Document:

Exhibit 10.3

 

FORM OF REPURCHASE AGREEMENT

(Two Step)

 

This
Repurchase Agreement (“Agreement”)
is entered into as of [                 ,
2009] (“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. 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) “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.

 

(c) “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.

 

(d) “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.

 

(e) “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.

 

(f) “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.

 

(g) “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.

 

(h) “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.

 

(i) “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 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)  Upon payment
to Seller or an affiliate of Seller of the amount of an Invoice pursuant to the
terms of the preceding paragraphs (a) or (b), Seller or its affiliate, as
applicable, shall be deemed, without the necessity of any further action, to
have transferred, assigned, set over and otherwise conveyed to Red Iron,
without recourse except as provided herein, all its right, title and interest
in, to and under, 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 each Invoice, as a true
sale and absolute assignment of its full right, title and ownership interest
therein 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 Invoices to Red Iron.

 

(d)  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 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 attomeys’ fees and
courts 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.

 

(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 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 

 

2

 

(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 Toro 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 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 or under
the terms 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 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 Section 3(i) hereof).

 

(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 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 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

 

3

 

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 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.

 

4

 

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 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 successors and/or assigns of the
parties hereto. 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.  This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, subject to the limitations of this Section 9(a).

 

(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 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)
  888-8801

  
	
   

  	
  Facsimile: (952)
  887-8258

  
	
   

  	
  Email:

  
	
   

  	
   

  
	
  If to Seller:

  	
  The Toro Company

  
	
   

  	
  8111 Lyndale Avenue
  South

  
	
   

  	
  Bloomington, MN 55420

  
	
   

  	
  Attention: Treasurer

  

 

5

 

	
   

  	
  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
THEREBY.  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
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]

 

6

 

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:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Print Name:

  	
   

  	
   

  	
  Print Name:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Tax ID No.:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Address for Notices:

  	
   

  	
  Address for Notices:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Facsimile No.

  	
   

  	
   

  	
  Facsimile No.

  	
   

  

 

7Exhibit 4.1

 

Warrant
No. W-1

 

THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW, AND MAY NOT BE ACQUIRED
UPON EXERCISE HEREUNDER, SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF UNLESS (i) A REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH
REGARD THERETO, OR (ii) AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH
OFFER, SALE OR TRANSFER.

 

COMMON STOCK PURCHASE WARRANT

 

To Purchase Shares of Common
Stock of

 

EXACT
SCIENCES CORPORATION

 

THIS COMMON STOCK PURCHASE
WARRANT (the “Warrant”) certifies that, for value received, MAYO
Foundation for Medical Education and Research (“Mayo”, and together with
any other registered holder(s) hereunder, the “Holder”), is entitled,
upon the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the date hereof (the “Initial
Exercise Date”) and on or prior to the close of business on the six-year
anniversary of the Initial Exercise Date (the “Termination Date”) but
not thereafter, to subscribe for and purchase from EXACT Sciences Corporation,
a Delaware corporation (the “Company”), up to One Million (1,000,000)
shares (the “Warrant Shares”) of Common Stock, par value $0.01 per
share, of the Company (the “Common Stock”).  The purchase price of one share of Common
Stock under this Warrant shall be equal to the Exercise Price, as defined in Section
2(b).

 

Section 1.                                            License
Agreement.  This
Warrant is being issued in connection with that certain License Agreement (the “License
Agreement”), dated June 11, 2009, between the Company and Mayo, as
consideration for the licenses granted to the Company thereunder.

 

Section 2.                                            Exercise.

 

a)                                      Exercise of
Warrant.  Subject to compliance with
applicable securities laws, exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by delivery to the
Company of a duly executed facsimile copy of the Notice of Exercise Form annexed
hereto (or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder at the address of such Holder
appearing on the books of the Company); provided, however, within
five Trading Days (as defined below) of the date said Notice of Exercise is
delivered to the Company, if this Warrant is exercised in full, the Holder
shall have surrendered this Warrant to the Company and the Company shall have
received payment of the aggregate Exercise Price of the Warrant Shares thereby
purchased by wire

 

 

transfer
or cashier’s check drawn on a United States bank.  Notwithstanding anything herein to the
contrary, the Holder shall not be required to physically surrender this Warrant
to the Company until the Holder has purchased all of the Warrant Shares
available hereunder and the Warrant has been exercised in full.  Partial exercises of this Warrant resulting
in purchases of a portion of the total number of Warrant Shares available
hereunder shall have the effect of lowering the outstanding number of Warrant
Shares purchasable hereunder in an amount equal to the applicable number of
Warrant Shares purchased.  The Holder and
the Company shall maintain records showing the number of Warrant Shares
purchased and the date of such purchases. 
The Company shall deliver any objection to any Notice of Exercise Form within
five Business Days (as defined below) of receipt of such notice.  In the event of any dispute or discrepancy,
the records of the Company shall be controlling and determinative in the
absence of manifest error.  The Holder
and any assignee, by acceptance of this Warrant, acknowledge and agree that, by
reason of the provisions of this paragraph, following the purchase of a portion
of the Warrant Shares hereunder, the number of Warrant Shares available for
purchase hereunder at any given time may be less than the amount stated on the
face hereof.  As used in this Warrant, “Trading
Day” means a day on which the Common Stock is traded on one of the
following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the Nasdaq Capital Market, the American
Stock Exchange, the New York Stock Exchange, the Nasdaq Global Market, the
Nasdaq Global Select Market or the OTC Bulletin Board (each, a “Trading
Market”).  If for any period prior to
the Termination Date the Common Stock ceases to trade on a Trading Market, the
term “Business Day”, meaning any day other than a Saturday, Sunday or
legal holiday, shall replace the term “Trading Day” in this Warrant for such
period.

 

b)                                     Exercise Price.  The per share exercise price of the Common
Stock under this Warrant shall be $1.90, subject to adjustment hereunder (the “Exercise
Price”).

 

c)                                      Cashless
Exercise.  This
Warrant may also be exercised at any time in whole or in part by means of a “cashless
exercise” in which the Holder shall be entitled to receive a certificate for
the number of Warrant Shares equal to the quotient obtained by dividing [(A-B)
(X)] by (A), where:

 

(A)                              = the VWAP on the
Trading Day immediately preceding the date of such election;

 

(B)                                = the Exercise
Price of this Warrant, as adjusted; and

 

(X)                               = the number of
Warrant Shares for which the cashless exercise is elected that are issuable
upon exercise of this Warrant in accordance with the terms of this Warrant by
means of a cash exercise rather than a cashless exercise.

 

For the purposes of this Section
2(c), “VWAP” means, for any date, the price determined by the first of
the following clauses that applies:  (i) if
the Common Stock is then listed or quoted on a Trading Market, the daily volume
weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed
or quoted for trading as reported by Bloomberg L.P. (based on a Trading Day
from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time); (ii) if
the Common Stock is not then quoted for trading on a Trading Market and if
prices for the Common Stock are then

 

2

 

reported
in the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization
or agency succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported; or (iii) in all other cases,
the fair market value of a share of Common Stock as determined by an
independent appraiser selected in good faith and paid for by the Company and
reasonably acceptable to the Holder.

 

d)                                     Mechanics of Exercise.

 

i.                                          Authorization
of Warrant Shares.  The Company
covenants that all Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of the purchase
rights represented by this Warrant, be duly authorized, validly issued, fully
paid and nonassessable and free from all taxes, liens and charges in respect of
the issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).

 

ii.                                       Delivery of
Certificates Upon Exercise.  Certificates for shares purchased hereunder
shall be transmitted by the transfer agent of the Company to the Holder by
crediting the account of the Holder’s prime broker with the Depository Trust
Company through its Deposit Withdrawal Agent Commission (“DWAC”) system
if the Company is a participant in such system, and otherwise by physical
delivery to the address specified by the Holder in the Notice of Exercise
within three Trading Days from the delivery to the Company of the Notice of
Exercise Form, surrender of this Warrant (if required) and payment of the
aggregate Exercise Price as set forth above (“Warrant Share Delivery Date”).  This Warrant shall be deemed to have been
exercised on the date the Exercise Price is received by the Company.  The Warrant Shares shall be deemed to have
been issued, and Holder or any other person so designated to be named therein
shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the Warrant has been exercised by payment to the
Company of the Exercise Price.

 

iii.                                    Restrictive
Legend. The Holder understands that unless the Warrant Shares may be sold
pursuant to Rule 144 under the Securities Act or another exemption from
registration under the Securities Act without any restriction as to the number
of securities as of a particular date that can then be immediately sold, the
Warrant Shares may bear a restrictive legend in substantially the form included
on this Warrant (and a stop-transfer order may be placed against transfer of
the certificates for such securities).

 

iv.                                   Delivery of New
Warrants Upon Exercise.  If
this Warrant shall have been exercised in part, the Company shall, at the
request of a Holder and upon surrender of this Warrant certificate, at the time
of delivery of the certificate or certificates representing Warrant Shares,
deliver to Holder a new Warrant evidencing the rights of Holder to purchase the
unpurchased Warrant Shares called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant.

 

v.                                      No Fractional
Shares or Scrip.  No
fractional shares or scrip representing fractional shares shall be issued upon
the exercise of this Warrant.  As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the

 

3

 

Company shall pay a cash
adjustment in respect of such final fraction in an amount equal to such
fraction multiplied by the Exercise Price.

 

Section
3.                                            Certain
Adjustments.

 

a)                                      Stock Dividends
and Splits.  If the
Company, at any time while this Warrant is outstanding:  (A) pays a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Company pursuant to this Warrant or the other Warrants), (B) subdivides
outstanding shares of Common Stock into a larger number of shares, (C) combines
(including by way of reverse stock split) outstanding shares of Common Stock
into a smaller number of shares, or (D) issues by reclassification of shares of
the Common Stock any shares of capital stock of the Company, then in each case
the Exercise Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding immediately before such event and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after
such event and the number of shares issuable upon exercise of this Warrant
shall be proportionately adjusted.  Any
adjustment made pursuant to this Section 3(a) shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination
or re-classification.

 

b)                                     Sale of Assets
and Mergers.  Upon the
sale by the Company of all or substantially all of its assets, or the merger or
consolidation of the Company with or into another entity in a transaction where
the shares of Common Stock outstanding immediately prior to the closing of such
merger or consolidation represent or are converted into or exchanged for shares
that represent less than a majority of the shares of capital stock of the
resulting or surviving entity outstanding immediately after the closing of such
merger or consolidation (each, a “Business Event”), this Warrant shall
be deemed exercised pursuant to a cashless exercise, with VWAP meaning the fair
market value of a share of Common Stock based on such Business Event.

 

c)                                      Calculations.  All calculations under this Section 3 shall
be made to the nearest cent or the nearest 1/100th of a share, as the case may
be.  For purposes of this Section 3, the
number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.

 

Section
4.                                            Transfer of
Warrant.

 

a)                                      Transferability.  Subject to the Securities Act and any other
restrictions set forth herein, this Warrant and all rights hereunder are
transferable (but only with all related obligations) with the prior written
consent of the Company and upon surrender of the Warrant with a properly
executed assignment, reasonably satisfactory to the Company, at the principal
office of the Company or such other office or agency as the Company may
designate.  Each Holder (i) acknowledges
that this Warrant and the Warrant Shares have not been registered under the
Securities Act, and (ii) agrees not to sell, pledge, distribute, offer for
sale, transfer or

 

4

 

otherwise dispose of this
Warrant or any Warrant Shares in the absence of (A) an effective registration
statement under the Securities Act as to this Warrant or the Warrant Shares and
registration or qualification of this Warrant or the Warrant Shares under any
applicable blue sky or state securities law then in effect, or (B) an opinion
of counsel, reasonably satisfactory to the Company, that such registration and
qualification are not required.

 

b)                                     New Warrants.  This Warrant may be divided or combined with
other Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 4(a), as
to any transfer which may be involved in such division or combination, the
Company shall execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with such notice.

 

c)                                      Warrant
Register.  The Company
shall register this Warrant, upon records to be maintained by the Company for
that purpose (the “Warrant Register”), in the name of the record Holder
hereof from time to time.  The Company
may deem and treat the registered Holder of this Warrant as the absolute owner
hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.

 

Section
5.                                            Notice of
Certain Events.  In case at any time or
from time to time:

 

a)                                      the Company shall take a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right;

 

b)                                     the Company shall declare a
dividend (or any other distribution) on the shares of Common Stock or other
equity interests, if any, of the Company;

 

c)                                      the Company shall authorize
the granting to the holders of the shares of Common Stock or other equity
interests, if any, of the Company of rights or warrants to subscribe for or
purchase any equity interests of any class or of any other rights or warrants;

 

d)                                     there shall be any
reclassification of the shares of Common Stock or other equity interests, if
any, of the Company, or any consolidation or merger to which the Company is a
party and for which approval of any holders of shares of Common Stock of the
Company is required, or any sale or other disposition of all or substantially
all of the assets of the Company; or

 

e)                                      of the voluntary or
involuntary dissolution, liquidation or winding up of the Company;

 

then the Company shall mail to Holder at the
last address of the Holder appearing on the books of the Company, as promptly
as possible but in any event at least twenty days prior to the applicable date
hereinafter specified, a notice stating (i) the date on which a record is to be
taken for the purpose of such dividend, distribution or rights or warrants or,
if a record is not to be taken, the date as of which the holders of shares of
Common Stock of

 

5

 

record to be entitled to such dividend,
distribution or rights are to be determined, (ii) the date of the distribution,
together with a description of the property to be distributed, (iii) the date
of such issuance, together with a description of the security so issued and the
consideration received by the Company therefor, and (iv) the date on which such
reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation or winding up is expected to become effective, the time, if any
such time is to be fixed, as of which the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of Common Stock
(or other securities) for the securities or other property deliverable upon
such reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation or winding up, and a description in reasonable detail of the
transaction.  Such notice shall be mailed
at least twenty days prior to the date or expected date therein specified.

 

Section
6.                                            Miscellaneous.

 

a)                                      No Rights as
Stockholder Until Exercise.  This Warrant does not entitle the Holder to
any voting rights or other rights as a stockholder of the Company prior to the
exercise hereof.  Upon the surrender of
this Warrant and the payment of the aggregate Exercise Price (or by means of a
cashless exercise), the Warrant Shares so purchased shall be and be deemed to
be issued to such Holder as the record owner of such shares as of the close of
business on the later of the date of such surrender or payment.

 

b)                                     Loss, Theft,
Destruction or Mutilation of Warrant.  The Company covenants that upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant or any stock certificate relating to
the Warrant Shares, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it (which, in the case of the Warrant,
shall not include the posting of any bond), and upon surrender and cancellation
of such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.

 

c)                                      Business Days. If the last
or appointed day for the taking of any action or the expiration of any right
required or granted herein shall not be a Business Day, then such action may be
taken or such right may be exercised on the next succeeding Business Day.

 

d)                                     Authorized
Shares.

 

The Company covenants that
during the period the Warrant is outstanding, it will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of the Warrant Shares upon the exercise of any purchase rights
under this Warrant.  The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant.  The Company will take all such reasonable
action as may be necessary to assure that such Warrant Shares may be issued as
provided herein without violation of any applicable law or regulation.

 

6

 

Except and to the extent as
waived or consented to by the Holder, the Company shall not by any action,
including, without limitation, amending its certificate of incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant
against impairment.  Without limiting the
generality of the foregoing, the Company will (a) not increase the par value of
any Warrant Shares above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (b) take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the exercise of
this Warrant, and (c) use commercially reasonable efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant.

 

Before taking any action
which would result in an adjustment in the number of Warrant Shares for which
this Warrant is exercisable or in the Exercise Price, the Company shall obtain
all such authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction
thereof.

 

e)                                      Governing Law.  This Warrant shall be governed by and
construed in accordance with Delaware law without regard for its conflicts of
law principals.

 

f)                                        Nonwaiver and
Expenses.  No course
of dealing or any delay or failure to exercise any right hereunder on the part
of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s
rights, powers or remedies, notwithstanding the fact that all rights hereunder
terminate on the Termination Date.  If
the Company willfully and knowingly fails to comply with any provision of this
Warrant, which results in any material damages to the Holder, the Company shall
pay to Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys’ fees, including
those of appellate proceedings, incurred by Holder in collecting any amounts
due pursuant hereto or in otherwise enforcing any of its rights, powers or
remedies hereunder.

 

g)                                     Notices.  Any notice, request or other document
required or permitted to be given or delivered to the Holder by the Company
shall be delivered in accordance with the notice provisions of the License
Agreement.

 

h)                                     Successors and
Assigns.  Subject to applicable
securities laws, this Warrant and the rights and obligations evidenced hereby
shall inure to the benefit of and be binding upon the successors of the Company
and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended
to be for the benefit of all Holders from time to time of this Warrant and
shall be enforceable by any such Holder or holder of Warrant Shares.

 

i)                                         Amendment.  This Warrant may be modified or amended or
the provisions hereof waived with the written consent of the Company and the
Holder.

 

7

 

j)                                         Severability.  Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.

 

k)                                      Headings.  The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.

 

********************

 

8

 

IN WITNESS WHEREOF, the
Company has caused this Warrant to be executed by its officer thereunto duly
authorized.

 

Dated:  June 11, 2009

 

	
   

  	
  EXACT SCIENCES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Kevin T. Conroy

  
	
   

  	
   

  	
  Name:

  	
  Kevin
  T. Conroy

  
	
   

  	
   

  	
  Title:

  	
  CEO
  and President

  

 

9

 

NOTICE OF EXERCISE

 

TO:                            EXACT Sciences
Corporation

 

(1)                                  The undersigned
hereby elects to purchase
            
Warrant Shares of the Company pursuant to the terms of the attached Warrant,
and tenders herewith payment of the exercise price, together with all
applicable transfer taxes, if any, in accordance with paragraph (2) below.

 

(2)                                  Payment shall
take the form of (check applicable box):

 

o            $                                    
in lawful money of the United States; or

 

o            the cancellation of such number of Warrant Shares as
is necessary, in accordance with the formula set forth in subsection 2(c), to
exercise this Warrant with respect to the number of Warrant Shares purchasable
pursuant to the cashless exercise procedure set forth in subsection 2(c).

 

(3)                                  Please issue a
certificate or certificates representing said Warrant Shares in the name of the
undersigned or in such other name as is specified below:

 

 

The Warrant Shares shall be
delivered to the following:

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