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 finan
