.(8) of paragraph FIFTH in its entirety.

THIRD: Thereafter, pursuant to resolution of the Board of Directors of
the Corporation, written consent of stockholders representing the necessary
number of shares as required by statute has been given in accordance with
Section 228 of the General Corporation Law of the State of Delaware to authorize
said amendment, and written notice has been given as provided in Section 228 of
the General Corporation Law of the State of Delaware.

FOURTH: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.

IN WITNESS WHEREOF, Selmer Industries, Inc. has caused this Certificate
of Amendment to be signed and attested by its duly authorized officers, this ___
day of ______, 1996.

SELMER INDUSTRIES, INC.

By: ______________________________
Name:
Title:

- 5 -

<PAGE>

ATTEST:

______________________________
By:
Title:

- 6 -

<PAGE>

EXHIBIT 3.4

BY-LAWS

SELMER INDUSTRIES, INC.

Adopted: July 8, 1993

<PAGE>

TABLE OF CONTENTS

Page
----

ARTICLE I Stockholders . . . . . . . . . . . . . . . . . . . 1

Section 1.1 Annual Meeting. . . . . . . . . . . . . . . . . 1
Section 1.2 Special Meetings. . . . . . . . . . . . . . . . 1
Section 1.3 Notice of Meetings. . . . . . . . . . . . . . . 1
Section 1.4 Quorum. . . . . . . . . . . . . . . . . . . . . 2
Section 1.5 Voting. . . . . . . . . . . . . . . . . . . . . 2
Section 1.6 Presiding Officer and Secretary . . . . . . . . 3
Section 1.7 Proxies . . . . . . . . . . . . . . . . . . . . 3
Section 1.8 List of Stockholders. . . . . . . . . . . . . . 3
Section 1.9 Written Consent of Stockholders in Lieu of
Meeting . . . . . . . . . . . . . . . . . . . . 3

ARTICLE II Directors. . . . . . . . . . . . . . . . . . . . . 4

Section 2.1 Number of Directors . . . . . . . . . . . . . . 4
Section 2.2 Election and Term of Directors. . . . . . . . . 4
Section 2.3 Vacancies and Newly Created Directorships . . . 4
Section 2.4 Resignation . . . . . . . . . . . . . . . . . . 5
Section 2.5 Removal . . . . . . . . . . . . . . . . . . . . 5
Section 2.6 Meetings. . . . . . . . . . . . . . . . . . . . 5
Section 2.7 Quorum and Voting . . . . . . . . . . . . . . . 6
Section 2.8 Written Consent of Directors in Lieu of a
Meeting . . . . . . . . . . . . . . . . . . . . 6
Section 2.9 Compensation. . . . . . . . . . . . . . . . . . 6
Section 2.10 Contracts and Transactions Involving Directors. 6

ARTICLE III Committees of the Board of Directors . . . . . . . 7

Section 3.1 Appointment and Powers. . . . . . . . . . . . . 7

ARTICLE IV Officers, Agents and Employees . . . . . . . . . . 8

Section 4.1 Appointment and Term of Office. . . . . . . . . 8
Section 4.2 Resignation and Removal . . . . . . . . . . . . 8
Section 4.3 Compensation and Bond . . . . . . . . . . . . . 8
Section 4.4 Chairman of the Board . . . . . . . . . . . . . 8
Section 4.5 President . . . . . . . . . . . . . . . . . . . 9
Section 4.6 Vice Presidents . . . . . . . . . . . . . . . . 9
Section 4.7 Treasurer . . . . . . . . . . . . . . . . . . . 9
Section 4.8 Secretary . . . . . . . . . . . . . . . . . . . 9
Section 4.9 Assistant Treasurers. . . . . . . . . . . . . . 10
Section 4.10 Assistant Secretaries . . . . . . . . . . . . . 10
Section 4.11 Delegation of Duties. . . . . . . . . . . . . . 10
Section 4.12 Loans to Officers and Employees; Guaranty of
Obligations of Officers and Employees . . . . . 10

<PAGE>

ARTICLE V Indemnification. . . . . . . . . . . . . . . . . . 11

Section 5.1 Indemnification of Directors, Officers,
Employees and Agents. . . . . . . . . . . . . . 11

ARTICLE VI Common Stock . . . . . . . . . . . . . . . . . . . 12

Section 6.1 Certificates. . . . . . . . . . . . . . . . . . 12
Section 6.2 Transfers of Stock. . . . . . . . . . . . . . . 12
Section 6.3 Lost, Stolen or Destroyed Certificates. . . . . 12
Section 6.4 Stockholder Record Date . . . . . . . . . . . . 12

ARTICLE VII Seal . . . . . . . . . . . . . . . . . . . . . . . 13

Section 7.1 Seal. . . . . . . . . . . . . . . . . . . . . . 13

ARTICLE VIII Waiver of Notice . . . . . . . . . . . . . . . . . 14

Section 8.1 Waiver of Notice. . . . . . . . . . . . . . . . 14

ARTICLE IX Checks, Notes, Drafts, Etc . . . . . . . . . . . . 14

Section 9.1 Checks, Notes, Drafts, Etc. . . . . . . . . . . 14

ARTICLE X Amendments . . . . . . . . . . . . . . . . . . . . 14

Section 10.1 Amendments. . . . . . . . . . . . . . . . . . . 14

ARTICLE XI Emergency By-Laws. . . . . . . . . . . . . . . . . 15

Section 11.1 Emergency By-Laws. . . . . . . . . . . . . . . 15

<PAGE>

BY-LAWS

SELMER INDUSTRIES, INC.

ARTICLE I

STOCKHOLDERS

SECTION 1.1 ANNUAL MEETING. Except as otherwise provided in Section
1.9 of these By-Laws, an annual meeting of stockholders of the Corporation
for the election of directors and for the transaction of any other proper
business shall be held at such time and date in each year as the Board of
Directors, the Chairman or the President may from time to time determine. The
annual meeting in each year shall be held at such hour on said day and at
such place within or without the State of Delaware as may be fixed by the
Board of Directors, or if not so fixed, at the principal business office of
the Corporation at 150 South Rodeo Drive, Suite 100, Beverly Hills,
California 90210.

SECTION 1.2 SPECIAL MEETINGS. A special meeting of the holders of
stock of the Corporation entitled to vote on any business to be considered at
any such meeting may be called by the Chairman of the Board, if any, or the
President or any Vice President, and shall be called by the Chairman of the
Board, if any, or the President or the Secretary when directed to do so by
resolution of the Board of Directors or at the written request of directors
representing a majority of the whole Board of Directors. Any such request
shall state the purpose or purposes of the proposed meeting.

SECTION 1.3 NOTICE OF MEETINGS. Whenever stockholders are required or
permitted to take any action at a meeting, unless notice is waived in writing
by all stockholders entitled to vote at the meeting, a written notice of the
meeting shall be given which shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called.

Unless otherwise provided by law, and except as to any stockholder duly
waiving notice, the written notice of any meeting shall be given personally
or by mail, not less than ten nor more than sixty days before the date of the
meeting to each stockholder entitled to vote at such meeting. If mailed,
notice shall be deemed given when deposited in the mail, postage prepaid,
directed to the stockholder at his or her address as it appears on the
records of the Corporation.

<PAGE>

When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. At the adjourned meeting the
Corporation may transact any business which might have been transacted at the
original meeting. If, however, the adjournment is for more than thirty days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder
of record entitled to vote at the meeting.

SECTION 1.4 QUORUM. Except as otherwise provided by law or by the
Certificate of Incorporation or by these By-Laws in respect of the vote
required for a specified action, at any meeting of stockholders the holders
of a majority of the outstanding stock entitled to vote thereat, either
present or represented by proxy, shall constitute a quorum for the
transaction of any business, but the stockholders present, although less than
a quorum, may adjourn the meeting to another time or place and, except as
provided in the last paragraph of Section 1.3 of these By-Laws, notice need
not be given of the adjourned meeting.

SECTION 1.5 VOTING. Except as otherwise provided by law, or by the
Certificate of Incorporation, whenever directors are to be elected at a
meeting, they shall be elected by a plurality of the votes cast at the
meeting by the holders of stock entitled to vote. Whenever any corporate
action, other than the election of directors, is to be taken by vote of
stockholders at a meeting, it shall, except as otherwise required by law or
by the Certificate of Incorporation or by these By-Laws, be authorized by a
majority of the votes cast at the meeting by the holders of stock entitled to
vote thereon.

Except as otherwise provided by law, or by the Certificate of
Incorporation, each holder of record of stock of the Corporation entitled to
vote on any matter at any meeting of stockholders shall be entitled to one
vote for each share of such stock standing in the name of such holder on the
stock ledger of the Corporation on the record date for the determination of
the stockholders entitled to vote at the meeting.

Upon the demand of any stockholder entitled to vote, the vote for
directors or the vote on any other matter at a meeting shall be by written
ballot, but otherwise the method of voting and the manner in which votes are
counted shall be discretionary with the presiding officer at the meeting.

<PAGE>

SECTION 1.6 PRESIDING OFFICER AND SECRETARY. At every meeting of
stockholders the Chairman of the Board, or in his or her absence (or if there
be none) the President, or in his or her absence a Vice President, or, if
none be present, the appointee of the meeting, shall preside. The Secretary,
or in his or her absence an Assistant Secretary, or if none be present, the
appointee of the presiding officer of the meeting, shall act as secretary of
the meeting.

SECTION 1.7 PROXIES. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or
her by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period. Every
proxy shall be signed by the stockholder or by his duly authorized attorney.

SECTION 1.8 LIST OF STOCKHOLDERS. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in the
name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.

The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
Section or the books of the Corporation, or to vote in person or by proxy at
any meeting of stockholders.

SECTION 1.9 WRITTEN CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Any
action required by statute to be taken at any annual or special meeting of
stockholders of the Corporation, or any action which may be taken at any
annual or special meeting of the stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of

<PAGE>

votes that would be necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were present and voted. Prompt
written notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. Any such written consent may be given by one
or any number of substantially concurrent written instruments of
substantially similar tenor signed by such stockholders, in person or by
attorney or proxy duly appointed in writing, and filed with the Secretary or
an Assistant Secretary of the Corporation. Any such written consent shall be
effective as of the effective date thereof as specified therein, provided
that such date is not more than sixty days prior to the date such written
consent is filed as aforesaid, or, if no such date is so specified, on the
date such written consent is filed as aforesaid.

ARTICLE II

DIRECTORS

SECTION 2.1 NUMBER OF DIRECTORS. The Board of Directors shall consist
of no less than three and no more than nine directors, such number to be
fixed from time to time by vote at a meeting or by written consent of the
holders of stock entitled to vote on the election of directors, or by a
resolution of the Board of Directors passed by a majority of the whole Board
of Directors, except that no decrease shall shorten the term of any incumbent
director unless such director is specifically removed pursuant to Section 2.5
of these By-Laws at the time of such decrease.

SECTION 2.2 ELECTION AND TERM OF DIRECTORS. Directors shall be elected
annually, by election at the annual meeting of stockholders or by written
consent of the holders of stock entitled to vote thereon in lieu of such
meeting. If the annual election of directors is not held on the date
designated therefor, the directors shall cause such election to be held as
soon thereafter as convenient. Each director shall hold office from the time
of his or her election and qualification until his successor is elected and
qualified or until his or her earlier resignation, or removal.

SECTION 2.3 VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Vacancies and
newly created directorships resulting from any increase in the authorized
number of directors may be filled by election at a meeting of stockholders or
by written consent of

<PAGE>

the holders of stock entitled to vote thereon in lieu of a meeting. Except as
otherwise provided by law, vacancies and such newly created directorships may
also be filled by a majority of the directors then in office, although less
than a quorum, or by a sole remaining director.

SECTION 2.4 RESIGNATION. Any director may resign at any time upon
written notice to the Corporation. Any such resignation shall take effect at
the time specified therein or, if the time be not specified, upon receipt
thereof, and the acceptance of such resignation, unless required by the terms
thereof, shall not be necessary to make such resignation effective.

SECTION 2.5 REMOVAL. Any or all of the directors may be removed at any
time, with or without cause, by vote at a meeting or by written consent of
the holders of stock entitled to vote on the election of directors.

SECTION 2.6 MEETINGS. Meetings of the Board of Directors, regular or
special, may be held at any place within or without the State of Delaware.
Members of the Board of Directors, or of any committee designated by the
Board, may participate in a meeting of such Board or committee by means of
conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and
participation in a meeting by such means shall constitute presence in person
at such meeting. An annual meeting of the Board of Directors shall be held
after each annual election of directors. If such election occurs at an annual
meeting of stockholders, the annual meeting of the Board of Directors shall
be held at the same place and immediately following such meeting of
stockholders, and no notice thereof need be given. If an annual election of
directors occurs by written consent in lieu of the annual meeting of
stockholders, the annual meeting of the Board of Directors shall take place
as soon after such written consent is duly filed with the Corporation as is
practicable, either at the next regular meeting of the Board of Directors or
at a special meeting. The Board of Directors may fix times and places for
regular meetings of the Board and no notice of such meetings need be given. A
special meeting of the Board of Directors shall be held whenever called by
the Chairman of the Board, if any, or by the President or by at least
one-third of the directors for the time being in office, at such time and
place as shall be specified in the notice or waiver thereof. Notice of each
special meeting shall be given by the Secretary or by a person calling the
meeting to each director by mailing the same, postage prepaid, not later than
the second

<PAGE>

day before the meeting, or personally or by telegraphing or telephoning the
same not later than the day before the meeting.

SECTION 2.7 QUORUM AND VOTING. A majority of the total number of
directors shall constitute a quorum for the transaction of business, but, if
there be less than quorum at any meeting of the Board of Directors, a
majority of the directors present may adjourn the meeting from time to time,
and no further notice thereof need be given other than announcement at the
meeting which shall be so adjourned. Except as otherwise provided by law, by
the Certificate of Incorporation, or by these By-Laws, the vote of a majority
of the directors present at a meeting at which a quorum is present shall be
the act of the Board of Directors.

SECTION 2.8 WRITTEN CONSENT OF DIRECTORS IN LIEU OF A MEETING. Any
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if all
members of the Board or of such committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.

SECTION 2.9 COMPENSATION. Directors may receive compensation for
services to the Corporation in their capacities as directors or otherwise in
such manner and in such amounts as may be fixed from time to time by the
Board of Directors.

SECTION 2.10 CONTRACTS AND TRANSACTIONS INVOLVING DIRECTORS. No
contract or transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for that reason, or solely because
the director or officer is present at or participates in the meeting of the
Board of Directors or committee thereof which authorizes the contract or
transaction, or solely because his, her or their votes are counted for such
purpose, if: (1) the material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are known to the Board
of Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a majority
of the disinterested directors, even though the disinterested directors be
less than a quorum; or (2) the material facts as to his or her relationship
or interest and as to the contract or transaction are disclosed or are known
to the stockholders entitled to vote thereon, and the contract or

<PAGE>

transaction is specifically approved in good faith by vote of the
stockholders; or (3) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting
of the Board of Directors or of a committee which authorizes the contract or
transaction.

ARTICLE III

COMMITTEES OF THE BOARD OF DIRECTORS

SECTION 3.1 APPOINTMENT AND POWERS. The Board of Directors may from
time to time, by resolution passed by majority of the whole Board, designate
one or more committees, each committee to consist of one or more directors of
the Corporation. The Board of Directors may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. The resolution of the
Board of Directors may, in addition or alternatively, provide that in the
absence or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or
not he, she or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any
such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it,
except as otherwise provided by law. Unless the resolution of the Board of
Directors expressly so provides, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Any
such committee may adopt rules governing the method of calling and time and
place of holding its meetings. Unless otherwise provided by the Board of
Directors, a majority of any such committee (or the member thereof, if only
one) shall constitute a quorum for the transaction of business, and the vote
of a majority of the members of such committee present at a meeting at which
a quorum is present shall be the act of such committee. Each such committee
shall keep a record of its acts and proceedings and shall report thereon to
the Board of Directors whenever requested so to do. Any or all members of any
such

<PAGE>

committee may be removed, with or without cause, by resolution of the Board
of Directors, passed by a majority of the whole Board.

ARTICLE IV

OFFICERS, AGENTS AND EMPLOYEES

SECTION 4.1 APPOINTMENT AND TERM OF OFFICE. The officers of the
Corporation may include a President, a Secretary and a Treasurer, and may
also include a Chairman of the Board, one or more Vice Presidents, one or
more Assistant Secretaries and one or more Assistant Treasurers. All such
officers shall be appointed by the Board of Directors or by a duly authorized
committee thereof. Any number of such offices may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more
than one capacity. Except as may be prescribed otherwise by the Board of
Directors or a committee thereof in a particular case, all such officers
shall hold their offices at the pleasure of the Board for an unlimited term
and need not be reappointed annually or at any other periodic interval. The
Board of Directors may appoint, and may delegate power to appoint, such other
officers, agents and employees as it may deem necessary or proper, who shall
hold their offices or positions for such terms, have such authority and
perform such duties as may from time to time be determined by or pursuant to
authorization of the Board of Directors.

SECTION 4.2 RESIGNATION AND REMOVAL. Any officer may resign at any
time upon written notice to the Corporation. Any officer, agent or employee
of the Corporation may be removed by the Board of Directors, or by a duly
authorized committee thereof, with or without cause at any time. The Board of
Directors or such a committee thereof may delegate such power of removal as
to officers, agents and employees not appointed by the Board of Directors or
such a committee. Such removal shall be without prejudice to a person's
contract rights, if any, but the appointment of any person as an officer,
agent or employee of the Corporation shall not of itself create contract
rights.

SECTION 4.3 COMPENSATION AND BOND. The compensation of the officers of
the Corporation shall be fixed by the Board of Directors, but this power may
be delegated to any officer in respect of other officers under his or her
control. The Corporation may secure the fidelity of any or all of its
officers, agents or employees by bond or otherwise.

SECTION 4.4 CHAIRMAN OF THE BOARD. The Chairman of the Board, if there
be one, shall preside at all meetings of

<PAGE>

stockholders and of the Board of Directors, and shall have such other powers
and duties as may be delegated to him or her by the Board of Directors.

SECTION 4.5 PRESIDENT. The President shall be the chief executive
officer of the Corporation. In the absence of the Chairman of the Board (or
if there be none), he or she shall preside at all meetings of the
stockholders and of the Board of Directors. He or she shall have general
charge of the business affairs of the Corporation. He or she may employ and
discharge employees and agents of the Corporation, except such as shall be
appointed by the Board of Directors, and he or she may delegate these powers.
The President may vote the stock or other securities of any other domestic or
foreign corporation of any type or kind which may at any time be owned by the
Corporation, may execute any stockholders' or other consents in respect
thereof and may in his or her discretion delegate such powers by executing
proxies, or otherwise, on behalf of the Corporation. The Board of Directors
by resolution from time to time may confer like powers upon any other person
or persons.

SECTION 4.6 VICE PRESIDENTS. Each Vice President shall have such
powers and perform such duties as the Board of Directors or the President may
from time to time prescribe. In the absence or inability to act of the
President, unless the Board of Directors shall otherwise provide, the Vice
President who has served in that capacity for the longest time and who shall
be present and able to act, shall perform all the duties and may exercise
any of the powers of the President. The performance of any duty by a Vice
President shall, in respect of any other person dealing with the Corporation,
be conclusive evidence of his or her power to act.

SECTION 4.7 TREASURER. The Treasurer shall have charge of all funds
and securities of the Corporation, shall endorse the same for deposit or
collection when necessary and deposit the same to the credit of the
Corporation in such banks or depositaries as the Board of Directors may
authorize. He or she may endorse all commercial documents requiring
endorsements for or on behalf of the Corporation and may sign all receipts
and vouchers for payments made to the Corporation. He or she shall have all
such further powers and duties as generally are incident to the position of
Treasurer or as may be assigned to him or her by the President or the Board
of Directors.

SECTION 4.8 SECRETARY. The Secretary shall record all the proceedings
of the meetings of the stockholders and directors in a book to be kept for
that purpose and shall also record

<PAGE>

therein all action taken by written consent of the stockholders or directors
in lieu of a meeting. He or she shall attend to the giving and serving of all
notices of the Corporation. He or she shall have custody of the seal of the
Corporation and shall attest the same by his or her signature whenever
required. He or she shall have charge of the stock ledger and such other
books and papers as the Board of Directors may direct, but he or she may
delegate responsibility for maintaining the stock ledger to any transfer
agent appointed by the Board of Directors. He or she shall have all such
further powers and duties as generally are incident to the position of
Secretary or as may be assigned to him or her by the President or the Board
of Directors.

SECTION 4.9 ASSISTANT TREASURERS. In the absence or inability to act
of the Treasurer, any Assistant Treasurer may perform all the duties and
exercise all the powers of the Treasurer. The performance of any such duty
shall, in respect of any other person dealing with the Corporation, be
conclusive evidence of his or her power to act. An Assistant Treasurer shall
also perform such other duties as the Treasurer or the Board of Directors may
assign to him or her.

SECTION 4.10 ASSISTANT SECRETARIES. In the absence or inability to act
of the Secretary, any Assistant Secretary may perform all the duties and
exercise all the powers of the Secretary. The performance of any such duty
shall, in respect of any other person dealing with the Corporation, be
conclusive evidence of his or her power to act. An Assistant Secretary shall
also perform such other duties as the Secretary or the Board of Directors may
assign to him or her.

SECTION 4.11 DELEGATION OF DUTIES. In case of the absence of any
officer of the Corporation, or for any other reason that the Board of
Directors may deem sufficient, the Board of Directors may confer for the time
being the powers or duties, or any of them, of such officer upon any other
officer or upon any director.

SECTION 4.12 LOANS TO OFFICERS AND EMPLOYEES; GUARANTY OF OBLIGATIONS
OF OFFICERS AND EMPLOYEES. The Corporation may lend money to, or guarantee
any obligation of, or otherwise assist any officer or other employee of the
Corporation or any subsidiary, including any officer or employee who is a
director of the Corporation or any subsidiary, whenever, in the judgment of
the directors, such loan, guaranty or assistance may reasonably be expected
to benefit the Corporation. The loan, guaranty or other assistance may be
with or without interest, and may be unsecured, or secured in such manner as
the Board of

<PAGE>

Directors shall approve, including, without limitation, a pledge of shares of
stock of the Corporation.

ARTICLE V

INDEMNIFICATION

SECTION 5.1 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS. Any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (including any action or
suit by or in the right of the Corporation to procure a judgment in its
favor) by reason of the fact that he or she is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall be
indemnified by the Corporation, if, as and to the fullest extent authorized
by applicable law, against expenses (including attorney's fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
or her in connection with the defense or settlement of such action, suit or
proceeding. Expenses incurred by an officer or director in defending a civil
or criminal action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such director or officer to
repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized by statute. Such
expenses incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate.
The indemnification and advancement of expenses provided by, or granted
pursuant to, this By-law or statute in a specific case shall not be deemed
exclusive of any other rights to which any person seeking indemnification or
advancement of expenses may be entitled under any lawful agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.

<PAGE>

ARTICLE VI

COMMON STOCK

SECTION 6.1 CERTIFICATES. Certificates for stock of the Corporation
shall be in such form as shall be approved by the Board of Directors and
shall be signed in the name of the Corporation by the Chairman or a Vice
Chairman of the Board, if any, or the President or a Vice President, and by
the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary. Such certificates may be sealed with the seal of the Corporation
or a facsimile thereof. Any of or all the signatures on a certificate may be
a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same
effect as if he or she were such officer, transfer agent or registrar at the
date of issue.

SECTION 6.2 TRANSFERS OF STOCK. Transfers of stock shall be made only
upon the books of the Corporation by the holder, in person or by duly
authorized attorney, and on the surrender of the certificate or certificates
for such stock property endorsed. The Board of Directors shall have the power
to make all such rules and regulations, not inconsistent with the Certificate
of Incorporation and these By-Laws and the law, as the Board of Directors may
deem appropriate concerning the issue, transfer and registration of
certificates for stock of the Corporation. The Board may appoint one or more
transfer agents or registrars of transfers, or both, and may require all
stock certificates to bear the signature of either or both.

SECTION 6.3 LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation
may issue a new stock certificate in the place of any certificate theretofore
issued by it, alleged to have been lost, stolen or destroyed, and the
Corporation may require the owner of the lost, stolen or destroyed
certificate of his or her legal representative to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or
the issuance of any such new certificate. The Board of Directors may require
such owner to satisfy other reasonable requirements.

SECTION 6.4 STOCKHOLDER RECORD DATE. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment

<PAGE>

thereof, or to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. Only such
stockholders as shall be stockholders of record on the date so fixed shall be
entitled to notice of, and to vote at, such meeting and any adjournment
thereof, or to give such consent, or to receive payment of such dividend or
other distribution, or to exercise such rights in respect of any such
change, conversion or exchange of stock, or to participate in such action,
as the case may be, notwithstanding any transfer of any stock on the books of
the Corporation after any record rate so fixed.

If no record date is fixed by the Board of Directors, (1) the record
date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the date on which notice is given, or, if notice is waived by all
stockholders entitled to vote at the meeting, at the close of business on the
day next preceding the day on which the meeting is held, (2) the record date
for determining stockholders entitled to express consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
necessary, shall be at the close of business on the day on which the first
written consent is expressed by the filing thereof with the Corporation as
provided in Section 1.9 of these By-Laws, and (3) the record date for
determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.

A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.

ARTICLE VII

SEAL

SECTION 7.1 SEAL. The seal of the Corporation shall be circular in
form and shall bear, in addition to any other emblem or device approved by
the Board of Directors, the name of

<PAGE>

the Corporation, the year of its incorporation and the words "Corporate Seal"
and "Delaware". The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or in any other manner reproduced.

ARTICLE VIII

WAIVER OF NOTICE

SECTION 8.1 WAIVER OF NOTICE. Whenever notice is required to be given
by statute, or under any provision of the Certificate of Incorporation or
these By-Laws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. In the case of a stockholder, such waiver of notice may
be signed by such stockholder's attorney or proxy duly appointed in writing.
Attendance of a person at a meeting shall constitute a waiver of notice of
such meeting, except when the person attends a meeting for the express
purpose of objecting at the beginning of the meeting, to the transaction of
any business because the meeting is not lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any regular or specific
meeting of the stockholders, directors or members of a committee of directors
need be specified in any written waiver of notice.

ARTICLE IX

CHECKS, NOTES, DRAFTS, ETC.

SECTION 9.1 CHECKS, NOTES, DRAFTS, ETC. Checks, notes, drafts,
acceptances, bills of exchange and other orders or obligations for the
payment of money shall be signed by such officer or officers or person or
persons as the Board of Directors or a duly authorized committee thereof may
from time to time designate.

ARTICLE X

AMENDMENTS

SECTION 10.1 AMENDMENTS. These By-Laws or any of them may be altered
or repealed, and new By-Laws may be adopted, by the stockholders by vote at a
meeting or by written consent without a meeting. The Board of Directors shall
also have power,

<PAGE>

by a majority vote of the whole Board of Directors, to alter or repeal any of
these By-Laws, to to adopt new By-Laws.

ARTICLE XI

EMERGENCY BY-LAWS

SECTION 11.1 EMERGENCY BY-LAWS. The Emergency By-Laws provided in
this Section 11.1 shall be operative during any emergency in the conduct of
the business of the Corporation resulting from an attack on the United States
or on a locality in which the Corporation conducts its business or
customarily holds meetings of its Board of Directors or its stockholders, or
during any nuclear or atomic disaster, or during the existence of any
catastrophe, or other similar emergency condition, as a result of which a
quorum of the Board of Directors or a standing committee thereof cannot
readily be convened for action, notwithstanding any difference provision in
the preceding By-Laws or in the Certificate of Incorporation or in any law.
To the extent not inconsistent with the provisions of this Section, the
By-Laws of the Corporation shall remain in effect during any emergency and
upon its termination the Emergency By-Laws shall cease to be operative. Any
amendments of these Emergency By-Laws may make any further or different
provision that may be practical and necessary for the circumstances of the
emergency.

During any such emergency: (A) A meeting of the Board of Directors or a
committee thereof may be called by any officer or director of the
Corporation. Notice of the time and place of the meeting shall be given by
the person calling the meeting to such of the directors as it may be
feasibale to reach by any available means of communication. Such notice shall
be given at such time in advance of the meeting as circumstances permit in
the judgment of the person calling the meeting; (B) The director or directors
in attendance at the meeting shall constitute a quorum; (C) The officers or
other persons designated on a list approved by the Board of Directors before
the emergency, all in such order of priority and subject to such conditions
and for such period of time (not longer than reasonably necessary after the
termination of the emergency) as may be provided in the resolution approving
the list, shall, to the extent required to provide a quorum at any meeting of
the Board of Directors, be deemed directors for such meeting; (D) The Board
of Directors, either before or during any such emergency, may provide, and
from time to time modify, lines of succession in the event that during such
emergency any or all officers or agents of the Corporation shall for any
reason be rendered incapable of discharging their duties; (E) The Board of
Directors, either before or during any such emergency, may, effective in the
emergency, change the head

<PAGE>

office or designate several alternative head offices or regional offices, or
authorize the officers so to do; and (F) To the extent required to constitute
a quorum at any meeting of the Board of Directors during such an emergency,
the officers of the Corporation who are present shall be deemed, in order of
rank and within the same rank in order of seniority, directors for such
meeting.

No officer, director or employee acting in accordance with any
Emergency By-Laws shall be liable except for willful misconduct.

These Emergency By-Laws shall be subject to repeal or change by further
action of the Board of Directors or by action of the stockholders.

<PAGE>

MANAGEMENT AGREEMENT

This Management Agreement, dated as of May 25, 1995, is by and
between Steinway Musical Properties, Inc., a Massachusetts corporation
(collectively with its subsidiaries, the "COMPANY"), and Kirkland Messina,
Inc., a California corporation ("KM" or the "MANAGERS").

In consideration of the premises and mutual covenants herein
contained, the parties hereto agree as follows:

SECTION 1. SERVICES.

1.1 ENGAGEMENT OF THE MANAGERS. The Company hereby retains the
Managers to render the management services described in this SECTION 1 during
the term of this Agreement, and the Managers hereby agree to provide such
services to the Company during the term hereof.

1.2 MANAGEMENT SERVICES. The Managers shall render management
services to the Company, subject to the direction of the Board of Directors
of the Company (the "BOARD"). Subject to such direction, the Managers agree
to:

(a) provide ongoing management and consulting services to
the Company, including strategic planning, marketing, consulting, financial
planning and capital budgeting, executive compensation program analysis and
such other management and consulting services as may, from time to time, be
reasonably requested by the Company;

(b) monitor the business of the Company and conduct
periodic reviews and analyses of such business as reasonably requested by the
Company;

(c) assist the Company in developing a long-term strategic
plan with respect to the business of the Company and identify, review and
analyze merger and acquisition opportunities for the Company;

(d) use their reasonable efforts to assist the Company in
arranging for the sale of the business of the Company, at such time as may be
directed by the Board; and

(e) provide such written reports concerning the services
they provide hereunder as may be reasonably requested by the Company.

1.3 EXTENT OF SERVICES. In carrying out their obligations under
this SECTION 1, the Managers shall devote such of their time as reasonably
may be required to discharge their obligations to provide services hereunder
and shall have regard to the objectives of the Board with respect to the
business of the Company and any specific instructions from time to time
communicated in writing by the Board to the Managers with respect to the
business of the Company and the services provided hereunder. The Managers
shall be free to render similar services to others.

SECTION 2. EXPENSE REIMBURSEMENT AND COMPENSATION.

2.1 REIMBURSEMENT OF EXPENSES. The Managers shall be reimbursed
within 20 business days of the submission to the Company of a reasonably
detailed invoice (i) for any overhead expenses and (ii) for any reasonable
out-of-pocket expenses incurred by them in connection with the provision of
the services described in SECTION 1 hereof, including without limitation for
rent, salaries, travel, meals, lodging, messengers or couriers.

<PAGE>

2.2 ANNUAL FEE. As compensation for the services provided by KM
pursuant to this Agreement, KM shall be entitled to receive from the Company
an aggregate fee in an amount equal to $150,000 per annum (the "ANNUAL FEE"),
payable in equal quarterly installments in arrears on the last day of each of
March, June, September and December, commencing June 30, 1995. The Company
shall pay the quarterly portion of the Annual Fee on each such date by
Company checks payable to Kirkland Messina, Inc. Notwithstanding the
foregoing, if the consolidated EBITDA of Selmer Industries, Inc. is less than
$35 million for any fiscal year ending on or after December 31, 1996, the
Annual Fee for the next succeeding year only shall be $1. In any such event,
the Annual Fee will be increased to $150,000 if, for any fiscal year
thereafter, the consolidated EBITDA of Selmer Industries, Inc. is equal to or
greater than $35 million dollars.

SECTION 3. TERMINATION.

3.1 TERM OF AGREEMENT. Subject to SECTION 3.2 hereof, this
Agreement shall become effective on the date hereof and shall continue in
full force and effect until the earlier of (i) the consummation of a Change
in Control and (ii) June 30, 2005. For purposes of this SECTION 3.1, "CHANGE
IN CONTROL" has the meaning ascribed to such term in that certain Indenture,
dated as of the date hereof, among The Selmer Company, Inc. and American Bank
National Association (the "Trustee"), as trustee.

3.2 TERMINATION.

(a) RIGHT OF TERMINATION. The Company may terminate this
Agreement with respect to the Managers upon 60 days' prior written notice to
the Managers if the Managers are in breach of its material obligations under
this Agreement, and the Managers may terminate this Agreement upon 60 days'
prior written notice to the Company if the Company is in breach of its
material obligations to the Managers under this Agreement.

(b) EFFECT OF TERMINATION. From and after the effective
date of any termination, whether pursuant to SECTION 3.2(a) hereof or at the
end of the term specified in SECTION 3.1 hereof, the Company shall have no
liability to the Managers with respect to whom this agreement has been
terminated for any compensation hereunder (other than compensation accrued
prior to the effective date of termination and remaining unpaid and a
reasonable fee for any final report requested pursuant to this Section), and
the Managers with respect to whom this agreement has been terminated shall
have no obligation to perform services hereunder. Upon effectiveness of the
termination of this Agreement, the Managers shall provide the Company all
records in its possession relating to the Company and shall, upon request of
the Board, render a final report to the Company with respect to the services
provided by the Managers pursuant to this Agreement.

SECTION 4. INDEMNIFICATION.

The Company hereby unconditionally and irrevocably covenants and
agrees to indemnify and hold harmless the Managers, their successors and
assigns, and all of their officers, directors, shareholders, beneficial
owners, partners, affiliates, agents and employees (collectively, the
"INDEMNITEES") against any and all claims, liabilities, attorneys' fees and
related litigation costs, fees and expenses in connection with any claim(s)
against any Indemnitee for any acts or omissions by the Managers, their
officers, directors, shareholders, beneficial owners, partners, affiliates,
agents and employees under or in connection with this Agreement, except by
reason of acts constituting bad faith, willful misconduct or gross negligence
in the performance or reckless disregard of the duties of the Managers
hereunder.

SECTION 5. MISCELLANEOUS.

5.1 SUBORDINATION. The Managers hereby acknowledge that all
amounts payable to them by the Company hereunder are and shall be subordinate
and inferior to, and subject to the claims

2
<PAGE>

and rights of the Holders of, certain indebtedness pursuant to and to the
extent provided in the Management Subordination Agreement, dated as of the
date hereof, by and between the Managers, the Company and the Trustee.

5.2 ASSIGNMENT. Neither the Managers nor the Company may assign
this Agreement or their respective rights or obligations hereunder to any
third party; PROVIDED, HOWEVER, that the Managers may assign any or all of
its rights or obligations hereunder to an entity that controls, is controlled
by or is under common control with the Managers.

5.3 NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be sent by
registered or certified mail, postage prepaid, or shall be delivered
personally or by overnight courier, or shall be sent by telecopy or similar
means of simultaneous transmission and receipt to the party to whom it is to
be given at the address or telecopy number of such party set forth below (or
to such other address as the party shall have furnished in writing in
accordance with the provisions of this SECTION 5.3):

(a) If to the Company, to:

Steinway Musical Properties, Inc.
800 South Street
Waltham, Massachusetts 02154-1439

Attention: Bruce Stevens

Telecopy: (617) 894-9803

(b) If to KM, to:

Kirkland Messina, Inc.
11100 Santa Monica Boulevard, Suite 825
Los Angeles, California 90025

Attention: Dana Messina

Telecopy: (310) 445-6522

Notices shall be deemed to have been given on the fifth day after being so
mailed, the next business day after delivery to an overnight courier, when sent
by telecopier (with receipt acknowledged) or upon receipt when delivered
personally.

5.4 WAIVER; REMEDIES. Any waiver by any party of a breach of
any provision of this Agreement shall not operate as or be construed to be a
waiver of any other breach of this Agreement. The failure of a party to
insist upon strict adherence to any term of this Agreement on one or more
occasions will not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Agreement. Any waiver hereunder must be in writing. All rights and
remedies which the Company or the Managers may have under this Agreement are
cumulative and in addition to any rights or remedies under applicable law or
in equity.

5.5 BINDING EFFECT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the Company and the Managers and
their respective successors and assigns.

5.6 NO THIRD PARTY BENEFICIARIES. This Agreement does not
create, and shall not be construed as creating, any rights enforceable by any
person not a party to this Agreement.

3
<PAGE>

5.7 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.

5.8 COUNTERPARTS; GOVERNING LAW. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument. This
Agreement shall be governed by and construed in accordance with the laws of
New York, without giving effect to conflict of laws principles.

5.9 RELATIONSHIP OF PARTIES. The parties agree that the
Managers in the performance of their duties hereunder are independent
contractors acting as agents of the Company, and that nothing contained
herein shall constitute any party as employee or legal representative of any
other for any purpose whatsoever, nor shall this Agreement be deemed to
create any form of business organization, joint venture or partnership
between the parties hereto or as giving the Managers any type of property
interest in the Company, nor is any party granted any right or authority to
assume or create any obligation or responsibility on behalf of any other
party, except as otherwise provided herein, nor shall any party be in any way
liable to any other party for any debt of the other.

5.10 MODIFICATION. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof and
may be modified only by a written instrument duly executed by each party
hereto.

[Signature page follows]

4
<PAGE>

IN WITNESS WHEREOF, the parties have duly executed this
Management Agreement as of the date first above written.

STEINWAY MUSICAL PROPERTIES, INC.

By: /s/ Bruce Stevens
-----------------------------
Bruce Stevens
President

KIRKLAND MESSINA, INC.

By: /s/ Dana Messina
-----------------------------
Dana Messina
Chief Executive Officer

<PAGE>
EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

SELMER INDUSTRIES, INC., a Delaware corporation

THE SELMER COMPANY, INC., a Delaware corporation

VINCENT BACH INTERNATIONAL, a corporation organized under the laws of
the United Kingdom

H & A SELMER, LTD., a corporation organized under the laws of Canada

STEINWAY MUSICAL PROPERTIES, INC., a Massachusetts corporation

STEINWAY, INC., a Delaware corporation

BOSTON PIANO, a Massachusetts corporation

STEINWAY & SONS, INC., a New York corporation

BOSTON PIANO GMBH, a corporation organized under the laws of
Germany

<PAGE>
EXHIBIT 23.1

INDEPENDENT AUDITORS CONSENT

We consent to the use in this Registration Statement of Selmer Industries,
Inc. on Form S-1 of our report dated March 8, 1996 appearing in the Prospectus,
which is part of this Registration Statement and to the reference to us under
the heading "Experts" in such Prospectus.

DELOITTE & TOUCHE LLP
Chicago, Illinois
May 10, 1996

<PAGE>
EXHIBIT 23.2

INDEPENDENT AUDITORS CONSENT

We consent to the use in this Registration Statement of Selmer Industries,
Inc. on Form S-1 of our report dated September 9, 1994 appearing in the
Prospectus, which is part of this Registration Statement and to the reference to
us under the heading "Experts" in such Prospectus.

DELOITTE & TOUCHE LLP
Boston, Massachusetts
May 10, 1996