Exhibit 10.11
MASTER NOTE PURCHASE AND REPURCHASE AGREEMENT
This Master Note Purchase and Repurchase Agreement (this "Agreement") is
executed as of August 31, 2000 by Xxxxxxx Musical Instruments, Inc. with an
address of 00000 Xxxx Xxxxxx, Xxxxxxx, XX 00000 ("Xxxxxxx") and Textron
Financial Corporation with an address of 000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000,
Xxxxxx Xxxxxx, XX 00000 ("TFC").
RECITALS
X. Xxxxxxx manufactures and distributes musical instruments ("Xxxxxxx
Products")and extends credit to selected retail dealers of Xxxxxxx Products
("Dealers"), facilitating the acquisition of Xxxxxxx Products by such Dealers
(the "Floor Plan");
B. In order to secure the Floor Plan, among other security, Xxxxxxx
establishes a first priority security interest in the Xxxxxxx Products financed
pursuant to the Floor Plan;
X. Xxxxxxx, from time to time, pursuant to powers of attorney granted
to Xxxxxxx by Dealers, executes promissory notes on behalf of Dealers evidencing
all or a portion of the outstanding indebtedness under the Floor Plan (the
"Notes");
X. Xxxxxxx and TFC intend that TFC will, from time to time, in an amount
not to exceed an aggregate of $1 Million at any time outstanding and with full
recourse to Xxxxxxx, purchase the Notes and take an assignment of all security
for, and all other rights of Xxxxxxx associated with, such Notes and the
indebtedness evidenced thereby; and
X. Xxxxxxx 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, Xxxxxxx and TFC agree as follows:
ARTICLE I - PURCHASE OF NOTES
1.1 PURCHASE OF NOTES. Provided that Xxxxxxx 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 Xxxxxxx in an aggregate
amount at any time outstanding not to exceed $1 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;
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( 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,
Xxxxxxx 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), Xxxxxxx 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. Xxxxxxx may, from time to time, request
that TFC purchase Notes. Xxxxxxx shall not sell any Note to any other party
unless Xxxxxxx 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, Xxxxxxx 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 Xxxxxxx Musical Instruments, Inc., pursuant to a valid power of
attorney, and shall be endorsed to TFC by Xxxxxxx as shown in EXHIBIT 1.4(b).
The Invoices and supporting material shall collectively identify the Xxxxxxx
Products being sold pursuant thereto by model and serial number, except for
various accessory Xxxxxxx 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 Xxxxxxx Products identified on the Invoices. Provided that the
Original Note is an Eligible Note, TFC shall pay the Purchase Price for such
Note to Xxxxxxx, or Xxxxxxx'x 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 Xxxxxxx within five days (5) following TFC's
receipt of the foregoing documents.
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1.5 ASSIGNMENT OF SECURITY AND OTHER RIGHTS. In connection with each
Purchased Note, Xxxxxxx assigns to TFC all of Xxxxxxx'x rights to payment of the
indebtedness evidenced by such Purchased Note, all of Xxxxxxx'x rights
associated with Xxxxxxx Products identified on the Invoices, an undivided joint
interest in all other security or such indebtedness in which Xxxxxxx has an
interest, and an undivided joint interest rights of Xxxxxxx associated with such
indebtedness. The rights of Xxxxxxx described in the foregoing sentence include,
but are not limited to, Xxxxxxx'x rights under the Security Agreement and Power
of Attorney entered into by Xxxxxxx with the applicable Dealer, any Guaranty and
Waiver By Individual(s) or similar instrument(s) executed in connection
therewith, and Xxxxxxx'x interest under policies of insurance covering Xxxxxxx
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 Xxxxxxx and
the Dealers associated with purchased Chattel Paper, pursuant to which such
Dealers have granted a security interest in Xxxxxxx Products to Xxxxxxx, 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,
Xxxxxxx 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 Xxxxxxx'x prior consent,
except for purchased Chattel Paper associated with a Purchased Note or Purchased
Notes for which Xxxxxxx has failed to honor its repurchase obligations under
this Agreement.
ARTICLE II - REPURCHASE OF NOTES
2.1 REPURCHASE OF NOTES. Xxxxxxx shall be obligated, if requested by TFC,
to repurchase all or a portion of the Purchased Notes under the following
circumstances:
(a) Xxxxxxx 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) Xxxxxxx 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) Xxxxxxx shall be obligated, if requested by TFC, to repurchase ALL
Purchased Notes if Xxxxxxx: (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 Xxxxxxx'x aggregate obligations are $1 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 Xxxxxxx is obligated to repurchase a Purchased Note because
of a circumstance set forth in the foregoing Subparagraph (a), Clause (i) or
Clause (ii), Xxxxxxx shall have the right to cause such
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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 Xxxxxxx 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 Xxxxxxx'x breach of the
warranties and/or obligations set forth in Sections 1.3, 2.2, 4.1, 4.2(b) and
4.4(b) of this Agreement), Xxxxxxx 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 Xxxxxxx pursuant to Section 1.3, as
of the date that Xxxxxxx pays the Repurchase Price to TFC. Xxxxxxx shall pay the
Repurchase Price for a Purchased Note to TFC within fifteen (15) days following
receipt of notice from TFC that Xxxxxxx is required to repurchase such Purchased
Note.
2.3 REASSIGNMENT OF RIGHTS. In connection with Xxxxxxx'x repurchase of a
Purchased Note, TFC shall reassign to Xxxxxxx all of TFC's rights in the Chattel
Paper associated therewith previously assigned to TFC by Xxxxxxx. 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 Xxxxxxx, without recourse, and shall return such Original Note
to Xxxxxxx together with the Invoices related thereto.
ARTICLE III - WARRANTIES OF XXXXXXX
Xxxxxxx continuously warrants to TFC as follows:
3.1 ORGANIZATION. Xxxxxxx 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. Xxxxxxx is duly qualified to
do business and is in good standing in each jurisdiction in which the property
owned, leased or operated by Xxxxxxx, or the nature of the business conducted by
Xxxxxxx, 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 Xxxxxxx (an "Adverse Effect").
3.2 AUTHORIZATION. Xxxxxxx has the power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
Xxxxxxx has duly approved and authorized the execution and delivery of this
Agreement, and no other proceedings on the part of Xxxxxxx are necessary in
connection therewith. This Agreement constitutes a valid and binding obligation
of Xxxxxxx, enforceable against Xxxxxxx in accordance with its terms.
3.3 AUTHORITY. The compliance by Xxxxxxx with the provisions hereof will
not: ( a ) violate any provision of the charter documents or by-laws of Xxxxxxx;
( 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 Xxxxxxx, pursuant to the terms of any agreement,
instrument or other obligation to which Xxxxxxx is party or by which any of
Xxxxxxx'x 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.
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3.4 PURCHASED CHATTEL PAPER. All of the documents associated with purchased
Chattel Paper contained in Xxxxxxx'x 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 (b) that the remedy of specific performance and other
forms of equitable relief are subject to judicial discretion. Xxxxxxx 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 Xxxxxxx to the applicable Dealer, in an amount equal to the
Purchase Price for such Eligible Note. Xxxxxxx 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 Xxxxxxx completes a
Request for Purchase of a Note with respect thereto.
3.5 PRIORITY OF LIENS AND INSURANCE. Xxxxxxx has a perfected security
interest in all Xxxxxxx Products owned by each Dealer associated with a
Purchased Note. Xxxxxxx has a first priority security interest in each of the
Xxxxxxx Products which is identified on the Invoices. Each Dealer associated
with a Purchased Note has obtained property insurance covering its inventory of
Xxxxxxx Products for their full replacement value and naming Xxxxxxx as Loss
Payee.
3.6 REPORTS AND INFORMATION. All reports and information delivered or
conveyed by Xxxxxxx 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 Xxxxxxx'x knowledge,
threatened against Xxxxxxx which, if adversely determined, would have an Adverse
Effect. Xxxxxxx 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
Xxxxxxx 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 XXXXXXX
Xxxxxxx covenants and agrees with TFC as follows:
4.1 BOOKS AND RECORDS. Xxxxxxx 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 Xxxxxxx has requested that TFC purchase.
4.2 ADDITIONAL DOCUMENTATION. Xxxxxxx 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. Xxxxxxx 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 Xxxxxxx'x
name or the location of Xxxxxxx'x principal place of business.
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4.4 BREACH OR DEFAULT. Xxxxxxx shall notify TFC as soon as reasonably
possible upon the occurrence of any circumstance which puts Xxxxxxx in breach of
any of Xxxxxxx'x covenants, warranties or agreements contained in this
Agreement.
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 Xxxxxxx
is, at any time, obligated to repurchase all Purchased Notes. Any termination or
expiration of this Agreement shall not affect the obligations of Xxxxxxx and TFC
under this Agreement with respect to Chattel Paper purchased by TFC from
Xxxxxxx.
5.2 POWER OF ATTORNEY. Xxxxxxx irrevocably appoints TFC, and any person
designated by TFC, for so long as any obligation remains outstanding under any
Purchased Note, as Xxxxxxx'x true and lawful attorney-in-fact to: (a) endorse,
in TFC's or Xxxxxxx'x name, any draft or other order for the payment of money
payable to Xxxxxxx and related to the purchased Chattel Paper, and (b) execute,
in TFC's or Xxxxxxx'x 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 Xxxxxxx and TFC relative to the subject
matter hereof. No modification of, or supplement to, this Agreement shall bind
Xxxxxxx or TFC unless in writing and signed by an authorized officer of Xxxxxxx
or TFC, as appropriate. No course of dealing and no delay or failure of Xxxxxxx
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. Xxxxxxx 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 Xxxxxxx. Xxxxxxx 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 Xxxxxxx (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 Xxxxxxx 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.
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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/ Xxxx X. Xxxx
---------------------------------
Print Name: Xxxx X. Xxxx
---------------------------------
Print Title: Vice President-Division Manager
---------------------------------
Address: 000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx Xxxxxx, XX 00000
XXXXXXX:
XXXXXXX MUSICAL INSTRUMENTS, INC.
By: /s/ X.X. Xxxxxxx
---------------------------------
Print Name: X.X. Xxxxxxx
---------------------------------
Print Title: Treasurer
---------------------------------
Address: 00000 Xxxx Xxxxxx
Xxxxxxx, XX 00000
