<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
of the securities exchange act of 1934
For the transition period from ___________________ to ___________________
Commission file number 0-1489
BEST UNIVERSAL LOCK CO.
(Exact name of registrant as specified in its charter)
WASHINGTON 91-0144790
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. BOX 50444, INDIANAPOLIS, INDIANA 46250
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (317) 849-2250
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the registrant's classes
of common, as of May 5, 1995.
SERIES A COMMON STOCK 78,824.31 SHARES
SERIES B COMMON STOCK 300,000 SHARES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INDEX
Page No.
--------
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income for the three months
ended March 31, 1995 and 1994 3
Condensed Consolidated Balance Sheets at March 31, 1995 and
December 31, 1994 4-5
Condensed Consolidated Statements of Shareholders' Equity at
March 31, 1995 and December 31, 1994 6
Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 1995 and 1994 7
Notes to Condensed Consolidated Financial Statements 8-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-12
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURE 14
Exhibit 15-34
2
<PAGE>
BEST LOCK COMPANIES
BEST LOCK CORPORATION AND SUBSIDIARY
BEST UNIVERSAL LOCK CO. (A NONOPERATING HOLDING COMPANY) AND SUBSIDIARIES
FRANK E. BEST, INC. (A NON-OPERATING HOLDING COMPANY) AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Three Months Ended March 31
1995 1994
------------ ------------
<S> <C> <C>
NET SALES $29,352,842 $23,390,011
OPERATING EXPENSES
Cost of Goods Sold 15,764,524 12,082,356
Selling 7,488,437 6,529,344
General and Administrative 4,042,870 3,143,423
Engineering, research and development 625,440 898,548
------------ -----------
Total operating expenses 27,921,271 22,653,671
------------ -----------
OPERATING INCOME 1,431,571 736,340
Interest expense (137,346) (5,046)
Other income, net 132,519 54,534
------------ -----------
INCOME before provision for income taxes 1,426,744 785,828
Provision for income taxes 597,541 318,149
------------ -----------
NET INCOME, Best Lock Corporation and Subsidiary 829,203 467,679
Minority interest in net income, Best Lock
Corporation and Subsidiary (175,750) (127,162)
Corporate--Best Universal Lock Co. expense (96) (311)
------------ -----------
NET INCOME, Best Universal Lock Co. and
Subsidiaries 653,357 340,206
Minority interest in net income, Best Universal
Lock Co. and Subsidiaries (192,332) (76,104)
Corporate--Frank E. Best, Inc. expense (66) (310)
------------ -----------
NET INCOME, Frank E. Best, Inc. and Subsidiaries $ 460,959 $ 263,792
------------ -----------
------------ -----------
</TABLE>
<TABLE>
<CAPTION>
Best Universal Lock Co.
Best Lock ------------------------ Frank E.
Corporation Series A Series B Best Inc.
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Earnings per common share:
Three months ended March 31, 1995 $ 6.49 $ 1.71 $ 1.71 $ 0.90
---------- --------- ---------- ----------
---------- --------- ---------- ----------
Three months ended March 31, 1994 $ 3.56 $ 0.88 $ 0.88 $ 0.44
---------- --------- ---------- ----------
---------- --------- ---------- ----------
Weighted average shares outstanding:
1995 127,827.43 82,731.60 300,000.00 511,919.46
---------- --------- ---------- ----------
---------- --------- ---------- ----------
1994 131,238.85 86,469.00 300,000.00 598,710.00
---------- --------- ---------- ----------
---------- --------- ---------- ----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
BEST UNIVERSAL LOCK CO. (A NONOPERATING HOLDING COMPANY) AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
March 31 December 31
1995 1994
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,787,703 $ 4,815,847
Trade receivables:
Direct 12,269,604 11,680,289
Sales representatives and other 2,909,800 2,688,434
Allowance for uncollectible accounts (301,954) (244,829)
Estimated refundable income taxes 0 141,708
Current portion of notes receivable 85,438 81,987
Inventories 15,455,546 14,579,058
Prepaid income taxes 3,166,828 3,566,922
Other prepaid expenses 62,713 152,342
------------ -----------
Total current assets 37,435,678 37,461,758
------------ -----------
PROPERTY, PLANT AND EQUIPMENT, at cost
Land and buildings 13,805,742 13,770,826
Machinery and equipment 29,376,911 29,478,143
Tooling 8,214,928 8,090,184
Furniture, fixtures and other 8,664,169 8,342,408
Construction work-in-progress 2,023,117 975,301
------------ -----------
62,084,867 60,656,862
Less - accumulated depreciation (31,490,684) (30,519,725)
------------ -----------
Total property, plant and equipment 30,594,183 30,137,137
------------ -----------
OTHER ASSETS
Long-term notes receivable 3,290,037 3,280,332
Other assets 1,345,177 149,447
------------ -----------
Total assets $ 72,665,075 $ 71,028,674
------------ -----------
------------ -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
BEST UNIVERSAL LOCK CO. (A NONOPERATING HOLDING COMPANY) AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
March 31 December 31
1995 1994
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable $ 2,500 $ 2,500
Current portion of retirement benefit obligations 1,369,954 1,381,967
Trade accounts payable 2,184,108 1,641,302
Customer advances 1,492,018 1,501,304
Accrued liabilities:
Income taxes 236,464 941,490
Property and other taxes 1,217,361 960,153
Payroll and vacation pay 3,425,293 3,918,751
Accrued severance 429,031 2,394,593
Accrued medical claims 880,000 850,000
Other 397,363 843,321
------------ -----------
Total current liabilities 11,634,092 14,435,381
------------ -----------
LONG-TERM DEBT 12,000,000 --
RETIREMENT BENEFIT OBLIGATION 4,274,403 4,444,971
DEFERRED INCOME TAXES 2,276,932 2,269,369
------------ -----------
Total liabilities 30,185,427 21,149,721
------------ -----------
MINORITY INTEREST IN SUBSIDIARIES 11,153,388 13,620,212
------------ -----------
COMMON STOCK AND COMMON STOCK OF BEST,
REDEEMABLE UNDER STOCK BONUS PLAN 4,087,473 4,087,473
------------ -----------
SHAREHOLDERS' EQUITY:
Capital stock:
Preferred stock, 7% cumulative, $100 par
value, callable at par, 500 shares
authorized, 53.2125 shares outstanding 1995;
63 shares outstanding 1994 6,300 6,300
Series A common stock, no par value,
100,000 shares authorized, 78,824.31
shares outstanding 1995; 86,469 shares
outstanding 1994 1,102,579 1,102,579
Series B common stock, no par value,
300,000 shares authorized and outstanding 1 1
------------ -----------
Total capital stock 1,108,880 1,108,880
------------ -----------
Accumulated earnings 35,947,408 35,294,051
Cumulative translation adjustment (147,402) (144,190)
Common stock and common stock of Best,
redeemable under Stock Bonus Plan (4,087,473) (4,087,473)
Treasury stock (5,582,626) --
------------ -----------
Total shareholders' equity 27,238,787 32,171,268
------------ -----------
Total liabilities and shareholders' equity $72,665,075 $71,028,674
------------ -----------
------------ -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
BEST UNIVERSAL LOCK CO. (A NONOPERATING HOLDING COMPANY) AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
March 31 December 31
------------ ------------
1995 1994
------------ ------------
<S> <C> <C>
CAPITAL STOCK:
Preferred stock, 7% cumulative, $100
par value, callable at par, 500 shares
authorized, 53.2125 shares outstanding 1995;
63 shares outstanding 1994 $ 6,300 $ 6,300
Series A common stock, no par value,
100,000 shares authorized, 78,824.31 shares
outstanding 1995; 86,469 shares outstanding 1994 1,102,579 1,102,579
Series B common stock, no par value,
300,000 shares authorized and
outstanding 1 1
------------ -----------
Total capital stock 1,108,880 1,108,880
------------ -----------
ACCUMULATED EARNINGS:
Balance at beginning of year 35,294,051 34,250,100
Net income (three months ended March 31, 1995
and twelve months ended December 31, 1994) 653,357 1,514,931
Cash dividends (see below) -- (470,980)
------------ -----------
Balance at end of year 35,947,408 35,294,051
------------ -----------
COMMON STOCK AND COMMON STOCK OF BEST,
REDEEMABLE UNDER STOCK BONUS PLAN (Note 8) (4,087,473) (4,087,473)
------------ -----------
CUMULATIVE TRANSLATION ADJUSTMENT (147,402) (144,190)
------------ -----------
TREASURY STOCK
Balance at beginning of year -- --
Shares purchased (5,582,626) --
------------ -----------
Balance at end of period (5,582,626) --
------------ -----------
Total shareholders' equity $27,238,787 $32,171,268
------------ -----------
------------ -----------
Cash dividends per share:
Preferred $ 0.00 $ 7.00
Series A common 0.00 1.66
Series B common 0.00 1.09
------------ -----------
------------ -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
BEST UNIVERSAL LOCK CO. (A NONOPERATING HOLDING COMPANY) AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Three Months Ended March 31
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 28,379,629 $ 24,629,902
Cash paid to suppliers and employees (31,125,955) (20,118,137)
Interest received 291,808 20,022
Interest paid (28,416) (5,008)
Income taxes paid (753,443) (72,056)
------------ -----------
Net cash provided by operating activities (3,236,377) 4,454,723
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and
equipment 1,161 9,147
Capital expenditures (1,581,654) (1,456,996)
------------ -----------
Net cash used in investing activities (1,580,493) (1,447,849)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings against unsecured line of credit 12,000,000 --
Purchase of treasury stock (8,211,021) --
------------ -----------
Net cash used in financing activities 3,788,979 --
------------ -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (253) (4,993)
------------ -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,028,144) 3,001,881
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,815,847 1,646,396
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,787,703 $ 4,648,277
------------ -----------
------------ -----------
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $ 653,357 $ 340,206
Adjustments--
Depreciation and amortization 1,146,730 1,146,641
Provision for losses on accounts receivable 78,619 3,726
(Gain) loss on sale of property, plant and
equipment (1,123) (3,418)
Minority interest related to current year
earnings 175,750 127,162
Changes in assets and liabilities--
(Increase) decrease in:
Accounts and notes receivable (812,800) 1,208,797
Refundable income taxes 68,407 --
Inventories (872,482) 461,321
Prepaid income taxes and other expenses 471,480 51,244
Other assets (1,248,833) (7,845)
Increase (decrease) in:
Accounts payable, customer advances and
accrued liabilities (2,088,498) 853,828
Income taxes payable (631,966) 227,759
Deferred income taxes 7,563 21,000
Retirement benefit and benefit obligation (182,581) 34,302
------------ -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES $(3,236,377) $ 4,464,723
------------ -----------
------------ -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
BEST LOCK COMPANIES
BEST LOCK CORPORATION AND SUBSIDIARY
BEST UNIVERSAL LOCK CO. (A NONOPERATING HOLDING COMPANY) AND
SUBSIDIARIES
FRANK E. BEST, INC. (A NONOPERATING HOLDING COMPANY) AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements have
not been audited by independent accountants. In the opinion of the
Company's management, the financial statements reflect all adjustments
necessary to fairly present the results of operations for the three-
month periods ended March 31, 1995 and 1994, the Company's financial
position at March 31, 1995 and December 31, 1994, and the cash flows
for the three-month periods ended March 31, 1995 and 1994. These
adjustments are of a normal recurring nature.
Certain notes and other information have been omitted from the
interim financial statements presented in this Quarterly Report on
Form 10-Q. Therefore, these financial statements should be read in
conjunction with the Company's 1994 Form 10-K.
The results for the first quarter of 1995 are not necessarily
indicative of future financial results.
The condensed consolidated financial statements for each parent
company in the Best Lock Companies (the Company) include their
respective subsidiaries as indicated below:
<TABLE>
<CAPTION>
Percent Owned
Parent Company Subsidiaries as of March 31, 1995
- -------------- ------------ --------------------
<S> <C> <C>
Frank E. Best, Inc. Best Universal Lock Co. 79%
(Best)
Best Universal Lock Best Lock Corporation 77%
Co. (Universal)
Best Lock
Corporation (Lock) Best Universal Locks Limited (Canada) 100%
</TABLE>
2. INCOME TAXES
The effective tax rate for the first quarter of 1995 was 41.9 percent
compared with 40.5 percent for the first quarter of 1994. The
effective tax rates are higher than the U.S. Federal statutory rate of
34% due to a higher tax rate in Canada and state income taxes.
8
<PAGE>
3. FINANCING AND RELATED PARTY ARRANGEMENTS
The Company entered into a new unsecured line of credit agreement
on February 15, 1995. The new credit agreement expires on February
15, 2002 and bears interest at a variable rate, based upon the prime
rate, LIBOR or the Federal Funds rate, at the Company's election. The
variable rate also fluctuates based upon the amounts borrowed under
the credit agreement. The Company is subject to the maintenance of
certain financial ratio covenants under terms of the credit agreement.
The amounts available under this credit agreement are $25,000,000
through February 14, 1998 less $3,750,000 for each one year period
thereafter until expiration. Borrowings under the credit agreement
are convertible, at the Company's option, into term notes ranging from
five to seven years, up through February 14, 1998. The Company
borrowed $12,000,000 under this agreement on February 15, 1995. The
interest on these borrowings is based on LIBOR, and was 7.43% as of
March 31, 1995. The weighted average interest rate (interest expense
divided by weighted average borrowing) during the period the
borrowings were outstanding was 7.43%.
4. RECLASSIFICATIONS
Certain reclassifications have been made to the condensed consolidated
balance sheet and statement of income for thet hree months ended March 31, 1994
to conform to the current year presentation.
5. OTHER MATTERS
On February 15, 1995, the Company settled all claims arising from a
derivative action threatened against it by a director, as well as all
claims against Lock's Chief Executive Officer and another officer.
The material components of the settlement included: (i) the
resignation of Walter E. Best from the Board of Directors and as
President of each of Lock, Universal, Best, and Walter E. Best
Company, Inc.; (ii) the resignation of Richard E. Best and Marshall W.
Best as officers and employees of Lock and the resignation of Robert
W. Best as an employee; (iii) the payment of the total sum of
$2,134,349 as severance, vacation and bonus payments to Walter E.
Best, Robert W. Best, Richard E. Best, Marshall W. Best and Edwina
McLemore, an employee of Lock; (iv) the payment of the total sum of
$1,240,000 in exchange for covenants not to compete from Walter E.
Best, Robert W. Best, Richard E. Best and Marshall W. Best; and (v)
the payment of the total sum of $8,178,296 for the acquisition of
shares of Lock and interests in a partnership as described below.
On February 15, 1995, Lock purchased for cash an 87% non-voting
interest in a partnership for $5,582,626. The sole purpose of the
partnership, which was newly formed, was to acquire shares of Best and
Universal from Walter E. Best and certain other family members and
related trusts. The purchase price of the shares was based on the
appraised value of such shares as of December 31, 1993 as determined
by an independent appraiser. An opinion that the transactions were
fair to the Company was rendered by Merrill Lynch, Pierce, Fenner &
Smith Incorporated to the Company's Board of Directors. The
partnership owns directly or indirectly 204,053 shares of Best common
stock, 8,787 shares of Universal Series A common stock and 11.25
shares of Universal preferred stock.
In addition, on February 15, 1995, Lock acquired 6,742 shares of
its own common stock at an appraised value of $385.00 per share or
$2,595,670.
9
<PAGE>
Lock's acquisition of its interest in the partnership and its
redemption of its own common shares were funded through the
utilization of a portion of the unsecured line of credit of
$25,000,000 as discussed in Note 3.
The Company accounted for the purchase of the Lock shares and the
87% partnership interest as treasury stock, which resulted in a
reduction to shareholders' equity of Lock of $8,178,296, Universal of
$5,582,626 and Best of $5,077,403. As a result of these transactions,
the minority interest of Universal decreased from 27% to 23% and the
minority interest of Best decreased from 22% to 21%.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
Since Frank E. Best, Inc. and Best Universal Lock Co. are non-
operating parents of Best Lock Corporation, a discussion of Best Lock
Corporation's business is necessary in order to understand the
character and development of the total enterprise. As the variations
between the financial statements of these three companies are not
significant, the discussion and analysis of Best Lock Corporation is
representative of all. The following, therefore, is a discussion of
the business of Best Lock Corporation (the Company).
ANALYSIS OF RESULTS OF OPERATIONS
Sales for the first quarter of 1995 increased $6 million (25%) over
the same period of 1994. Sales from the manufacturing division (BLM)
to independent distributors and Authorized Contract Construction
Dealers accounted for $2.5 million of the increase. The remainder of
the increase resulted from higher sales at the company's distribution
division (BLS), which is at least partially attributable to severe
weather conditions in 1994.
The gross profit on sales, while increasing by $2.3 million, decreased
to 46.3% of sales, compared to 48.3% in the prior year. Higher
manufacturing overhead in the BLM division, mainly attributable to
increased fringe benefit costs of approximately $400,000, caused the
reduction in the gross profit percentage.
Operating income improved by $695,000 (94%) to 4.9% of net sales from
3.1% for the same period in 1994. Selling and administrative expenses
increased by 19.2% due to higher salaries and fringe benefits of
approximately $1 million. The Company is also in the process of
implementing software for the order processing, inventory management,
and accounting functions, which increased professional fees by
$700,000.
Engineering expenses decreased by $273,000 (30.4%) over the first
quarter of 1994, due to reductions in personnel associated with the
development of certain product lines and lower expenditures for
engineering-related professional fees.
The Company's effective tax rate was 41.9% in the first quarter of
1995 as compared to 40.5% for the same period in 1994. The effective
tax rates are higher than the U.S. Federal statutory rate of 34% due
to a higher tax rate in Canada and state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity continues to be strong for the first quarter
of 1995. Working capital increased by $2.8 million, mainly due to the
utilization of the unsecured line of credit, as discussed in Note 3 to
the condensed consolidated financial statements. The current ratio of
3.2:1 at March 31, 1995 improved significantly from the ratio of 2.6:1
at December 31, 1994. Current liabilities decreased by $2.7 million
due to payments primarily associated with the resignations discussed
in Note 5 to the condensed consolidated financial statements, which
reduced accrued severance, accrued vacation and other accrued
expenses. Days sales outstanding decreased to 46 days from 55 days at
December 31, 1994 due to an overall improvement in collections.
Inventory turns of 4.2 in the first quarter of 1995 increased from 3.4
11
<PAGE>
in the first quarter of 1994 due to increased sales and the Company's
continued emphasis on inventory management and control. Inventory
levels increased by $876,000 in the first quarter of 1995. This
increase is a result of a decrease in backlog in the manufacturing
division and an increase in inventory at the corporate-owned
distribution offices.
Capital expenditures for the first quarter of 1995 were $1.6 million.
Capital spending is projected to total between $5.0 and $7.0 million
for the year. This total includes approximately $3.0 million for
enhanced computer systems and related software.
During the first quarter of 1995, the Company borrowed $12 million
against an unsecured line of credit to fund the purchase of $8.2
million in treasury stock. Proceeds from the borrowing were also used
to pay severance and accrued vacation as described above.
The Company plans to meet its 1995 working capital and capital
expenditure requirements through funds from operations and borrowings
on the line of credit.
12
<PAGE>
Part II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Item 3 of the Company's Form 10-K for the year
ended December 31, 1994. There have been no new legal proceedings
initiated during the quarter, nor has there been a change in status or
termination of any previously reported legal proceeding.
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Settlement Agreement executed in connection with the resignations
described in Note 5 to the condensed consolidated financial statements
is attached hereto as an exhibit.
A Form 8-K was filed on March 2, 1995 for each of the companies (Lock,
Universal and Best) to reflect the transaction described in Note 5
above.
13
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
BEST UNIVERSAL LOCK CO.
(Registrant)
Date: May 15, 1995 By: /s/ Edward C. Memmen, Jr.
--------------------------------
Vice President
(Principal Accounting Officer)
14
<PAGE>
This AGREEMENT (the "Agreement") is entered into this 15th day of
February 1995, by and among the following listed parties:
1. Best Lock Corporation (the "Corporation"),
2. Best Aircraft Corporation ("Aircraft"),
3. Best Lock Partnership (the "Partnership"),
4. Walter E. Best Company, Inc. ("WEBCO"),
5. Frank E. Best, Inc. ("FEB"),
6. Best Universal Lock Co. ("BUL"),
7. Walter E. Best, as Trustee of the
Walter E. Best Revocable Trust (the "WEB Trust"),
8. Dona J. Best, as Trustee of the Dona J. Best
Revocable Intervivos Trust (the "DJB Trust"),
9. Walter E. Best,
10. Dona J. Best,
11. Robert W. Best,
12. Denise Best,
13. Richard E. Best,
14. Amber Best,
15. Marshall W. Best,
16. Tracey Best,
17. Russell C. Best, and
18. Gregg A. Dykstra.
W I T N E S S E T H:
WHEREAS, the Corporation is a publicly traded, for-profit
corporation that is organized under the laws of the state of Delaware,
that has its principal place of business in Indianapolis, Indiana, and
that engages principally in the business of designing and
manufacturing locks and locking devices;
WHEREAS, the Corporation is a subsidiary corporation of BUL,
FEB, and WEBCO (hereinafter collectively referred to as the
Corporation's "Affiliates");
WHEREAS, the Corporation shall purchase units of non-voting
interests in the Partnership, an Indiana general partnership in which
Russell C. Best and WEBCO are partners and that has as its principal
asset shares of FEB common stock, to establish and maintain the
Partnership as an investment vehicle to benefit the shareholders of
the Corporation in the following ways: (i) it will permit the
purchase of the interests held by certain senior members of the
Corporation's management in the Corporation and certain affiliates of
the Corporation in a manner that will afford the Corporation enhanced
flexibility to undertake future restructuring transactions, should
such transactions be determined to be beneficial to the Corporation
and its shareholders, in a manner that reduces tax costs; (ii) it will
enhance the flexibility of the Corporation to structure a sale of
assets in a tax efficient manner should the Corporation ever determine
to sell its assets; (iii) it will assist the accomplishment of the
objective of causing the Corporation and certain of its affiliates to
become members of a consolidated group for federal income tax purposes
and, thereby, to achieve savings in federal income taxation for the
Corporation's primary shareholder, Best Universal Lock Co., including
with respect to distributions of dividends; and (iv) it will assist
the accomplishment of the objective of reducing the financial and
other costs of compliance with requirements imposed upon the
Corporation by the Securities Exchange Act of 1934;
WHEREAS, BUL, a subsidiary of FEB, is a publicly traded, for-
profit corporation organized under the laws of the state of Washington
with its principal place of business located in Indianapolis, Indiana;
WHEREAS, FEB is a publicly traded, for-profit corporation
organized under the laws of the state of Washington with its principal
place of business in Indianapolis, Indiana;
WHEREAS, WEBCO is a privately held, for-profit corporation
organized under the laws of the state of Indiana with its principal
place of business in Indianapolis, Indiana;
15
<PAGE>
WHEREAS, the following persons serve as employees of the
Corporation in the following capacities: (1) Russell C. Best - Chief
Executive Officer, (2) Walter E. Best - Chairman and President,
(3) Richard E. Best - Vice President, (4) Marshall W. Best - Vice
President, and (5) Robert W. Best - Assistant to the President
(hereinafter these five individuals are referred to as the "Best
Family Managers");
WHEREAS, Gregg A. Dykstra serves as the Corporation's general
counsel;
WHEREAS, Dona J. Best, wife of Walter E. Best, Denise Best, wife
of Robert W. Best, Amber Best, wife of Richard E. Best, and Tracey
Best, wife of Marshall W. Best, legally and/or beneficially own shares
in the Corporation and/or one or more of the Corporation's Affiliates;
WHEREAS, serious differences of opinion respecting the management
and the desired future direction of the Corporation exist among the
Best Family Managers and Gregg A. Dykstra;
WHEREAS, these differences of opinion have prevented the
Corporation's Board of Directors, of which Walter E. Best and Russell C.
Best are members, from operating effectively;
WHEREAS, Walter E. Best has expressed strong criticism and
disagreement with certain proposals advanced by, as well as certain
past conduct of, Russell C. Best and Gregg A. Dykstra;
WHEREAS, the Corporation's Board of Directors has considered and
reviewed the dispute among the Best Family Managers and Gregg A.
Dykstra and has determined that the interests of the Corporation's
shareholders cannot be best served if the dispute continues and all of
the Best Family Managers remain employees of the Corporation;
WHEREAS, the Corporation and all the members of its Board of
Directors believe, that the interests of the Corporation's
shareholders are best served by terminating the dispute among the Best
Family Managers and eliminating the conflict that now prevents the
Corporation's Board of Directors from operating effectively by
severing the relationship that Walter E. Best, Robert W. Best, Richard
E. Best, and Marshall W. Best have with the Corporation pursuant to
the terms of a severance arrangement;
WHEREAS, the parties have executed a Letter of Intent, dated
November 29, 1994, as amended by an Amendment dated January 6, 1995
and by a Second Amendment dated January 27, 1995, which sets forth
their agreement in principle with respect to the terms of the
severance arrangement;
WHEREAS, the Corporation has engaged Merrill Lynch, Pierce,
Fenner & Smith Incorporated to review the terms of the proposed
severance arrangement, and Merrill Lynch has issued its written
opinion, dated February 14 1995, that the proposed severance
arrangement, if effected, is fair to the shareholders of the
Corporation from a financial perspective;
WHEREAS, the parties desire this Agreement to constitute their
definitive agreement respecting the terms of the severance arrangement
detailed in the Letter of Intent, as amended;
WHEREAS, the Corporation desires that the current dispute among
the Best Family Managers and Gregg A. Dykstra and between Russell C.
Best and Walter E. Best, as members of the Board of Directors of the
Corporation, be resolved;
WHEREAS, Walter E. Best, Dona J. Best, Robert W. Best, Denise
Best, Richard E. Best, Amber Best, Marshall W. Best, and Tracey Best
desire to divest themselves of all their relationships with the
Corporation, including all ownership, management, and employment
relationships, by selling all of their stock in the Corporation and
its Affiliates and by resigning all positions, including but not
limited to, Director, Officer, and Employee held in the Corporation
and its Affiliates, and its Stock Bonus Plan;
WHEREAS, Aircraft is a closely held corporation that is organized
under the laws of the state of Indiana, has its principal place of
business in Indianapolis, Indiana, and engages in the business of
owning and leasing various aircraft and automobiles for executive
transportation;
16
<PAGE>
WHEREAS, Aircraft leases automobiles to the Corporation, both
Aircraft and the Corporation desire to terminate their leasing
relationship and the Corporation desires to purchase and Aircraft
desires to sell certain of these automobiles;
NOW, THEREFORE, in consideration of the mutual covenants
expressed herein and other good and sufficient consideration, the
parties hereto agree to the following:
ARTICLE 1: REPRESENTATIONS AND WARRANTIES
A. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. The Corporation
makes the following representations and warranties:
1. ORGANIZATION OF THE CORPORATION. The Corporation is a
corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware and is duly
qualified to transact all the business required herein. The
Corporation has the full power and authority to purchase and sell
tangible and intangible property and to borrow funds and to carry
on its business as now conducted.
2. CORPORATE AUTHORITY. The Corporation has full right, power,
capacity, and authority to enter into this Agreement, to
consummate the transactions contemplated hereby, and to comply
with the terms, conditions, and provisions hereof. The
execution, delivery, and performance of this Agreement by the
Corporation have been duly authorized and approved by the Board
of Directors of the Corporation and do not require any further
authorization or consent. This Agreement and all the other
documents, papers, and instruments related directly or indirectly
thereto, constitute, in accordance with their terms, valid,
enforceable, and legally binding obligations of the Corporation.
3. NO VIOLATION, ARTICLES OF INCORPORATION, BY-LAWS, ETC. The
execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated hereby and the
compliance with or fulfillment of the terms and provisions hereof
and of any other agreement or instrument contemplated hereby, do
not and will not (i) conflict with or result in a breach of any
of the provisions of the Articles of Incorporation, or the
By-Laws of the Corporation, (ii) contravene any law, rule, or
regulation of any state or of the United States, or any order,
writ, award, judgment, decree, or other determination that
affects or binds the Corporation, or any of its respective
properties, (iii) conflict with, result in a breach of,
constitute a default under, or give rise to a right of
termination under any contract, deed of trust, mortgage, trust,
lease, governmental, or other license, permit or other
authorization, contract, agreement, note, or
17
<PAGE>
any other agreement, instrument, or restriction to which the
Corporation is a party or by which any properties of
the Corporation may be affected or bound, or (iv)
require the approval, consent or authorization of, or
registration with, any third party or any foreign,
federal, state or local court, governmental authority,
or regulatory body.
B. REPRESENTATIONS AND WARRANTIES OF AIRCRAFT. Aircraft makes the
following representations and warranties:
1. Organization of Aircraft. Aircraft is a corporation duly
organized, validly existing, and in good standing under the laws
of the State of Indiana and is duly qualified to transact all the
business required herein. Aircraft has the full power and
authority to purchase and sell tangible and intangible property
and to borrow funds and to carry on its business as now conducted.
2. CORPORATE AUTHORITY. Aircraft has full right, power, capacity,
and authority to enter into this Agreement, to consummate the
transactions contemplated hereby, and to comply with the terms,
conditions, and provisions hereof. The execution, delivery, and
performance of this Agreement by Aircraft have been duly
authorized and approved by the Board of Directors of Aircraft and
do not require any further authorization or consent.
3. NO VIOLATION, ARTICLES OF INCORPORATION, BY-LAWS, ETC. The
execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated hereby and the
compliance with or fulfillment of the terms and provisions hereof
and of any other agreement or instrument contemplated hereby, do
not and will not (i) conflict with or result in a breach of any
of the provisions of the Articles of Incorporation, or the
By-Laws of Aircraft (ii) contravene any law, rule, or regulation
of any state or of the United States, or any order, writ, award,
judgment, decree, or other determination that affects or binds
Aircraft, or any of its respective properties, (iii) conflict
with, result in a breach of, constitute a default under, or give
rise to a right of termination under any contract, deed of trust,
mortgage, trust, lease, governmental, or other license, permit or
other authorization, contract, agreement, note, or any other
agreement, instrument, or restriction to which Aircraft is a
party or by which any properties of Aircraft may be affected or
bound, except for the contractual arrangement that Aircraft has
with National City Bank of Indianapolis, Indiana (the "NCB
Contract"), or (iv) require the approval, consent or
authorization of, or registration with, any third party or any
foreign, federal, state or local court, governmental authority,
or regulatory body except that the approval of National City Bank
of Indianapolis ("NCB") to the transfer of the automobiles
contemplated herein is required and has been secured.
4. TITLE AND CONDITION. Except for the interest of NCB in certain
automobiles as reflected in the NCB Contract, Aircraft currently
has, and as of the date of closing, will have good and marketable
title, free and clear of any and all Liens, as hereinafter
defined, to each of the automobiles identified in EXHIBIT A. The
automobiles owned and held by Aircraft are in good and
serviceable condition and suitable for the uses for which they
are intended. For purposes of this Agreement, a "Lien" shall
mean any lien, encumbrance, mortgage, hypothecation, pledge,
conditional sales contract, equity, charge, hire or hire purchase
agreement, or other similar conflicting ownership or security
interest in favor of any third party, except for any lien for
state or local property taxes that is not yet due and payable.
II. ARTICLE 2: ECONOMIC PROVISIONS
A. ORDER OF TRANSACTIONS. The transactions described within this
Article 2 shall occur in the order prescribed in this Section 2.1, and
in the event the order prescribed herein may conflict with the order in
any other provision, this Section 2.1 shall control.
1. FIRST TRANSACTION. WEBCO's redemption of all the WEBCO shares
owned by the DJB Trust, the WEB Trust, Robert W. Best, Denise
Best, Richard E. Best, Amber Best, Marshall W. Best, and Tracey
Best for non-voting interests in the Partnership.
18
<PAGE>
2. SECOND TRANSACTION. The Corporation shall purchase all the
non-voting interests in the Partnership owned by the DJB Trust,
the WEB Trust, Robert W. Best, Denise Best, Richard E. Best,
Amber Best, Marshall W. Best, and Tracey Best.
3. THIRD TRANSACTION. The Partnership shall purchase all the shares
of stock in FEB and BUL owned by Walter E. Best, the DJB Trust,
Robert W. Best, Richard E. Best, and Marshall W. Best.
4. FOURTH TRANSACTION. The Corporation shall redeem all
the shares of stock in the Corporation owned by Walter E. Best,
the DJB Trust, Robert W. Best, Richard E. Best, and Marshall W.
Best.
5. FIFTH TRANSACTION. All the transactions that are not identified as
part of the first, second, third, or fourth transactions above
shall occur as part of this fifth transaction.
After the transactions contemplated hereunder are effected, the
Corporation will own an 87.00 percentage interest in the Partnership.
B. SHARES OWNED BY WALTER E. BEST.
PURCHASE BY PARTNERSHIP. On February 15, 1995, the Partnership shall
purchase from Walter E. Best, and Walter E. Best shall sell to the
Partnership, all the shares of capital stock that he owns in FEB and
BUL.
REDEMPTION BY CORPORATION. On February 15, 1995, the Corporation
shall redeem from Walter E. Best, and Walter E. Best shall present to
the Corporation for redemption, all the shares of stock he owns in the
Corporation, for cash in the amount equal to the aggregate appraised
value of the Corporation shares on December 31, 1993, as determined by
Sigurd R. Wendin & Associates, Inc. and reflected in Richard Wendin's
letter dated May 16, 1994, which is attached as EXHIBIT B (the "Wendin
Appraisal I").
These transactions shall occur as follows:
1. FEB COMMON. The Partnership shall purchase ten (10) shares of
common stock in FEB from Walter E. Best for $293.60 in cash, based on
the FEB common stock appraised fair market value of $29.36 per share.
2. BUL COMMON. The Partnership shall purchase five (5) shares of
common stock in BUL from Walter E. Best for $329.80 in cash,
based on the BUL common stock appraised fair market value of
$65.96 per share.
3. CORPORATION COMMON. The Corporation shall redeem two (2) shares
of common stock in the Corporation from Walter E. Best for
$770.00 in cash, based on the Corporation common stock appraised
fair market value of $385.00 per share.
Walter E. Best shall deliver to the Corporation no later than
February 15, 1995 all stock certificates and properly endorsed and
executed stock powers in a form sufficient to permit the transfer of
ownership of the stock.
C. SHARES OWNED BY THE DONA J. BEST REVOCABLE INTERVIVOS TRUST.
REDEMPTION BY WEBCO AND PURCHASE BY CORPORATION. On February 15,
1995, WEBCO shall redeem from the DJB Trust, and the DJB Trust
shall present to WEBCO for redemption, all the non-voting shares
of common stock that the DJB Trust owns in WEBCO in return for a
non-voting interest in the Partnership, and the Corporation shall
then purchase the non-voting interest in the Partnership from the
DJB Trust for cash in the amount equal to the aggregate appraised
fair market value of the non-voting WEBCO common shares that the
DJB Trust redeemed, valued as of December 31, 1993, as determined
by the Wendin appraisal dated December 21, 1994, which is
attached as EXHIBIT C (the "Wendin Appraisal II").
19
<PAGE>
PURCHASE BY PARTNERSHIP. On February 15, 1995, the Partnership shall
purchase from Dona J. Best, as trustee of the Dona J. Best Revocable
Trust, created under the trust agreement dated December 19, 1991, as
amended (the "DJB Trust"), and the DJB Trust shall sell to the
Partnership, all the common stock the DJB Trust owns in BUL in return
for cash in the amount equal to the aggregate value of the shares as
appraised in the Wendin Appraisal I.
REDEMPTION BY CORPORATION. On February 15, 1995, the Corporation
shall redeem from the DJB Trust, and the DJB Trust shall present for
redemption to the Corporation all the stock the DJB Trust owns in the
Corporation, in return for cash in the amount equal to the aggregate
appraised value of the Corporation shares as appraised in the Wendin
Appraisal I.
These transactions shall occur as follows:
1. WEBCO NON-VOTING COMMON. WEBCO shall redeem TWO HUNDRED
SIXTY-EIGHT (268) shares of non-voting common stock in WEBCO from
the DJB Trust for a non-voting interest in the Partnership. The
Corporation shall then purchase the non-voting Partnership
interest from the DJB Trust for $144,272.44 in cash. The
$144,272.44 price of the non-voting Partnership interest is based
on the appraised fair market value of the TWO HUNDRED SIXTY-EIGHT
(268) WEBCO non-voting common shares of $538.33 per share.
2. BUL COMMON. The Partnership shall purchase TWO THOUSAND THREE
HUNDRED NINETY-EIGHT (2,398) shares of common stock in BUL from
the DJB Trust for $158,172.08 in cash, based on the BUL common
stock appraised fair market value of $65.96 per share.
3. CORPORATION COMMON. The Corporation shall redeem ONE THOUSAND
FOUR HUNDRED FIFTY-NINE (1,459) shares of the Corporation's
common stock from the DJB Trust for $561,715.00 in cash, based on
the Corporation stock appraised fair market value of $385.00 per
share.
The DJB Trust shall deliver to the Corporation, no later than
February 15, 1995, all stock certificates and properly endorsed and
executed stock powers in a form sufficient to permit the transfer of
ownership of the stock.
D. SHARES OWNED BY THE WALTER E. BEST REVOCABLE TRUST.
REDEMPTION BY WEBCO AND PURCHASE BY CORPORATION. On February 15,
1995, WEBCO shall redeem from Walter E. Best, as trustee of the
Walter E. Best Revocable Trust, created under the Trust Agreement dated
May 8, 1992, as amended (the "WEB Trust"), and the WEB Trust shall
present to WEBCO for redemption, all the shares of non-voting common
stock that the WEB Trust owns in WEBCO in return for a non-voting
interest in the Partnership, and the Corporation shall then purchase
the non-voting interest in the Partnership from the WEB Trust for cash
in the amount equal to the aggregate appraised fair market value of the
non-voting WEBCO common shares that the WEB Trust redeemed, valued as
of December 31, 1993, pursuant to the Wendin Appraisal II.
These transactions shall occur as follows:
1. WEBCO NON-VOTING COMMON. WEBCO shall redeem SIX THOUSAND FIVE
HUNDRED SIXTY-TWO (6,562) shares of non-voting common stock in
WEBCO from the WEB Trust for a non-voting interest in the
Partnership. The Corporation shall then purchase the non-voting
Partnership interest from the WEB Trust for $3,532,521.46 in
cash. The $3,532,521.46 price of the non-voting Partnership
interest is based on the appraised fair market value of the SIX
THOUSAND FIVE HUNDRED SIXTY-TWO (6,562) WEBCO non-voting common
shares of $538.33 per share;
The WEB Trust shall deliver to the Corporation, no later than
February 15, 1995, all stock certificates and properly endorsed
and executed stock powers in a form sufficient to permit the
transfer of ownership of the stock.
20
<PAGE>
E. SHARES OWNED BY ROBERT W. BEST, DENISE BEST, RICHARD E. BEST, AMBER
BEST, MARSHALL W. BEST, AND TRACEY BEST.
REDEMPTION BY WEBCO AND PURCHASE BY CORPORATION. On February 15,
1995, WEBCO shall redeem from Robert W. Best, Denise Best, Richard E.
Best, Amber Best, Marshall W. Best, and Tracey Best, and Robert W.
Best, Denise Best, Richard E. Best, Amber Best, Marshall W. Best, and
Tracey Best shall present for redemption, all the non-voting shares
of common stock in WEBCO that they own in return for non-voting
interests in the Partnership, and the Corporation shall then purchase
the non-voting Partnership interests from these persons for cash in
the amount equal to the aggregate appraised fair market value of the
non-voting WEBCO common shares that they redeemed, valued as of
December 31, 1993, pursuant to the Wendin Appraisal II.
PURCHASE BY PARTNERSHIP. On February 15, 1995, the Partnership shall
purchase from Robert W. Best, Denise Best, Richard E. Best, Amber
Best, Marshall W. Best, and Tracey Best, and Robert W. Best, Denise
Best, Richard E. Best, Amber Best, Marshall W. Best, and Tracey Best
shall sell to the Partnership, all the capital stock in FEB and BUL
that they own for cash in the amount equal to the aggregate appraised
value of the respective FEB and BUL shares on December 31, 1993,
pursuant to the Wendin Appraisal I.
REDEMPTION BY CORPORATION. On , 1995, the Corporation shall redeem
from Robert W. Best, Denise Best, Richard E. Best, Amber Best,
Marshall W. Best, and Tracey Best, and Robert W. Best, Denise Best,
Richard E. Best, Amber Best, Marshall W. Best, and Tracey Best shall
present for redemption to the Corporation, all the capital stock in
the Corporation that they own for cash in the amount equal to the
aggregate appraised value of the Corporation shares on December 31,
1993, pursuant to the Wendin Appraisal I.
These transactions shall occur as follows:
1. ROBERT W. BEST.
a) WEBCO NON-VOTING COMMON. WEBCO shall redeem FOUR HUNDRED
SIXTY-FIVE (465) shares of non-voting common stock in WEBCO
from Robert W. Best for a non-voting interest in the
Partnership. The Corporation shall then purchase the
non-voting Partnership interest from Robert W. Best for
$250,323.45 in cash. The $250,323.45 price of the
non-voting Partnership interest is based on the appraised
fair market value of the FOUR HUNDRED SIXTY-FIVE (465) WEBCO
non-voting common shares of $538.33 per share;
b) FEB COMMON. The Partnership shall purchase ONE THOUSAND
FOUR HUNDRED NINETY (1,490) shares of FEB common stock from
Robert W. Best for $43,746.40 in cash, based on the FEB
common stock appraised fair market value of $29.36 per share;
c) BUL COMMON. The Partnership shall purchase TWO THOUSAND ONE
HUNDRED TWENTY-EIGHT (2,128) shares of BUL common stock from
Robert W. Best for $140,362.88 in cash, based on the BUL
common stock appraised fair market value of $65.96 per share;
d) BUL PREFERRED. The Partnership shall purchase THREE AND
THREE-FOURTHS (3.75) shares of BUL preferred stock for
$375.00 in cash, based on the BUL preferred stock appraised
fair market value of $100.00 per share, which shares are
owned jointly as tenants in common by Robert W. Best,
Richard E. Best, Marshall W. Best, and Russell C. Best (the
"Best Brothers"), and which shares represent Robert W.
Best's undivided TWENTY-FIVE PERCENT (25%) interest in the
FIFTEEN (15) shares of BUL preferred stock jointly owned by
the Best Brothers;
21
<PAGE>
e) CORPORATION COMMON. The Corporation shall redeem ONE THOUSAND
NINE HUNDRED SEVEN (1,907) shares of the Corporation's
common stock from Robert W. Best for $734,195.00 in cash,
based on the Corporation common stock appraised fair market
value of $385.00 per share.
Robert W. Best shall deliver to the Corporation, no later than
February 15, 1995, all stock certificates and properly
endorsed and executed stock powers in a form sufficient
to permit the transfer of ownership of the stock.
2. DENISE BEST.
a) WEBCO NON-VOTING COMMON. WEBCO shall redeem FIFTY-EIGHT (58)
shares of non-voting common stock in WEBCO from Denise Best
for a non-voting interest in the Partnership. The
Corporation shall then purchase the non-voting Partnership
interest for $31,223.14 in cash. The $31,223.14 price of the
non-voting Partnership interest is based on the appraised
fair market value of the FIFTY-EIGHT (58) WEBCO non-voting
common shares of $538.33 per share.
Denise Best shall deliver to the Corporation, no later than
February 15, 1995, all stock certificates and properly endorsed
and executed stock powers in a form sufficient to permit the
transfer of ownership of the stock.
3. RICHARD E. BEST.
a) WEBCO NON-VOTING COMMON. WEBCO shall redeem FOUR HUNDRED
SIXTY-FIVE (465) shares of non-voting common stock in WEBCO
from Richard E. Best for a non-voting interest in the
Partnership. The Corporation shall then purchase the
non-voting Partnership interest from Richard E. Best for
$250,323.45 in cash. The $250,323.45 price of the
non-voting Partnership interest is based on the appraised
fair market value of the FOUR HUNDRED SIXTY-FIVE (465) WEBCO
non-voting common shares of $538.33 per share;
b) FEB COMMON. The Partnership shall purchase ONE THOUSAND FOUR
HUNDRED EIGHTY-SEVEN (1,487) shares of FEB common stock from
Richard E. Best for $43,658.32 in cash., based on the FEB
common stock appraised fair market value of $29.36 per share;
c) BUL COMMON. The Partnership shall purchase TWO THOUSAND ONE
HUNDRED TWENTY-EIGHT (2,128) shares of BUL common stock from
Richard E. Best for $140,362.88 in cash, based on the BUL
common stock appraised fair market value of $65.96 per share;
d) BUL PREFERRED. The Partnership shall purchase THREE AND
THREE-FOURTHS (3.75) shares of BUL preferred stock for
$375.00 in cash, based on the BUL preferred stock appraised
fair market value of $100.00 per share, which shares are
owned jointly as tenants in common by the Best Brothers and
which shares represent Richard E. Best's undivided
TWENTY-FIVE PERCENT (25%) interest in the FIFTEEN (15)
shares of BUL preferred stock jointly owned by the Best
Brothers;
e) CORPORATION COMMON. The Corporation shall redeem ONE THOUSAND
SIX HUNDRED EIGHTY-SEVEN (1,687) shares of the Corporation's
common stock from Richard E. Best for $649,495.00 in cash,
based on the Corporation common stock appraised fair market
value of $385.00 per share.
Richard E. Best shall deliver to the Corporation, no later than
February 15, 1995, all stock certificates and properly endorsed
and executed stock powers in a form sufficient to permit the
transfer of ownership of the stock.
22
<PAGE>
4. AMBER BEST.
a) WEBCO NON-VOTING COMMON. WEBCO shall redeem FIFTY-EIGHT (58)
shares of non-voting common stock in WEBCO from Amber Best
for a non-voting interest in the Partnership. The
Corporation shall then purchase from Amber Best the
non-voting Partnership interest for $31,223.14 in cash. The
$31,223.14 price of the non-voting Partnership interest is
based on the appraised fair market value of the FIFTY EIGHT
(58) WEBCO non-voting common shares of $538.33 per share.
Amber Best shall deliver to the Corporation, no later than
February 15, 1995, all stock certificates and properly
endorsed and executed stock powers in a form sufficient to
permit the transfer of ownership of the stock.
5. MARSHALL W. BEST.
a) WEBCO NON-VOTING COMMON. WEBCO shall redeem FOUR HUNDRED
SIXTY-FIVE (465) shares of non-voting common stock in WEBCO
from Marshall W. Best for a non-voting interest in the
Partnership. The Corporation shall then purchase the
non-voting Partnership interest from Marshall W. Best for
$250,323.45 in cash. The $250,323.45 price of the
non-voting Partnership interest is based on the appraised
fair market value of the FOUR HUNDRED SIXTY-FIVE (465) WEBCO
non-voting shares of $538.33 per share;
b) FEB COMMON. The Partnership shall purchase ONE THOUSAND
FOUR HUNDRED EIGHTY-SEVEN (1,487) shares of FEB common stock
from Marshall W. Best for $43,658.32 in cash, based on the
FEB common stock appraised fair market value of $29.36 per
share;
c) BUL COMMON. The Partnership shall purchase TWO THOUSAND ONE
HUNDRED TWENTY-EIGHT (2,128) shares of BUL common stock from
Marshall W. Best for $140,362.88 in cash, based on the BUL
common stock appraised fair market value of $65.96 per share;
d) BUL PREFERRED. The Partnership shall purchase THREE AND
THREE-FOURTHS (3.75) shares of BUL preferred stock for
$375.00 in cash, based on the BUL preferred stock appraised
fair market value of $100.00 per share, which shares are
owned jointly as tenants in common by the Best Brothers and
which shares represent Marshall W. Best's undivided
TWENTY-FIVE PERCENT (25%) interest in the FIFTEEN (15)
shares of BUL preferred stock jointly owned by the Best
Brothers;
e) CORPORATION COMMON. The Corporation shall purchase ONE
THOUSAND SIX HUNDRED EIGHTY-SEVEN (1,687) shares of the
Corporation's common stock from Marshall W. Best for
$649,495.00 in cash, based on the Corporation common stock
appraised fair market value of $385.00 per share.
Marshall W. Best shall deliver to the Corporation, no later
than February 15, 1995, all stock certificates and properly
endorsed and executed stock powers in a form sufficient to permit
the transfer of ownership of the stock.
6. TRACEY BEST.
a) WEBCO NON-VOTING COMMON. WEBCO shall redeem FIFTY-EIGHT (58)
shares of non-voting common stock in WEBCO from Tracey Best
for a non-voting interest in the Partnership. The
Corporation shall then purchase the non-voting Partnership
interest from Tracey Best for $31,223.14 in cash. The
$31,223.14 price of the non-voting Partnership interest is
based on the appraised fair market value of the FIFTY-EIGHT (58)
23
<PAGE>
WEBCO non-voting shares of $538.33 per share.
Tracey Best shall deliver to the Corporation, no later than
February 15, 1995, all stock certificates and properly
endorsed and executed stock powers in a form sufficient to permit
the transfer of ownership of the stock.
F. SHARES OF FEB COMMON STOCK OWNED BY THE 1972 IRREVOCABLE TRUST. The
Huntington Trust Company, N.A., as the Trustee of the 1972
Irrevocable Trust, created under the trust agreement dated
December 28, 1972, for the benefit of the four Best Brothers (the
"1972 Trust"), shall sell to the Partnership on February 15, 1995,
ELEVEN THOUSAND EIGHT HUNDRED NINETY-ONE (11,891) shares of FEB
common stock, which constitute the total 11,891 FEB common shares held
by the 1972 Trust, for $349,119.76 in cash, based on the Wendin
Appraisal I fair market value of $29.36 per share.
G. RESULT OF SHARE TRANSACTIONS. After all the transactions involving
sales and purchases of shares and interests of FEB, BUL, BLC, WEBCO,
and the Partnership, which are described in Sections 2.2 through 2.6,
are completed, BLC will own an eighty-seven percent (87.00%) interest in
the Partnership.
H. SEVERANCE PAYMENT: WALTER E. BEST. On February 15, 1995, the
Corporation shall pay to Walter E. Best in cash as compensation a
severance payment of $500,000.
I. COVENANT NOT TO COMPETE: WALTER E. BEST. On February 15, 1995,
the Corporation shall pay to Walter E. Best $640,000 in cash for his
covenant not to compete against the Corporation, as provided in this
Section 2.9.
For a period of five years beginning on February 15, 1995, the
effective date of this Agreement, and ending on February 15, 2000,
Walter E. Best shall not: (i) engage in any capacity (including, but
not limited to, capacities as an employee, independent contractor, or
agent) or have any interest, direct or indirect, in any business in
the locking and security industry or otherwise in competition with the
Corporation's business; or (ii) use, or permit the use of, the name
"Best" for marketing or commercial purposes in association with any
business in the locking and security industry or otherwise in
competition with the Corporation's business with which he may become
associated. Walter E. Best may request that the Corporation waive the
enforcement of its rights under the covenants herein in a particular
situation, and the Corporation may or may not agree to waive its
rights.
J. RESIGNATIONS: WALTER E. BEST. Walter E. Best shall resign as an
employee, officer, and member of the Board of Directors of the
Corporation and as an officer and member of the Board of Directors of
each of FEB, BUL, WEBCO, and Best Universal Locks Limited, effective
as of February 15, 1995. Walter E. Best shall resign as a member of
the Administrative Committee of the Corporation's Stock Bonus Plan,
effective as of February 15, 1995.
K. RESIGNATIONS: ROBERT W. BEST, RICHARD E. BEST, AND MARSHALL W.
BEST. Robert W. Best shall resign as an employee of the Corporation,
effective as of February 15, 1995. Each of Richard E. Best and
Marshall W. Best shall resign as an employee and officer of the
Corporation, effective as of February 15, 1995.
L. CANCELLATION OF INDEBTEDNESS. On February 15, 1995, the
Corporation shall cancel $28,690.97, which is the approximate amount
of the indebtedness owed on that date by each of Robert W. Best,
Richard E. Best, and Marshall W. Best to the Corporation under the
terms of the promissory notes each of them executed in connection with
the Corporation's prior interest in part of the proceeds of the joint
and survivor life insurance policy owned by Robert W. Best, as Trustee
of the Walter Edwin Best Irrevocable Life Insurance Trust, created
under the trust agreement dated April 15, 1989. The canceled
promissory notes shall be given to Robert W. Best, Richard E. Best,
and Marshall W. Best by the Corporation upon the execution of this
Agreement. Further, the Corporation shall not charge Robert W. Best,
Richard E. Best, or Marshall W. Best for expenses the Corporation has
incurred to permit them to attend any training classes or seminars.
M. SEVERANCE PAYMENT: ROBERT W. BEST. On February 15, 1995, the
Corporation shall pay to Robert W.
24
<PAGE>
Best in cash as compensation a severance payment of $405,612.
N. SEVERANCE PAYMENT: RICHARD E. BEST. On February 15, 1995, the
Corporation shall pay to Richard E. Best in cash as compensation a
severance payment of $423,381.
O. SEVERANCE PAYMENT: MARSHALL W. BEST. On February 15, 1995, the
Corporation shall pay to Marshall W. Best in cash as compensation a
severance payment of $416,614.
P. COVENANT NOT TO COMPETE: ROBERT W. BEST, RICHARD E. BEST, AND
MARSHALL W. BEST. In connection with the purchase of their shares in
FEB, BUL, the Corporation, and WEBCO, each of Robert W. Best,
Richard E. Best, and Marshall W. Best covenants as follows:
1. GENERAL COVENANT. For a two (2) year period, beginning on
February 15, 1995, the effective date of the Agreement, and
ending on February 15, 1997, he shall not engage in any capacity
(including, but not limited to, capacities as an employee,
independent contractor, or agent) or have any interest, direct or
indirect, in any business in the locking and security industry or
otherwise in competition with the Corporation's business.
2. OTHER COVENANTS. For a five (5) year period, beginning on
February 15, 1995, the effective date of the Agreement, and
ending on February 15, 2000, he shall not:
a) Participate in any marketing or similar effort to promote a
product or service in the locking and security industry or
otherwise competitive with any product or service then
marketed by the Corporation;
b) Engage in any capacity (including, but not limited to,
capacities as an employee, independent contractor, or agent)
or have any interest, direct or indirect, in any business in
the locking and security industry or otherwise in competition
with the Corporation's business if any Best Family Member (as
defined in Section 2.19 below) or person related to a Best
Family Member by blood owns any equity interest in such
business other than a de minimus interest; or
c) Use, or permit the use of, the name "Best" for marketing or
commercial purposes in association with any business in the
locking and security industry or otherwise in competition
with the Corporation's business with which he may become
associated.
3. ACTIVITIES OUTSIDE THE COVENANTS NOT TO COMPETE. Notwithstanding
any other provision of this Section 2.16, Richard E. Best shall
be free at any time to perform services for, or have an interest,
direct or indirect, in, any enterprise that is not in the locking
industry and that does not have as one of its principal
activities the marketing or promotion of locks or locking
systems. For example, Richard E. Best shall be free at any time
to perform services as a manager of plant or building security
for any enterprise that is not in the locking industry and that
does not have as one of its principal activities the marketing or
promotion of locks or locking systems. Similarly, Richard E. Best
shall be free at any time to perform managerial services for a
corporation in the security industry, such as Nora Security, so
long as such corporation does not have as one of its principal
activities the marketing or promotion of locks or locking systems.
4. PAYMENT FOR COVENANTS. On February 15, 1995, in return for their
covenants not to compete reflected in this Section 2.16, the
Corporation shall pay to each of Robert W. Best, Richard E. Best,
and Marshall W. Best $200,000 in cash.
5. WAIVER. Any of Robert W. Best, Richard E. Best, and Marshall W.
Best may request that the Corporation waive the enforcement of
its rights under these covenants in a particular situation, and
the Corporation may or may not agree to waive its rights.
Q. VACATION AND BONUS DAYS. In accordance with the Corporation's
personnel policies, the Corporation shall compensate Walter E. Best,
Robert W. Best, Richard E. Best, and Marshall W. Best for
25
<PAGE>
their vacation days and bonus days accrued to and including
December 31, 1994, as follows:
1. WALTER E. BEST. On February 15, 1995, the Corporation shall pay
to Walter E. Best, for his 113 vacation days and 57 bonus days,
the aggregate amount of $195,132.80.
2. ROBERT W. BEST. On February 15, 1995, the Corporation shall pay to
Robert W. Best, for his 25 vacation days and 18 bonus days, the
aggregate amount of $24,162.56.
3. RICHARD E. BEST. On February 15, 1995, the Corporation shall pay
to Richard E. Best, for his 19 vacation days and 13 bonus days,
the aggregate amount of $19,182.08.
4. MARSHALL W. BEST. On February 15, 1995, the Corporation shall pay
to Marshall W. Best, for his 22 vacation days and 14 bonus days,
the aggregate amount of $22,746.24.
Each of Walter E. Best, Robert W. Best, Richard E. Best, and
Marshall W. Best waives any right he may have to receive payment for
vacation and/or bonus days in excess of the amounts reflected in this
Section 2.17.
R. SEVERANCE ARRANGEMENT: EDWINA MCLEMORE. Upon execution of a
customary release and waiver of claims against the Corporation in
connection with the termination of her employment, attached as
EXHIBIT D, on February 15, 1995, the Corporation shall pay to Edwina
McLemore in cash as compensation a severance payment of $38,188, and
shall pay to her $4,848 for her 20 vacation days and 13 bonus days
accrued to and including December 31, 1994. The aggregate amount of
this severance package to be paid to Edwina McLemore is $43,036.
Under this severance arrangement, Edwina McLemore's employment with
the Corporation shall terminate on February 15, 1995. In addition,
Walter E. Best shall ensure that on or before the date of closing
Edwina McLemore waives any right she may have to receive payment for
vacation and/or bonus days in excess of the amounts reflected in
this Section 2.18.
S. CORPORATION INDEMNIFICATION POLICY AND REIMBURSEMENT OF LEGAL FEES
INDEPENDENT OF INDEMNIFICATION POLICY. The Corporation's Board of
Directors shall adopt and maintain a policy to indemnify directors
and executive officers that includes the advancement of legal fees,
so long as the maintenance of such a policy is legally permissible,
at all times that the Corporation is in existence.
All legal fees up to $82,208.50 in the aggregate that have been
incurred by Walter E. Best in connection with the formulation and/or
consideration of the claims Walter E. Best has advanced shall be
paid by the Corporation as additional consideration to Walter E.
Best.
T. GENERAL RELEASE. Upon the fulfillment of all the parties' payment
obligations set forth herein, each of Walter E. Best, Dona J. Best,
Robert W. Best, Denise Best, Richard E. Best, Amber Best, Marshall W.
Best, Tracey Best (collectively hereinafter termed the "Best
Family Members"), Walter E. Best, as Trustee of the WEB Trust, and
Dona J. Best, as Trustee of the DJB Trust, shall provide a general
release of any and all claims, in substantially the form of release
attached as EXHIBIT E (the "Release"),that each may have against
WEBCO, FEB, BUL, and the Corporation and the Corporation's officers,
directors, and agents, including, but not limited to, Gregg A.
Dykstra, John R. Rogers, Donald L. Beckerich, David M. DeWitt,
Douglas P. Long, and Russell C. Best. Each of WEBCO, FEB, BUL, the
Partnership, the Corporation, Gregg A. Dykstra, and Russell C. Best
shall provide, and the Corporation shall, in good faith, use its
best efforts to ensure that the other above-named individuals shall
provide, a Release of claims that each may have against any of the
Best Family Members, the WEB Trust, the DJB Trust, John R. Price,
Herbert A. Jensen, Michael Williams, Michael R. Franceschini, and
Kent Newton.
U. COVENANT NOT TO ACQUIRE SHARES. Each of the Best Family Members,
the WEB Trust, and the DJB Trust covenants not to acquire, or assist
others in acquiring, any FEB, BUL, Corporation, or WEBCO shares or
Partnership interests. Each of the Best Family Members, the WEB
Trust, and the DJB Trust covenants that if any of them ever acquires
any such shares or interests, for example by inheritance or as a
distribution from the Corporation's Stock Bonus Plan, he, she, or it
shall sell the shares to the Corporation for the value of the shares
or the interests to the Partnership for the value of the
interests, the
26
<PAGE>
value of the shares or interests to be determined as appraised
by a reputable and experienced independent appraiser. All appraisal
fees shall be paid by FEB, BUL, the Corporation, WEBCO, or the
Partnership, as the case may be.
V. CONSOLIDATED OMNIBUS BUDGET RECONCILIATION ACT OF 1985 LAWS. The
Corporation shall comply with all laws imposed under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") in
connection with the termination of employment of Robert W. Best,
Richard E. Best, Marshall W. Best, Edwina McLemore, and Walter E.
Best.
W. CONFIDENTIAL AND PROPRIETARY INFORMATION OF THE CORPORATION. Each
of the Best Family Members shall return to the Corporation any and
all confidential and proprietary information of WEBCO, FEB, BUL, or
the Corporation that is currently in his or her possession and shall
covenant never to disclose any confidential or proprietary
information of the Corporation and its Affiliates to third parties.
X. DUTY TO NOTIFY. During the five (5) year period, beginning
February 15, 1995, the effective date of the Agreement, and ending
on February 15, 2000, each of Walter E. Best, Robert W. Best,
Richard E. Best, and Marshall W. Best shall notify the Corporation
of the identity of any entity engaged in business in the locking and
security industry with which he secures employment or other work.
Any notification required shall be given to the Corporation within
ten (10) days after the employment or other work is secured.
Y. WALTER E. BEST: OFFICE PROPERTY. Walter E. Best may take, at no
expense to him, the file cabinets, electric typewriter, and personal
effects from his office at the Corporation at his convenience before
February 15, 1995, as evidenced by his signature on the receipt
attached as EXHIBIT F. Walter E. Best may use his office for as
long as necessary through February 15, 1995, to organize materials
and clear the office. Walter E. Best shall return to the
Corporation any corporate property in his possession, with the
exception of the property identified above, no later than
February 15, 1995.
Z. AIRCRAFT PROPERTY. As of the closing date, Aircraft has removed
all its property from the Corporation's premises, and the
Corporation has delivered to Walter E. Best all the books and
records of Aircraft that are in the Corporation's possession as
evidenced by the signed receipt in EXHIBIT F.
AA. PHOTOGRAPH. The Corporation shall provide a duplicate of the
photograph of Frank E. Best to Marshall W. Best not later than
February 15, 1995.
BB. MARSHALL W. BEST: OFFICE FURNITURE. By February 15, 1995, the
Corporation shall convey to Marshall W. Best, at no expense to him,
the wood cabinet and desk that are located in the Corporation's
hangar, as evidenced by his signature on the receipt in EXHIBIT F.
CC. AGREEMENT TERMS NOT CONFIDENTIAL. Each of the parties to the
Agreement is free to discuss the terms of the Agreement with anyone
at any time and at any place.
DD. PROHIBITION AGAINST SEEKING FUTURE EMPLOYMENT. None of the Best
Family Members shall apply for employment with WEBCO, FEB, BUL, the
Corporation, or the Partnership at anytime after February 15, 1995.
EE. WEBCO DIVIDEND. Walter E. Best and Russell C. Best shall cause
WEBCO to declare and pay cash dividends in the amount of $9.00 per
share on or before February 15, 1995.
FF. NO OBLIGATION TO GIFT WEBCO DIVIDENDS. Russell C. Best shall
have no obligation to gift or otherwise transfer to Robert W. Best,
Richard E. Best, or Marshall W. Best any part of the cash dividends
he is paid in 1995 or in subsequent years with respect to WEBCO
voting or non-voting shares that he owns or may in the future own.
GG. SALE OF FURNITURE. The Corporation shall offer to sell the
following items of furniture and equipment at the appraised values
identified in EXHIBIT J to Richard E. Best: an executive swivel
chair, four (4) caster chairs, a conference table, two (2) lamps,
and a blueprint file. Any sale shall be effected not later
27
<PAGE>
than February 15, 1995.
HH. CANCELLATION OF AUTOMOBILE LEASES. The Corporation and Aircraft
shall cancel, effective February 15, 1995, the lease agreements
pursuant to which the Corporation leases from Aircraft company cars
used by Robert W. Best, Richard E. Best, and Marshall W. Best. The
Corporation does not object to Robert W. Best, Richard E. Best, and
Marshall W. Best purchasing the cars that they currently use from
Aircraft following the cancellation of the Corporation's leases of
those vehicles from Aircraft.
II. FEDERAL AND STATE INCOME TAX PREPARATION. The Corporation shall
pay Robert W. Best, Richard E. Best, Marshall W. Best, and Walter E.
Best for the costs of accounting services incurred by each of them
to prepare their individual 1994 federal and state income tax
returns in the following amounts: (1) to Walter E. Best: $4,250.00,
(2) to Robert W. Best: $2,235.00, (3) to Richard E. Best: $1,170.00,
and (4) to Marshall W. Best: $400.00. The Corporation shall
cooperate in the preparation of all the tax returns by promptly
providing all the information necessary for completing the returns.
JJ. CANCELLATION OF LEASES AND PURCHASE OF AUTOMOBILES. The
Corporation and Aircraft shall cancel the lease agreements pursuant
to which the Corporation leases from Aircraft the automobiles, which
are listed on EXHIBIT A, that are owned by Aircraft and are
currently used by employees of the Corporation. The Corporation
shall purchase each of the automobiles reflected in Exhibit K for an
amount equal to the amount of bank indebtedness owed by Aircraft
respecting each such automobile on February 15, 1995. The
Corporation shall pay the purchase price to Aircraft either by
paying cash or by assuming the amount of Aircraft's bank
indebtedness owed on the closing date respecting each of the
automobiles, as identified on the attached EXHIBIT K. Aircraft
shall endorse the titles to the automobiles listed on EXHIBIT K to
the Corporation. Copies of the titles to be endorsed are attached
as EXHIBIT L.
KK. DOCUMENTS OF BEST FOUNDATION, INC. The Corporation shall perform
no services, including accounting services, for Best Foundation,
Inc. or Best Aircraft, Inc. after February 15, 1995, the effective
date of the Agreement. The Corporation shall deliver to Walter E.
Best, by February 15, 1995, all books and records of Best
Foundation, Inc. that are in the Corporation's possession.
LL. WAIVER OF RIGHTS TO INVENTIONS AND INTELLECTUAL PROPERTY. Each
of Robert W. Best, Richard E. Best, Marshall W. Best, and Walter E.
Best hereby waives, and, if deemed necessary by the Corporation,
shall assign to the Corporation, any rights he may have in any
inventions or other intellectual property, whether or not
patentable, that he may have worked with or on while an employee of
the Corporation.
MM. PKS LITIGATION. Walter E. Best shall, in good faith and to the
best of his abilities, render services to the Corporation's outside
counsel with respect to the litigation with ILCO ("the PKS
litigation") to which the Corporation is now a party. The
Corporation shall pay Nine Thousand Dollars ($9,000.00) to Walter E.
Best for the services he renders respecting the PKS litigation after
February 15, 1995.
NN. SUPPLEMENTAL RETIREMENT BENEFITS AGREEMENT. The Corporation
shall honor and keep in full force and effect the Supplemental
Retirement Benefits Agreement, as amended, with Walter E. Best dated
March 14, 1990.
OO. REMOVAL OF PERSONAL EFFECTS. As of the closing date, Walter E.
Best, Robert W. Best, Richard E. Best, and Marshall W. Best have
removed all their personal effects from their offices at the
Corporation as evidenced by the receipts in EXHIBIT F .
PP. STOCK BONUS PLAN. As further consideration for this Agreement,
Walter E. Best, Robert W. Best, Richard E. Best, and Marshall W.
Best covenant as follows:
1. IRREVOCABLE WAIVER OF RIGHT TO VOTE STOCK. Each of Walter E. Best,
Robert W. Best, Richard E. Best, and Marshall W. Best irrevocably
waives the right to vote the stock allocated to their respective
accounts, pursuant to the terms of the Best Lock Corporation
Stock Bonus Plan and Trust Agreement (the "Plan"), as evidenced
by signed forms of irrevocable waiver attached as EXHIBIT G,
which shall be given to the Plan Trustee, NBD.
28
<PAGE>
2. IRREVOCABLE ELECTION TO RECEIVE CASH DISTRIBUTIONS. Each of Walter
E. Best, Robert W. Best, Richard E. Best, and Marshall W. Best
irrevocably elects to receive any amounts distributed to them,
pursuant to the terms of the Plan, in cash, not in the form of
stock, as evidenced by the signed forms of irrevocable election
attached as EXHIBIT H, which shall be given to the Plan Trustee,
NBD.
QQ. IRREVOCABLE WAIVER OF RIGHT TO VOTE STOCK UNDER IRREVOCABLE TRUST.
Walter E. Best shall relinquish certain of his rights, powers, and
interests with respect to the Walter E. Best Irrevocable Trust ,
under Agreement dated December 28, 1972, by executing the Irrevocable
Waiver that is attached as EXHIBIT I.
RR. LIFE INSURANCE POLICIES. The Corporation's indebtedness under each
of the split-dollar agreements to which it is a party with each of
Richard E. Best and Marshall W. Best, satisfied respectively, will be
by payment out of the cash value of the policies and the Corporation
shall, upon the satisfaction of such indebtedness, no longer have any
rights or interests respecting either such policy.
III. ARTICLE 3: GENERAL PROVISIONS
A. EFFECTIVE DATE AND CLOSING DATE. The effective date and the closing date
of this Agreement are February 15, 1995.
B. GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the state of Indiana and shall
be enforced in either federal or state court located in Marion County,
Indiana.
C. COUNTERPARTS. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all of
which shall constitute but one and the same instrument.
D. COMPLETE AGREEMENT. This Agreement and the Exhibits attached hereto
contain the entire agreement between the parties with respect to the
transactions described herein and shall supersede all previous oral or
written and all contemporaneous oral negotiations, commitments, and
understandings.
E. HEADINGS. The Headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
F. SEVERABILITY. Any provision of this Agreement that is invalid, illegal,
or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity, illegality, or
unenforceability, without affecting in any way the remaining provisions
hereof in the jurisdiction and without rendering that or any other
provision of this Agreement invalid, illegal, or unenforceable in any
other jurisdiction.
G. EXPENSES OF TRANSACTIONS. Except as otherwise specifically stated in
this Agreement, the parties are responsible for paying all their own
expenses in giving effect to this Agreement. The parties are
responsible for their own tax consequences due to this Agreement.
H. EXHIBITS. Each of the Exhibits referenced in or attached to this
Agreement forms an integral part of the Agreement and by this
reference is incorporated herein as if set forth in this Agreement
verbatim.
I. AUTHORIZATION. The parties represent that they are each properly
authorized to execute the Agreement and the Exhibits hereto.
J. NOTICES. Any notices pursuant to this Agreement shall be in writing
and deemed complete when delivered by hand or when mailed by registered
or certified mail, postage pre-paid and return receipt requested,
addressed as follows:
29
<PAGE>
Best Lock Corporation
6161 East 75th Street
P.O. Box 50444
Indianapolis, IN 46250
Best Aircraft Corporation
8111 Bayberry Court
Indianapolis, IN 46250
The Best Lock Partnership
6161 East 75th Street
P.O. Box 50444
Indianapolis, IN 46250
Walter E. Best Company, Inc.
6161 East 75th Street
P.O. Box 50444
Indianapolis, IN 46250
Frank E. Best, Inc.
6161 East 75th Street
P.O. Box 50444
Indianapolis, IN 46250
Best Universal Lock Co.
6161 East 75th Street
P.O. Box 50444
Indianapolis, IN 46250
Walter E. Best, as Trustee of the Walter E. Best Revocable
Trust
8111 Bayberry Court
Indianapolis, IN 46250
Dona J. Best, as Trustee of the Dona J. Best Revocable
Intervivos Trust
8111 Bayberry Court
Indianapolis, IN 46250
Walter E. Best
Dona J. Best
8111 Bayberry Court
Indianapolis, IN 46250
Robert W. Best
Denise Best
6518 Calais Circle
Indianapolis, IN 46220
Richard E. Best
Amber Best
12535 Richlane Drive
Indianapolis, IN 46236
Marshall W. Best
Tracey Best
10858 Tenacious Drive
Indianapolis, IN 46236
30
<PAGE>
Russell C. Best
755 Eagle Creek Court
Zionsville, IN 46077
Gregg A. Dykstra
1838 Arrowwood Drive
Carmel, IN 46033
K. REMEDIES FOR BREACH. Any party to this Agreement may seek any legal or
equitable remedy provided by law for the breach of any of the provisions
herein.
L. WAIVERS. The waiver of one provision in this Agreement does not
constitute the waiver of any others.
M. SUCCESSORS AND ASSIGNS. This Agreement and the provisions hereof shall
be binding upon and inure to the benefit of each of the parties and their
respective heirs, successors, and assigns. No party to this Agreement
may assign any of his rights or obligations hereunder without the written
consent of each of the other parties to this Agreement.
N. THIRD PARTIES. No provision contained herein shall be deemed to confer
upon any person or entity, other than the parties hereto and their
respective heirs, successors, and assigns, any right or remedy under, or
by reason of, this Agreement.
O. CONSENT TO I.R.C. SECTION 1377(a)(2) ELECTION. All parties that own or
owned shares of stock in WEBCO during the 1995 calendar year shall give
written consent, in substantially the same form that is attached hereto
as EXHIBIT M, to the election required under I.R.C. Section 1377(a)(2)
that will permit WEBCO's year to be split into two separate taxable
years: the first taxable year beginning January 1, 1995, and ending on
the date of the redemption of the WEBCO non-voting shares under this
Agreement, and the second taxable year beginning the day after the date
of redemption and ending on December 31, 1995.
P. AGREEMENT TO NOTIFY TO AVOID ATTRIBUTION. Walter E. Best shall execute
the "Agreement to Notify Under I.R.C. Section 302(c)(2)(A)(iii) to Avoid
Application of Family Attribution Rules" attached as EXHIBIT N pursuant
to I.R.C. Section 302 (c)(2)(A)(iii) and Treas. Reg. Section
1.302-4(a)1. Dona J. Best shall execute the "Agreement to Notify Under
I.R.C. Section 302(c)(2)(A)(iii)Waiver of to Avoid Attribution" attached
as EXHIBIT O pursuant to I.R.C. Section 302 (c)(2)(A)(iii) and Treas.
Reg. Section 1.302-4(a)1.
Q. COMPENSATION. All compensation to be paid by the Corporation under this
Agreement is identified in the gross amount before deduction of amounts
for withholding FICA, FUTA, and income taxes.
IN WITNESS WHEREOF, the undersigned parties hereto have executed this
Agreement on February 15, 1995.
BEST LOCK CORPORATION
Date: __________________ By: _________________________________
Russell C. Best, Chief Executive
Officer
BEST AIRCRAFT CORPORATION
Date: __________________ By: _________________________________
Walter E. Best, President
BEST LOCK PARTNERSHIP
31
<PAGE>
Date: __________________ By: ________________________________
Russell C. Best, General Partner
WALTER E. BEST COMPANY, INC.
Date: __________________ By: _________________________________
Walter E. Best, President
FRANK E. BEST, INC.
Date: __________________ By: _________________________________
Walter E. Best, President
BEST UNIVERSAL LOCK CO.
Date: __________________ By: _________________________________
Walter E. Best, President
WALTER E. BEST REVOCABLE TRUST,
UNDER AGREEMENT DATED MAY 8, 1992, AS
AMENDED
Date: __________________ By: _________________________________
Walter E. Best, Trustee
DONA J. BEST REVOCABLE INTERVIVOS
TRUST, UNDER AGREEMENT DATED DECEMBER
19, 1991, AS AMENDED
Date: __________________ By: _________________________________
Dona J. Best, Trustee
Date: __________________ __________________________________
WALTER E. BEST
Date: __________________ __________________________________
DONA J. BEST
Date: __________________ __________________________________
ROBERT W. BEST
32
<PAGE>
Date: __________________ __________________________________
DENISE BEST
Date: __________________ __________________________________
RICHARD E. BEST
Date: __________________ __________________________________
AMBER BEST
Date: __________________ __________________________________
MARSHALL W. BEST
Date: __________________ __________________________________
TRACEY BEST
Date: __________________ __________________________________
RUSSELL C. BEST
Date: __________________ __________________________________
GREGG A. DYKSTRA
33
<PAGE>
INDEX OF EXHIBITS TO AGREEMENT
Exhibit A - Automobiles
Exhibit B - Wendin Appraisal I
Exhibit C - Wendin Appraisal II
Exhibit D - Edwina McLemore Release
Exhibit E - General Releases
Exhibit F - Receipts
Exhibit G - Irrevocable Waiver of Right to Vote Stock
Exhibit H - Irrevocable Election to Receive Cash Distributions
Exhibit I - Irrevocable Waiver of Right to Vote Stock Under Irrevocable Trust
Exhibit J - Sale of Furniture
Exhibit K - Schedule of Automobile Purchase Prices
Exhibit L - Automobile Titles
34
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 3,787,703
<SECURITIES> 0
<RECEIVABLES> 15,264,842
<ALLOWANCES> 301,954
<INVENTORY> 15,455,546
<CURRENT-ASSETS> 37,435,678
<PP&E> 62,064,867
<DEPRECIATION> 31,490,684
<TOTAL-ASSETS> 72,665,075
<CURRENT-LIABILITIES> 11,634,092
<BONDS> 12,000,000
<COMMON> 1,102,580
0
6,300
<OTHER-SE> 26,129,907
<TOTAL-LIABILITY-AND-EQUITY> 72,665,075
<SALES> 29,352,842
<TOTAL-REVENUES> 29,352,842
<CGS> 15,764,524
<TOTAL-COSTS> 27,921,271
<OTHER-EXPENSES> 175,846
<LOSS-PROVISION> 78,619
<INTEREST-EXPENSE> 137,346
<INCOME-PRETAX> 1,250,898
<INCOME-TAX> 597,541
<INCOME-CONTINUING> 653,357
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 653,357
<EPS-PRIMARY> 1.71
<EPS-DILUTED> 1.71
</TABLE>
