August 199312-1730D
APPENDIX I
AGREEMENT OF PURCHASE AND SALE
dated as of
FEBRUARY 25, 1992
among
PARK-OHIO INDUSTRIES, INC.,
PO ACQUISITION COMPANY, INC., KAY HOME PRODUCTS, INC. and
EDWARD F. CRAWFORD
MERGERS AND ACQUISITIONS§12.505
B
TABLE OF CONTENTS
Page
ARTICLE I — PURCHASE AND SALE OF ASSETS ......................................................... 1
1.1 Purchase and Sale of Assets ................................................................................. 1
1.2 Purchase Price ...................................................................................................... 1
1.3 Issuance of Contingent Shares ............................................................................. 2
1.4 Purchase Price Adjustment .................................................................................. 3
1.5 Closing ................................................................................................................. 4
1.6 Deliveries at Closing ............................................................................................ 4
ARTICLE II — ASSUMPTION OF LIABILITIES ............................................................... 5
2.1 Assumption of Liabilities ..................................................................................... 5
2.2 No Other Liabilities Assumed.............................................................................. 5
2.3 Assumed Contracts............................................................................................... 6
ARTICLE III — COVENANTS AND AGREEMENTS ........................................................ 6
3.1 Conduct of Business Until Closing Date ............................................................. 6
3.2 Access and Confidentiality .................................................................................. 7
3.3 No Other Acquirors .............................................................................................. 7
3.4 Best Efforts........................................................................................................... 7
3.5 Certain Tax Matters.............................................................................................. 8
3.6 Approval by Park-Ohio’s Shareholders ............................................................... 9
3.7 Proxy Statement and Registration Statement ....................................................... 9
3.8 Indemnification Regarding Proxy Statement and Registration Statement........... 10
3.9 Publicity ............................................................................................................... 10
3.10 Noncompetition; Nonsolicitation ......................................................................... 10
3.11 Notice of Certain Events ...................................................................................... 10
3.12 Conduct of Park-Ohio .......................................................................................... 11
3.13 Extension of Existing Standstill Agreement ........................................................ 11
3.14 Employee Matters ................................................................................................ 11
3.15 Dividends by KHP to Crawford ........................................................................... 11
3.16 No Solicitation by Park-Ohio ............................................................................... 12
3.17 Release from Guarantees...................................................................................... 12
ARTICLE IV — REPRESENTATIONS AND WARRANTIES ........................................... 12
4.1 Representations and Warranties of Crawford and KHP ...................................... 12
4.2 Representations and Warranties of Park-Ohio and Purchaser ............................. 18
ARTICLE V — CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF CRAWFORD AND KHP.......................................................................
21
5.1 Representations and Warranties True .................................................................. 21
5.2 Performance of Obligations and Agreements ...................................................... 21
5.3 Resolutions ........................................................................................................... 21
5.4 Officers’ Certificate ............................................................................................. 21
5.5 Opinion of Counsel for Park-Ohio and Purchaser ............................................... 21
5.6 Employment and Standstill Agreements .............................................................. 22
5.7 P-O Material Adverse Effect................................................................................ 22
ARTICLE VI — CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARK-OHIO AND PURCHASER ............................................................
22
6.1 Representations and Warranties True .................................................................. 22
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August 199312-1730D
6.2 Performance and Obligations and Agreements .................................................... 22
Page
6.3 Resolutions ............................................................................................................... 22
6.4 Certificate ................................................................................................................. 22
6.5 Opinion of Counsel for Crawford and KHP ............................................................ 22
6.6 Fairness Opinion ...................................................................................................... 23
6.7 Employment and Standstill Agreements .................................................................. 23
6.8 Consents and Approvals........................................................................................... 23
6.9 Material Adverse Effect ........................................................................................... 23
6.l0 Indebtedness; Net Worth .......................................................................................... 23
ARTICLE VII — RECIPROCAL CONDITIONS PRECEDENT ......................................... 23
7.1 Governmental and Other Approvals ........................................................................ 23
7.2 No Injunctions or Restraints .................................................................................... 23
7.3 Shareholder Approval; Registration Statement........................................................ 23
7.4 Financing .................................................................................................................. 24
ARTICLE VIII — INDEMNIFICATION .............................................................................. 24
8.1 Indemnification ........................................................................................................ 24
8.2 Indemnification by Park-Ohio and Purchaser .......................................................... 24
8.3 Provisions Governing Indemnification .................................................................... 24
8.4 Indemnification Procedures ..................................................................................... 25
8.5 Survival of Representations and Warranties ............................................................ 25
ARTICLE IX — TERMINATION ......................................................................................... 26
9.1 Bases for Termination .............................................................................................. 26
9.2 Written Notice .......................................................................................................... 26
9.3 Effect of Termination ............................................................................................... 26
ARTICLE X — AMENDMENTS .......................................................................................... 27
ARTICLE XI — GENERAL PROVISIONS.......................................................................... 27
11.1 Expenses................................................................................................................... 27
11.2 Notices ..................................................................................................................... 27
11.3 Corporate Action ...................................................................................................... 27
11.4 Governing Law ........................................................................................................ 27
11.5 Successors ................................................................................................................ 27
11.6 Assignment............................................................................................................... 27
11.7 Counterparts ............................................................................................................. 28
11.8 Bulk Sales ................................................................................................................ 28
11.9 Action by Crawford ................................................................................................. 28
SIGNATURES ........................................................................................................................ 28
EXHIBITS
EXHIBIT A — Form of Standstill Agreement
EXHIBIT B — Form of Employment Agreement
EXHIBIT C — Form of Bill of Sale and General Assignment
EXHIBIT D — Form of Deed of Assumption of Assumed Liabilities and Assumed Contracts
MERGERS AND ACQUISITIONS§12.505
D
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE (the “Agreement”), dated as of February 25, 1992, is
among PARK-OHIO INDUSTRIES, INC., an Ohio corporation (“Park-Ohio”), PO ACQUISITION
COMPANY, INC., an Ohio corporation (“Purchaser”) and a wholly owned subsidiary of Park-Ohio, KAY
HOME PRODUCTS, INC., an Ohio corporation (“KHP”), and EDWARD F. CRAWFORD, owner of all the
issued and outstanding shares of stock of KHP (“Crawford”).
WHEREAS, on the terms and subject to the conditions set forth in this Agreement, KHP desires to sell the
Assets (as hereinafter defined) and assign the Assumed Liabilities (as hereinafter define d) to Purchaser, and
Purchaser desires to acquire the Assets and assume the Assumed Liabilities from KHP; and
WHEREAS, on the Closing Date (as hereinafter defined), Park-Ohio, KHP and Crawford will be entering
into a Standstill Agreement in the form of Exhibit A attached hereto (the “Standst ill Agreement”), which
provides, among other things, for certain restrictions on KHP’s and Crawford’s ability to acquire addi tional
shares of voting stock of the Company; and
WHEREAS, the parties intend that this transaction qualify as a tax-free reorganizati on under Section
368(a)(1)(c) of the Code (as hereinafter defined), and
WHEREAS, on the Closing Date, Park-Ohio and Crawford will be entering into an Employment
Agreement in the form of Exhibit B attached hereto (the “Employment Agreement”), which provides, among
other things, that the Company will hire Crawford as Chairman of the Board and Chief Executive Officer for a
three year term.
NOW, THEREFORE, in consideration of their respective agreements and undertakings set forth herein
and in the Standstill Agreement and the Employment Agreement, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Purchase and Sale of Assets. On the terms and subject to the conditions set forth in this Agreement,
at the Closing (as defined in Section 1.5 hereof), KHP shall sell, transfer, convey, assign and deliver to
Purchaser, and Purchaser shall purchase from KHP, all of the right, title and interest of KHP and its affiliates
and associates (for purposes of this Agreement, such terms shall have the meanings set forth in Rule 12b-2 of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), in, to and under the businesses,
franchises, licenses, rights, privileges, properties and assets (of every kind, nature and descripti on, real, personal
or mixed, tangible or intangible and wherever situated), including the goodwill and business as a going concern,
existing as of the Closing Date (as defined in Section 1.5 hereof) and used in the busine ss of KHP or otherwise
necessary to carry on the business of KHP as presently conducted (the “Assets”), including, without limitation,
(i) all of the assets reflected on the Closing Balance Sheet, (ii) all rea l and personal property, including
machinery, equipment and fixtures; (iii) all inventory; (iv) all cash and cash e quivalents, accounts receivable
and all other notes receivable, deposits and advances; (v) all prepaid items; (vi) all agreements, contracts,
commitments, leases, licenses and other arrangements (to the extent assignable); (vii) all intellectual property
(including all applications and registrations therefor) and other intangibles, including pa tents, trademarks,
tradenames, service marks, copyrights, trade secrets, know-how, inventions, goodwill and organizational costs;
(viii) all computer hardware and software; (ix) all books of account, records, files, invoic es, customer and
supplier lists and other data relating to the business of KHP; and (x) all permits, lic enses, authorizations,
approvals and consents (to the extent assignable) related to the business of KHP.
1.2 Purchase Price. On the terms and subject to the conditions set forth in this Agreement, for and in
consideration of the sale of the Assets, Park-Ohio shall issue to KHP (i) 850,000 shares of Common Stoc k, par
value $1.00 per share (“Shares”), of Park-Ohio at the Closing, subject to adjustment as provided in Section 1.4
(the “Initial Shares”), and (ii) the number of additional Shares, if any, provided for in Section 1.3 hereof.
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1.3 Issuance of Contingent Shares.
(a) Upon the terms and subject to the conditions set forth in this Section 1.3, on the da te which is
the later of (i) the date 10 days after receipt by Park-Ohio of audited financial state ments of Purchaser (the
“Financial Statements”) for the period commencing on the day following the Closing Dat e (the “Initial
Date”) and ending on the second anniversary of the Initial Date (the “Earn-Out Period”) and (ii) if
disputed pursuant to (e) be low, the date 10 days after the final resolution of such disputes, Pa rk-Ohio
shall issue to KHP the number of Shares, if any, determined pursuant to (b) be low.
(b) Subject to (g) be low, based upon Pre-Tax Income, the number of Shares issuable by Park-
Ohio to KHP pursuant to (a) above is as follows:
Pre-Tax Income Number of Shares
$6,000,000 or more .................................................................. 1,150,000
$5,900,000 to $5,999,999 ........................................................ l, 130,000
$5,750,000 to $5,899,999 ........................................................ 1,085,000
$5,600,000 to $5,749,999 ........................................................ 1,040,000
$5,450,000 to $5,599,999 ........................................................ 995,000
$5,300,000 to $5,449,999 ........................................................ 950,000
$5,150,000 to $5,299,999 ........................................................ 900,000
$5,000,000 to $5,149,999 ........................................................ 850,000
$4,850,000 to $4,999,999 ........................................................ 790,000
$4,700,000 to $4,849,999 ........................................................ 725,000
$4,550,000 to $4,699,999 ........................................................ 660,000
$4,400,000 to $4,549,999 ........................................................ 595,000
$4,250,000 to $4,399,999 ........................................................ 525,000
$4,100,000 to $4,249,999 ........................................................ 455,000
$3,950,000 to $4,099,999 ........................................................ 385,000
$3,800,000 to $3,949,999 ........................................................ 315,000
$3,650,000 to $3,799,999 ........................................................ 245,000
$3,500,000 to $3,649,999 ......................................................... 175,000
$3,350,000 to $3,499,999 ......................................................... 105,000
$3,200,000 to $3,349,999 ......................................................... 35,000
Less than $3,200,000 ................................................................ 0
Notwithstanding the foregoing, if Long-Term Debt (as defined in (c) be low) exceeds $3,000,000, no
Shares shall be issuable by Park-Ohio pursuant to this Section 1.3.
(c) For purposes of this Section 1.3, the following terms shall have the following meanings:(i) “Pre-Tax Income” shall mean the “Income be fore Income Taxes” of Purchaser
(consistent with the manner in which such amount is determined for KHP for the eleven months
ended November 30, 1991) for the Earn-Out Period as set forth in the Financial Statements or, if
disputed pursuant to (e) be low, the amount finally determined pursuant to the dispute re solution
procedure set forth in (e) be low;
(ii) “Long-Term Debt” shall mean the outstanding long-term debt for borrowed money of
Purchaser as at the last day of the Earn-Out Period determined in accordance wit h GAAP and ·
including, without limitation, the current maturities of all such long-term debt and a ll capitalized
lease obligations of Purchaser and any indebtedness incurred outside of the ordinary course of
business in lieu of long term debt for borrowed money or which is used, directly or indirectly, to
refinance or reduce long-term debt for borrowed money; and
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(iii) “GAAP” shall mean generally accepted accounting principles as consistently applied by
Park-Ohio in the preparation of its financial statements, except that inventory of Purcha ser shall be
valued using FIFO rather than LIFO used by Park-Ohio.
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(d) The Financial Statements shall be prepared by Park-Ohio’s accountants in accordance with
GAAP with the following exceptions: (i) all expenses or liabilities incurred by Park-Ohio or its affiliates
(other than Purchaser) on be half of Purchaser shall be included as expenses or liabilities of Purchaser; (ii)
no allocation shall be made to Purchaser for general corporate overhead of Park-Ohio or corporat e
services performed by Park-Ohio for Purchaser, (iii) the salary and benefits of the President, Cha irman
and Chief Executive Officer, if any, as well as all other employees of Purcha ser shall be included as
expenses of Purchaser, (iv) the salary and benefits of Crawford as Chairman and Chief Execut ive Officer
of Park-Ohio and of any other employees of Park-Ohio and its affiliates (other than Purchaser) shall not be
included as expenses of Purchaser, provided that there shall be a charge to Purchaser for t ime spent by any
employees of Park-Ohio and its affiliates (other than Purchaser) on matters for Purchaser if such
employees devote substantial time and efforts on be half of Purchaser; provided, further, that there shall
not be a charge to Purchaser for the salary and benefits of senior officers or members of the c orporate staff
performing services for the Purchaser in the ordinary course of their duties; (v) all interest paid or accrued
during the Earn-Out Period on any debt of Purchaser and on any capitalized leases of Purchaser duri ng the
Earn-Out Period shall be subtracted in calculating Pre-Tax Income; (vi) no allocati on shall be made to
Purchaser for the preparation of the Financial Statements or for other services directly relating to this
Agreement and the transactions contemplated hereby and (vii) appropriate adjustment shall be made if
during the Earn-Out Period the business of Purchaser is not conducted in the ordinary course of business.
(e) Either party may object to the calculation of Pre-Tax income set forth i n the Financial
Statements. Any such objection must be made by delivery of a written statement of obje ctions (stating the
basis of the objections with reasonable specificity) to the other party within 5 days fol lowing delivery of
the Financial Statements, which shall be delivered simultaneously to Crawford and Park-Ohio in the
manner provided herein. If there is no such objection within such 5-day period, the Financial Stat ements
and the amount of Pre-Tax Income set forth therein shall be considered final and binding upon the parties.
In the event Crawford or Park-Ohio are unable to resolve a dispute or disagreement set forth in a written
objection pursuant to this Section 1.3(e), either party may elect, by written notic e to the other party (given
within 5 days after receipt of such other party’s objections) to have all such disputes or disagreements
resolved by an accounting firm of recognized national standing selected by Park-Ohio’s accounta nts (the
“Selected Accounting Firm”). The Selected Accounting Firm shall make a final and binding resolution of
the disputes or disagreements. The Selected Accounting Firm shall be instructed to use every reasonable
effort to perform its services within 15 days after submission of such disputes to it and, in any case, as
soon as practicable. The costs and expenses for the services of the Selected Accounti ng Firm shall be
shared equally by Crawford and Park-Ohio.
(f) During the Earn-Out Period, all issues confronted by Park-Ohio which may have an impact on
Pre-Tax Income shall be decided by the Board of Directors of Park-Ohio with Crawford either not present
or abstaining, provided that Crawford may participate in discussions regarding such issues and ma y, as
Chairman and Chief Executive Officer, oversee implementation of actions necessary t o carry out such
decisions.
(g) Notwithstanding anything to the contrary contained in (b) above, in the event of a change i n the
Shares by reason of any stock dividend, split-up, combination or the like, the number of Shares issuabl e
pursuant to this Section 1.3 shall be appropriately adjusted. In the event of a merger, consolidation or
other business combination in which the Shares are changed or converted, in lieu of the issuance of Shares
under this Section 1.3, KHP or Crawford, as the case may be , shall be entitled to t hat which it Would
have received had it ‘received Shares under this Section 1.3 immediately prior t o the consummation of
such event.
1.4 Purchase Price Adjustment. (a) Within 60 days after the Closing, Purchaser shall deliver to KHP a final closing bala nce sheet
of KHP, as of the close of business on the Closing Date together with a statement of the KHP Debt (as
defined be low) and the KHP Net Worth (as defined be low) (together, the “Closing Balance Sheet”);
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provided that the liabilities reflected on the Closing Balance Sheet shall only include the Assumed
Liabilities and not the Retained Liabilities. For purposes of this Agreement, t he term “KHP Debt” or
Crawford, as the case may be , shall mean the aggregate amount of KHP’s short and long-term
indebtedness for borrowed money and capitalized lease obligations and the term “KHP Net Worth” shall
mean KHP’s tangible net worth as shown on the Closing Balance Sheet. The Closing Balance Sheet shall
be prepared in accordance with generally accepted accounting principles on a basi s consistent with those
applied in the preparation of the November 30, 1991 KHP balance sheet referred to in Sect ion 4.1(g).
Purchaser shall pay all costs and expenses of preparing the Closing Balance Sheet and KHP or Crawford
shall pay all costs and expenses of any accountants or consultants retained by KHP or Crawford with
respect to KHP’s evaluation of the Closing Balance Sheet.
(b) KHP may object to any of the information contained in the Closing Balance Sheet which could
affect the KHP Debt or KHP Net Worth as set forth therein. Any such objection must be made by delivery
of a written statement of objections (stating the basis of the objections with reasona ble specificity) to
Park-Ohio within 5 days following delivery of the Closing Balance Sheet. If KHP does not so object
within such 5-day period, the Closing Balance Sheet as delivered to KHP shall be conside red final and
binding upon the parties. In the event the Purchaser and KHP are unable to resolve a dispute or
disagreement set forth in a written objection pursuant to this Section 1.4(b), such disputes shall be
resolved in the same manner as provided for in Section 1.3(e) hereof as if the Closing Ba lance Sheet were
the Financial Statements.
(c) After the Closing, each of Purchaser and KHP shall permit representatives of the othe r and
their accounting firm, during normal business hours, to have reasonable access to, and to e xamine and
make copies of, all books and records regarding KHP which are in the possession of the other and all work
papers of the other and the other’s accountants for purposes of preparing or reviewing the Closing Ba lance
Sheet.
(d) If the KHP Net Worth exceeds $2,962,000, then Purchaser shall return to Crawford or KHP
without any consideration therefor Assets in an amount in immediately available funds e qual to such
excess KHP Net Worth.
(e) If the KHP Net Worth as shown on the Closing Balance Sheet shall be less than $2,422,737,
then KHP or Crawford may, if they so desire, immediately transfer to Park-Ohio an amount i n
immediately available funds up to the amount of such difference between $2,422,737 and the KHP Ne t
Worth as shown on the Closing Balance Sheet, provided that such payment may be made onl y if and to
the extent any amount has been previously transferred to Crawford pursuant to Section 3.15 hereof. The
KHP Net Worth shall be increased by the amount of any such payment. If the KHP Net Worth (a fter
giving effect to any such payment) shall be less than $2,422,737, then KHP or Crawford shall imme diately
transfer to Park-Ohio without any consideration therefor the certificate representing the Shares issued to
KHP pursuant to Section 1.2(i) hereof and Park-Ohio shall issue to KHP a certificate representing a
number of Shares equal to 850,000 minus a number equal to (x) $2,422,737 minus the KHP Net Worth
divided by (y) the average of the closing price of the Shares on the NASDAQ for the 5 trading days
immediately preceding the date of payment.
1.5 Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take
place as promptly as practicable following the approval of the transactions contempl ated by this Agreement by
the shareholders of Park-Ohio and the date on which the last of the conditions set forth in Arti cles V, VI and VII
hereof is fulfilled or waived. Unless otherwise agreed by the parties, the Closing shall t ake place at the offices
of Park-Ohio, 600 Tower East, 20600 Chagrin Boulevard, Cleveland, Ohio. The date on which the Closing
occurs is referred to herein as the “Closing Date”.
1.6 Deliveries at Closing.
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August 199312-1730D
(a)At the Closing, Crawford and KHP shall deliver to Park-Ohio and Purchaser: (i) a bill of sale
and general assignment substantially in the form attached hereto as Exhibit C (the “Bill of Sale”), duly
executed by KHP; (ii) an assignment and assumption agreement substantially in the form attached as
Exhibit D (the “Assignment and Assumption Agreement”), duly executed by KHP; (iii) the resoluti ons
referred to in Section 6.3 hereof; (iv) the certificates referred to in Section 6.4 a nd 6.10 hereof; (v) the
opinion of counsel referred to in Section 6.5 hereof; (vi) the Employment Agreement duly execut ed by
Crawford; (vii) the Standstill Agreement duly executed by Crawford and KHP; (viii) duly exec uted
consents referred to in Section 3.4 hereof; and (ix) all other documents, instruments and writ ings
reasonably requested by Purchaser or Park-Ohio at or prior to Closing pursuant to this Agreement or
otherwise required herewith.
(b) At the Closing, Purchaser and Park-Ohio shall deliver to Crawford and KHP: (i) a certificate
representing the Initial Shares duly registered in KHP’s name and duly executed and authe nticated; (ii) the
Bill of Sale duly executed by Purchaser’, (iii) the Assignment and Assumption Agreement dul y executed
by Purchaser, (iv) the resolutions referred to in Section 5.3 hereof; (v) the officer’s certificat e referred to
in Section 5.4 hereof; (vi) the opinion of counsel referred to in Section 5.5 hereof; (vii) t he Employment
Agreement duly executed by Park-Ohio; (viii) the Standstill Agreement duly executed by Park-Ohi o; and
(ix) all other documents, instruments and writings reasonably requested by Crawford or KHP at or prior t o
Closing pursuant to this Agreement or otherwise required herewith.
ARTICLE II
ASSUMPTION OF LIABILITIES
2.1 Assumption of Liabilities. On the terms and subject to the conditions of this Agreement, at the
Closing, Purchaser will assume only (the “Assumed Liabilities”) (i) all liabilitie s of KHP as of the Closing Date
reflected on the Closing Balance Sheet, provided that such liabilities are of the same type and consistent in
scope and amount with the liabilities set forth on the November 30, 1991 balance sheet re ferred to in Section
4.1(g) hereof, (ii) the ordinary course obligations of KHP under the Assumed Contracts (as hereinafter defined),
and (iii) all liabilities set forth on Schedule 2.1. Notwithstanding the foregoing, the Assume d Liabilities shall
not include, and Purchaser shall not be responsible for and KHP shall retain and discharge, a ny liabilities not
specifically assumed herein, including, without limitation, any liabilities and obl igations which arise from the
conduct of the business of KHP or the ownership of assets by KHP prior to the Closing relating to T axes (as
defined in Section 3.5(a)) attributable to periods up to and including the Closing Date, environm ental matters,
product liability matters and labor, employee and employee benefit plan matters (e xcept as expressly set forth
on Schedule 2.1).
2.2 No Other Liabilities Assumed. Except for the Assumed Liabilities, Purchaser has not agreed to
pay, shall not be required to assume and shall have no liability or obligation, direct or indirect, absolute or
contingent, of KHP, Crawford or any of their affiliates or associates or of any other person (“Re tained
Liabilities”), including, without limitation:
(i) any liability, whether known or unknown, fixed or contingent, or other obligation of Crawford,
KHP or their respective affiliates and subsidiaries or of any predecessor owner of KHP or any of i ts
affiliates or subsidiaries which (x) was incurred prior to the Closing Date in respect of or relating to the
Assets or the conduct of the business of KHP or its affiliates or subsidiaries, except to the extent that the
same was an Assumed Liability or (y) is unrelated to the Assets or the conduct of the business of KHP;
(ii) (w) the events, circumstances, or conditions described in Schedule 4.1(p) to this Agreem ent;
(x) any pollution or threat to human health or the environment that is related in any way to KHP’s or any
previous owner’s or operator’s management, use, control, ownership or operation of the Assets or the
business of KHP including, without limitation, all on-site and off-site activities invol ving Materials of
Environmental Concern (as hereinafter defined), and that occurred, existed, arises out of condit ions or
circumstances that occurred or existed, or was caused, in whole or in part, on or be fore the Closing Date,
MERGERS AND ACQUISITIONS§12.505
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whether or not the pollution or threat to human health or the environment is described in Schedule 4.1(p)
to this Agreement; (y) any Environmental Claim (as hereinafter defined) against any person or entity
whose liability for such Environmental Claim KHP has or may have assumed or retained either
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August 199312-1730D
contractually or by operation of law; and (z) the breach of any environmental representation or warranty
set forth in Section 4.1(p) of this Agreement; and
(iii) any liability referred to on Schedule 4.1(j) and Item 2 on Schedule 4.1(k).
2.3 Assumed Contracts. At the Closing, KHP shall convey, transfer and assign, and Purchaser shall
accept and assume, those contracts, agreements and commitments listed on Schedule 2.3 hereto (the “Assumed
Contracts”).
ARTICLE III
COVENANTS AND AGREEMENTS
3.1 Conduct of Business Until Closing Date. From the date of this Agreement until the Closing Date,
except with the prior written consent of Park-Ohio, KHP shall conduct its business in the ordinary course and
consistent with past practices and use its reasonable best efforts to preserve intact its business organization and
goodwill, keep available the services of its present officers and key employees and pre serve the goodwill and
business relationships with suppliers, customers and others having business relationships with it. Without
limiting the generality of the foregoing, KHP shall:
(a) refrain from changing, in any material respect, any of its business policies relat ing to its
business;
(b) maintain and keep its assets in good repair, working order and condition (except for
obsolescence and ordinary wear and tear and damage due to casualty);
(c) perform all of its obligations under all contracts, leases and any and all other agre ements
relating to or affecting its assets or its business where the failure to so perform woul d have a Material
Adverse Effect (as hereinafter defined):
(d) refrain from(i) except as specifically provided in Section 3.15 hereof, declaring or paying any dividends
or other distributions;
(ii) issuing, redeeming, selling or disposing of, or creating any obligation to issue, redeem,
sell r dispose of, any shares of its capital stock (whether authorized but unissued or held in treasury);
(iii) taking any action with respect to the grant of any severance or termination pa y to any
employees or with respect to any increase of benefits payable under its severance or te rmination pay
policies or agreements in effect on the date hereof and applicable to employees;
(iv) entering into, adopting, modifying or amending any written employment, collective
bargaining, severance, consulting, bonus, incentive compensation, deferred compensation, profit
sharing, employee benefit, welfare benefit or other agreement, plan or arrangement providing for
compensation or benefits to employees;
(v) increasing in any manner the compensation or fringe benefits of any employee or paying
any benefit or compensation not required by any existing agreement, plan or arrangement; except, in
the case of each of the foregoing, reasonable actions consistent with past practices or in accordance
with any existing agreement, plan or arrangement;
(vi) taking any action that could be reasonably anticipated to have a Material Adverse Effect r
that could cause any representation or warranty set forth in Article IV hereof to be untrue or any
condition to Closing not to be satisfied;
(vii) accelerate billings, shipments to customers, payments from customers, orders from
suppliers or payment of accounts payable or adjust the level of inventory, except in the ordi nary
course of business;
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iii) other than in the ordinary course of business consistent with past practice, enter into,
assume or permit any mortgage, pledge, conditional sale or title retention agreeme nt, lien, easement,
right-of-way, lease, encumbrance or charge of any kind which will continue on or after the Closi ng
upon the Assets, whether now or hereafter acquired, or create or assume any obligation for borrowed
money;
(ix) make capital expenditures in excess of $50,000 in the aggregate;
(x) other than in the ordinary course of business, acquire any of the business or assets of
any other person, firm, association or corporation;
(xi) sell or otherwise dispose of any significant portion of the Assets other than the sale of
inventory in the ordinary course of business;
(xii) do any act or omit to do any act, or permit any act or omission to act, whi ch could cause
breach or default by KHP under any of KHP’s contracts, agreements, commitments or obligations;
(xiii) enter into or amend any confidentiality agreement or any agreement, contrac t or
arrangement which would impose any restriction on competition on KHP or on the ability to hire
employees from any person;
(xiv) enter into or amend any other agreements, commitments or contracts which,
individually or in the aggregate, are material to KHP, except agreements for the purcha se and sale of
goods or services in the ordinary course of business, consistent with past practice and not in excess
of current requirements;
(xv) incur, assume or prounts owed to KHP) or otherwise be come liable or responsible
(whether directly, contingently or otherwise) for any material obligations or liabilities of any other
person;
(xvi) except as set forth on Schedule 3.1(d), enter into any transaction, agreement or
arrangement (including, without limitation, the transfer of any assets) between KHP, on the one
hand, and Crawford or his affiliates or associates (other than KHP), on the other hand;
(xvii) move the location of KHP’s main offices or any production facility; or
(xviii) agree to take any of the foregoing actions.
3.2 Access and Confidentiality. From the date of this Agreement until the Closing Date, Crawford and
KHP shall provide Park-Ohio with such information and permit Park-Ohio’s officers and representatives such
access during normal business hours to their respective properties and records as the other may from time to
time reasonably request, including such access by Park-Ohio as it reasonably determines is ne cessary to make
the determinations contemplated by Section 9.1(d)(iv). All such information shall be treat ed as and kept
confidential unless it is available from public sources or required by law to be disclose d. If the transactions
contemplated by this Agreement are not consummated, all documents received by Park-Ohio sha ll be returned
to KHP, and all summaries, transcriptions, notes and descriptions prepared by or on be half of Park-Ohio or
Purchaser and based on such documents shall be destroyed, and such information shall remain confi dential and
such information shall not be used to compete with KHP.
3.3 No Other Acquirors. Crawford agrees that he will not, after the date hereof and prior to the Closing
Date or termination of this Agreement, whichever is earlier, seek, directly or through agents, representatives,
other affiliated parties, or permit any of KHP’s officers to seek any person or persons, other tha n Park-Ohio and
Purchaser to acquire or purchase all or a substantial part of KHP’s assets or any or all of KHP’s c apital stock, or
to effect a consolidation or merger or other business combination, recapitalization, l iquidation or similar
transaction.
3.4 Best Efforts. Upon the terms and subject to the conditions of this Agreement, each of Park-Ohio and
Purchaser, on the one hand, and KHP and Crawford, on the other hand, shall take all necessary corporat e and
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August 199312-1730D
other action and use its best efforts to obtain all necessary authorizations and approvals and to make all
MERGERS AND ACQUISITIONS§12.505
N
necessary filings required to carry out the transactions contemplated by this Agreement, to satisfy the conditions
specified in Articles V, VI and VII hereof at the earliest practicable date and otherwise to perform its
obligations under this Agreement. KHP and Crawford shall, prior to the Closing Date, use its best efforts to
obtain all consents required for the assignment to Purchaser of all KHP’s rights, title and interests in, to and
under the Assumed Contracts and to assist Purchaser in securing the transfer of, or obtaining repl acements for,
each permit, license and approval that is necessary for Purchaser to use the Assets in the conduct of its business
(collectively, the “Permits”). Purchaser will cooperate with KHP in obtaining the release of its obligations under
the Assumed Contracts, provided, that such release does not result in the imposition of addi tional obligations
on, or less favorable terms to, Purchaser.
3.5 Certain Tax Matters.(a)Except as otherwise provided in this Agreement, Park-Ohio, Purchaser, Crawford and KHP
agree that (i) Crawford and KHP shall be responsible for and shall pay all Taxes (as define d be low)
attributable or arising from the business and operations of KHP conducted on or be fore the Closi ng Date;
(ii) Park-Ohio and Purchaser shall be responsible for and shall pay all Taxes attributable or arising from
the business and operations of Purchaser conducted after the Closing Date and (iii) Crawford a nd KHP
shall be responsible for their own income and franchise Taxes, if any, arising from the transac tions
contemplated by this Agreement. For purposes of determining the amounts of Tax allocated to the parties
as described in clauses (i) and (ii) of the immediately preceding sentence, t o the extent permissible under
applicable law, Taxes shall be allocated to the taxable period or portion there of ending on the Closing
Date using an interim-closing-of-the-books method assuming that such taxable period ended at t he close
of the Closing Date, except that (i) exemptions, allowances or deductions that are c alculated on an annual
basis (such as the deduction for depreciation) shall be apportionated on a per diem basis and (ii) real
property Taxes shall be allocated in accordance with Section 164(d) of the Internal Re venue Code of
1986, as amended (the “Code”).
(b) Crawford, KHP, Purchaser and Park-Ohio shall cause all real property Taxes, personal
property Taxes and similar ad valorem obligations levied with respect to the Assets for assessment periods
which include the Closing Date (collectively, the “Apportioned Obligations”) to be apportioned among
KHP and Purchaser as of the Closing Date based on the number of days in any such period falli ng on or be
fore the Closing Date, on the one hand, and after the Closing Date, on the other hand (it being understood
that Purchaser is only responsible for the portion of each such Apportioned Obligation attributable t o the
number of days after the Closing Date in the relevant assessment period). The Purchaser shah be
responsible for filing all returns required to be filed in respect of the Apportioned Obligati ons for any
assessment period that includes the Closing Date which have ‘not already been filed. W ithin 10 days of
the due date of any such return, Purchaser shall deliver to Crawford and KHP a statement of the
Apportioned Obligation shown due on such return and KHP’s share thereof (computed in accordance with
the first sentence of this paragraph 3.5 (b)) and KHP shall pay to Purchaser its share thereof wi thin 5 days
of the receipt of such statement.
(c) For purposes of this Agreement, “Taxes” shall mean all taxes, fees, levies, dutie s, charges or
other assessments imposed by any federal, state, county, local or foreign government, taxi ng authority,
subdivision or agency thereof, including interest, penalties, additions to tax or additional amounts thereto.
(d) Any refunds of Taxes (including any interest thereon) received by Purchaser that were borne
by KHP, shall be for the benefit of KHP. All other refunds of Taxes shall be for the benefit of Purchase r.
Crawford and Purchaser shall cooperate reasonably with one another to obtain such refunds, provided that
the party entitled to such refunds agrees t °
pay all costs and expenses of obtaining such refunds (or a
portion of such costs and expenses corresponding to the portion of such refund to which such party is
entitled under this Section 3.5).
(e) After the Closing Date, Purchaser and Park-Ohio, on the one hand, and Crawford and KHP, on
the other hand, shall make available to the other, as reasonably requested, and to any taxing authority in
the event requested by the other, all information, records or documents relating to liabilities or potential
MERGERS AND ACQUISITIONS§12.505
August 199312-1730D
liabilities for Taxes for all periods ending prior to or including the Closing Date and shall preserve all such
information, records, and documents for ten years after the Closing Date.
(f) Purchaser shall promptly notify Crawford and KHP in writing upon its receipt of notice of any
pending or threatened audits or assessments of Taxes which may affect the amount of Taxes for which
Crawford and KHP are responsible pursuant to this Agreement, and Crawford shall similarly notify
Purchaser with respect to Taxes for which Purchaser is responsible pursuant to this Agreement . Crawford
shall have the sole right to represent the taxpayer’s interest in any tax audit or a dministrative or court
proceeding (a “Proceeding”) insofar as such Proceeding relates solely to taxable periods e nding on or
before the applicable Closing Date and Purchaser shall have the sole right to represe nt such interests in
any such Proceeding insofar as it relates solely to taxable periods be ginning on or after the applicable
Closing Date. In connection therewith, Purchaser and Crawford each may employ counsel of it s choice at
its own expense and both Purchaser and Crawford agree that each will cooperate with the other and the
other’s counsel in the defense against or compromise of any claim or item or with respect to any period in
a Proceeding for which the other is responsible, and that each will compensate the other for any costs or
expenses incurred by the other in rendering such cooperation. In any case in which a Proceeding re lates to
a taxable period be ginning be fore and ending after the applicable Closing Date or i nvolves claims or
items which affect both periods for which Crawford or KHP is responsible and periods for which
Purchaser is responsible, Crawford and Purchaser agree to cooperate with one another in good faith in
jointly represent as to such unagreed matter, and if Purchaser and KHP cannot agree on the selection of
such an arbitrator, the independent public accountants of Purchaser and KHP shall jointly select an
arbitrator.
(g) Notwithstanding any other provision hereof to the contrary, this Section 3.5 shall survive until
the expiration of the applicable statutes of limitations on assessment, collect ion or refund of such Taxes
(including extensions thereof).
(h) Crawford and KHP shall pay all sales, gains, use, stamp, value-added, transfer, recording and
other similar taxes and any transfer or recording fees or other similar costs incurred or asse ssed (including
interest and penalties, if any) in connection with the sale or transfer of the Assets or the transactions
contemplated by this Agreement. Purchaser shall pay all recording fees and other simi lar taxes and any
recording fees or other similar costs incurred or assessed (including interest and penaltie s, if any) in
connection with the sale or transfer of the Assets or the transactions contemplated by t his Agreement.
Purchaser and Crawford shall cooperate to take all reasonable steps to minimize any taxes, fees or costs
referred to in this Section.
3.6 Approval by Park-Ohio’s Shareholders. Park-Ohio shall cause a meeting of its shareholders to be
called and held at the earliest practicable date for the purposes of acting on this Agreement and the transactions
contemplated hereby. Park-Ohio will, through its Board of Directors, recommend to its shareholders approval of
such matters and shall use its best efforts to secure the approval of its shareholders for the transactions
contemplated herein, subject in each case to its fiduciary duties under applicabl e law, as determined by the
Board of Directors of Park-Ohio after consultation with counsel. The parties contemplate t hat at such meeting
Park-Ohio will seek the adoption of an amendment to its Articles of Incorporation providing that the vote
required to approve the issuance of Shares pursuant to this Agreement shall be the affirmati ve vote of a majority
of the outstanding Shares.
3.7 Proxy Statement and Registration Statement. On the terms and subject to conditions of this
Agreement, (i) Park-Ohio will prepare and file with the Securities and Exchange Com mission (the “SEC”) a
preliminary Proxy Statement and shall use its best efforts to prepare and file a definit ive Proxy Statement and
(ii) Park-Ohio shall prepare and file with the SEC and shall use its best efforts to cause to be come effective a
registration statement on Form S-4 or other appropriate form (the “Registration Stateme nt”) under the Securities
Act of 1933, as amended (the “Securities Act”) and the prospectus contained therein (the “Prospectus”) for the
purpose of registering the Shares issuable to KHP hereunder. KHP shall furnish to Park-Ohio all information
concerning Crawford, KHP and their respective affiliates that is required to be incl uded in the Proxy Statement
MERGERS AND ACQUISITIONS§12.505
P
and the Registration Statement. KHP shall promptly advise Park-Ohio if KHP be comes aware of any event or
set of facts relating to any information that KHP has furnished that
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should be set forth in an amendment of, or supplement to, the Proxy Statement and the Registration Statement .
3.8 Indemnification Regarding Proxy Statement and Registration Statement. Subject to applicable
law, Park-Ohio, on the one hand, and KHP and Crawford, on the other hand, each hereby agrees to indemnify
the other and its respective directors, officers, agents, employees, and each person who may be controlled by it
or be under common control with Park-Ohio or with KHP or Crawford within the meaning of either Sect ion 15
of the Securities Act or Section 20 of the Exchange Act, and to hold each of them ha rmless from and against
any losses, claims, damages or liabilities, joint or several, to which they, or any of them, may be come subject
insofar as such losses, claims, damages or liabilities (or actions in respect there of) arise out of or arc based upon
any alleged untrue statement of any material fact contained in information pertaining to it contained or referred
to in the Proxy Statement or Registration Statement or upon any alleged omission to sta te therein a material fact
required to be stated therein or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
3.9 Publicity. Park-Ohio and Purchaser, on the one hand, and Crawford and KHP, on the other hand,
shall consult with each other prior to issuing any press releases or otherwise making public st atements with
respect to the transactions contemplated hereby and prior to making any filings with any federal or state
governmental or regulatory agency or with any securities exchange with respect thereto, exc ept as required by
law or listing agreement with NASDAQ.
3.10 Noncompetition; Nonsolicitation. In order that Park-Ohio and Purchaser may have and enjoy the
benefit of the acquisition by Purchaser of the Assets, Crawford and KHP shall not, and shall ca use their
respective affiliates and associates not to, directly or indirectly, for so long a s Crawford is an officer or director
of Park-Ohio and for a period of two years commencing after Crawford is neither an officer or dire ctor, (a)
engage (as owner, stockholder, partner or otherwise, except as a holder of fewer than 5% of the out standing
shares or other equity interests of a company whose shares or other equity interests are public ly traded) in any
business which directly or indirectly competes with Park-Ohio or any of its affiliates or subsidiaries, except that,
for purposes of this clause (a), neither the manufacture, distribution and sale of one and two gallon cans by
Crawford Container Company consistent with current practice, nor the distribution and sale consi stent with
current practice by Crawford Container Company of five gallon cans manufactured by Park-Ohio or any of its
affiliates or subsidiaries, shall be deemed to be direct or indirect competition with Park-Ohio or any of its
affiliates or subsidiaries, or (b) except by Crawford in the performance of his duties as Chairm an and Chief
Executive Officer of Park-Ohio, induce or attempt to persuade any current or future employee of Park-Ohio or
any of its affiliates or subsidiaries not to be employed by, or to terminate such employe e’s employment with,
such employee’s employer. Crawford and KHP acknowledge and agree that the provisions of clause (a) of this
Section 3.10 are reasonable and valid in geographical and temporal scope and in all other respects. If, at any
time, any provision of clause (a) of this Section 3.10 shall be deemed invalid or unenforceabl e by a court or
other body of competent jurisdiction under applicable law, for any reason, the remainder of t he provisions of
clause (a) of this Section 3.10 shall be given full effect, without regard to the i nvalid portions thereof. If any
court or other body of competent jurisdiction determines that any of the provisions of clause (a ) of this Section
3.10, or any part thereof, is invalid or unenforceable, for any reason, clause (a) of this Section 3.10 shall be
come and be immediately amended to include restrictions on competition and i nterference, to the extent the
same shall be deemed reasonable and enforceable by such court or body.
3.11 Notice of Certain Events. If in the course of the transactions contemplated by this Agreement,
either Park-Ohio or Purchaser, on the one hand, or Crawford or KHP, on the other hand, shall acquire
knowledge of any fact, law or circumstance which would be required to be disclosed by such pa rty to avoid a
breach of its representations and warranties contained in this Agreement, then such party shall immediately
disclose such fact, law or circumstance to the other party. For purposes of determining the accuracy of the
representations and warranties contained in Article IV in order to determine the ful fillment of the conditions set
forth in Article V and Article VI, the schedules delivered pursuant to Article IV shal l be deemed to include only
that information contained therein on the date of this Agreement.
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August 199312-1734DC
3.12 Conduct of Park-Ohio. Except as contemplated by this Agreement, during the period from the
date hereof until the Closing Date, neither Park-Ohio nor its affiliates will ta ke any actions set forth in (i)
Section 3.1(d)(i) other than the declaration and payment of Park-Ohio’s regular dividend on its $.75 Cumulative
Preferred Stock of $.19 per share in the first quarter and $.18 per share in each of the se cond, third and fourth
quarters or (ii) Section 3.1(d)(ii) other than (x) issuing employee stock options to purchase up to 350,000 Shares,
(y) issuing Shares upon conversion of Park-Ohio’s outstanding shares of preferred stock or (z) issui ng Shares upon
exercise of employee stock options.
3.13 Extension of Existing Standstill Agreement. Park-Ohio and Crawford agree that, by executing this
Agreement, and through no further action on the part of the parties, the term of the Agree ment, dated March 6,
1989, among Park-Ohio, Crawford and William E. Sopko providing, among other things, for a standstill agreement
on be half of Crawford shall be extended such that it shall continue in full force and effect from and after the date
hereof until the earlier of (i) the Closing Date or (ii) one year after terminat ion of this Agreement in accordance
with its terms unless such termination is due to the breach by Park-Ohio or P urchaser of its obligations under this
Agreement.
3.14 Employee Matters. (a) The parties hereto intend that the sale of the Assets shall not c onstitute a
permanent shutdown of the operations of the business of KHP for purposes of entitling any of the current or former
employees of the business of KHP (“Business Employees”) to payment of pension or severance pay benefits or any
other benefits. Notwithstanding the foregoing, it is understood that, as between the parties hereto, KHP and
Crawford and not Park-Ohio or Purchaser shall be responsible for and shall retain, and inde mnify and hold
harmless Park-Ohio and Purchaser from and against, all liabilities and obligat ions, if any (the recitation herein of
such possibility not being intended as an acknowledgment that any such liabilit ies or obligations do, in fact, exist or
will arise), for (i) all benefits (including without limitation, salary and bene fit continuation or severance benefits)
that may be payable under the Plans (as defined in Section 4 1 (k) hereof) to any curre nt or former Business
Employee as a result of such employee’s termination of employment with KHP arising on, prior to or in connection
with the Closing Date and (ii) all notices, payments, fines or assessme nts due to any such employee pursuant to any
applicable federal, state or local law or common law, statute, rule or regul ation with respect to any such termination
(or constructive termination) or employment with KHP on or prior to the Closing Dat e The parties further intend
that the sale of the Assets shall not entitle current or former Business Employees who are offered and accept
employment with the Purchaser to receive a benefit from any Plans or otherwise while employed by Purchaser,
unless specifically permitted under such Plans.
(b) The obligation to pay all benefits, including, without limitation, health, denta l, life, accidental death and
disability, and related benefits, which arc payable to current or former Business Employees under the Plans and, in
the case of Business Employees who are offered and accept employment with P urchaser on or after the Closing
Date, which arise or are based on events which occurred on or prior to Closing (whethe r or not claims for such
benefits are submitted on or prior to Closing), shall remain the responsibility of K HP and Crawford whether or not
the claiming employee be comes an employee of Purchaser on or after the Clos ing Date, except to the extent that
any liability for any of the foregoing is reflected on the Closing Balance Sheet and KHP and Crawford will
indemnify and hold harmless Park-Ohio and Purchaser from and against all such obligati ons and liabilities relating
thereto. Neither Purchaser nor Park-Ohio shall assume or be responsible for any obligat ions or liability in respect of
any benefits which arc payable at any time to, or in respect of, current or former B usiness Employees under the
Plans or which arise out of or in connection with their employment with KHP, except to the extent that any liability
for any of the foregoing is specifically reflected on the Closing Balance Sheet.
(c) After Closing, Purchaser and KHP shall each provide the other on a continuing ba sis at no cost to the
other such information regarding Business Employees who are offered and accept employm ent with Purchaser as
the other shall reasonably request in order to permit proper administration of benefit plans applicable to such
employees
3.15 Dividends by KHP to Crawford. Notwithstanding anything to the contrary in Section 31(d)(i), KHP
may declare and pay a cash divi dend to Crawford in an amount equal to Crawford’s good faith estimate
MERGERS AND ACQUISITIONS§12.505
12-1734C© 1993 Jefren Publishing Company, Inc.D
of his liability for the unpaid Taxes for the 1991 taxable year and for the portion of the 1992 taxable year up to
and including the Closing Date for which Crawford is liable (assuming the use of all deduc tions and credits
available to Crawford) by virtue of KHP’s status as an S corporation under Sec
