Exhibit 99.9
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT (the "Agreement") is made and entered into on this
6th day of October, 2010, by and between Samick Musical Instruments Co., Ltd., a
Korean corporation (the "Borrower"), and KDB Capital Corporation, a Korean
corporation (the "Lender").
WITNESSETH:
-----------
WHEREAS, the Borrower is the owner of the shares of the Ordinary Common
Stock of Steinway Musical Instruments, Inc., a Delaware corporation
("Steinway").
WHEREAS, the Borrower and the Lender have entered into certain loan
agreement (the "Loan Agreement")in March 2010; and
WHEREAS, the Lender now desires to secure the repayment of the loan under
the Loan Agreement, and the Borrower has agreed to grant right of pledge over
800,000 shares of Ordinary Common Stocks of Steinway ("the Pledged Shares") in
accordance with the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements herein contained, the Borrower and the Lender hereby agree as
follows:
1. Pledge. As security for the due and punctual payment of all amounts due
and payable pursuant to the Loan Agreement, the Borrower hereby pledges,
hypothecates, assigns, transfers, sets over and grants to the Lender, its
successors and assigns a security interest in and lien upon all of the
Borrower's right, title and interest in and to the Pledged Shares. Concurrent to
this Agreement, the Borrowers shall execute certain Pledged Collateral Account
Control Agreement, the form of which is attached hereto as Exhibit A, and
deposit the Pledged Shares in the Pledged Collateral Account at Merrill Lynch.
The Pledged Shares shall not be physically conveyed or transferred to the Lender
but remain in the custody of Merrill Lynch.
2. Events of Default. If the Borrower is default in the performance of any
of the terms, agreements or covenants of this Agreement or the Loan Agreement,
such occurrence shall constitute a default hereunder (each an "Event of
Default").
3. Dividends, Voting Rights and Disposition Rights. So long as no Event of
Default shall have occurred and be continuing, the Borrower shall be entitled
(a) to receive any and all cash dividends declared and paid in respect of the
Pledged Shares (other than liquidating dividends); (b) to exercise any and all
voting and other consensual rights in respect thereof and the Lender shall have
no rights to receive any and all cash dividends or to exercise any and all
voting and other consensual rights and (c) to dispose the Pledged Shares with
the Lender's consent.
4. The Lender's Remedies Upon Default. If any Event of Default shall have
occurred and be continuing 30 days after the giving of written notice thereof by
the Lender to the Borrower the Lender may: (a) be entitled to receive any and
all cash dividends declared and paid in respect of the Pledged Shares (other
than liquidating dividends); (b) exercise any and all voting and other
consensual rights in respect thereof and the Lender shall have no rights to
receive any and all cash dividends or to exercise any and all voting and other
consensual rights and (c) dispose the Pledged Shares with the Lender's consent.
In such event the Lender shall provide ML with the specific instruction.
5. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and altogether but
one instrument.
6. Entire Agreement. This Agreement supersedes any other agreements,
contracts, or understanding between the parties with respect to the Pledged
Shares and this Agreement constitutes the entire agreement between the two
parties. This Agreement shall not be varied in its terms or conditions by any
oral agreement or representation, or otherwise, than by an instrument in writing
of even or subsequent date thereto, executed by both the Borrower and the
Lender.
7. Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the Republic of Korea.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
By: ___________________________________________
Name Jong Sup Kim
Title: Chairman
"Borrower"
By: ___________________________________________
Name: Sung Min Choo
Title: Investment Finance Division, Managing
Director
"Lender"
Exhibit A
Pledged Collateral Account Control Agreement
Merrill Lynch
Wealth Management
Bank of America Corporation
[LOGO OMITTED]
Pledged Collateral Account Control Agreement
- --------------------------------------------------------------------------------
================================================================================
PLEDGED COLLATERAL ACCOUNT CONTROL AGREEMENT Account Number (Internal Use Only)
[_][_][_] - [_][_][_][_][_]
================================================================================
================================================================================
PLEDGED COLLATERAL ACCOUNT CONTROL AGREEMENT
================================================================================
INSTRUCTIONS : Complete Boxes A, B, and C.
1. The Parties
The Parties to this agreement ("Agreement") are the Client named below, the
Creditor named below and Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch").
2. The Pledged Account
Box A Client has granted Creditor a security interest in Merrill Lynch account
__________________________ ("Account") pursuant to a separate Security Agreement
between Client and Creditor.
If the Account will be a new Merrill Lynch account, Client hereby instructs
Merrill Lynch to transfer the assets listed in Exhibit A to the Account. The
Account shall be maintained as a cash securities account, and will be titled
"[Name of Client] Pledged Collateral Account for [Name of Creditor]" or a
substantially similar title.
The purpose of this Agreement is to perfect the Creditor's security interest in
the Account by granting Creditor control over the Account; however, this
Agreement does not create Creditor's security interest in the Account inasmuch
as Client and Creditor have a separate Security Agreement for that purpose.
Client has not granted a security interest in the Account to any party other
than Creditor, except for Merrill Lynch's broker lien referenced in section 7
and any lien for service fees to an Investment Manager or Agent named in Box B
in section 4. Merrill Lynch has not entered into a Control Agreement with
respect to the Account with any other party and agrees that it will not do so
while this Agreement is in effect. The manager signing this Agreement on behalf
of Merrill Lynch hereby represents, to the best of his or her knowledge, that no
person other than Client, Creditor, Merrill Lynch and any Investment Manager or
Agent named in Box B in section 4 has any claim, lien or interest in the Account
or the assets in the Account.
All assets in the Account will be treated as financial assets under Article 8 of
the New York Uniform Commercial Code.
3. Excluded Assets
Client and Creditor acknowledge that the following assets (each an "Excluded
Asset" and, collectively, "Excluded Assets") are not covered by this Agreement
even if shown, for information purposes, on a periodic account statement for the
Account, because Merrill Lynch is not the legal custodian of such assets: money
market deposit account (MMDA) balances, shares of the Merrill Lynch
Institutional Funds (unless such shares are held directly by Merrill Lynch),
non-listed limited partnership interests, annuities and life insurance
contracts, and precious metals. Merrill Lynch will not be responsible for
assuring that any Excluded Assets are not acquired with assets from the Account.
4. Client's Authority over the Account
Until Creditor delivers to Merrill Lynch a Notice of Exclusive Control pursuant
to section 6, Client will have full authority to give instructions with respect
to assets in the Account in regard to voting and other rights, but will not have
the authority to give any entitlement orders with respect to, or terminate or
withdraw assets from the Account, except as may be provided in Box C, without
written consent by Creditor. Client's authority with respect to trading in the
Account and receipt of income from the Account will be governed by the
completion of boxes B and C, which authority Creditor may revoke at any time by
written notice delivered to Merrill Lynch.
Box B
Is Client permitted to trade in the Account?
[_] Yes [X] No
If yes, except as otherwise provided in section 6, Merrill Lynch may
comply with any trading instructions from Client or the Investment Manager or
Agent named below without further consent by Creditor.
- --------------------------------------------------------------------------------
Print name of Merrill Lynch advisory service, Investment Manager or Agent
designated by separate power of attorney or equivalent document on file with
Merrill Lynch
Box C
Is Client permitted to withdraw income?
[X] Yes [_] No
If yes, Client is authorized to receive all interest and regular cash dividends
earned on assets in the Account monthly:
[_] by check
or
[X] by transfer to account no. _______________________________
If an Investment Manager or Agent is named in Box B, Creditor agrees that the
assets in the Account are subject to Client's agreement with such manager or
agent and that periodic payment of normal advisory and service fees from assets
in the Account pursuant to such an agreement is permitted without consent of
Creditor.
5. Control by Creditor
Merrill Lynch agrees to comply with any instructions it receives from Creditor
at any time to transfer, sell, redeem, close open trades or otherwise liquidate
any assets in the Account (including
Investment products are provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated and:
- --------------------------------------------------------------------------------
Are Not FDIC Insured May Lose Value Are Not Bank Guaranteed
- --------------------------------------------------------------------------------
Merrill Lynch, Pierce, Fenner & Smith Incorporated is a registered
broker-dealer, member SIPC, and a wholly owned subsidiary of Bank of America
Corporation.
Merrill Lynch, Pierce, Fenner & Smith Incorporated is not a tax advisor. We
suggest you consult your personal tax advisor before making tax-related
investment decisions.
Page 1 | Pledged Collateral Account Control Agreement Code 1226 - 1109
================================================================================
PLEDGED COLLATERAL ACCOUNT CONTROL AGREEMENT Account Number (Internal Use Only)
[_][_][_] - [_][_][_][_][_]
================================================================================
instructions to transfer assets directly to, or into an account in the name of,
Creditor), without further consent by Client. All instructions to transfer
assets from the Account must be in writing. If Creditor is an entity, Merrill
Lynch is authorized to take instructions from any person Merrill Lynch
reasonably believes represents Creditor.
6. Notice of Exclusive Control
Creditor may at any time deliver to Merrill Lynch a "Notice of Exclusive
Control" substantially in the form of Exhibit B. Upon receipt of such notice by
the manager of the Merrill Lynch office servicing the Account, Merrill Lynch
will cease complying with trading instructions from, or on behalf of, Client
with respect to the Account, cease distributing to Client interest and regular
cash dividends earned on assets in the Account, and refuse to accept any other
instructions from Client intended to exercise any authority with respect to the
Account except upon instruction of Creditor.
7. Priority of Creditor's Security Interest
So long as this Agreement is in effect, Merrill Lynch subordinates in favor of
Creditor any security interest, lien, or right of setoff it may have, now or in
the future, against assets in the Account, except Merrill Lynch may retain a
prior lien on assets in the Account to secure payment for assets purchased for
the Account and to collect normal commissions and service fees.
8. Duplicate Statements and Confirmations
Merrill Lynch will send Creditor duplicate copies of periodic account statements
and trade confirmations, if any, contemporaneously with those sent to Client.
9. Responsibility and Protection of Merrill Lynch
Except for permitting a transfer of assets from the Account in violation of
section 4, Merrill Lynch will not be liable to Creditor for complying with
instructions from Client that are received by Merrill Lynch before Merrill Lynch
receives a Notice of Exclusive Control in accordance with section 6. Merrill
Lynch will not be liable to Client for complying with a Notice of Exclusive
Control or any instructions received from any person Merrill Lynch reasonably
believes represents Creditor. Merrill Lynch has no duty to investigate whether
Creditor is authorized under the Security Agreement to give such Notice of
Exclusive Control or such instructions.
Client hereby agrees to indemnify and hold harmless Merrill Lynch, its officers,
directors, employees and agents, and any Investment Manager or Agent named in
Box B in section 4, against claims, liabilities and expenses arising out of
maintenance of the Account pursuant to this Agreement (including reasonable
attorneys' fees), except if such claims, liabilities or expenses are caused
solely by Merrill Lynch's or such manager's or agent's gross negligence or
willful misconduct, respectively.
Creditor hereby agrees to indemnify and hold harmless Merrill Lynch, its
officers, directors, employees and agents, and any Investment Manager or Agent
named in Box B in section 4, against claims, liabilities and expenses
(including reasonable attorneys' fees) arising out of Merrill Lynch's compliance
with any instructions from Creditor with respect to the Account except if such
claims, liabilities or expenses are caused solely by Merrill Lynch's or such
manager's or agent's gross negligence or willful misconduct, respectively.
This Agreement does not create any obligations for Merrill Lynch except for
those expressly set forth in this Agreement.
10. Termination; Survival
Creditor may terminate this Agreement by written notice to Merrill Lynch. Upon
notification by Creditor to Merrill Lynch that Creditor's security interest in
the Account has terminated, this Agreement will automatically terminate. Merrill
Lynch may terminate this Agreement on thirty (30) days written notice to
Creditor and Client. In the event that Merrill Lynch voluntarily terminates this
Agreement, Merrill Lynch shall transfer the assets in the Account as directed in
writing by the Creditor. Section 9, "Responsibility and Protection of Merrill
Lynch," will survive termination of this Agreement.
11. Effect of Agreement
Client and Creditor agree that this Agreement supplements the applicable Merrill
Lynch account agreement with respect to the Account, and any related agreement
if the Account is a managed account under a Merrill Lynch advisory program with
a manager named in Box B, and that it does not abridge any rights that Merrill
Lynch might otherwise have, except as provided in section 7. If there is any
inconsistency between this Agreement and such Merrill Lynch account agreements
this Agreement will control. The Parties also acknowledge that there are no
other understandings or agreements with Merrill Lynch concerning the Account
except for this Agreement, the Merrill Lynch account agreements and any
agreement with an Investment Manager or Agent named in Box B to which Merrill
Lynch may be a party.
12. Governing Law
This Agreement and the Account will be governed by the internal laws of the
State of New York with respect to interpretation and enforcement.
13. Amendments
No amendment of, or waiver of a right under, this Agreement will be binding
unless it is in writing and signed by the party to be charged.
14. Severability
To the extent a provision of this Agreement is unenforceable, this Agreement
will be construed as if the unenforceable provision were omitted.
15. Successors and Assigns of Creditor
A successor to or assignee of Creditor's rights and obligations under the
Security Agreement between Creditor and Client will succeed to Creditor's rights
and obligations under this Agreement.
Page 2 | Pledged Collateral Account Control Agreement Code 1226 - 1109
================================================================================
PLEDGED COLLATERAL ACCOUNT CONTROL AGREEMENT Account Number (Internal Use Only)
[_][_][_] - [_][_][_][_][_]
================================================================================
================================================================================
SIGNATURE PAGE
================================================================================
INSTRUCTIONS : Fill in names and addresses and sign. Use Exhibit A to list the
assets to be transferred into the Merrill Lynch Pledged Collateral Account.
PLEASE NOTE : This Agreement may be executed in counterparts, but the preparer
should provide the completed original to Merrill Lynch with signed photocopy
counterparts provided to Client and Creditor.
Client :
Client's Name (Print)____________________________________________________________________________
Signature _____________________________________________________ Date____________________________
Name of Individual Signing (Print)_______________________________________________________________
Title____________________________________________________________________________________________
Client's Address: Street_________________________________________________________________________
City______________________________________________ State/Province________________________________
Postal Code (zip code)_________________________________ Country__________________________________
PLEASE NOTE : This is the name to whom periodic account statements and trade
confirmations will be addressed unless another officer's name is provided to
Merrill Lynch for this purpose.
Creditor :
Creditor's Name (Print)__________________________________________________________________________
Signature ______________________________________________________ Date____________________________
Name of Individual Signing (Print)_______________________________________________________________
Title (an authorized officer)____________________________________________________________________
Creditor's Address: Street ______________________________________________________________________
City______________________________________________ State/Province________________________________
Postal Code (zip code) ________________________________ Country__________________________________
Merrill Lynch , Pierce , Fenner, & Smith Incorporated :
Managing Director/Director (or designee) Name (Print) ___________________________________________
Signature ______________________________________________________ Date____________________________
Page 3 | Pledged Collateral Account Control Agreement Code 1226 - 1109
================================================================================
PLEDGED COLLATERAL ACCOUNT CONTROL AGREEMENT Account Number (Internal Use Only)
[_][_][_] - [_][_][_][_][_]
================================================================================
================================================================================
EXHIBIT A
================================================================================
INSTRUCTIONS : Use Exhibit A to list the Quantity Description assets to be
transferred into the Merrill Lynch Pledged Collateral Account.
PLEASE NOTE : If an existing managed account, such as a ML Consults(R)or other
managed account, is being pledged, please attach a copy of the most recent
monthly account statement and write "See attached statement".
Quantity Description
_____________ ______________________________________________________________
_____________ ______________________________________________________________
_____________ ______________________________________________________________
_____________ ______________________________________________________________
_____________ ______________________________________________________________
_____________ ______________________________________________________________
_____________ ______________________________________________________________
_____________ ______________________________________________________________
_____________ ______________________________________________________________
_____________ ______________________________________________________________
_____________ ______________________________________________________________
_____________ ______________________________________________________________
_____________ ______________________________________________________________
_____________ ______________________________________________________________
_____________ ______________________________________________________________
_____________ ______________________________________________________________
_____________ ______________________________________________________________
_____________ ______________________________________________________________
_____________ ______________________________________________________________
_____________ ______________________________________________________________
_____________ ______________________________________________________________
_____________ ______________________________________________________________
_____________ ______________________________________________________________
Page 4 | Pledged Collateral Account Control Agreement Code 1226 - 1109
================================================================================
PLEDGED COLLATERAL ACCOUNT CONTROL AGREEMENT Account Number (Internal Use Only)
[_][_][_] - [_][_][_][_][_]
================================================================================
================================================================================
EXHIBIT B : SAMPLE NOTICE OF EXCLUSIVE CONTROL
================================================================================
NOT TO BE USED AT ACCOUNT OPENING - TO BE USED IN EVENT OF DEFAULT OR OTHER
EVENT IN WHICH CREDITOR REQUIRES EXCLUSIVE CONTROL.
PLEASE NOTE:
If this notice is sent by fax, it must be addressed to Managing
Director/Director with receipt confirmed by telephone, and the original mailed
or delivered to the office servicing the Account as indicated on the account
statement.
[Letterhead of Creditor]
Date: ________________
To: Managing Director /Director
Merrill Lynch, Pierce, Fenner & Smith Inc.
___________________________________________
___________________________________________
___________________________________________
[Insert address of Merrill Lynch office servicing account as indicated on
Account Statement]
Pledged Collateral Account number __________________________________________
in the name of "_________________________________________
Name of Client
Pledged Collateral Account for_____________________________________"
Name of Creditor
This is to notify Merrill Lynch that the above-referenced pledged collateral
account ("Account") is now under the exclusive control of Creditor named above.
Merrill Lynch is hereby instructed to cease complying with trading instructions
given by or on behalf of Client (named above) relating to said Account, to cease
distributing interest and regular cash dividends earned on property in the
Account, and to refuse to accept any other instructions from Client intended to
exercise any authority with respect to the Account unless instructed by the
undersigned on behalf of Creditor.
Creditor warrants to Merrill Lynch that this Notice of Exclusive Control is
lawful and authorized by the Security Agreement between Client and Creditor.
All future instructions on the Account shall be given solely by the undersigned
on behalf of Creditor unless further evidence of authority is provided to
Merrill Lynch.
Name (Print)____________________________________________________________________
Signature____________________________________________________Date ______________
Title (an authorized officer) __________________________________________________
Page 5 | Pledged Collateral Account Control Agreement Code 1226 - 1109
Merrill Lynch
Wealth Management
Bank of America Corporation
[LOGO OMITTED]
Code 1226 -1109