Document:

MASTER NOTE PURCHASE AND REPURCHASE AGREEMENT

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 Financial

Corporation with an address of 701 Xenia Avenue South, Suite 300, Golden

Valley, MN 55416 (“TFC”).

 

RECITALS

 

A.            Selmer

manufactures and distributes musical instruments (“Selmer Products”) and

extends credit to selected retail dealers of Selmer Products (“Dealers”),

facilitating the acquisition of Selmer Products by such Dealers (the “Floor

Plan”);

 

B.            In

order to secure the Floor Plan, among other security, Selmer establishes a

first priority security interest in the Selmer Products financed pursuant to

the 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 of

the outstanding indebtedness under the Floor Plan (the “Notes”);

 

D.            Selmer

and TFC intend that TFC will, from time to time, in an amount not to exceed an

aggregate of $18 Million at any time outstanding and with full recourse to

Selmer, purchase the Notes and take an assignment of all security for, and all

other rights of Selmer associated with, such Notes and the indebtedness

evidenced thereby; and

 

E.             Selmer

shall be obligated to repurchase the Notes under the circumstances set forth in

this agreement.

 

AGREEMENT

 

In reliance upon the

various 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 obligations

set forth in this Agreement (and will not be in breach of, or in non-compliance

with, such obligations following the purchase hereinafter described), TFC will

purchase Eligible Notes (as hereinafter defined) from Selmer in an aggregate

amount at any time outstanding not to exceed $18 Million.  The purchase price for each Eligible Note

shall be equal to the outstanding principal balance of such Eligible Note at

the time of purchase (the “Purchase Price”).

 

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

 

(a)           is

not in default;

 

(b)           conforms

to the documentation requirements set forth in Section 1.4;

 

(c)           is

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

 

 

(d)           provides

for full straight line amortization of the principal balance thereof (or some

other amortization of principal acceptable to TFC); and

 

(e)           is

from a Dealer with which TFC has not had a prior unsatisfactory relationship.

 

In order for TFC to make a determination as to the

eligibility of a Note, Selmer shall submit a list of Dealers to TFC and update

such list on a regular basis.  In

addition, if TFC’s purchase of a Note would result in the aggregate amount of

outstanding principal under all Notes purchased by TFC with respect to the

subject 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          Minimum

Yield 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), Selmer

agrees to pay to TFC, on or before the twentieth (20th) day of the following

month, the difference between the amount of interest accrued during such month

at the Note Rate and the amount of interest which would have accrued during

such month at the Minimum Acceptable Interest Rate.  The Minimum Acceptable Interest Rate shall be a variable rate per

annum, adjusted monthly, equal to Prime plus three and one-quarter percent

(3.25%).  Prime for any month shall be

the greater of:  (a) the prime

commercial rate of interest per annum published by the index bank referenced in

the Purchased Notes on the last day of the preceding month, or (b) Seven

percent (7.0%) per annum.  Unless

otherwise specified in the Purchased Notes, all interest calculations under the

Purchased Notes shall be done using a year of 360 days and the actual number of

days elapsed in the computation period.

 

1.4          Request

for Purchase of a Note. 

Selmer may, from time to time, request that TFC purchase Notes.  Selmer shall not sell any Note to any other

party unless Selmer has first requested that TFC purchase such Note.  Any such request shall be made by

submitting, for each Note, a completed Request for Purchase of a Note in the

form attached hereto as Exhibit 1.4(a); and the sole original of such

Note in the form attached hereto as Exhibit 1.4(b) (“Original

Note”).  In addition, TFC shall have the

right to receive copies of the bookkeeping counterpart of all invoices

identifying the indebtedness evidenced by such Original Note (the “Invoices”)

and upon such request made by TFC, Selmer shall deliver the Invoices within

seven (7) business days.  Such Original

Note shall have been executed on behalf of the Dealer obligated thereon by an

authorized officer of Selmer Musical Instruments, Inc., pursuant to a valid

power of attorney, and shall be endorsed to TFC by Selmer as shown in Exhibit

1.4(b).  The Invoices and supporting

material shall collectively identify the Selmer Products being sold pursuant

thereto by model and serial number, except for various accessory Selmer

Products 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 Products

identified on the Invoices.  Provided

that the Original Note is an Eligible Note, TFC shall pay the Purchase Price

for 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 the

foregoing documents in acceptable form. 

If TFC determines that any Note submitted for purchase is not an

Eligible Note, TFC shall return all documents associated with such submission

to Selmer within five days (5) following TFC’s receipt of the foregoing

documents.

 

1.5          Assignment

of Security and Other Rights.  In connection with each Purchased Note, Selmer assigns to TFC all

of Selmer’s rights to payment of the indebtedness evidenced by such Purchased

Note, all of Selmer’s rights associated with Selmer Products identified on the

Invoices, an undivided joint interest in all other security or such

indebtedness in which Selmer has an interest, and an undivided joint interest

rights of Selmer associated with such indebtedness.  The rights of Selmer 

 

2

 

described in the foregoing sentence include, but are not limited to,

Selmer’s rights under the Security Agreement and Power of Attorney entered into

by Selmer with the applicable Dealer, any Guaranty and Waiver By Individual(s)

or similar instrument(s) executed in connection therewith, and Selmer’s

interest under policies of insurance covering Selmer Products owned by the

applicable Dealer.  The collection of

writings evidencing the rights described in this Section, including the

Purchased Notes, are hereinafter referred to as the “Chattel Paper.”

 

1.6          Perfection

and Protection of TFC’s Interest in Purchased Chattel Paper.  TFC shall perfect its interest in all

purchased Chattel Paper by filing an appropriate UCC-1 Financing Statement

identifying the Chattel Paper to be purchased. 

In addition, all original instruments executed between Selmer and the

Dealers associated with purchased Chattel Paper, pursuant to which such Dealers

have granted a security interest in Selmer Products to Selmer, shall be

conspicuously stamped with the legend set forth at Exhibit 1.6 hereto.

 

1.7          Alteration

of Chattel Paper and Waiver of Rights.  For so long as there are outstanding amounts

owing to TFC under a Purchased Note or Purchased Notes, Selmer agrees not to

amend, supplement or otherwise alter, or waive any rights under, any of the

purchased Chattel Paper associated therewith without TFC’s prior consent.  TFC agrees not to amend, supplement or

otherwise alter, or waive any rights under, any purchase Chattel Paper without

Selmer’s prior consent, except for purchased Chattel Paper associated with a

Purchased Note or Purchased Notes for which Selmer has failed to honor its

repurchase obligations under this Agreement.

 

ARTICLE II - REPURCHASE OF NOTES

 

2.1          Repurchase

of Notes.  Selmer

shall be obligated, if requested by TFC, to repurchase all or a portion of the

Purchased Notes under the following circumstances:

 

(a)           Selmer

shall be obligated, if requested by TFC, to repurchase all of the Purchased

Notes relating to a particular Dealer if any of the following occur: (i) such

Dealer defaults in the payment of principal and/or interest under the

applicable Purchased Note(s) and such obligation(s) is past due more than

ninety (90) days; (ii) such Dealer is otherwise in default under the terms of

the applicable Purchased Note(s); or (iii) Selmer breaches the terms of any

warranty contained in Sections 3.4 and 3.5 of this Agreement as such warranty

relates to such Dealer or the applicable Purchased Notes; and 

 

(b)           Selmer

shall be obligated, if requested by TFC, to repurchase all Purchased

Notes if Selmer: (i) breaches any provision of this Agreement, other than the

warranties set forth in Sections 3.4 and 3.5 of this agreement; (ii) is in

default under the terms and conditions of any loan, lease, or similar agreement

pursuant to which Selmer’s aggregate obligations are $18 Million or more and

all 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 its

commencement.

 

In the event that Selmer is obligated to repurchase a

Purchased Note because of a circumstance set forth in the foregoing

Subparagraph (a), Clause (i) or Clause (ii), Selmer shall have the right to

cause such Dealer to cure such default (in its entirety) within thirty (30)

days following receipt of notice from TFC of the occurrence of such

circumstance.  In the event that Selmer

is obligated to repurchase some or all of the Purchased Notes because of a

circumstance set forth in the foregoing Subparagraph (a), Clause (iii), or

Subparagraph (b), Clause (i) (expect for Selmer’s breach of the warranties

and/or obligations set 

 

3

 

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) days

following receipt of notice from TFC of the occurrence of such breach.

 

2.2          Repurchase

Price.  The

Repurchase Price for a Purchased Note shall be equal to all principal, accrued

interest and other charges owing to TFC pursuant to such Purchased Note, and

owing to TFC by Selmer pursuant to Section 1.3, as of the date that Selmer pays

the Repurchase Price to TFC.  Selmer

shall 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 repurchase

such Purchased Note.

 

2.3          Reassignment

of Rights.  In

connection with Selmer’s repurchase of a Purchased Note, TFC shall reassign to

Selmer all of TFC’s rights in the Chattel Paper associated therewith previously

assigned to TFC by Selmer.  TFC warrants

that such assignment of rights shall be free and clear of the interest of any

party claiming such interest through TFC. 

TFC shall endorse the applicable Original Note to Selmer, without

recourse, and shall return such Original Note to Selmer together with the

Invoices 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 Delaware

and has all requisite power and authority to own, operate and lease its

properties and to carry on its business as presently being conducted.  Selmer is duly qualified to do business and

is in good standing in each jurisdiction in which the property owned, leased or

operated by Selmer, or the nature of the business conducted by Selmer, makes

such qualification necessary, except where the failure to be so qualified would

not have an adverse effect on the financial condition or business prospects of

Selmer (an “Adverse Effect”).

 

3.2          Authorization.  Selmer has the power and authority to

execute and deliver this Agreement and to consummate the transactions

contemplated hereby.  Selmer has duly

approved and authorized the execution and delivery of this Agreement, and no

other proceedings on the part of Selmer are necessary in connection

therewith.  This Agreement constitutes a

valid and binding obligation of Selmer, enforceable against Selmer in

accordance with its terms.

 

3.3          Authority.  The compliance by Selmer with the provisions

hereof will not: (a) violate any provision of the charter documents or by-laws

of Selmer; (b) violate any provision of, constitute a default under (or an

event which, with notice or lapse of time or both, would constitute a default

under), or result in the creation of any lien, security interest, charge or

encumbrance upon any of the properties of Selmer, pursuant to the terms of any

agreement, instrument or other obligation to which Selmer is party or by which

any of Selmer’s properties are bound; (c) violate any order, rule or regulation

of any court or governmental authority; or (d) require the consent of, or

notice to, any governmental or regulatory authority.

 

3.4          Purchased

Chattel Paper. 

All of the documents associated with purchased Chattel Paper contained

in Selmer’s credit or documentation files are, in all material respects, what

they purport to be and, as appropriate, are valid and binding obligations of

the Dealer associated therewith, enforceable against such Dealer in accordance

with their terms, except: (a) as enforcement may be limited by bankruptcy or

other similar laws affecting the enforcement of creditors’ rights generally;

and 

 

4

 

(b) that the remedy of specific performance and other forms of

equitable relief are subject to judicial discretion.  Selmer has good and 

marketable title to the purchased Chattel Paper and to the indebtedness

evidenced 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 the

applicable Dealer, in an amount equal to the Purchase Price for such Eligible Note.  Selmer has not accepted interest, or any

other similar amounts, from any Dealer obligated on any Purchased Note in

advance of any due date occurring after the date that Selmer completes a

Request for Purchase of a Note with respect thereto.

 

3.5          Priority

of Liens and Insurance. 

Selmer has a perfected security interest in all Selmer Products owned by

each Dealer associated with a Purchased Note. 

Selmer has a first priority security interest in each of the Selmer

Products which is identified on the Invoices. 

Each Dealer associated with a Purchased Note has obtained property

insurance covering its inventory of Selmer Products for their full replacement

value and naming Selmer as Loss Payee.

 

3.6          Reports

and Information. 

All reports and information delivered or conveyed by Selmer to TFC pertaining

to the Purchased Notes are accurate and complete in all material respects.

 

3.7          Litigation.  There are no proceedings before any court or

governmental authority (each a “Proceeding”) pending or, to the best of

Selmer’s knowledge, threatened against Selmer which, if adversely determined,

would have an Adverse Effect.  Selmer is

not subject to any judgment or other order entered in any law suit or

proceeding which would have an Adverse Effect.

 

3.8          Compliance

with Laws.  The

Purchased Notes have been entered into by Selmer in accordance with all

applicable laws and other requirements of governmental authorities (including,

but not limited to, usury, equal credit opportunity and similar laws or

regulations), except where the failure to comply with such laws, regulations or

other requirements would not have an Adverse Effect.

 

ARTICLE IV - AFFIRMATIVE AND NEGATIVE COVENANTS OF SELMER

 

Selmer covenants and agrees with TFC as follows:

 

4.1          Books

and Records. 

Selmer shall: (a) keep accurate and complete records pertaining to the

purchased Chattel Paper, and (b) permit TFC, upon reasonable notice and at

reasonable times, to audit the credit and documentation files of a Dealer

associated with purchased Chattel Paper, or an Eligible Note which Selmer has

requested that TFC purchase.

 

4.2          Additional

Documentation.  Selmer

shall execute and deliver to TFC all additional documents which TFC may, from

time to time, determine are necessary or appropriate to evidence or perfect

TFC’s interest in the purchased Chattel Paper.

 

4.3          Existence,

Name and Principal Place of Business.  Selmer shall: (a) maintain its existence in

good standing, and (b) deliver to TFC written notice, at least sixty (60) days

in advance, of any proposed change in Selmer’s name or the location of Selmer’s

principal place of business.

 

4.4          Breach

or Default. 

Selmer shall notify TFC as soon as reasonably possible upon the

occurrence of any circumstance which puts Selmer in breach of any of Selmer’s

covenants, warranties or agreements contained in this Agreement.

 

5

 

ARTICLE V - MISCELLANEOUS

 

5.1          Term of

Agreement.  This

Agreement shall be in effect for a period of one (1) year from the date

hereof.  TFC may terminate this

Agreement if Selmer is, at any time, obligated to repurchase all Purchased

Notes.  Any termination or expiration of

this Agreement shall not affect the obligations of Selmer and TFC under this

Agreement with respect to Chattel Paper purchased by TFC from Selmer.

 

5.2          Power of

Attorney.  Selmer

irrevocably appoints TFC, and any person designated by TFC, for so long as any

obligation remains outstanding under any Purchased Note, as Selmer’s true and

lawful attorney-in-fact to: (a) endorse, in TFC’s or Selmer’s name, any draft

or other order for the payment of money payable to Selmer and related to the

purchased Chattel Paper, and (b) execute or authenticate, in TFC’s or Selmer’s

name, all other instruments and documents necessary or appropriate to enable

TFC to enforce TFC’s rights in the purchased Chattel Paper against any

associated Dealer.

 

5.3          Integration,

Modification and Course of Dealing.  This Agreement constitutes the entire

agreement of Selmer and TFC relative to the subject matter hereof.  No modification of, or supplement to, this

Agreement shall bind Selmer or TFC unless in writing and signed by an

authorized officer of Selmer or TFC, as appropriate.  No course of dealing and no delay or failure of Selmer or TFC to

exercise any right, power or privilege under this Agreement will affect any

other or future exercise of such right, power or privilege.

 

5.4          Assignment

and Delegation. 

Selmer shall have the right, from time to time, to sell, assign or

otherwise transfer its entire interest in this Agreement to any entity which it

controls, is controlled by, or is under common control with Selmer.  Selmer may not assign or transfer any of its

rights or delegate any of its obligations under this Agreement under any other

circumstances.  TFC shall have the

right, from time to time, to sell, assign or otherwise transfer its interest in

this Agreement and the purchased Chattel Paper, either in whole or in part, to

any entity which controls, is controlled by, or is under common control with

TFC.

 

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, return

receipt requested.  All of the Notices

shall be sent to TFC (Attention:  Vice

President - Operations) or Selmer (Attention: 

Vice President of Finance) at the address for such party set forth at

the end of this Agreement or to such other address as such party shall

designate from time to time.

 

5.6          Binding

Effect and Governing Law.  This Agreement shall not be deemed to create any right in any

party except as provided herein and shall inure to the benefit of, and by

binding upon, the successors and assigns of Selmer and TFC.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN

ACCORDANCE WITH, THE LAWS OF THE STATE OF RHODE ISLAND, WITHOUT REFERENCE TO

APPLICABLE CONFLICT OF LAW PRINCIPLES.

 

6

 

The undersigned, pursuant to due corporate and/or

partnership authority, have caused this Agreement to be executed as of the date

set 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

  
					

 

7Section 1

AWARD AGREEMENT

 

UNDER THE AMENDED AND RESTATED

ALLIANCE PARTNERS COMPENSATION PLAN

 

You

have been granted an award under the Amended and Restated Alliance Partners

Compensation Plan (the “Plan”), as specified below:

 

	

  Participant (“you”):

  	

  Bruce Calvert

  
	

   

  
	

  Amount of Award: 

  	

  $

  	

  2,000,000

  
	

   

  
	

  Date of Grant:

  	

  Dec. 31, 2001

  
	

   

  
	

  Vesting Commencement Date:

  	

  Jan. 31, 2003

  
					

 

In

connection with your award (the “Award”), you, Alliance Capital Management

Holding L.P.(“Holding”) and Alliance Capital Management L.P. (“Alliance”) agree

as set forth in this agreement (the “Agreement”).  The Plan provides a description of the terms and conditions

governing the Award.  If there is any

inconsistency between the terms of this Agreement and the terms of the Plan,

the Plan’s terms completely supersede and replace the conflicting terms of this

Agreement.  All capitalized terms have

the meanings given them in the Plan, unless specifically stated otherwise in

the Agreement.

 

You

will be asked to make an election with respect to the investment of your Award

as described in Section 3(b) of the Plan. 

Once you have made this election in accordance with the terms of the

Plan and the election form, your Award will be treated as invested in either

restricted Units of Holding, or in one or more designated money-market, debt or

equity fund sponsored by Alliance or its Affiliate in accordance with the terms

of the Plan applicable to Post-2000 Awards.

 

It

is expressly understood that the Committee is authorized to administer,

construe, and make all determinations necessary or appropriate to the

administration of the Plan and this Agreement, all of which shall be binding

upon you.  The Committee is under no

obligation to treat you or your award consistently with the treatment provided

for other participants in the Plan.

 

This

Agreement does not confer upon you any right to continuation of employment by a

Company, nor does this Agreement interfere in any way with a Company’s right to

terminate your employment at any time.

 

This

Agreement will be subject to all applicable laws, rules, and regulations, and

to such approvals by any governmental agencies or national securities exchanges

as may be required.

 

1

 

This

Agreement will be governed by, and construed in accordance with, the laws of

the state of New York (without regard to conflict of law provisions).

 

This

Agreement and the Plan constitute the entire understanding between you and the

Companies regarding this award.  Any

prior agreements, commitments or negotiations concerning this award are

superseded.  This Agreement may be

amended only by another written agreement, signed by both parties.

 

BY SIGNING

BELOW, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE

PLAN.

 

IN

WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed

effective as of Dec. 31, 2001.

 

	

   

  	

  Alliance Capital

  Management L.P.

  
	

   

  	

  By: 

  	

  Alliance Capital

  Management Corp., G.P.

  
	

   

  	

   

  
	

   

  	

  Participant

  
	

   

  	

   

  
	

   

  	

   /s/ Bruce Calvert

  
	

   

  	

   Signature

  

 

2

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