Stock For Stock Exchange Agreement

EXHIBIT 10.5


STOCK FOR STOCK EXCHANGE AGREEMENT


This Stock for Stock Exchange Agreement (this "Agreement"), dated October 23, 1997, is made and entered into by and among Exmark Manufacturing Company Incorporated, a Nebraska corporation ("Exmark"), and Roger Smith ("Smith"), an individual resident of New Cumberland, Pennsylvania, and the owner of all of the outstanding shares of capital stock of The Holiman Co., Inc., a Pennsylvania corporation ("Holiman").


RECITAL


Smith desires to deliver to Exmark, and Exmark desires to acquire from Smith, all of the capital stock of Holiman, which is owned beneficially and of record by Smith, pursuant to the terms and conditions set forth in this Agreement. It is intended that the transactions contemplated by this Agreement qualify, for federal income tax purposes, as a tax-free reorganization under the provisions of Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the "Code").


In consideration of the foregoing and the mutual covenants, conditions and agreements set forth in this Agreement (the receipt and sufficiency of which are hereby acknowledged), the parties hereto agree as follows:


1. AGREEMENT BY SMITH TO DELIVER SHARES AND EXMARK TO ACQUIRE SHARES. Subject to the terms and conditions of this Agreement, on the Closing Date (as defined in Section 8 below), Smith agrees to deliver and Exmark agrees to acquire from Smith all of the outstanding shares of capital stock of Holiman (the "Shares"). At the Effective Time (as defined in Section 2(c) below), and subject to the terms and conditions of this Agreement, Exmark shall be the sole owner of all outstanding shares of capital stock of Holiman.


2. EXCHANGE OF SHARES. The Shares shall be acquired solely in exchange for shares of Class C Preferred Stock, $.01 par value per share, of Exmark (the "Exmark Class C Stock") as follows:


(a) EXCHANGE OF SHARES. In exchange for the delivery of the Shares by Smith to Exmark, Exmark shall deliver to Smith, as full consideration for the Shares, 3,689 shares of Exmark Class C Stock (the "Acquisition Consideration"). Such exchange is referred to herein as the "Share Exchange."


(b) PAYMENT OF ACQUISITION CONSIDERATION. On the Closing Date, Exmark shall deliver the Acquisition Consideration to Smith and contemporaneously Smith shall deliver to Exmark share certificates representing the Shares together with duly executed stock powers attached thereto transferring the Shares to Exmark.


(c) EFFECTIVE TIME. The Share Exchange shall be effected as promptly as practicable, but in no event more than three business days, after the satisfaction or waiver of the conditions set forth in Sections 6 and 7 of this Agreement. The time at which the Share Exchange is effected is referred to herein as the "Effective Time."


3. REPRESENTATIONS AND WARRANTIES OF SMITH. Smith hereby represents and warrants to Exmark as follows, except as set forth in the Disclosure Schedule delivered by Smith to Exmark on the date hereof (the "Disclosure Schedule") (which Disclosure Schedule sets forth certain exhibits referenced herein and exceptions to the representations and warranties contained in this Agreement under captions referencing each and every Section to which such exhibits or exceptions apply):


(a) INCORPORATION AND CORPORATE POWER. Holiman is a corporation duly incorporated, validly existing and in good standing under the laws of the state of Pennsylvania, and Holiman has the requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. Holiman has the corporate power and authority and all authorizations, licenses, permits and certifications necessary to own and operate its properties and to carry on its business as now conducted and presently proposed to be conducted. The copies of the articles of incorporation and bylaws of Holiman are set forth in the Disclosure Schedule and reflect all amendments made thereto and are correct and complete as of the date hereof. Holiman is qualified to do business as a foreign corporation in every jurisdiction in which the nature of its business or its ownership of property requires it to be so qualified.


(b) NO BREACH. The execution, delivery and performance of this Agreement by Smith and the consummation by Smith of the transactions contemplated hereby do not conflict with or result in any breach of any of the provisions of, constitute a default under, result in a violation of, result in the creation of a right of termination or acceleration or any lien, security interest, charge or encumbrance upon any assets of Holiman, or require any authorization, consent, approval, exemption or other action by or notice to any court, other governmental body or other "Person" (such term shall mean an individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, or government or political subdivision thereof) under the provisions of the articles of incorporation or bylaws of Holiman or any contract, indenture, mortgage, lease, loan agreement or other agreement, relationship, commitment or instrument, written or oral, by which Holiman or Smith are bound or affected, or any law, statute, rule or regulation or order, judgment or decree to which Holiman or Smith are subject.


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(c) GOVERNMENTAL AUTHORITIES; CONSENTS. Neither Smith nor Holiman is required to submit any notice, report or other filing with any governmental authority in connection with the execution or delivery by Smith of this Agreement or the consummation of the transactions contemplated hereby. No consent, approval or authorization of any governmental or regulatory authority or any other party or person is required to be obtained by Holiman or Smith in connection with Smith's execution, delivery and performance of this Agreement or the transactions contemplated hereby.


(d) SUBSIDIARIES; PREDECESSORS. Holiman does not own any stock, partnership interest, joint venture interest or any other security or ownership interest issued by any other corporation, organization, joint venture, partnership, limited liability company or entity.

(e) CAPITAL STOCK.


(i) On the date hereof, the authorized capital stock of
Holiman consists of 4,000 shares of common stock, par value $10.00 per
share, ("Holiman Common Stock"), of which 2,820 shares are issued and
outstanding as of the date hereof. On the date hereof and immediately
prior to the Effective Time, all of Holiman's issued and outstanding
capital stock is held of record by Smith. All such outstanding shares of
Holiman Common Stock (A) have been duly authorized and are validly issued,
fully paid and nonassessable, (B) are not subject to preemptive rights
created by statute, Holiman's articles of incorporation or bylaws, or any
other agreement to which either Holiman or Smith is bound and (C) were
issued in full compliance with all applicable securities laws.


(ii) There are no rights, subscriptions, warrants, options,
conversion rights or agreements of any kind outstanding to purchase or
otherwise acquire from Holiman any shares of Holiman Common Stock or other
securities of Holiman of any kind (and there are no agreements or other
obligations of Holiman to grant any of the foregoing) and there are no
agreements or other obligations (contingent or otherwise) which may require
Holiman to repurchase or otherwise acquire any shares of Holiman Common
Stock.


(iii) No persons other than Smith and Francine H. Smith are, in
Holiman's reasonable judgment, "affiliates" of Holiman within the meaning
of Rule 145 promulgated by the Securities Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "Securities Act").


(f) FINANCIAL STATEMENTS. The Disclosure Schedule sets forth copies of the unaudited balance sheets, as of June 30, 1997, June 30, 1996 and June 30, 1995, of Holiman and the unaudited statements of earnings, shareholders' equity and cash flows of Holiman for each of the years ended June 30, 1997, June 30, 1996 and June 30, 1995 (collectively, the "Holiman Annual Financial Statements"). Except as set forth in the Disclosure Schedule, the Holiman Annual Financial Statements are based upon the information contained in the


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books and records of Holiman and fairly present the financial condition of Holiman as of the dates thereof and respective results of operations for the periods referred to therein. The Holiman Annual Financial Statements have been prepared in accordance with generally accepted accounting principles (as such principles apply to unaudited financial statements ("GAAP")), on a basis consistent with the method used by Holiman in preparing the unaudited financial statements of Holiman for the three-year period from July 1, 1994 to June 30, 1997, which financial statements are presented in accordance with GAAP.


(g) ABSENCE OF UNDISCLOSED LIABILITIES. Except as reflected in the June 30, 1997 balance sheet included in the Holiman Annual Financial Statements (the "Latest Balance Sheet"), Holiman has no liabilities (whether accrued, absolute, contingent, unliquidated or otherwise, whether due or to become due, whether known or unknown, and regardless of when asserted) arising out of transactions or events heretofore entered into, or any action or inaction, or any state of facts existing, with respect to or based upon transactions or events heretofore occurring, except liabilities which have arisen in the ordinary course of business (none of which is an uninsured liability in excess of $10,000 for breach of contract, breach of warranty, tort, infringement, claim or lawsuit).


(h) NO MATERIAL ADVERSE CHANGES. Since the date of the Latest Balance Sheet, there has been no material adverse change in the assets, financial condition, operating results, co-distributor, customer, employee or supplier relations, business condition or prospects of Holiman (other than as a direct result of general economic conditions or an industry downturn).


(i) ABSENCE OF CERTAIN DEVELOPMENTS. Since May 1, 1997, Holiman has not (except as described in the Disclosure Schedule):


(i) borrowed any amount or incurred or become subject to any
liability in excess of $25,000, except (A) current liabilities incurred in
the ordinary course of business and (B) liabilities under contracts entered
into in the ordinary course of business;


(ii) mortgaged, pledged or subjected to any lien, charge or
any other encumbrance, any of its assets with a fair market value in excess
of $25,000, except (A) liens for current property Taxes not yet due and
payable, (B) liens imposed by law and incurred in the ordinary course of
business for obligations not yet due to carriers, warehousemen, laborers,
materialmen and the like, (C) liens in respect of pledges or deposits under
workers' compensation laws, or (D) liens voluntarily created in the
ordinary course of business, all of which liens aggregate less than
$25,000;


(iii) discharged or satisfied any lien or encumbrance or paid
any liability, in each case with a value in excess of $25,000, other than
current liabilities paid in the ordinary course of business;


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(iv) sold, assigned or transferred (including, without
limitation, transfers to any employees, affiliates or shareholders) any
tangible assets with a fair market value in excess of $25,000, or canceled
any debts or claims, in each case, except in the ordinary course of
business;


(v) sold, assigned or transferred (including, without
limitation, transfers to any employees, affiliates or shareholders) any
patents, trademarks, trade names, copyrights, trade secrets or other
intangible assets;


(vi) disclosed, to any person other than Exmark, the Toro
Company, a Delaware corporation ("Toro"), and authorized representatives of
Exmark and Toro, any proprietary confidential information, other than
pursuant to a confidentiality agreement prohibiting the use or further
disclosure of such information, which agreement is identified in the
Disclosure Schedule and is in full force and effect on the date hereof;


(vii) waived any rights of material value or suffered any
extraordinary losses or adverse changes in collection loss experience,
whether or not in the ordinary course of business or consistent with past
practice;


(viii) declared or paid any dividends or other distributions
with respect to any shares of Holiman's capital stock or redeemed or
purchased, directly or indirectly, any shares of Holiman's capital stock or
any options, warrants or other rights to purchase the same, except for the
payment of a one-time cash dividend to be paid between the date hereof and
the Effective Time, which dividend shall not exceed the difference between
(A) the net worth of Holiman prior to the payment of such dividend and (B)
$200,000;


(ix) issued, sold or transferred any of its equity securities,
securities convertible into or exchangeable for its equity securities or
options, warrants or other rights to acquire its equity securities, or any
bonds or debt securities;


(x) taken any other action or entered into any other
transaction other than in the ordinary course of business and in accordance
with past custom and practice, or entered into any transaction with any
"Insider" (as defined in Section 3(u) hereof) other than employment
arrangements otherwise disclosed in this Agreement and the Disclosure
Schedule, or the transactions expressly contemplated by this Agreement;


(xi) suffered any material theft, damage, destruction or loss
of or to any property or properties owned or used by it, whether or not
covered by insurance;


(xii) other than in the ordinary course of business consistent
with past practices, and except as expressly contemplated by Section 5(b)
of this


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Agreement, made or granted any bonus, or any wage, salary or compensation
increase to any director, officer, employee or consultant whose annual
compensation from Holiman in the preceding fiscal year exceeded $45,000, or
made or granted any increase in any employee benefit plan or arrangement,
or amended or terminated any existing employee benefit plan or arrangement,
or adopted any new employee benefit plan or arrangement or made any
commitment or incurred any liability to any labor organization;


(xiii) made any single capital expenditure or commitment
therefor in excess of $25,000;


(xiv) made any loans or advances to, or guarantees for the
benefit of, any persons in excess of $10,000;


(xv) made any charitable contributions or pledges in excess
of $10,000;


(xvi) made any change in accounting principles or practices
from those utilized in the preparation of the Holiman Annual Financial
Statements;


(xvii) experienced any amendment, modification or termination
of any existing, or entered into any new, contract, agreement, plan, lease,
license, permit or franchise which is, either individually or in the
aggregate, material to the business, operations, financial position or
prospects of Holiman other than in the ordinary course of business;


(xviii) experienced any labor dispute material to the business,
operations, financial position or prospects of Holiman;


(xix) experienced any change in any assumption underlying or
method of calculating, any bad debt, inventory, contingency or other
reserve;


(xx) experienced any lapse or termination of any material
permit that was issued or relates to Holiman or its business, including any
failure to renew any such permit; or


(xxi) discontinued or altered, in any material respect, its
advertising or promotional activities or its pricing and purchasing
policies.


(j) TITLE TO PROPERTIES.


(i) Holiman does not own any real property. The real
property listed as leased (the "Leased Property") in the Disclosure
Schedule constitutes all of the real property owned, used or occupied by
Holiman (the "Real Property"). Such Disclosure Schedule includes the
location, uses thereof and Holiman indebtedness


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thereon, if any, for all Real Property. The Real Property has access,
sufficient for the conduct of the business of Holiman as now conducted or
as presently proposed to be conducted, to public roads and to all
utilities, including electricity, sanitary and storm sewer, potable water,
natural gas and other utilities, used in the operation of the business of
Holiman at that location.


(ii) The leases for the Leased Property (the "Leases") are in
full force and effect, and Holiman holds a valid and existing leasehold
interest under each of the Leases for the term set forth in the Disclosure
Schedule. Holiman has delivered to Exmark complete and accurate copies of
each of the Leases, and none of the Leases has been modified in any
respect, except to the extent that such modifications are disclosed by the
copies delivered to Exmark. Except as set forth in the Disclosure
Schedule, Holiman is not in default, and to the knowledge of Holiman no
circumstances exist which, if unremedied, would, either with or without
notice or the passage of time or both, result in such default under any of
the Leases; nor to the knowledge of Holiman is any other party to any of
the Leases in default.


(iii) Holiman owns good and marketable title to each of the
tangible properties and tangible assets reflected on the Latest Balance
Sheet or acquired since the date thereof, free and clear of all liens and
encumbrances, except for (A) liens for current Taxes not yet due and
payable, (B) liens set forth in the Disclosure Schedule, (C) the properties
subject to the Leases, (D) assets disposed of since the date of the Holiman
Latest Balance Sheet in the ordinary course of business, (E) liens imposed
by law and incurred in the ordinary course of business for obligations not
yet due to carriers, warehousemen, laborers and materialmen and (F) liens
in respect of pledges or deposits under workers' compensation laws, all of
which liens aggregate less than $25,000.


(iv) All of the buildings, machinery, vehicles, equipment and
other tangible assets necessary for the conduct of the business of Holiman
are in good condition and repair, ordinary wear and tear excepted, and are
usable in the ordinary course of business. There are no defects in such
assets or other conditions relating thereto which adversely affect the
operation or value of such assets. Holiman owns or leases under valid
leases, all buildings, machinery, equipment and other tangible assets
necessary for the conduct of its business as presently conducted, except
for defects of title that do not materially affect the use of such assets
by Holiman and except for such assets that can be purchased or leased for
nominal consideration.


(k) ACCOUNTS RECEIVABLE. The accounts receivable reflected on the Holiman Latest Balance Sheet and those arising thereafter are valid receivables, are not subject to valid counterclaims or set-offs, and are collectible in accordance with their terms, except to the extent of the bad debt reserve reflected on the Holiman Latest Balance Sheet.


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(l) TAX MATTERS.


(i) Each of Holiman and any affiliated, combined or unitary
group of which Holiman is or was a member, any predecessor of Holiman and
any Plans (as defined in Section 3(q) hereof), as the case may be (each, a
"Tax Affiliate" and, collectively, the "Tax Affiliates"), has: (A) timely
filed (or has had timely filed on its behalf) all returns, declarations,
reports, estimates, information returns, and statements ("Returns")
required to be filed or sent by it in respect of any Taxes (as defined in
Section 3(l)(xi) hereof) or required to be filed or sent by it by any
taxing authority having jurisdiction and all such Returns are true and
correct in all material respects; (B) timely and properly paid (or has had
paid on its behalf) all Taxes due and payable with respect to the periods
covered by such Returns; (C) established on its Latest Balance Sheet, in
accordance with GAAP, reserves that are adequate for the payment of any
Taxes not yet due and payable for all Tax periods or portions thereof
ending on, prior to, or including the Closing Date, the amount of which as
of the date of the Latest Balance Sheet is set forth in the Disclosure
Schedule; and (D) complied with all applicable laws, rules, and regulations
relating to the withholding of Taxes and the payment thereof (including,
without limitation, withholding of Taxes under Sections 1441 and 1442 of
the Code, or similar provisions under any foreign laws), and timely and
properly withheld from individual employee wages or other payments to
employees and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over under all applicable laws. Since
the incorporation of Holiman, all of the compensation paid to Smith was
"reasonable allowance for salaries or other compensation" within the
meaning of Section 162(a)(1) of the Code and was fully deductible by
Holiman. True and correct copies of any and all Returns filed by any Tax
Affiliate have been provided to Exmark.


(ii) There are no liens for Taxes upon any assets of Holiman
or of any Tax Affiliate, except liens for Taxes not yet due. Holiman is
not a party to any tax sharing agreement or other arrangement for the
payment or reimbursement of Taxes.


(iii) No deficiency for any Taxes has been proposed, asserted
or assessed against Holiman or the Tax Affiliates that has not been
resolved and paid in full. No waiver, extension or comparable consent
given by Holiman or the Tax Affiliates regarding the application of the
statute of limitations with respect to any Taxes or Returns is outstanding,
nor is any request for any such waiver or consent pending. There has been
no Tax audit or other administrative proceeding or court proceeding with
regard to any Taxes or Returns, nor is any such Tax audit or other
proceeding pending, nor has there been any notice to Holiman by any Taxing
authority regarding any such Tax, audit or other proceeding, nor, to the
best knowledge of Holiman, is any such Tax audit or other proceeding
threatened with regard to any Taxes or Returns. Holiman does not expect
the assessment of any additional Taxes of Holiman or the Tax Affiliates and
is not aware of any


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unresolved questions, claims or disputes concerning the liability for Taxes
of Holiman or the Tax Affiliates which would exceed the estimated reserves
established on its books and records.


(iv) Neither Holiman nor any Tax Affiliate is a party to any
agreement, contract or arrangement that would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code and the consummation of the
transactions contemplated by this Agreement will not be a factor causing
payments to be made by Holiman or any Tax Affiliate that are not deductible
(in whole or in part) under Section 280G of the Code.


(v) Neither Holiman nor any Tax Affiliate has requested any
extension of time within which to file any Return, which Return has not
since been filed.


(vi) No property of Holiman or any Tax Affiliate is property
that Holiman or any Tax Affiliates is or will be required to treat as being
owned by another person under the provisions of Section 168(f)(8) of the
Code (as in effect prior to amendment by the Tax Reform Act of 1986) or is
"tax-exempt use property" within the meaning of Section 168 of the Code.


(vii) Neither Holiman nor any Tax Affiliate is required to
include in income any adjustment under Section 481(a) of the Code by reason
of a voluntary change in accounting method initiated by Holiman or any Tax
Affiliate as a result of the Tax Reform Act of 1986 and neither Holiman nor
any Tax Affiliate has knowledge that the Internal Revenue Service has
proposed any such adjustment or change in accounting method.


(viii) All transactions that could give rise to an
understatement of federal income tax (within the meaning of Section 6661 of
the Code as it applied prior to repeal) or an underpayment of tax (within
the meaning of Section 6662 of the Code) were reported in a manner for
which there is substantial authority or were adequately disclosed (or, with
respect to Returns filed before the Effective Time, will be reported in
such a manner or adequately disclosed) on the Returns required in
accordance with Sections 6661(b)(2)(B) and 6662(d)(2)(B) of the Code.


(ix) Neither Holiman nor any Tax Affiliate has engaged in any
transaction that would result in a deemed election under Section 338(e) of
the Code, and neither Holiman nor any Tax Affiliate will engage in any such
transaction within any applicable "consistency period" (as such term is
defined in Section 338 of the Code).


(x) Neither Holiman nor any Tax Affiliate has filed any
consent under Section 341(f) of the Code.


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(xi) For purposes of this Agreement, the term "Taxes" means
all taxes, charges, fees, levies, or other assessments, including, without
limitation, all net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, social security, unemployment, excise, estimated, severance,
stamp, occupation, property, or other taxes, customs duties, fees,
assessments, or charges of any kind whatsoever, including, without
limitation, all interest and penalties thereon, and additions to tax or
additional amounts imposed by any taxing authority, domestic or foreign,
upon Holiman or any Tax Affiliate.


(m) CONTRACTS AND COMMITMENTS.


(i) The Disclosure Schedule lists the following agreements,
whether ...