Exhibit 10.1
 
AMENDED AND RESTATED REPURCHASE AGREEMENT
 
(Two Step)
 
This Amended and Restated Repurchase Agreement (“Agreement”) is entered into as
of January 29, 2010 (“Effective Date”) by and between THE TORO COMPANY, a
Delaware corporation, a manufacturer (hereinafter “Seller”), and RED IRON
ACCEPTANCE, LLC, a Delaware limited liability company (“Red Iron”), to set forth
the terms and conditions under which Red Iron will provide financing for certain
dealers and distributors as set forth below.  This Agreement amends and restates
in its entirety that certain Repurchase Agreement (Two Step) dated as of October
1, 2009 by and between Seller and Red Iron. In consideration of the matters and
mutual agreements herein contained, Red Iron and Seller agree as follows:
 
1.
Definitions.

 
 
(a)
“Approval” herein shall mean Red Iron’s agreement, whether in writing, by
electronic transmission or orally (provided, however, that such oral agreement
be promptly confirmed in writing), to provide floorplan inventory financing for
the sale of Inventory by Seller or an affiliate of Seller to a Dealer and/or
Distributor, which agreement shall be in effect for a period of sixty (60) days
from the date issued.

 
 
(b)
“Average Receivables” herein shall mean, with respect to an annual period (or
such shorter period at the end of the term of this Agreement or as otherwise
specified herein), the sum of the ending receivable balances of Red Iron
associated with the Challenged Dealers for each month included in such annual
period (or of each month in the current calendar year in the case of the
calculation for the end of the term of this Agreement or as otherwise specified
herein) divided by 12 or such lesser number of months for any period of less
than one year.  Receivable balances for the purposes of this definition shall be
the unpaid principal balances of the receivables without taking into account any
provision for credit loss, interest due thereon or any miscellaneous amounts
payable in connection with the collection thereof.

 
 
(c)
“Challenged Dealer Invoice” herein shall mean Invoices associated with a
Challenged Dealer.

 
 
(d)
“Dealer” herein shall mean any person, firm or corporation which buys Inventory
at wholesale from Seller or an affiliate of Seller and sells Inventory at
retail.

 
 
(e)
“Dealer Invoice” herein shall mean an invoice, bill of sale or other evidence,
whether in writing or electronically transmitted, of the sale or delivery of
Inventory by Seller or an affiliate of Seller to a Dealer.

 
 
(f)
“Distributor” herein shall mean any person, firm, corporation or buying group
which buys Inventory from Seller or an affiliate of Seller and sells Inventory
at wholesale.

 

 
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(g)
“Distributor Dealer” herein shall mean any person, firm or corporation which
buys Inventory at wholesale from a Distributor and sells Inventory at retail.

 
 
(h)
“Distributor Invoice” herein shall mean an invoice, bill of sale or other
evidence, whether in writing or electronically transmitted, of the sale or
delivery of Inventory by Seller or an affiliate of Seller to a Distributor.

 
 
(i)
“Distributor to Dealer Invoice” herein shall mean an invoice, bill of sale or
other evidence, whether in writing or electronically transmitted, of the sale or
delivery of Inventory by a Distributor to a Dealer or a Distributor Dealer.

 
 
(j)
“Inventory” herein shall mean any and all products, including parts and
accessories, software and related services manufactured, distributed or sold at
wholesale by Seller or an affiliate of Seller.

 
 
(k)
“Invoice” herein shall mean a Dealer Invoice, a Distributor Invoice and/or a
Distributor to Dealer Invoice, either collectively or individually, as the case
may be.

 
 
(l)
“Wholesale Instrument” herein shall mean an Invoice, billing statement,
inventory schedule or other evidence of indebtedness, including the books and
records of Red Iron, arising out of the financing by Red Iron of an Invoice.

 
2.
Financing Program.

 
 
(a)
If Seller or an affiliate of Seller requests an Approval or sends to Red Iron an
Invoice, and the Dealer and/or Distributor related to such Approval or Invoice
is eligible for floorplan inventory financing in accordance with the credit and
operational policies of Red Iron, then Red Iron shall, from time to time in its
commercially reasonable discretion consistent with such credit and operational
policies, issue such Approvals and advance against such Invoices, all under the
terms of this Agreement. Upon issuance of an Approval by Red Iron, Seller shall
(or, as applicable, shall cause its affiliate to) deliver an original Invoice to
Red Iron. Provided Red Iron receives the Invoice within sixty (60) days of the
date Red Iron issued the Approval and within thirty (30) days of the ship date
referred to in the Invoice, Red Iron shall pay Seller or its affiliate, as
applicable, the amount of the Invoice, subject to the terms of the financing
program then in effect between Seller and Red Iron. If the Invoice is not
received within said 60- and 30-day periods, or is not acceptable in form or
content once received, Red Iron has the right, without notice to Seller or its
affiliate, as applicable, to cancel the Approval related to said Invoice. Prior
to funding any Approval, Red Iron has the right to cancel said Approval upon
oral or written notice (provided, however, that oral notice be promptly
confirmed in writing) to Seller or its affiliate, as applicable, should Dealer
or Distributor be in default of any of its obligations to Red Iron and provided
that Seller or its affiliate, as applicable, has not shipped Inventory in
reliance on Red Iron’s Approval. Advances on Invoices and Approvals for such
advances issued by Red Iron as provided hereunder shall

 

 
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constitute an acceptance of the terms and conditions hereof by Seller (for
itself or on behalf of its affiliate, as applicable) and Red Iron as to each
such advance, and no other act or notice shall be required on the part of Red
Iron or Seller (or its affiliate, as applicable) to entitle such advances and
Approvals to the benefits of this Agreement. Red Iron may deduct, set-off,
withhold and/or apply any sums from payments due to Seller (either on behalf of
itself or its affiliate, as applicable) from Red Iron under this Agreement any
sums or payments due to Red Iron from Seller and/or its affiliates in respect of
any advance to be made by Red Iron against any Invoice.  Seller and Red Iron may
from time to time enter into written agreements for any Seller sponsored special
financing program for Dealers and/or Distributors.

 
 
(b)
If Seller or an affiliate of Seller delivers to Red Iron an original Invoice
that is the subject of open account financing of inventory and related items and
the amount of such Invoice is within (i) pre-established credit limits
applicable to the Dealer and/or Distributor related to such Invoice and (ii)
unsecured credit limits established by Red Iron from time to time (which shall
not be less than $4,000,000 in the aggregate at any time unless otherwise agreed
by the parties hereto), then Red Iron shall, from time to time in its
commercially reasonable discretion consistent with the credit and operational
policies of Red Iron, make an advance against such Invoice under the terms of
this Agreement.  Subject to the foregoing, if Red Iron receives the Invoice
within thirty (30) days of the ship date referred to in the Invoice, Red Iron
shall pay Seller or its affiliate, as applicable, the amount of the Invoice,
subject to the terms of the financing program then in effect between Seller and
Red Iron.  Advances on Invoices issued by Red Iron as provided hereunder shall
constitute an acceptance of the terms and conditions hereof by Seller (for
itself or on behalf of its affiliate, as applicable) and Red Iron as to each
such advance, and no other act or notice shall be required on the part of Red
Iron or Seller (or its affiliate, as applicable) to entitle such advances to the
benefits of this Agreement.  Red Iron may deduct, set-off, withhold and/or apply
any sums from payments due to Seller (either on behalf of itself or its
affiliate, as applicable) from Red Iron under this Agreement any sums or
payments due to Red Iron from Seller and/or its affiliates in respect of any
advance to be made by Red Iron against any Invoice.

 
 
(c)

 
 
(1)
If (i) Seller or an affiliate of Seller requests an Approval or sends to Red
Iron an Invoice or requests that Red Iron accept a group of Invoices
attributable to a single Dealer or Distributor, which would otherwise be subject
to Section 2(a) above but for the fact that the Dealer and/or Distributor
related to such Approval or Invoice is not eligible for floorplan inventory
financing in accordance with the credit and operational policies of Red Iron or
(ii) Seller or an affiliate of Seller delivers to Red Iron an original Invoice
or requests that Red Iron accept a group of Invoices attributable to a single
Dealer or Distributor, which would otherwise be subject to Section 2(b) above
but for the fact that such Invoice fails to

 

 
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meet the requirements of Section 2(b) (in either case whether as part of an
individual request or group request a “Non-conforming Invoice”), then, provided
such request indicates that any such Non-conforming Invoice is subject to the
Non-conforming Invoice Recourse Obligation set forth below, Red Iron shall, from
time to time in its commercially reasonable discretion, issue such Approval and
advance against such Non-conforming Invoice, all under the terms of this
Agreement including the applicable terms set forth in Section 2(a) and 2(b)
above but subject to the Non-conforming Invoice Recourse Obligation. Seller
hereby requests that Red Iron accept all Invoices which would otherwise be
subject to Section 2(a) or Section 2(b) with respect to the Dealers/Distributors
listed on Schedule 1 attached hereto and agrees that all such Invoices are
subject to the Non-conforming Invoice Recourse Obligation.

 
 
(2)
If a Dealer or Distributor shall default in the payment of any Non-conforming
Invoice, after the expiration of any cure period applicable to such
Non-conforming Invoice and upon demand by Red Iron which shall set forth in
reasonable detail the nature of such default, Seller shall repurchase such
Non-conforming Invoice from Red Iron as provided below, which repurchase,
subject to Seller’s performance thereof, shall be Red Iron’s sole and exclusive
remedy with respect to such defaulted Non-conforming Invoice (such repurchase
obligation being referred to herein as the “Non-conforming Invoice Recourse
Obligation”). In connection with such repurchase, Seller shall pay to Red Iron
in immediately available funds not later than five (5) business days after
Seller’s receipt from Red Iron of demand for the repurchase of such
Non-conforming Invoice, in payment for such repurchase, an amount equal to the
outstanding balance (including accrued but unpaid interest) remaining unpaid
under such Non-conforming Invoice. The payment of such amount in immediately
available funds shall otherwise be considered payment in full of such
Non-conforming Invoice.

 
 
(3)
Upon the payment required to be made to Red Iron as provided in clause (c)(2),
Red Iron shall automatically and without further action be deemed to transfer,
assign, set over and otherwise convey to Seller or its designee, without
recourse, representation or warranty, except as set forth in the immediately
following sentence, all the right, title and interest of Red Iron in and to the
applicable Non-conforming Invoice and any related Wholesale Instrument, all
moneys due or to become due and all collateral security with respect thereto and
all amounts received with respect thereto and all proceeds thereof. Such
transfer shall be free and clear of any liens created by or through Red
Iron.  Any collections received by Red Iron after the date of transfer with
respect to any Non-conforming Invoices transferred to Seller or its designee
pursuant to this clause (c)(3), as well as any amounts received by Red Iron
after the date of transfer from an account debtor with respect thereto shall be
deemed held by Red Iron in trust and as fiduciary for Seller or its designee and
Red Iron shall pay the

 

 
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same over to Seller or its designee promptly upon receipt.  Red Iron will
irrevocably instruct any account debtor with respect to such repurchased
Non-conforming Invoice to make all payments on account thereof after such
assignment to Seller or its designee.  Red Iron shall execute such documents and
instruments of transfer or assignment and take such other actions as shall
reasonably be requested by Seller or its designee to effect the conveyance of
such Non-conforming Invoice pursuant to this clause (c)(3).

 
 
(4)
Seller and Red Iron acknowledge and agree that Red Iron’s rights under Section
2(c) of this Agreement with regard to Non-conforming Invoices are in lieu of Red
Iron’s rights under the provisions of Sections 3(a) and 3(b) of this Agreement
and are not subject to the limitation set forth in Section 4(a) of this
Agreement.

 
 
(5)
Notwithstanding the foregoing, if Red Iron notifies Seller, as a result of its
own determination or in response to a request from Seller, that due to changed
circumstances any Non-conforming Invoice or any group of Non-conforming Invoices
attributable to a single Dealer or Distributor sold to Red Iron pursuant to this
Section 2(c) is no longer subject to any condition requiring that it or they be
treated as Non-conforming Invoice(s) such that it or they would qualify for sale
pursuant to either Section 2(a) or 2(b) above, the subject Invoice(s) shall no
longer be considered as Non-conforming Invoice(s) and Seller shall no longer be
subject to the Recourse Obligation with respect thereto; provided, however, that
such Invoice shall be subject to the provisions of Section 3(a), 3(b) and 4(a)
of this Agreement.  Red Iron agrees to respond to any request from Seller made
pursuant to the preceding sentence, which request shall specify with reasonable
detail the basis for such request, indicating Red Iron’s acceptance of such
request or rejection of such request and the reason for such rejection, in
writing within five (5) business days after Red Iron’s receipt of such request
from Seller. At such time as all Invoices due from any of the
Dealers/Distributors listed on Schedule 1 attached hereto are determined in
accordance with the foregoing procedure no longer to be Non-conforming Invoices,
such Schedule 1 shall be amended to delete reference to such Dealer/Distributor.
Likewise, at such time as Seller requests that Red Iron accept a group of
Invoices attributable to a single Dealer or Distributor as Non-conforming
Invoices in accordance with the provisions of this Section 2(c), such Schedule 1
shall be amended to add a reference to such Dealer/Distributor. Such amendments
to Schedule 1, and any other updates, amendments, supplements or modifications
to Schedule 1 as may be mutually agreed upon by the parties from time to time,
shall be in writing and initialed by an authorized representative of each party.

 
 
(d)
Upon Red Iron’s payment to Seller or an affiliate of Seller of the amount of an
Invoice pursuant to the terms of the preceding Sections 2 (a), (b) or (c),
Seller or its affiliate, as applicable, shall be deemed, without the necessity
of any further

 

 
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action, to have transferred, assigned, set over and otherwise conveyed to Red
Iron, without recourse except as provided herein, all of its right to receive
payment under or in respect of such Invoice and any related Wholesale
Instrument, any collateral security securing payment thereof and any other
credit support together with all monies due or to become due and all amounts
received or receivable with respect thereto, including all rights to receive
payments thereon from any Dealer and/or Distributor.  For accounting purposes,
no Seller or affiliate of Seller, as applicable, shall account for the
transactions contemplated by this Agreement in any manner other than, with
respect to the sale of the right to receive payment of each Invoice, as a true
sale to Red Iron.  Seller and its affiliates shall also maintain their
respective records and books of account in a manner which clearly reflects each
such sale of the right to receive payment of such Invoices to Red Iron.

 
 
(e)

 
 
(1)
From time to time, Seller and Red Iron may agree to list a Dealer or Distributor
Dealer on Schedule 2 attached hereto (each, a “Challenged Dealer”). Red Iron
agrees to provide Seller with monthly reports setting forth unpaid principal
balances of Challenged Dealer Invoices due Red Iron from each Challenged Dealer
as of the end of each month, past due status of any such balances and such other
information as Seller may reasonably request.  If a Challenged Dealer shall
default in the payment of any Challenged Dealer Invoice, after the expiration of
any cure period applicable to such Challenged Dealer Invoice, Red Iron shall (i)
attempt to collect from the Challenged Dealer the Inventory and amounts due
under such Challenged Dealer Invoice through customary collection efforts deemed
appropriate by Red Iron to the extent legally feasible and in its commercially
reasonable discretion; (ii) attempt to cause the relevant Distributor to
repurchase any such collected Inventory and honor any recourse obligation which
such Distributor may have to Red Iron; and (iii) attempt to tender to Seller or
an affiliate of Seller any such collected Inventory eligible under Section 3(a)
or 3(b) of this Agreement.  Notwithstanding the foregoing, Red Iron shall not
commence litigation in an attempt to collect amounts due under a Challenged
Dealer Invoice pursuant to this clause (e)(1) unless (x) such litigation is
approved by Seller or (y) Red Iron determines, in its reasonable judgment, that
its rights would be prejudiced by any delay caused by the need to obtain
Seller’s approval, in which case it may commence litigation upon notice to
Seller.  Seller shall pay Red Iron upon demand all costs and expenses actually
incurred by Red Iron in connection with collection efforts described in this
clause (e)(1)) or to the extent such costs and expenses are otherwise approved
in advance by Seller.

 
 
(2)
In the event any amounts remain unpaid with  respect to such Challenged Dealer
Invoice after Red Iron has undertaken commercially reasonable efforts to comply
with the provisions of the preceding clause (e)(1), upon demand by Red Iron
which shall set forth in reasonable detail the nature of

 

 
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such default, subject to the limits set forth in clause (4) below, Seller shall
repurchase such Challenged Dealer Invoice from Red Iron for an amount equal to
the outstanding balance (including accrued but unpaid interest for a period not
to exceed ninety (90) days after the Invoice due date) remaining unpaid under
such Challenged Dealer Invoice after applying any amounts received by Red Iron
pursuant to the actions described in clause (e)(1) (such repurchase obligation
being referred to herein as the “Challenged Dealer Recourse Obligation”). The
Challenged Dealer Recourse Obligation shall be paid to Red Iron in immediately
available funds not later than five (5) business days after Seller’s receipt
from Red Iron of demand for the repurchase of such Challenged Dealer Invoice,
which payment shall be considered payment in full of such Challenged Dealer
Invoice.

 
 
(3)
Upon the payment required to be made to Red Iron as provided in clause (e)(2),
Red Iron shall automatically and without further action be deemed to transfer,
assign, set over and otherwise convey to Seller or its designee, without
recourse, representation or warranty, except as set forth in the immediately
following sentence, all the right, title and interest of Red Iron in and to the
applicable Challenged Dealer Invoice and any related Wholesale Instrument, all
moneys due or to become due and all collateral security, if any, with respect
thereto and all amounts received with respect thereto and all proceeds
thereof.  Such transfer shall be free and clear of any liens created by or
through Red Iron.  Any collections received by Red Iron after the date of
transfer with respect to any Challenged Dealer Invoices transferred to Seller or
its designee pursuant to this clause (e)(3) as well as any amounts received by
Red Iron after the date of transfer from an account debtor with respect thereto
shall be deemed held by Red Iron in trust and as fiduciary for Seller or its
designee and Red Iron shall pay the same over to Seller or its designee promptly
upon receipt.  Red Iron will irrevocably instruct any account debtor with
respect to such purchased Challenged Dealer Invoice to make all payments on
account thereof after such assignment to Seller or its designee.  Red Iron shall
execute such documents and instruments of transfer or assignment and take such
other actions as shall reasonably be requested by Seller or its designee to
effect the conveyance of such Challenged Dealer Invoice pursuant to this clause
(e)(3).

 
 
(4)
Notwithstanding the foregoing, neither Seller nor any affiliate of Seller shall
have any obligation to purchase a Challenged Dealer Invoice during any calendar
year under the terms of this Agreement if any of the following are applicable:

 
 
(i)
the aggregate amount of Challenged Dealer Recourse Obligations  fully and
finally paid hereunder to Red Iron with respect to Challenged Dealer Invoices in
such calendar year equals or exceeds One Million Dollars ($1,000,000);

 

 
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(ii)
the aggregate amount of Challenged Dealer Recourse Obligations fully and finally
paid hereunder to Red Iron exceeds (A) during 2010, the greater of $100,000 or
ten percent (10%) of Average Receivables for the period to date in 2010 or (B)
during 2011, ten percent (10%) of Average Receivables for the period to date in
2011 or (C) in 2012 and thereafter, ten percent (10%) of Average Receivables for
the most recently completed twelve month period; or

 
 
(iii)
with respect to a particular Challenged Dealer, to the extent the Challenged
Dealer Recourse Obligations fully and finally paid hereunder would exceed 110%
of the credit line reflected on Schedule 2 for such Challenged Dealer (as in
effect at the time of such purchase).

 
Seller acknowledges that as additional Challenged Dealer Invoices are purchased
by Red Iron during the course of a calendar year, Seller may be obligated to
honor the purchase obligations with respect to Challenged Dealer Invoices that
were exempt from such purchase obligation in prior months as a result of the
application of clause (ii) of the preceding sentence and agrees to do so
promptly upon demand by Red Iron following the close of any calendar month in
which such purchase obligation arises.  Beginning December 31, 2010, Red Iron
shall, within forty-five (45) days following each December 31 and the expiration
date of this Agreement, calculate Average Receivables for the calendar year then
ending (or the period ending on such expiration date).  Red Iron will thereafter
promptly remit to Seller the amount, if any, by which the Challenged Dealer
Recourse Obligations fully and finally paid by Seller hereunder with respect to
such immediately preceding calendar year (or the current calendar year period
ending on the expiration date) exceeded ten percent (10%) of Average Receivables
for such period.
 
 
(5)
Seller and Red Iron acknowledge and agree that Red Iron’s rights under Section
2(e) of this Agreement with regard to Challenged Dealer Invoices are in addition
to Red Iron’s rights under the provisions of Sections 3(a) and 3(b) of this
Agreement (provided, however, that upon the payment in full of any Challenged
Dealer Recourse Obligations with respect to any Challenged Dealer Invoice, Red
Iron shall thereafter not be entitled to exercise its rights under Sections 3(a)
and 3(b) with respect to such Challenged Dealer Invoice and any related
Inventory) and are not subject to the limitation set forth in Section 4(a) of
this Agreement.

 
 
(6)
Notwithstanding the foregoing, if Red Iron notifies Seller, as a result of its
own determination or in response to a request from Seller, that due to changed
circumstances any Challenged Dealer is no longer subject to any condition
requiring that it be treated as a Challenged Dealer, including, but not limited
to, a determination that a Challenged Dealer has become

 

 
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eligible for floorplan inventory financing in accordance with the credit and
operational policies of Red Iron, any Invoices of such former Challenged Dealer
shall no longer qualify for the provisions of this Section 2(e) and Seller shall
no longer be subject to the Challenged Dealer Recourse Obligation with respect
thereto; provided, however, that such Invoices shall be subject to the
provisions of Sections 3(a), 3(b) and 4(a) of this Agreement.  Red Iron agrees
to respond to any request from Seller made pursuant to the preceding sentence,
which request shall specify with reasonable detail the basis for such request,
indicating Red Iron’s acceptance of such request or rejection of such request
and the reason for such rejection, in writing within ten (10) business days
after Red Iron’s receipt of such request from Seller. At such time Schedule 2
shall be amended to delete reference to such former Challenged Dealer. Likewise,
at such time as Seller and Red Iron determine that future Invoices related to
any other Dealer or Distributor Dealer are to be subject to the provisions of
this Section 2(e), such Schedule 2 shall be amended to add a reference to such
Dealer or Distributor Dealer such that any Challenged Dealer Invoices acquired
by Red Iron with respect to such Dealer or Distributor Dealer after the date of
such amendment will be subject to the provisions of this Section 4(e).  Such
amendments to Schedule 2, and any other updates, amendments, supplements or
modifications to Schedule 2 as may be mutually agreed upon by the parties from
time to time, shall be in writing and initialed by an authorized representative
of each party.  Seller and Red Iron anticipate that Schedule 2 may be updated on
at least a monthly basis throughout the term of this Agreement.

 
 
(f)
Seller (on behalf of itself and its affiliates) hereby grants to Red Iron a
limited power of attorney for the sole purpose of endorsing checks, drafts and
other instruments received by Red Iron payable to the order of Seller and its
affiliates and relating, in whole or in part, to receivables held by Red Iron.

 
3.
Repurchase of Inventory; Extended Service Contract Recourse.

 
 
(a)
Seller’s Repurchase of Inventory Sold by Seller or its Affiliates Directly to a
Dealer or Distributor. Subject to Section 4, if Red Iron shall repossess or come
into possession of any Inventory, or any part thereof, covered by any Dealer
Invoice or Distributor Invoice, Seller agrees to repurchase such Inventory from
Red Iron in a condition that is new and unused, subject to normal wear and tear
resulting from display or demonstration, and wherever located. Seller shall pay
Red Iron, within thirty (30) days of request therefor and in good funds, the
outstanding balance (including accrued but unpaid interest) remaining unpaid
under such Invoice. In addition, Seller shall pay Red Iron for all costs and
expenses actually incurred by Red Iron in taking possession or in the
repossession of such Inventory, including shipping and storage costs (not to
exceed 10% of the original Invoice) plus reasonable attorneys’ fees and court
costs actually incurred. Seller shall not assert any interest in or title to
such Inventory until it has paid Red Iron all amounts as specified herein in
full.

 

 
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(b)
Seller’s Repurchase of Inventory Sold by a Distributor to a Dealer. Subject to
Section 4, if Red Iron shall repossess or come into possession of any Inventory,
or any part thereof, covered by any Distributor to Dealer Invoice, and
Distributor fails to repurchase such Inventory from Red Iron within thirty (30)
days of Red Iron’s demand therefor, Seller agrees to repurchase such Inventory
from Red Iron in a condition that is new and unused, subject to normal wear and
tear resulting from display or demonstration, and wherever located. Subject to
Section 3(h), Seller shall pay Red Iron, within thirty (30) days of request
therefor and in good funds, the outstanding balance (including accrued but
unpaid interest) amount remaining unpaid under such Distributor to Dealer
Invoice. In addition, Seller shall pay Red Iron for all costs and expenses
actually incurred by Red Iron in taking possession or in the repossession of
such Inventory, including shipping and storage costs (not to exceed 10% of the
original Invoice) plus reasonable attorneys’ fees and court costs actually
incurred. Seller shall not assert any interest in or title to such Inventory
until it has paid Red Iron all amounts as specified herein in full.

 
 
(c)
Seller and Red Iron agree that the repurchase of Inventory hereunder shall not
be deemed to be a transfer subject to Sections 9-615(f) or 9-618 of the Illinois
Uniform Commercial Code or any similar provision of any other applicable law.

 
 
(d)
If an Invoice delivered to Red Iron by Seller does not identify the covered
Inventory by serial number, but only by model number, and Seller cannot prove to
Red Iron’s reasonable satisfaction that an item of Inventory is covered by a
particular Invoice, then for purposes of determining the age or price of an item
of Inventory under this Agreement, the item of Inventory shall be deemed to be
covered by the most recent Invoice which has an item with the same model number
as the item of Inventory tendered for repurchase.

 
 
(e)
Seller further agrees that in the event Red Iron refinances Inventory pursuant
to a buyout of debt from another financing source or otherwise, such Inventory
will be subject to repurchase by Seller under this Section 3, notwithstanding
the fact that Red Iron did not finance the initial purchase of such Inventory
from Seller.

 
 
(f)
Seller agrees (and Seller will cause its affiliates, as applicable) to execute
any additional agreements, instruments, and documents which Red Iron may
reasonably require to maintain Red Iron’s rights and interests in any Inventory.

 
 
(g)
To the extent reasonably feasible, and without prejudicing Red Iron’s rights,
Red Iron shall provide Seller prior written notice of Red Iron’s intent to
commence litigation against a Dealer or Distributor.

 
 
(h)
Red Iron shall provide Seller contemporaneous written notice of any action by
Red Iron against a Dealer or Distributor with respect to any amounts unpaid
under a Distributor to Dealer Invoice.  Red Iron shall not make a demand on
Seller to perform its obligations under Section 3(b) above until at least ten
(10) days after providing such notice to Seller or, in the case where the Dealer
or Distributor

 

 
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disputes such amounts in good faith, until at least thirty (30) days after
providing such notice to Seller.

 
 
(i)
If an Invoice for an extended service contract is not paid when due, then Red
Iron shall have the benefit of recourse to Seller with respect to such Invoice
on such terms as Red Iron and Seller shall mutually agree from time to time.

 
4.
Net Repurchase Limit; Remarketing.

 
 
(a)
Neither Seller nor any affiliate of Seller shall have any obligation under
Section 3 of this Agreement, Section 3 of that certain Repurchase Agreement
dated November 25, 2009 (“Canada Repurchase Agreement”) by and between Seller
and TCF Commercial Finance Canada, Inc., a Canadian Federal corporation
(“TCFCFC”), or under similar provisions of any other repurchase agreement
entered into by and between Seller or an affiliate of Seller, on the one hand,
and Red Iron on the other, to repurchase any additional Inventory in a calendar
year once the aggregate amount of repurchase obligations fully and finally paid
hereunder to Red Iron during such calendar year, together with the aggregate
amount of any repurchase obligations fully and finally paid by Seller or any
affiliate of Seller to TCFCFC under Section 3 of the Canada Repurchase
Agreement, equals or exceeds the Net Repurchase Limit for such calendar
year.  “Net Repurchase Limit” shall mean Seven and One-Half Million Dollars
($7,500,000) for each calendar year during the term of this Agreement.  The
foregoing Net Repurchase Limit shall not relieve Seller or its affiliates from
(i) any obligation to repurchase or otherwise acquire any Inventory pursuant to
any separate agreement between Seller or an affiliate of Seller and any
Distributor or (ii) any other recourse obligation Seller or an affiliate of
Seller may have to Red Iron (including the recourse described in Sections 2(c),
2(e) and 3(i) hereof).  The value in United States Dollars of Inventory
repurchased pursuant to Section 4(a) of the Canadian Repurchase Agreement shall
be determined using the Canada dollar exchange rate printed in the Wall Street
Journal on the effective date of the applicable repurchase transaction.

 
 
(b)
Once the Net Repurchase Limit has been reached in a calendar year, Seller agrees
to use its best efforts to remarket any additional repossessed Inventory on
behalf of Red Iron on a non-discriminatory, non-priority basis for an amount not
less than the outstanding balance (including accrued but unpaid interest)
remaining due Red Iron on such Inventory.  As used herein, such best efforts
shall include advertising and using the same methods to market such Inventory as
Seller uses to market similar products in the course of conducting its own
business, subject to Red Iron’s rights to approve all aspects of any resale of
such Inventory.  Red Iron acknowledges that Seller in the ordinary course of its
business will be engaged in the marketing of other similar Inventory and that
such activity shall not constitute a breach of any duty of Seller under the
terms of this Section 4(b) so long as Seller complies with the two immediately
preceding sentences.  Red Iron will reimburse Seller for reasonable
out-of-pocket, third party expenses, including

 

 
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reasonable commissions (if any), incurred by Seller in providing remarketing
services pursuant to this Section 4(b).

 
5.
Seller Representations and Warranties.

 
 
(a)
Seller represents and warrants, at the time of any Red Iron Approval and/or
advance against any Invoice as provided hereunder, that: (i) each and every
Invoice issued by Seller or its affiliate, as applicable, represents valid
obligations of a Dealer and/or Distributor, is legally enforceable according to
its terms and relates to bona fide, original acquisition sales of Inventory by
Seller or its affiliate, as applicable, to a Dealer and/or Distributor without
any claim, offset or defense to payment by Dealer and/or Distributor and that
Dealer and/or Distributor requested that the acquisition of Inventory be
financed by Red Iron; (ii) Seller’s (or, as applicable, its affiliate’s) title
to all Inventory is free and clear of all security interests, liens and
encumbrances when transferred to Dealer and/or Distributor and Seller or its
affiliate, as applicable, transfers to Dealer and/or Distributor all its right,
title and interest in and to the Inventory; (iii) the Inventory is in new and
unused condition; it is of the kind, quality and condition represented or
warranted to Dealer and/or Distributor; it meets or exceeds all applicable
federal, state and local safety, manufacturing and other standards; and if it is
a type of Inventory customarily crated or boxed, such crate or box is factory
sealed.

 
 
(b)
In the event of breach of any of the foregoing representations or warranties,
Seller will, immediately upon demand, purchase from Red Iron the Wholesale
Instrument relating to the Invoice or Inventory with respect to which the
representation/warranty was breached and pay, in good immediately available
funds, the unpaid balance amount of the Wholesale Instrument, plus all charges
owing by Dealer and/or Distributor with respect thereto, and all of Red Iron’s
costs and expenses, including reasonable attorneys’ fees, actually incurred in
connection with such breach.

 
6.
Seller Covenants and Indemnity.  Seller covenants as follows:

 
 
(a)
All Inventory financed by Red Iron shall be subject to applicable product
warranties of Seller (or its affiliate, as applicable), and Seller agrees to
perform, or cause to be performed, all repairs, modifications and/or other acts
required of Seller or its affiliate, as applicable, pursuant to said product
warranties. All expenses of performance under this covenant shall be paid by
Seller.

 
 
(b)
If Seller or its affiliate, as applicable, accepts the return from any Dealer
and/or Distributor of any Inventory covered by any Wholesale Instrument,
voluntarily or otherwise, whether or not any substitution is made for such
returned Inventory, Seller will reimburse Red Iron for the unpaid balance amount
of the Wholesale Instrument within thirty (30) days of the return.

 
 
(c)
At any time at which Seller is not required to file reports with the U.S.
Securities Exchange Commission pursuant to Section 13 or Section 15(d) of the
Securities

 

 
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Exchange Act of 1934, as amended, Seller will, upon request, promptly provide
Red Iron with Seller’s year-end balance sheet and annual profit and loss
statement for each fiscal year prepared in accordance with generally accepted
accounting principles, consistently applied.

 
 
(d)
All transactions of Seller and its affiliates related to the sale of Inventory
financed by Red Iron shall comply with all applicable laws, rules, regulations
and orders of all governmental entities having jurisdiction over such
transactions.  Seller agrees to indemnify and hold Red Iron harmless from and
against any and all claims, damages, costs, expenses, penalties and judgments
asserted or imposed upon, or incurred by, Red Iron as a result of breach by
Seller or its affiliates of any provision of this Section 6.

 
 
(e)
Seller will notify Red Iron promptly (i) if Seller or its affiliate, as
applicable, terminates, or gives notice of its intent to terminate, its
agreement with any Distributor or (ii) if any Distributor terminates, or gives
notice of its intent to terminate, its agreement with Seller or one of its
affiliates.

 
7.
Waivers.

 
 
(a)
Seller (on behalf of itself and its affiliates) waives: notice of non-payment;
protest and dishonor and notice of protest and dishonor of any Wholesale
Instrument; notice of Red Iron’s acceptance of this Agreement; and all other
notices to which Seller or its affiliates might otherwise be entitled to by law.
Red Iron may, at any time or times, without notice to or further consent of
Seller or its affiliates, renew and extend the time of payment of Wholesale
Instruments and compromise or adjust claims on Wholesale Instruments or
Inventory covered thereby and waive or modify performance of such terms and
conditions of its financing arrangement with Dealers and/or Distributors, as Red
Iron may determine to be reasonable, and no such renewal, extension, compromise,
adjustment, waiver or modification shall affect the obligations or liabilities
of Seller hereunder.

 
 
(b)
No waiver of any provision of this Agreement shall be implied, and no waiver
shall be valid, unless it is in writing and signed by the person or party to be
charged.  No waiver of any breach of any of the terms, provisions or conditions
of this Agreement shall be construed as or held to be a waiver of any other
breach, or a waiver of, acquiescence in, or consent to, any further or
succeeding breach hereof.

 
8.
Term and Termination.

 
 
(a)
Initial Term.  The initial term of this Agreement shall commence on the
Effective Date and, provided this Agreement is not terminated earlier as
otherwise provided herein, shall continue until October 31, 2014 (the “Initial
Term”) and thereafter shall be extended automatically for additional two-year
terms (each, an “Additional Term”) unless at least one year prior to the
expiration of the Initial Term or Additional Term (as applicable) either party
gives notice to the other

 

 
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party of its intention not to extend the term, in which event the Agreement
shall terminate at the end of the then current Initial Term or Additional
Term.  Notwithstanding the foregoing, this Agreement shall automatically
terminate upon the final dissolution, winding up and liquidation of Red Iron.

 
 
(b)
Default Termination.  If Seller (or, as applicable, one of its affiliates) is in
default of any of the provisions of this Agreement and Seller shall fail to cure
(or cause the cure of) such default within thirty (30) days after notice by Red
Iron of such default (or such longer period of time as is reasonably necessary
to allow Seller to cure (or cause the cure of) such default but, in any event,
not more than seventy-five (75) days after notice by Red Iron of such default),
Red Iron shall then have the right to terminate this Agreement without further
notice and without penalty and the right to exercise all remedies available to
Red Iron under applicable law.

 
 
(c)
Effect of Termination.  The termination of all or any part of this Agreement
shall not affect the obligations of Seller or its affiliates with respect to
Invoices approved or advanced against by Red Iron, or other obligations incurred
by either party, prior to the effective date of such termination.

 
9.
General.

 
 
(a)
This Agreement has been duly authorized and executed by Seller and Red Iron and
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and/or assigns, subject to the limitations of this Section
9(a). Neither party may assign this Agreement without the prior written consent
of the other (which consent shall not be unreasonably withheld), unless such
assignment is to a successor-in-interest to the assigning party.

 
 
(b)
This Agreement constitutes the entire agreement between the parties and contains
all of the agreements between the parties with respect to the subject matter
hereof.  This Agreement supersedes any and all other agreements, either oral or
written, between the parties hereto with respect to the subject matter
hereof.  No amendment or modification of this Agreement shall be valid unless
the same shall be in writing and signed by the parties hereto.  Notwithstanding
the foregoing, the parties acknowledge that there may be other agreements
between them from time to time covering related matters such as financing
program terms, Seller sponsored rate programs or electronic invoice transmission
which shall continue in full force and effect. This Agreement shall not be
deemed to create, or intend, a joint venture, partnership, agency or other
similar relationship between Seller and Red Iron.

 
 
(c)
Notices and all other communication provided for herein shall be in writing and
shall be deemed to have been given to a party at the earlier of (i) when
personally delivered, (ii) 72 hours after having been deposited into the custody
of the U.S. Postal Service, sent by first class certified mail, postage prepaid,
(iii) one business day after deposit with a national overnight courier service,
(iv) upon receipt of a

 

 
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confirmation of facsimile transmission or (v) upon receipt of electronic mail
(with a notice contemporaneously given by another method specified in this
Section 9(c)); in each case addressed as follows:

 
If to Red Iron:                   Red Iron Acceptance, LLC
8111 Lyndale Avenue South
Bloomington, MN 55420
Attention: General Manager
Telephone: (952) 887-8266
Facsimile: (952) 887-8258
Email:  tevans@tcfif.com
 
If to Seller:                         The Toro Company
8111 Lyndale Avenue South
Bloomington, MN 55420
Attention: Treasurer
Telephone: 952-887-8449
Facsimile: 952-887-8920
Email: Tom.Larson@toro.com
 
or to such other address as either party hereto may have furnished to the other
party hereto in writing in accordance herewith, expect that notices of change of
address shall be effective only upon receipt.
 
 
(d)
This Agreement shall be subject to and governed by the laws of the state of
Illinois, without regard to conflicts of law principles.

 
 
(e)
The respective acts and obligations of the parties under this Agreement shall be
performed solely by said parties; provided, however, if any act or obligation
hereunder is performed by any party’s subsidiary, affiliate or agent, then such
performance shall be deemed to be the act or obligation of Seller or Red Iron,
as applicable.

 
 
(f)
Seller agrees to pay all reasonable out of pocket costs and expenses, including
attorneys’ fees, actually incurred by Red Iron in enforcing any of the
provisions of this Agreement.

 
 
(g)
EACH OF SELLER AND RED IRON, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
AS TO ANY ISSUE RELATING TO THIS AGREEMENT IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.  THIS WAIVER IS A MATERIAL INDUCEMENT FOR OUR ENTERING INTO
THIS AGREEMENT.

 
 
(h)
Each of Seller and Red Iron hereby irrevocably submits to the non-exclusive
jurisdiction of the Federal courts and the courts of the state of Minnesota
sitting in

 

 
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Minneapolis or St. Paul, Minnesota or any state court located in Hennepin
County, Minnesota, and by execution and delivery of this Agreement, each party
hereto accepts for itself and in connection with its properties, generally and
unconditionally, the non-exclusive jurisdiction of such courts with respect to
any litigation concerning this Agreement or the transactions contemplated hereby
or any matters related thereto.  Each party hereto irrevocably waives any
objection (including any objection to the laying of venue or any objection on
the grounds of forum non conveniens) which it may now or hereafter have to the
bringing of any proceeding with respect to this Agreement to the courts set
forth above.  Each party hereto agrees to the personal jurisdiction of such
courts and that service of process may be made on it at the address indicated in
Section 9(c) above.  Nothing herein shall affect the right to serve process in
any other manner permitted by law.

 
 
(i)
NO PARTY TO THIS AGREEMENT SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO
THIS AGREEMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH
PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR
PUNITIVE, EXEMPLARY OR, EXCEPT IN THE CASE OF FRAUD, BAD FAITH, WILLFUL
MISCONDUCT OR GROSS NEGLIGENCE, INDIRECT OR CONSEQUENTIAL DAMAGES THAT MAY BE
ALLEGED AS A RESULT OF ANY TRANSACTION CONTEMPLATED HEREUNDER.

 
 
(j)
If any portion or portions of this Agreement shall be, for any reason, invalid
or unenforceable, the remaining portion or portions shall nevertheless be valid,
enforceable and carried into effect, unless to do so would clearly violate the
present legal and valid intention of the parties hereto.

 
 
(k)
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same agreement.  This Agreement may be executed by facsimile signature or
electronic transmission, as directed by Red Iron.

 
 
(l)
The headings in this Agreement are inserted for convenience only and are not to
be considered in the interpretation or construction of the provisions
hereof.  Unless the context of this Agreement otherwise clearly requires, the
following rules of construction shall apply to this Agreement: (i) the words
“hereof,” “herein” and “hereunder” and words of similar import shall refer to
this Agreement as a whole and not to any particular provision of this Agreement;
(b) the words “include” and “including” and words of similar import shall not be
construed to be limiting or exclusive and (c) the word “or” shall have the
meaning represented by the phrase “and/or.”

 
[SIGNATURE PAGE FOLLOWS]
 

 
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the Effective Date.

 
The Toro Company
 
Red Iron Acceptance, LLC
Seller
     
By:
/s/ T. J. Larson
 
By:
/s/ Tom Evans
Print Name:
Thomas J. Larson
Print Name:
Tom Evans
Title:
Vice President, Treasurer
Title:
General Manager
Tax ID No.:
41-0580470
                               

 
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