**Exhibit 10.10**

 

**MASTER NOTE PURCHASE AND REPURCHASE AGREEMENT**

 

This Master Note Purchase and Repurchase Agreement(this “Agreement”) is executed as of August 1, 2001 by The Selmer Company, Inc.with an address of 600 Industrial Parkway, Elkhart, IN  46516 (“Selmer”) and Textron FinancialCorporation with an address of 701 Xenia Avenue South, Suite 300, GoldenValley, MN 55416 (“TFC”).

 

**RECITALS**

 

A.            Selmermanufactures and distributes musical instruments (“Selmer Products”) andextends credit to selected retail dealers of Selmer Products (“Dealers”),facilitating the acquisition of Selmer Products by such Dealers (the “FloorPlan”);

 

B.            Inorder to secure the Floor Plan, among other security, Selmer establishes afirst priority security interest in the Selmer Products financed pursuant tothe Floor Plan;

 

C.            Selmer,from time to time, pursuant to powers of attorney granted to Selmer by Dealers,executes promissory notes on behalf of Dealers evidencing all or a portion ofthe outstanding indebtedness under the Floor Plan (the “Notes”);

 

D.            Selmerand TFC intend that TFC will, from time to time, in an amount not to exceed anaggregate of $18 Million at any time outstanding and with full recourse toSelmer, purchase the Notes and take an assignment of all security for, and allother rights of Selmer associated with, such Notes and the indebtednessevidenced thereby; and

 

E.             Selmershall be obligated to repurchase the Notes under the circumstances set forth inthis agreement.

 

**AGREEMENT**

 

In reliance upon thevarious representations, warranties and covenants set forth in this Agreement,Selmer and TFC agree as follows:

 

**ARTICLE I - PURCHASE OF NOTES**

 

**1.1**           **Purchase of Notes.**  Provided that Selmer is in compliance with,and is not in breach of, any of its warranties, covenants or other obligationsset forth in this Agreement (and will not be in breach of, or in non-compliancewith, such obligations following the purchase hereinafter described), TFC willpurchase Eligible Notes (as hereinafter defined) from Selmer in an aggregateamount at any time outstanding not to exceed $18 Million.  The purchase price for each Eligible Noteshall be equal to the outstanding principal balance of such Eligible Note atthe time of purchase (the “Purchase Price”).

 

**1.2**          **Eligible Notes.**  An “Eligible Note” is a Note which:

 

(a)           isnot in default;

 

(b)           conformsto the documentation requirements set forth in Section 1.4;

 

(c)           isfor a term not to exceed twenty-four (24) months;

 

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(d)           providesfor full straight line amortization of the principal balance thereof (or someother amortization of principal acceptable to TFC); and

 

(e)           isfrom a Dealer with which TFC has not had a prior unsatisfactory relationship.

 

In order for TFC to make a determination as to theeligibility of a Note, Selmer shall submit a list of Dealers to TFC and updatesuch list on a regular basis.  Inaddition, if TFC’s purchase of a Note would result in the aggregate amount ofoutstanding principal under all Notes purchased by TFC with respect to thesubject Dealer exceeding $500,000.00, such Note shall not be an “Eligible Note”unless TFC determines that the creditworthiness of such Dealer is acceptable.

 

**1.3          MinimumYield on Purchased Notes.**  To the extent that any Eligible Note purchased by TFC (a“Purchased Note”) accrues interest in any month at a rate (the “Note Rate”)less than the Minimum Acceptable Interest Rate (as hereinafter defined), Selmeragrees to pay to TFC, on or before the twentieth (20th) day of the followingmonth, the difference between the amount of interest accrued during such monthat the Note Rate and the amount of interest which would have accrued duringsuch month at the Minimum Acceptable Interest Rate.  The Minimum Acceptable Interest Rate shall be a variable rate perannum, adjusted monthly, equal to Prime plus three and one-quarter percent(3.25%).  Prime for any month shall bethe greater of:  (a) the primecommercial rate of interest per annum published by the index bank referenced inthe Purchased Notes on the last day of the preceding month, or (b) Sevenpercent (7.0%) per annum.  Unlessotherwise specified in the Purchased Notes, all interest calculations under thePurchased Notes shall be done using a year of 360 days and the actual number ofdays elapsed in the computation period.

 

**1.4          Requestfor Purchase of a Note.** Selmer may, from time to time, request that TFC purchase Notes.  Selmer shall not sell any Note to any otherparty unless Selmer has first requested that TFC purchase such Note.  Any such request shall be made bysubmitting, for each Note, a completed Request for Purchase of a Note in theform attached hereto as Exhibit 1.4(a); and the sole original of suchNote in the form attached hereto as Exhibit 1.4(b) (“OriginalNote”).  In addition, TFC shall have theright to receive copies of the bookkeeping counterpart of all invoicesidentifying the indebtedness evidenced by such Original Note (the “Invoices”)and upon such request made by TFC, Selmer shall deliver the Invoices withinseven (7) business days.  Such OriginalNote shall have been executed on behalf of the Dealer obligated thereon by anauthorized officer of Selmer Musical Instruments, Inc., pursuant to a validpower of attorney, and shall be endorsed to TFC by Selmer as shown in Exhibit1.4(b).  The Invoices and supportingmaterial shall collectively identify the Selmer Products being sold pursuantthereto by model and serial number, except for various accessory SelmerProducts which do not bear serial numbers and which will not, in the aggregate,constitute more than five percent (5.0%) of the value of the Selmer Productsidentified on the Invoices.  Providedthat the Original Note is an Eligible Note, TFC shall pay the Purchase Pricefor such Note to Selmer, or Selmer’s designee, in immediately available funds,by wire transfer, within three (3) business days following TFC’s receipt of theforegoing documents in acceptable form. If TFC determines that any Note submitted for purchase is not anEligible Note, TFC shall return all documents associated with such submissionto Selmer within five days (5) following TFC’s receipt of the foregoingdocuments.

 

**1.5          Assignmentof Security and Other Rights.**  In connection with each Purchased Note, Selmer assigns to TFC allof Selmer’s rights to payment of the indebtedness evidenced by such PurchasedNote, all of Selmer’s rights associated with Selmer Products identified on theInvoices, an undivided joint interest in all other security or suchindebtedness in which Selmer has an interest, and an undivided joint interestrights of Selmer associated with such indebtedness.  The rights of Selmer 

 

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described in the foregoing sentence include, but are not limited to,Selmer’s rights under the Security Agreement and Power of Attorney entered intoby Selmer with the applicable Dealer, any Guaranty and Waiver By Individual(s)or similar instrument(s) executed in connection therewith, and Selmer’sinterest under policies of insurance covering Selmer Products owned by theapplicable Dealer.  The collection ofwritings evidencing the rights described in this Section, including thePurchased Notes, are hereinafter referred to as the “Chattel Paper.”

 

**1.6          Perfectionand Protection of TFC’s Interest in Purchased Chattel Paper.**  TFC shall perfect its interest in allpurchased Chattel Paper by filing an appropriate UCC-1 Financing Statementidentifying the Chattel Paper to be purchased. In addition, all original instruments executed between Selmer and theDealers associated with purchased Chattel Paper, pursuant to which such Dealershave granted a security interest in Selmer Products to Selmer, shall beconspicuously stamped with the legend set forth at Exhibit 1.6 hereto.

 

**1.7          Alterationof Chattel Paper and Waiver of Rights.**  For so long as there are outstanding amountsowing to TFC under a Purchased Note or Purchased Notes, Selmer agrees not toamend, supplement or otherwise alter, or waive any rights under, any of thepurchased Chattel Paper associated therewith without TFC’s prior consent.  TFC agrees not to amend, supplement orotherwise alter, or waive any rights under, any purchase Chattel Paper withoutSelmer’s prior consent, except for purchased Chattel Paper associated with aPurchased Note or Purchased Notes for which Selmer has failed to honor itsrepurchase obligations under this Agreement.

 

**ARTICLE II - REPURCHASE OF NOTES**

 

**2.1          Repurchaseof Notes.**  Selmershall be obligated, if requested by TFC, to repurchase all or a portion of thePurchased Notes under the following circumstances:

 

(a)           Selmershall be obligated, if requested by TFC, to repurchase all of the PurchasedNotes relating to a particular Dealer if any of the following occur: (i) suchDealer defaults in the payment of principal and/or interest under theapplicable Purchased Note(s) and such obligation(s) is past due more thanninety (90) days; (ii) such Dealer is otherwise in default under the terms ofthe applicable Purchased Note(s); or (iii) Selmer breaches the terms of anywarranty contained in Sections 3.4 and 3.5 of this Agreement as such warrantyrelates to such Dealer or the applicable Purchased Notes; and 

 

(b)           Selmershall be obligated, if requested by TFC, to repurchase all PurchasedNotes if Selmer: (i) breaches any provision of this Agreement, other than thewarranties set forth in Sections 3.4 and 3.5 of this agreement; (ii) is indefault under the terms and conditions of any loan, lease, or similar agreementpursuant to which Selmer’s aggregate obligations are $18 Million or more andall applicable grace periods for the cure of such default have expired; or(iii) is the subject of a bankruptcy, receivership or similar proceeding which,if involuntary, is not dismissed within thirty (30) days following itscommencement.

 

In the event that Selmer is obligated to repurchase aPurchased Note because of a circumstance set forth in the foregoingSubparagraph (a), Clause (i) or Clause (ii), Selmer shall have the right tocause such Dealer to cure such default (in its entirety) within thirty (30)days following receipt of notice from TFC of the occurrence of suchcircumstance.  In the event that Selmeris obligated to repurchase some or all of the Purchased Notes because of acircumstance set forth in the foregoing Subparagraph (a), Clause (iii), orSubparagraph (b), Clause (i) (expect for Selmer’s breach of the warrantiesand/or obligations set 

 

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forth in Sections 1.3, 2.2, 4.1, 4.2(b) and 4.4(b) of this Agreement),Selmer shall have the right to cure such breach within thirty (30) daysfollowing receipt of notice from TFC of the occurrence of such breach.

 

**2.2          RepurchasePrice.**  TheRepurchase Price for a Purchased Note shall be equal to all principal, accruedinterest and other charges owing to TFC pursuant to such Purchased Note, andowing to TFC by Selmer pursuant to Section 1.3, as of the date that Selmer paysthe Repurchase Price to TFC.  Selmershall pay the Repurchase Price for a Purchased Note to TFC within fifteen (15)days following receipt of notice from TFC that Selmer is required to repurchasesuch Purchased Note.

 

**2.3          Reassignmentof Rights.**  Inconnection with Selmer’s repurchase of a Purchased Note, TFC shall reassign toSelmer all of TFC’s rights in the Chattel Paper associated therewith previouslyassigned to TFC by Selmer.  TFC warrantsthat such assignment of rights shall be free and clear of the interest of anyparty claiming such interest through TFC. TFC shall endorse the applicable Original Note to Selmer, withoutrecourse, and shall return such Original Note to Selmer together with theInvoices related thereto.

 

**ARTICLE III - WARRANTIES OF SELMER**

 

Selmer continuously warrants to TFC as follows:

 

**3.1          Organization.**  Selmer is a corporation duly organized,validly existing and in good standing under the laws of the State of Delawareand has all requisite power and authority to own, operate and lease itsproperties and to carry on its business as presently being conducted.  Selmer is duly qualified to do business andis in good standing in each jurisdiction in which the property owned, leased oroperated by Selmer, or the nature of the business conducted by Selmer, makessuch qualification necessary, except where the failure to be so qualified wouldnot have an adverse effect on the financial condition or business prospects ofSelmer (an “Adverse Effect”).

 

**3.2          Authorization.**  Selmer has the power and authority toexecute and deliver this Agreement and to consummate the transactionscontemplated hereby.  Selmer has dulyapproved and authorized the execution and delivery of this Agreement, and noother proceedings on the part of Selmer are necessary in connectiontherewith.  This Agreement constitutes avalid and binding obligation of Selmer, enforceable against Selmer inaccordance with its terms.

 

**3.3          Authority.**  The compliance by Selmer with the provisionshereof will not: (a) violate any provision of the charter documents or by-lawsof Selmer; (b) violate any provision of, constitute a default under (or anevent which, with notice or lapse of time or both, would constitute a defaultunder), or result in the creation of any lien, security interest, charge orencumbrance upon any of the properties of Selmer, pursuant to the terms of anyagreement, instrument or other obligation to which Selmer is party or by whichany of Selmer’s properties are bound; (c) violate any order, rule or regulationof any court or governmental authority; or (d) require the consent of, ornotice to, any governmental or regulatory authority.

 

**3.4          PurchasedChattel Paper.** All of the documents associated with purchased Chattel Paper containedin Selmer’s credit or documentation files are, in all material respects, whatthey purport to be and, as appropriate, are valid and binding obligations ofthe Dealer associated therewith, enforceable against such Dealer in accordancewith their terms, except: (a) as enforcement may be limited by bankruptcy orother similar laws affecting the enforcement of creditors’ rights generally;and 

 

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(b) that the remedy of specific performance and other forms ofequitable relief are subject to judicial discretion.  Selmer has good and marketable title to the purchased Chattel Paper and to the indebtednessevidenced thereby, free and clear of all defenses, set-offs, counterclaims,liens and encumbrances of every kind and nature.  Each Purchased Note constitutes a bona fide loan by Selmer to theapplicable Dealer, in an amount equal to the Purchase Price for such Eligible Note.  Selmer has not accepted interest, or anyother similar amounts, from any Dealer obligated on any Purchased Note inadvance of any due date occurring after the date that Selmer completes aRequest for Purchase of a Note with respect thereto.

 

**3.5          Priorityof Liens and Insurance.** Selmer has a perfected security interest in all Selmer Products owned byeach Dealer associated with a Purchased Note. Selmer has a first priority security interest in each of the SelmerProducts which is identified on the Invoices. Each Dealer associated with a Purchased Note has obtained propertyinsurance covering its inventory of Selmer Products for their full replacementvalue and naming Selmer as Loss Payee.

 

**3.6          Reportsand Information.** All reports and information delivered or conveyed by Selmer to TFC pertainingto the Purchased Notes are accurate and complete in all material respects.

 

**3.7          Litigation.**  There are no proceedings before any court orgovernmental authority (each a “Proceeding”) pending or, to the best ofSelmer’s knowledge, threatened against Selmer which, if adversely determined,would have an Adverse Effect.  Selmer isnot subject to any judgment or other order entered in any law suit orproceeding which would have an Adverse Effect.

 

**3.8          Compliancewith Laws.**  ThePurchased Notes have been entered into by Selmer in accordance with allapplicable laws and other requirements of governmental authorities (including,but not limited to, usury, equal credit opportunity and similar laws orregulations), except where the failure to comply with such laws, regulations orother requirements would not have an Adverse Effect.

 

**ARTICLE IV - AFFIRMATIVE AND NEGATIVE COVENANTS OF SELMER**

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Selmer covenants and agrees with TFC as follows:

 

**4.1          Booksand Records.** Selmer shall: (a) keep accurate and complete records pertaining to thepurchased Chattel Paper, and (b) permit TFC, upon reasonable notice and atreasonable times, to audit the credit and documentation files of a Dealerassociated with purchased Chattel Paper, or an Eligible Note which Selmer hasrequested that TFC purchase.

 

**4.2          AdditionalDocumentation. **Selmershall execute and deliver to TFC all additional documents which TFC may, fromtime to time, determine are necessary or appropriate to evidence or perfectTFC’s interest in the purchased Chattel Paper.

 

**4.3          Existence,Name and Principal Place of Business.**  Selmer shall: (a) maintain its existence ingood standing, and (b) deliver to TFC written notice, at least sixty (60) daysin advance, of any proposed change in Selmer’s name or the location of Selmer’sprincipal place of business.

 

**4.4          Breachor Default.** Selmer shall notify TFC as soon as reasonably possible upon theoccurrence of any circumstance which puts Selmer in breach of any of Selmer’scovenants, warranties or agreements contained in this Agreement.

 

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**ARTICLE V - MISCELLANEOUS**

 

**5.1          Term ofAgreement.**  ThisAgreement shall be in effect for a period of one (1) year from the datehereof.  TFC may terminate thisAgreement if Selmer is, at any time, obligated to repurchase all PurchasedNotes.  Any termination or expiration ofthis Agreement shall not affect the obligations of Selmer and TFC under thisAgreement with respect to Chattel Paper purchased by TFC from Selmer.

 

**5.2          Power ofAttorney.**  Selmerirrevocably appoints TFC, and any person designated by TFC, for so long as anyobligation remains outstanding under any Purchased Note, as Selmer’s true andlawful attorney-in-fact to: (a) endorse, in TFC’s or Selmer’s name, any draftor other order for the payment of money payable to Selmer and related to thepurchased Chattel Paper, and (b) execute or authenticate, in TFC’s or Selmer’sname, all other instruments and documents necessary or appropriate to enableTFC to enforce TFC’s rights in the purchased Chattel Paper against anyassociated Dealer.

 

**5.3          Integration,Modification and Course of Dealing.**  This Agreement constitutes the entireagreement of Selmer and TFC relative to the subject matter hereof.  No modification of, or supplement to, thisAgreement shall bind Selmer or TFC unless in writing and signed by anauthorized officer of Selmer or TFC, as appropriate.  No course of dealing and no delay or failure of Selmer or TFC toexercise any right, power or privilege under this Agreement will affect anyother or future exercise of such right, power or privilege.

 

**5.4          Assignmentand Delegation.** Selmer shall have the right, from time to time, to sell, assign orotherwise transfer its entire interest in this Agreement to any entity which itcontrols, is controlled by, or is under common control with Selmer.  Selmer may not assign or transfer any of itsrights or delegate any of its obligations under this Agreement under any othercircumstances.  TFC shall have theright, from time to time, to sell, assign or otherwise transfer its interest inthis Agreement and the purchased Chattel Paper, either in whole or in part, toany entity which controls, is controlled by, or is under common control withTFC.

 

**5.5          Notices. **All notices, requests,demands and other communications made pursuant to this Agreement (the“Notices”) shall be in writing and shall be sent by certified mail, returnreceipt requested.  All of the Noticesshall be sent to TFC (Attention:  VicePresident - Operations) or Selmer (Attention: Vice President of Finance) at the address for such party set forth atthe end of this Agreement or to such other address as such party shalldesignate from time to time.

 

**5.6          BindingEffect and Governing Law.**  This Agreement shall not be deemed to create any right in anyparty except as provided herein and shall inure to the benefit of, and bybinding upon, the successors and assigns of Selmer and TFC.  **THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED INACCORDANCE WITH, THE LAWS OF THE STATE OF RHODE ISLAND, WITHOUT REFERENCE TOAPPLICABLE CONFLICT OF LAW PRINCIPLES.**

 

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The undersigned, pursuant to due corporate and/orpartnership authority, have caused this Agreement to be executed as of the dateset forth above.

 
|   | **TFC:**                      |
|--------|-------------------------------|
|   |                          |
|   | TEXTRON FINANCIAL CORPORATION |
|   |                          |
|   | By:                           | /s/ John K. King |   |
|   | Print Name:                   | John K. King |   |
|   | Print Title:                  | President Floorplan Finance |   |
|   | Address:                      | 701 Xenia Avenue South, Suite 300 |
|   |                          | Golden Valley, MN   55416 |
|   |                          |
|   | **SELMER:**                   |
|   |                          |
|   | THE SELMER COMPANY, INC.      |
|   |                          |
|   | By:                           | /s/ Michael R. Vickrey |   |
|   | Print Name:                   | Michael R. Vickrey |   |
|   | Print Title:                  | Executive Vice President – Finance |   |
|   | Address:                      | 600 Industrial Parkway |
|   |                          | Elkhart, IN   46516 |
|        |                               |  |  |  |

 

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