<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
/ / Confidential, For Use of the Commission Only (as Permitted by Rule
14a-6(e)(2))
QUIXOTE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and how it is determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
-----------------------------------------------------------------------
(3) Filing party:
-----------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
[LOGO]
NOTICE AND AGENDA OF THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD WEDNESDAY, NOVEMBER 19, 1997
--------------------
TO THE STOCKHOLDERS OF QUIXOTE CORPORATION:
Notice is hereby given that the Annual Meeting of Stockholders of Quixote
Corporation (the "Company") will be held on Wednesday, November 19, 1997, in the
Assembly Room at The Northern Trust Company, 50 South LaSalle Street, Chicago,
Illinois 60675. The meeting, which will commence at 10:00 a.m. Central Standard
Time, will consider:
1. The election of two (2) directors to serve for a three-year term
expiring at the Annual Meeting of Stockholders to be held in 2000;
2. The election of one (1) director to serve for a two-year term expiring
at the Annual Meeting of Stockholders to be held in 1999;
3. The approval of the amendment to the Company's 1993 Long-Term Stock
Ownership Incentive Plan;
4. The approval of the amendment to the Company's 1991 Director Stock
Option Plan;
5. The approval of the amendment to the Company's Certificate of
Incorporation; and
6. The approval of Coopers & Lybrand L.L.P. as independent auditors for the
Company.
The Annual Meeting will also transact such other business as may properly
come before it.
Only stockholders of record at the close of business on September 23, 1997,
will be entitled to notice of, and to vote at, the meeting.
Stockholders are encouraged to attend the meeting in person. To ensure that
your shares will be represented, we urge you to vote, date, sign and mail the
enclosed Proxy Card in the envelope which is provided, whether or not you expect
to be present at the meeting. The prompt return of your Proxy Card will be
appreciated. It will also save the Company the expense of a reminder mailing.
IT IS IMPORTANT TO YOU AND TO YOUR COMPANY THAT YOU VOTE YOUR SHARES BY
COMPLETING AND RETURNING THE ENCLOSED PROXY CARD.
WE APPRECIATE YOUR COOPERATION AND WE THANK YOU.
By order of the Board of Directors,
[/S/]
JOAN R. RILEY
SECRETARY
Chicago, Illinois
September 29, 1997
<PAGE>
I M P O R T A N T
A PROXY STATEMENT AND PROXY CARD ARE SUBMITTED WITH THIS NOTICE. ALL
STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT AND TO COMPLETE AND MAIL
THE PROXY CARD PROMPTLY. THE ENCLOSED ENVELOPE FOR THE RETURN OF THE PROXY
CARD REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. A LIST OF
STOCKHOLDERS ENTITLED TO VOTE AT THE ANNUAL MEETING WILL BE AVAILABLE FOR
INSPECTION BY ANY STOCKHOLDER FOR ANY PURPOSE GERMANE TO THE MEETING DURING
ORDINARY BUSINESS HOURS FOR A PERIOD OF TEN DAYS PRIOR TO THE MEETING AT THE
PRINCIPAL OFFICES OF THE COMPANY, ONE EAST WACKER DRIVE, 30TH FLOOR,
CHICAGO, ILLINOIS.
<PAGE>
[LOGO]
SEPTEMBER 29, 1997
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD WEDNESDAY, NOVEMBER 19, 1997
--------------------
PROXY SOLICITATION
This Proxy Statement is furnished to stockholders of Quixote Corporation
(the "Company"), on or about September 29, 1997, in connection with the
solicitation of proxies on behalf of the Board of Directors to be voted at the
Annual Meeting of Stockholders on Wednesday, November 19, 1997, at 10:00 a.m.,
Central Standard Time, in the Assembly Room at The Northern Trust Company, 50
South LaSalle Street, Chicago, Illinois 60675, and at any adjournment thereof.
The person voting the enclosed proxy may revoke it at any time before it is
exercised by writing to the Secretary of the Company at its principal office,
One East Wacker Drive, Chicago, Illinois 60601, or by attending the Annual
Meeting and voting in person, in which case any prior proxy given will be
automatically revoked.
Properly executed proxies received prior to the meeting will be voted at the
meeting. If a stockholder designates how the proxy is to be voted on any
business to come before the meeting, the signed proxy will be voted in
accordance with such designation. If a stockholder fails to designate how his
proxy should be voted, the signed proxy will be voted for: the election of the
nominees named below as Directors; the approval of the amendment of the 1993
Long-Term Stock Ownership Incentive Plan (the "Long-Term Plan"); the approval of
the amendment of the 1991 Director Stock Option Plan (the "Director Plan"); the
approval of the amendment of the Company's Certificate of Incorporation; and the
approval of Coopers & Lybrand L.L.P. as the Company's independent auditors.
The costs of this solicitation will be paid by the Company. Such costs
include preparation, printing and mailing of the Notice of Annual Meeting, Proxy
Card and this Proxy Statement. The officers and employees of the Company and its
subsidiaries may solicit proxies personally or by telephone and telegram.
Arrangements will be made with brokerage houses and other custodians, nominees
and fiduciaries for proxy material to be sent to the principals, and the Company
will reimburse such persons for their expenses. The Company has also retained
the firm of
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<PAGE>
Morrow & Co., Inc. to assist in the solicitation of proxies at a cost of
approximately $7,500 plus reasonable out-of-pocket expenses.
VOTING AT THE ANNUAL MEETING
Stockholders of record owning the Company's common stock, $.01 2/3 par value
("Common Stock"), at the close of business on September 23, 1997, will be
entitled to vote at the Annual Meeting. On that date, 8,024,576 shares of Common
Stock were outstanding. Each outstanding share of Common Stock entitles the
holder to one vote upon each matter presented at the Annual Meeting. The
affirmative vote of a majority of all of the shares of Common Stock of the
Company present in person or represented by proxy and entitled to vote at the
meeting is necessary to approve the amendment of the Director Plan, the
amendment of the Long-Term Plan, and the approval of Coopers & Lybrand, L.L.P.,
as independent auditors for the Company. The nominees for Director will be
elected if they receive the affirmative vote of at least sixty percent of all
votes entitled to be cast at this meeting. The approval of the amendment of the
Certificate of Incorporation will be approved if it receives the affirmative
vote of at least sixty percent of all votes entitled to be cast at this meeting.
Shares voted as abstentions on any matter (or a "withhold vote for" as to
Directors) will be counted as shares that are present and entitled to vote for
purposes of determining a quorum at the meeting and as unvoted, although present
and entitled to vote, for purposes of determining the approval of each matter as
to which the stockholder has abstained. Abstentions and withheld votes have the
effect of votes against a matter.
Pursuant to the New York Stock Exchange rules, brokers who hold shares of
Common Stock as nominees will have discretionary authority to vote those shares
on the proposals. However, if a broker submits a proxy that indicates the broker
does not have discretionary authority (known as "broker non-votes"), such
non-votes will be counted as shares that are present and entitled to vote for
purposes of determining a quorum at the meeting, but will not be considered as
present and entitled to vote with respect to such matters. Accordingly, broker
non-votes will have the effect of votes against a matter.
While the Notice of Annual Meeting calls for the transaction of such other
business as may properly come before the meeting, management has no knowledge of
any matters to be presented for action by the stockholders except as already set
forth. The enclosed proxy gives discretionary authority to the persons holding
those proxies to vote in accordance with their best judgment as to any other
business.
ELECTION OF DIRECTORS
At the Annual Meeting, two (2) Directors are to be elected to serve three
year terms until the Annual Meeting to be held in 2000 and until their
successors are elected and qualified. The Company is soliciting proxies to vote
for its nominees, James H. DeVries and Lawrence C. McQuade, as Directors of the
Company.
At the Annual Meeting, one (1) Director is to be elected to fill the vacancy
created by the resignation of David S. Ruder. The term shall be for a two year
term until the Annual Meeting to be held in 1999 and until a successor is
elected and qualified. In May 1997 the Board of Directors elected Leslie J.
Jezuit to fill the vacancy until the Annual Meeting and the Company is
soliciting proxies for Mr. Jezuit as a Director of the Company.
All proxies will be voted in accordance with the stated instructions. If any
nominee ceases to be a candidate for election for any reason, the proxy will be
voted for a substitute nominee designated by the Board. The Board of Directors
currently has no reason to believe that any
2
<PAGE>
nominee will be either unwilling or unable to serve as a Director if elected.
Proxies given by stockholders cannot be voted for more than three (3) persons.
The nominees for Director will be elected if they receive the affirmative vote
of at least sixty percent (60%) of all votes entitled to be cast at this
meeting.
INFORMATION CONCERNING NOMINEES FOR DIRECTOR AND DIRECTORS CONTINUING IN OFFICE.
The information appearing in this section in regard to age and principal
occupation or employment has been furnished to the Company by the respective
nominees for Director and by the respective Directors continuing in office.
Information relating to the beneficial ownership of the Company's Common Stock
by Directors and nominees for Director is set forth in the table on page 24.
NOMINEES FOR DIRECTOR FOR A THREE-YEAR TERM
EXPIRING IN 2000
JAMES H. DEVRIES
Mr. DeVries, 65, has served as a Director of the Company since July 1969.
Prior to his retirement from the Company in June 1997, Mr. DeVries served as
Executive Vice President and Secretary of the Company, and as Secretary of
Energy Absorption Systems, Inc.
LAWRENCE C. MCQUADE
Mr. McQuade, 70, is Chairman of Qualitas International (since 1994). In
addition, he serves as a Director of Bunzl P.L.C. (since 1991) and of Oxford
Analytica, Inc. (since 1988), and is a founding partner of River Capital
International L.L.C. Mr. McQuade was Vice Chairman of Prudential Mutual Fund
Management, Inc. from 1988 through April 1995. He was Executive Vice President
and a Director of W.R. Grace & Co. from 1975 to 1987. Mr. McQuade served as
Chairman of the Czech & Slovak American Enterprise Fund from August 1995 to
March 1996. In 1967 to 1969 he served as Assistant Secretary, U.S. Department of
Commerce. He is a graduate of Yale University, Oxford University (Rhodes
Scholar), and Harvard Law School. Mr. McQuade has served as a Director of the
Company since February 1992 and is a member of the Audit/Compensation Committee.
NOMINEE FOR DIRECTOR FOR A TWO-YEAR TERM
EXPIRING IN 1999
LESLIE J. JEZUIT
Leslie J. Jezuit, 51, was elected by the Board of Directors in May 1997 to
fill the vacancy created by the resignation of David S. Ruder. Mr. Jezuit has
served as President and Chief Operating Officer of the Company since January
1996 and is also Vice Chairman and a Director of Energy Absorption Systems, Inc.
Mr. Jezuit is a former member of the Board of Directors of Prospectus Plus, Inc.
Prior to joining the Company, Mr. Jezuit served from 1991 to 1995 as President
and Chief Operating Officer of Robertshaw Controls Company, a $500 million
manufacturer of HVAC, appliance and pneumatic controls. He also served as Vice
President and General Manager of the Cutler-Hammer division of Eaton Corporation
(1985-1991); in various positions at Federal Signal Corporation, including Group
President and Vice President of Corporate Development (1980-1985); as Vice
President of Marketing at Mead Digital Systems (1975-1980); and in various
management positions at the Graphic Systems Division of Rockwell International
(1968-1975).
3
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE ELECTION OF MR.
DEVRIES, MR. MCQUADE, AND MR. JEZUIT AS DIRECTORS OF THE COMPANY.
DIRECTORS CONTINUING IN OFFICE
WILLIAM G. FOWLER
Mr. Fowler, 69, is an attorney at, and a shareholder of, the law firm of Van
Cott, Bagley, Cornwall & McCarthy of Salt Lake City, Utah. He joined the Board
in January 1973. Mr. Fowler is the Chairman of the Audit/Compensation Committee.
His current term as Director expires at the Annual Meeting to be held in 1998.
ROBERT D. VAN ROIJEN, JR.
Mr. van Roijen, 58, has been the President of Tox Financial Company, a
private investment firm, since 1988. He was formerly associated with Control
Laser Corporation, serving in various capacities from 1977 to 1987, including as
Chairman of the Board and as President and Chief Executive Officer. Mr. van
Roijen is also a director of Commonwealth Scientific; Applied Digital
Technology; St. Leonard's Corporation; and Security Storage Company, and is a
former director of Sonex Research, Inc. and AMBAR Corp. Mr. van Roijen has
served as a Director of the Company since May 1993 and is a member of the
Audit/Compensation Committee. His current term as Director expires at the Annual
Meeting to be held in 1998.
PHILIP E. ROLLHAUS, JR.
Mr. Rollhaus, 63, is Chairman of the Board and the Chief Executive Officer
of the Company. Mr. Rollhaus has served in these capacities and as a Director of
the Company since the Company was founded in July 1969. Mr. Rollhaus also served
as President of the Company from July 1969 until Mr. Leslie J. Jezuit's
appointment to that office in January 1996. Mr. Rollhaus is Chairman and Chief
Executive Officer of Energy Absorption Systems, Inc., a wholly-owned subsidiary
of the Company. His current term as Director expires at the Annual Meeting to be
held in 1999.
AUDIT/COMPENSATION COMMITTEE
The Audit/Compensation Committee recommends the accounting firm to be
employed as the Company's independent auditors to the Board; consults with the
auditors regarding the audit; reviews the auditors' report or proposed report
and resulting letter of comments to management; consults with the auditors and
management regarding the adequacy of internal controls; determines adjustments
to salaries, bonuses and other forms of compensation (including stock option
grants) afforded the principal Officers of the Company and its subsidiaries; and
considers any other matter relating to the Company's affairs that the Committee,
in its discretion, deems appropriate. The Audit/Compensation Committee had four
meetings during fiscal 1997.
The Board of Directors does not have a nominating committee. The Board of
Directors as a whole performs the functions normally performed by nominating
committees.
REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
In fiscal 1997, Directors who were also employees of the Company were paid a
fee of $1,000 for each day of scheduled meetings of the Board, plus expenses.
Non-employee Directors were paid a fee of $2,000 for each day of scheduled
meetings of the Board and the Audit/Compensation Committee, plus traveling and
related expenses, and $500 for each telephone conference
4
<PAGE>
meeting. There were eight scheduled meetings (nine meeting days) and five
telephone conference meetings of the Board in fiscal 1997. There was one
scheduled meeting and three telephone conference meetings in fiscal 1997 of the
Audit/Compensation Committee.
Present and future Directors are eligible to receive stock options as
granted from time to time by the Board of Directors pursuant to the Director
Plan, subject to certain limits on the number of shares any individual Director
may receive. Options are granted under the Director Plan at 100% of fair market
value on the grant date and require continued service as a Director for at least
a year from the grant date as a condition of exercise. On March 6, 1997, the
Company granted each of the Directors options to purchase 2,000 shares of Common
Stock at $9.00 per share.
The Company maintains accidental death and disability insurance coverage in
the amount of $500,000 on behalf of each of the non-employee Directors, payable
to the designated beneficiary of each Director. The Company paid premiums of
$385.00 for each Director to provide such insurance in fiscal 1997.
SUMMARY COMPENSATION TABLE
The following table summarizes the total compensation earned or paid for
services rendered in all capacities during each of the years ended June 30,
1997, 1996 and 1995, by the named Executive Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION AWARDS
------------------------------------------
ANNUAL COMPENSATION RESTRICTED
------------------------------- OTHER ANNUAL STOCK OPTIONS/
SALARY BONUS COMPENSATION(1) AWARD(S)(2) SARS
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#)
- ---------------------------------------- --------- --------- --------- ---------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Philip E. Rollhaus, Jr ................. 1997 $ 425,000 100,000 $ 280,072 $ 196,875 32,000
Chairman and Chief Executive Officer, 1996 425,000 130,000 101,706 0 42,000
Quixote Corporation and Energy 1995 425,000 135,000 180,825 0 27,060
Absorption Systems, Inc.
Leslie J. Jezuit ....................... 1997 275,000 100,000 177,501 157,500 25,000
President and Chief Operating Officer, 1996(3) 137,500 70,000 35,411 0 55,000
Quixote Corporation; Vice Chairman,
Energy Absorption Systems, Inc.
George D. Ebersole ..................... 1997 215,000 75,000 32,825 0 10,000
President and Chief Operating Officer, 1996 215,000 100,000 26,506 0 15,000
Energy Absorption Systems, Inc. 1995 210,000 125,000 49,085 0 9,710
James H. DeVries (Retired June 1997 270,000 35,000 141,398 70,875 2,000
30,1997) . 1996 270,000 35,000 74,821 0 2,000
Executive Vice President and Secretary, 1995 270,000 30,000 71,134 0 22,210
Quixote Corporation; Secretary, Energy
Absorption Systems, Inc.
Myron R. Shain (Retired June 30, 1997 225,000 0 119,406 55,125 0
1997) ................................. 1996 225,000 35,000 60,369 0 10,000
Executive Vice President--Finance and 1995 225,000 80,000 42,674 0 7,765
Treasurer, Quixote Corporation; Vice
President and Treasurer, Energy
Absorption Systems, Inc.
<CAPTION>
ALL OTHER
COMPENSATION(4)
NAME AND PRINCIPAL POSITION ($)
- ---------------------------------------- ----------------
<S> <C>
Philip E. Rollhaus, Jr ................. $ 3,200
Chairman and Chief Executive Officer, 3,000
Quixote Corporation and Energy 3,000
Absorption Systems, Inc.
Leslie J. Jezuit ....................... 3,200
President and Chief Operating Officer, 0
Quixote Corporation; Vice Chairman,
Energy Absorption Systems, Inc.
George D. Ebersole ..................... 3,050
President and Chief Operating Officer, 3,000
Energy Absorption Systems, Inc. 3,105
James H. DeVries (Retired June 2,843
30,1997) . 3,083
Executive Vice President and Secretary, 3,008
Quixote Corporation; Secretary, Energy
Absorption Systems, Inc.
Myron R. Shain (Retired June 30, 579,500
1997) ................................. 3,000
Executive Vice President--Finance and 3,126
Treasurer, Quixote Corporation; Vice
President and Treasurer, Energy
Absorption Systems, Inc.
</TABLE>
- ------------------------
(1) The amounts disclosed include (a) cash paid under the Quixote Corporation
Long-Term Stock Ownership Incentive Plan (the "Long-Term Plan") to cover the
federal, state and other taxes arising from the restricted stock issued in
the fiscal year to Messrs. Rollhaus, DeVries, Shain and Ebersole pursuant to
the Long-Term Plan and, (b) cash paid to cover the federal, state and other
taxes arising from a restricted stock award granted on June 25, 1997 to
Messrs. Rollhaus, Jezuit, DeVries and Shain. The amounts disclosed for
Messrs. Rollhaus, Jezuit and Mr. DeVries also include compensation of $9,000
paid to Messrs. Rollhaus
5
<PAGE>
and DeVries and $1,000 paid to Mr. Jezuit for their services as Directors of
the Company. The amount disclosed for Mr. Jezuit includes the second
installment of a guaranteed payment provided for in his original terms of
employment and paid in January 1997 in the amount of $50,000. Perquisites
and other personal benefits are disclosed for Mr. DeVries and Mr. Shain,
including an automobile allowance of $21,743 for Mr. DeVries and an
automobile allowance of $19,180 and Exec-U-Care reimbursement of $18,135 for
Mr. Shain. The aggregate amount of perquisites and other personal benefits
for Messrs. Rollhaus, Jezuit and Ebersole did not exceed the lesser of
$50,000 or ten percent (10%) of the total annual salary and bonus reported
for each of them and is therefore not included.
(2) The amounts disclosed for Messrs. Rollhaus, Jezuit, DeVries and Shain
include the dollar value of restricted stock awards granted to them on June
25, 1997 associated with the performance of DMI and its eventual sale. The
fair market value of the shares on the date of grant was $7.88. The total
number of shares awarded are as follows: Mr. Rollhaus - 25,000 shares; Mr.
Jezuit - 20,000 shares; Mr. DeVries - 9,000 shares; and Mr. Shain - 7,000
shares. The restricted shares are fully vested, but are subject to transfer
restrictions until June 25, 1998, at which time 50% of the shares shall
become unrestricted shares. On June 25, 1999 all restrictions shall lapse.
The transfer restrictions lapse upon the employee's death, disability,
termination of employment or change-in-control of the Company. Dividends
will be paid on the restricted stock. In addition to the amounts disclosed,
restricted stock awards also were granted to Messrs. Rollhaus, DeVries,
Shain and Ebersole in 1993 pursuant to the Long-Term Plan. The number of
shares covered by the 1993 restricted stock awards and the number of shares
vested, respectively, are as follows: Mr. Rollhaus - 91,530/91,530; Mr.
DeVries - 32,410/32,410; Mr. Shain - 46,000/23,000; and Mr. Ebersole -
37,037/26,455. Due to Mr. Shain's retirement on June 30, 1997, no further
shares from the stock award will vest for him. The number and value of each
employee's aggregate restricted stock holdings, respectively, as of June
30,1997 were as follows: Mr. Rollhaus - 116,530 shares/$932,240; Mr. Jezuit
- 20,000 shares/$160,000; Mr. DeVries - 41,410 shares/$331,280; Mr. Shain -
30,000 shares/$240,000; and Mr. Ebersole - 26,455 shares/$211,640. Pursuant
to the terms of the Long-Term Plan, the remaining restricted stock covered
by the 1993 award granted to Mr. Ebersole will be issued in two equal annual
installments on June 30 of the next two fiscal years, subject to the
continuation of employment and transferability restrictions described below,
and subject further to the Company's right to terminate the agreement at any
time after June 30, 1998. In order to receive an annual issuance of
restricted stock, Mr. Ebersole must be employed by the Company or its
subsidiaries on the last day of the fiscal year in which such stock issued
(except in the case of his death, disability or termination of employment
other than for cause). Mr. Ebersole may not sell or transfer any restricted
stock received under the Long-Term Plan until the earlier of the date his
employment is terminated or the date he reaches retirement age (whether he
actually retires at that time or not). Pursuant to the terms of the
Long-Term Plan, dividends are paid only on shares of restricted stock issued
and delivered to the named Executive.
(3) Mr. Jezuit began his employment with the Company on December 29, 1995.
(4) Amounts shown for Messrs. Rollhaus, Jezuit, DeVries and Ebersole for fiscal
1997 are matching contributions by the Company under the Company's 401(k)
Plan. The amount shown for Mr. Shain includes $575,877 paid, payable or
accrued to him in connection with his retirement and $3,623 in matching
contributions by the Company under the Company's 401(k) Plan.
STOCK OPTION GRANTS IN FISCAL YEAR 1997
The following table shows the options granted to the named Executive
Officers during fiscal 1997 and the potential realizable value of those grants
(on a pre-tax basis) determined in accordance with SEC rules. The information in
this table shows how much the named Executive Officers may eventually realize in
future dollars under three hypothetical situations: if the price of the
Company's Common Stock does not increase, and if the stock gains 5% or 10% in
value per year, compounded over the life of the options. These amounts represent
assumed rates of appreciation, and are not intended to forecast future
appreciation of the Company's Common Stock.
The options described in this table have exercise prices equal to the
current market value of a share of Common Stock on the date they were granted.
Unless the Company's stock price appreciates and the recipient continues to be
employed until the options vest, the options will have no value.
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------- POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK
% OF TOTAL PRICE APPRECIATION FOR OPTION TERM(2)
OPTIONS -----------------------------------------------------------
GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE
GRANTED IN FISCAL PRICE EXPIRATION 0%
NAME (#) (1) YEAR ($/SH) DATE -- 5% ($) 10% ($)
- ------------------------------------------- ----------- ------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Philip E. Rollhaus, Jr..................... 30,000 23.3% 9.00 03/06/02 0 74,596 164,838
2,000 1.6% 9.00 03/06/07 0 11,320 28,687
Leslie J. Jezuit........................... 25,000 19.4% 9.00 03/06/02 0 62,163 137,365
George D. Ebersole......................... 10,000 7.8% 9.00 03/06/02 0 24,865 54,946
James H. DeVries (Retired June 30, 1997)... 2,000 1.6% 9.00 03/06/07 0 11,320 28,687
Myron R. Shain (Retired June 30, 1997)..... 0 0 0 0 0 0 0
</TABLE>
- ------------------------
(1) The options which expire on March 6, 2002 were granted on March 6, 1997
under the Long-Term Plan and the options which expire March 6, 2007 were
granted on the same date under the Director Plan. All options were granted
at the Current Market Price (as defined in the Plans) on such date and
became exercisable in March 1997. All option rights under the Long-Term Plan
lapse upon termination of employment except for limited exercise periods. In
the event of a change in control of the Company (as defined in the Long-Term
Plan and Director Plan), the Plans give each optionee the right, within 30
days of such change in control, to exercise his options, notwithstanding the
other provisions of the Plans.
(2) The potential realizable value to all stockholders at the appreciation rates
of 0%, 5% and 10% would be $0, $17,562,441 and $38,808,402 (based on shares
outstanding at June 30, 1997 and assuming such shares were purchased for
$8.00 on June 30, 1997 and held until June 30, 2002).
AGGREGATED OPTION EXERCISES AND OPTION VALUES TABLE
The following table shows information concerning the exercise of stock
options by each of the named Executive Officers during fiscal 1997, and the
value of all remaining exercisable and unexercisable options at June 30, 1997,
on a pre-tax basis.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS/SARS AT
ACQUIRED ON VALUE OPTIONS/SARS AT 6/30/97(#) 6/30/97($) (1)
EXERCISE REALIZED -------------------------------- ------------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ----------- ----------- ----------- ------------------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Philip E. Rollhaus, Jr......... 0 $ 0 209,060 0 $ 85,720 $ 0
Leslie J. Jezuit............... 0 0 80,000 0 16,875 0
George D. Ebersole............. 0 0 34,710 0 16,875 0
James H. DeVries............... 25,000 68,750 72,210 0 16,220 0
Myron R. Shain................. 0 0 17,765 0 11,250 0
</TABLE>
- ------------------------
(1) Based on the closing price of the Company's Common Stock as reported on the
NASDAQ-NMS on June 30, 1997 ($8.00).
7
<PAGE>
EMPLOYMENT AGREEMENTS AND TERMINATION BENEFITS
The Company has an employment agreement with Philip E. Rollhaus, Jr. that
was entered into in February 1989 (the "Employment Agreement"). The Company had
employment agreements with James H. DeVries and Myron R. Shain that terminated
with their retirement in June 1997. The Company also has a separation agreement
with George D. Ebersole that was entered into in February 1989 and with Leslie
J. Jezuit that was entered into in April 1996 (the "Severance Agreements"). The
Employment Agreement and Severance Agreements are collectively referred to as
the "Agreements". Each Severance Agreement provides for an initial two-year term
and for automatic one-year extensions of such term on each Agreement's
anniversary unless the Board of Directors gives the executive a required notice
of the Company's intent not to extend his Severance Agreement. Mr. Ebersole's
Severance Agreement was automatically extended in February 1997, and Mr.
Jezuit's Severance Agreement was automatically extended in April 1997, for one
year. Mr. Rollhaus' Employment Agreement, amended in June 1991, provides for an
initial three-year term with an automatic one-year extension of such term each
year on the Agreement's anniversary date unless the Board of Directors should
previously determine not to extend the term. The Employment Agreement was
automatically extended in June 1997 for one year. The Board of Directors
believes that the Agreements assure fair treatment of the Executive Officers in
relation to their careers with the Company by assuring them of some financial
security. The Agreements also protect the stockholders by encouraging the
Executive Officers to continue their attention to their duties without
distraction in a potentially disturbing circumstance and neutralizing any bias
they might have in evaluating proposals for the acquisition of the Company.
In addition to providing for the payment of a base annual salary included in
the above summary compensation table and other employee fringe benefits, Mr.
Rollhaus' Employment Agreement provides for special separation pay and benefits
in the event of termination of his employment under certain circumstances. The
Employment Agreement provides that upon termination, Mr. Rollhaus will receive
his base salary through the termination date determined in accordance with such
Agreement. If his employment is terminated due to disability, his Employment
Agreement provides for a separation payment equal to two times the sum of the
annual base salary and the average of his yearly bonus payments over the
preceding two years. If, after a change in control of the Company, the Company
terminates Mr. Rollhaus' employment, other than for cause or disability, or if
Mr. Rollhaus terminates his employment for good reason, the Company will pay him
a separation payment equal to 300% of the sum of his then current base salary
and average yearly bonus payment for the last two years. Such payments will be
made on a semi-monthly basis over a period of 36 months following termination of
employment. If the Company fails to make an installment payment when due, Mr.
Rollhaus has the right to accelerate all remaining compensation owned him. If
such termination occurs prior to a change in control of the Company, the
Employment Agreement provides that the Company will pay Mr. Rollhaus a
separation payment equal to twice his base salary. Whether or not a change in
control has occurred, upon such termination Mr. Rollhaus must be offered
continued participation in (or comparable replacement of) retirement and group
insurance benefits through the later of the expiration of the term of the
Employment Agreement or the date of termination. The Employment Agreement
further provides that if any excise tax is imposed pursuant to Section 4999 of
the Internal Revenue Code on any payments to be received by Mr. Rollhaus in
connection with a change in control of the Company or termination of his
employment pursuant to the Employment Agreement or otherwise (the "Total
Payments"), any severance payments will be reduced to the extent necessary so
that no portion of the Total Payments is subject to the excise tax.
8
<PAGE>
The Severance Agreements provide if, after a change of control of the
Company, the employment of the executive is terminated other than (i) by death
or disability, (ii) by the Company or employing subsidiary for cause, or (iii)
by the executive for other than good reason, the Company will pay the executive
a separation payment equal to 200% of the sum of his base salary and average
yearly bonus payment for the last two years, with such payment being reduced by
the present value of any other payments made to, or on behalf of, the executive
which would constitute a "parachute payment" within the meaning of that term as
defined in Section 280G of the Internal Revenue Code of 1986, as amended.
The Agreements define a "change in control" as a change in the stock
ownership of a magnitude which requires the filing of reports under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). For the
purposes of the Agreements, a "change in control" shall be deemed to have
occurred if any of the following occur: (i) any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding securities; (ii) if
during any period of two consecutive years, there is a change in the composition
of the Board of Directors of the Company such that 50% of the non-employee Board
members have not been slated by the Board; (iii) a consolidation or merger
occurs and the Company is not the surviving company or the Company sells all or
substantially all of its assets; or (iv) the Company is liquidated or dissolved.
The term "good reason" is generally defined by the Agreements to mean any
unfavorable change in the executive's or employee's position, duties,
compensation or benefits and "cause" is generally defined as willful conduct of
an executive or employee demonstrably injurious to the Company or employing
subsidiary. The Agreements also contain provisions for the payment of legal
expenses incurred by the executives and the employees as a result of any
termination of employment after a change in control.
REPORT OF THE AUDIT/COMPENSATION
COMMITTEE ON EXECUTIVE COMPENSATION
The Audit/Compensation Committee (the "Compensation Committee" or
"Committee") of the Board of Directors of the Company, which is composed of
three independent, non-employee Directors (see page 12), is responsible for
reviewing the recommendations of the Chairman and Chief Executive Officer and
the President and Chief Operating Officer and determining the compensation and
other remuneration afforded the Officers of the Company, including the persons
who are listed in the Summary Compensation Table on page 5 (hereinafter
collectively referred to as the "Executive Officers"). Determinations of the
Compensation Committee relating to executive compensation are reviewed by the
entire Board. Action regarding awards under the 1993 Long-Term Stock Ownership
Incentive Plan (the "Plan") are made solely by the Compensation Committee in
compliance with Rule 16b-3 of the Securities Exchange Act.
COMPENSATION PRINCIPLES AND POLICIES OF THE COMPANY
The Board has delegated to the Compensation Committee the responsibility to
be certain that the Officers of the Company are compensated fairly and
effectively in a manner consistent with the compensation philosophy and policies
of the Company. The compensation philosophy and its attributes have an
historical basis aimed at growing the Company in a responsible and progressive
manner to enhance the value of its shares. Philip E. Rollhaus, Jr., founder,
Chairman of the Board and Chief Executive Officer, has been at the helm and
guided the management team through the 28 years of the Company's existence.
During fiscal 1997, the Board and management, cooperatively, have taken bold
steps to consolidate around Quixote's highway and transportation safety
business, Energy Absorption Systems, Inc. The Company naturally suffered
9
<PAGE>
realizable losses attributable to discontinued operations, but, nonetheless, has
made substantial progress by redirecting its resources toward the business which
offers the greatest future potential. Due to the consolidation, two senior
executives who retired in fiscal 1997 and whose combined salaries and bonuses
exceeded $500,000, will not be replaced and additional related cost reductions
should be achieved over time. Significantly, the Company, at the same time, also
eliminated all debt and ended the year with a sizable amount of cash and a
strong balance sheet to support anticipated future growth. Furthermore, the
Company has been able to continue to adhere to its basic policy of investing in
the technologies relating to its highway and transportation safety business, and
remains a leader in these industries.
Fiscal 1997 was dedicated to the purposeful consolidation and redirection of
the Company's near and long-term strategies. During the year, the Company sold
substantially all of the assets of its Disc Manufacturing, Inc. subsidiary for
$80.3 million in cash, which was near book value, reflecting management's
decision to exit the compact disc business due to declining selling prices and
other adverse market conditions, and concentrate its energies and resources on
Energy Absorption Systems, Inc., which offers the greatest potential for growth
and profit. Despite charges of $1.4 million related to Energy Absorption's
investment in the FIP Industriale S.p. A. joint venture, which management has
determined to phase down, and a 44% increase in research and development
expenditures for new products, Energy Absorption recorded substantial profits in
fiscal 1997. In addition, Energy Absorption ended fiscal 1997 with record sales
in the fourth quarter, reflecting, in part, the introduction of several new
products.
In addition to considering the Company's profitability for the year, the
Compensation Committee critically evaluates management's performance in dealing
with competition and economic issues, as well as performance in implementing the
Company's long-term strategies. Share value depends in large part upon such
performance. Temporary declines in earnings can be a natural consequence of
forward-thinking business strategies. Accordingly, the attainment of strategic
objectives and enhanced long-term financial results are as significant in the
Committee's evaluation process as are short-term changes in profitability.
The Committee procedures in fixing compensation include engaging the
services of an independent compensation consultant to evaluate compensation
levels and to advise it regarding competitive influences upon compensation
policies.
The Company's compensation program includes base salary and the
consideration of annual bonus and stock option awards. The Compensation
Committee considers all three components together in determining the total
compensation of executives. This program provides incentives compatible with
current and long-term management goals of the Company and its competitiveness in
the marketplace, while recognizing individual performance. The ultimate
objective of the program is the enhancement of shareholder value. An effective
compensation policy requires that a significant portion of each officer's
compensation be at risk in the form of bonuses and stock options. The Executive
Officer group owned approximately 600,559 shares of Company Common Stock at June
30, 1997, or an average of about 120,111 common shares per Executive Officer. In
particular, the Committee believes that granting stock options and encouraging
executive stock ownership further relates compensation to the enhancement of
share value.
The Committee endorses the strategy of refocusing and growing the Company
around its core business of highway and transportation safety, and is confidant
that the current management is in the process of successfully pursuing that
strategy.
BASE SALARY AND ANNUAL BONUS
The annual review of each officer's base salary, which is subject to annual
adjustment, takes into account the officer's performance as well as material
modifications affecting the officer's
10
<PAGE>
responsibilities. The review also considers competitive opportunities that exist
for executives of various levels of experience both within and outside the
Company's current industry and the desire to retain and groom various executives
for more expanding duties and responsibilities.
The Committee felt that the Company's temporarily reduced size should not
influence salaries as the refocused strategy, including the recent divestiture
of DMI, which was directed by the Board and overwhelmingly approved by the
shareholders, was implemented successfully by management. Balancing all
considerations, including the current expectation that the Company should attain
higher levels of revenue through the introduction of new products and
acquisitions, the Committee recommended, and the Board approved, small
cost-of-living adjustments to the top-level salaries and significant reductions
in annual bonuses from previous levels for each of those executives.
Accordingly, Mr. Rollhaus' salary was increased from $425,000 in fiscal 1997 to
$445,000 in fiscal 1998.
The Company historically has provided annual bonuses selectively to its
Officers to encourage sustained high performance. The use of such bonuses places
a significant portion of total annual compensation at risk. In lieu of a cash
bonus associated with the performance of DMI and its eventual sale during the
year, the Board felt a stock award at the market price of $7 7/8 better aligned
our executives with the continuing task of improving earnings and, in turn,
shareholder value. It also placed additional shares in the hands of several of
our executives who form the new nucleus of the management team. Generally, cash
bonuses were reduced for senior executives in fiscal 1997. Mr. Rollhaus' bonus
was reduced to $100,000.
STOCK OPTIONS
Quixote Corporation utilizes stock options, granted pursuant to the Plan, as
one of the three components of the Company's management compensation package.
Stock options are acceptable as an incentive to increase the Company's value.
Substantial stock ownership by its executives has been a hallmark of the
Company, and stock options are an important ingredient of total compensation.
Options generally vest over a three-year period and are exercisable over a
specified period of time following the date of grant, which is typically five
years. Option recipients must be employed by the Company at the time of vesting
and at the time the options are exercised.
Without meaningful stock options the Company would find it difficult to
attract and retain highly talented and qualified management employees. For the
last three fiscal years, the Company has granted options to employees to
purchase an annual average of 176,503 shares at the market price on the date of
grant. In fiscal 1997, the Committee granted Mr. Rollhaus employee options to
purchase 30,000 shares of the Company's Common Stock at the fair market value of
such stock on the date of grant.
STOCK BASED RETIREMENT PLAN
The Company maintains a stock-based retirement plan (the "Retirement Plan"),
which is a component of its 1993 Long-Term Stock Ownership Incentive Plan, to
provide its executives with a competitive retirement program.
Under the Retirement Plan, which is in lieu of any supplemental executive
retirement program, the Compensation Committee makes annual awards of Company
stock to selected key executives. The share awards, together with a cash award
intended to cover the concomitant income tax burden, are calculated under
accepted actuarial principles as the number required to provide a targeted
competitive retirement benefit. The targeted benefit, however, will be achieved
at retirement only if the value of the Company's stock grows at a sustained
compounded
11
<PAGE>
level established by the Board. Furthermore, in order to receive each year's
award, the executive must remain in the employ of the Company through the end of
the fiscal year in which it is awarded (except in the case of the Officer's
death, disability or termination of employment other than for cause during that
year), and he or she must have retained all shares previously awarded under the
Retirement Plan. The Compensation Committee believes that the Retirement Plan
mutually benefits the Company, its stockholders and its most senior executives.
OTHER COMPENSATION
The Company has an Incentive Savings Plan (the "Plan") which offers all
employees (subject to certain eligibility requirements), including the named
Executive Officers, tax advantages pursuant to Section 401(k) of the Internal
Revenue Code. During fiscal year 1997, the Company made a matching contribution
to the Plan of $.40 on each dollar of the first 5% of compensation contributed
by the participant, subject to legal maximums imposed by the Internal Revenue
Code. Contributions are made by participants by means of a payroll deduction
program. The total aggregate amount of the Company's matching contribution for
the named Executive Officers is included in the Summary Compensation Table on
page 5.
The Company maintains an Exec-U-Care Medical Reimbursement Plan which
provides additional health and life insurance protection for certain Officers of
the Company and its subsidiaries, in addition to the group health and life
insurance policies provided to all employees. The participants in the
Exec-U-Care Plan include Messrs. Rollhaus, Jezuit and Ebersole. The total
aggregate cost to the Company during fiscal year 1997 under the Plan for those
Executive Officers was $18,480.
LIMITATION ON DEDUCTIBILITY OF COMPENSATION
In 1993, the tax laws were amended by the addition of Section 162(m) of the
Internal Revenue Code. Effective for fiscal years beginning after 1993, that
Section limits the deductibility of compensation paid by a publicly-held company
to its chief executive officer and to the four other Officers who are most
highly compensated. Generally, amounts paid in excess of $1 million to a covered
executive, other than performance-based compensation, cannot be deducted. No
Executive Officer was affected by this limitation in fiscal 1997.
AUDIT/COMPENSATION COMMITTEE
William G. Fowler, Chairman
Lawrence C. McQuade
Robert D. van Roijen, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are William G. Fowler, who
serves as Chairman, Lawrence C. McQuade and Robert D. van Roijen, Jr.
12
<PAGE>
COMMON STOCK PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG QUIXOTE CORPORATION, THE RUSSELL 2000 INDEX
AND THE S&P MANUFACTURING (DIVERSIFIED INDUSTRY) INDEX.
The following graph compares the five year cumulative total return of the
Company's Common Stock with the Russell 2000 Index and the Standard & Poor's
Manufacturing (Diversified Industry) Index assuming the investment of $100 on
June 30, 1992 and the reinvestment of dividends.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
QUIXOTE CORPORATION RUSSEL 2000 S & P MANUFACTURING (DIVERSIFIED)
<S> <C> <C> <C>
6/92 100 100 100
6/93 106 126 119
6/94 162 131 132
6/95 100 158 175
6/96 56 196 223
6/97 68 228 332
</TABLE>
CERTAIN TRANSACTIONS AND BUSINESS RELATIONSHIPS
See "Employment Agreements and Termination Benefits" and the "Summary
Compensation Table" above for a description of certain transactions and business
relationships involving management of the Company. In addition, James H.
DeVries, a Director of the Company and its former Executive Vice President and
General Counsel, has entered into an arrangement with the Company to provide
consulting services for the period July 1, 1997 through October 31, 1997 in
connection with certain litigation matters. The arrangement provides for Mr.
DeVries to be paid $160 per hour up to a maximum of 8 hours per day plus
expenses.
13
<PAGE>
APPROVAL OF THE AMENDMENT
OF THE QUIXOTE CORPORATION
1993 LONG-TERM STOCK OWNERSHIP INCENTIVE PLAN
The Board of Directors has adopted, subject to approval of the stockholders,
certain amendments to the 1993 Long-Term Stock Ownership Incentive Plan (the
"Long-Term Plan"). The first amendment increases the aggregate number of shares
available for grant under the Long-Term Plan from 750,000 shares to 1,015,000
shares, an increase of 265,000 shares, in order to assure that an adequate
number of shares is available for grant during the remainder of the term of the
Long-Term Plan. There are currently less than 2,000 shares available for grant
under the Long-Term Plan. The Long-Term Plan expires June 30, 2003, except that
options may not be granted after August 19, 2001. A second amendment to the
Long-Term Plan permits the Audit/ Compensation Committee to grant Retirement
Awards (as defined below) to persons who have served as employees of the Company
or Subsidiaries for less than 10 years. No other substantive amendments are
being made to the Long-Term Plan.
The purpose of the Long-Term Plan is to advance the growth and prosperity of
the Company and its Subsidiaries by providing officers and key employees with
additional incentives. The Company's management believes that the Company's
future success and profitability will depend to a great extent on its ability to
continue to attract, retain and motivate highly qualified individuals and that
an effective compensation policy for these individuals includes not only a
competitive annual salary, but also long-term incentives linked to stockholder
return and Company performance. The Company believes an important role is played
by stock-based incentives in retaining the services of outstanding personnel and
in encouraging such employees to have greater personal financial investment and
stock ownership in the Company.
Because the granting of Options (as defined below) and other Awards (as
defined below) under the provisions of the amended Long-Term Plan will continue
to be entirely in the discretion of the Audit/Compensation Committee, it is not
possible to designate the employees to whom Awards will be granted under the
amended Long-Term Plan or the number of shares to be covered by such Awards. It
is expected that the aggregate number of persons eligible to participate under
the Long-Term Plan will not exceed 50. Grants of Awards under the Long-Term Plan
made during the year ended June 30, 1997 are show in the table on page 5.
The following is a summary of the principal provisions of the Long-Term
Plan. Capitalized terms used in this summary which are not defined herein have
the meanings ascribed to them in the Long-Term Plan. A copy of the Long-Term
Plan will be available at the forthcoming Annual Meeting of Stockholders or in
advance of the meeting to any stockholder to whom this Proxy Statement is
furnished upon written or oral request directed to: Joan R. Riley, Secretary,
Quixote Corporation, One East Wacker Drive, Chicago, Illinois 60601; telephone
number (312) 467-6755.
GENERAL INFORMATION
The Long-Term Plan provides for the granting of stock options and retirement
awards (payable in cash and stock) (collectively, the "Awards"). Such Awards,
which will expire not more than 10 years after their respective Grant Dates, may
be granted alone or in conjunction with one or more other Awards.
Options may be granted to any employee (including officers) of the Company
or of any of its Subsidiaries. Retirement Awards (as defined below) may be
granted only to key executives who have completed 10 years of continuous service
for the Company or its Subsidiaries. The amendment to the Long-Term Plan will
authorize the Audit/Compensation Committee to waive in its discretion that
requirement.
14
<PAGE>
SCOPE OF THE LONG-TERM PLAN
The Long-Term Plan provided that an aggregate of 750,000 shares of the
Company's Common Stock were available and reserved for delivery on account of
Awards and the exercise of Awards, with 500,000 shares of Common Stock available
and reserved for delivery on account of options and 250,000 shares of Common
Stock available and reserved for delivery on account of Retirement Stock Awards
(as defined below). If any Award expires or terminates without having been
exercised or distributed in full or is forfeited, the shares of Common Stock
associated with such expired or terminated Award shall become available for
other Awards. The amendment will add 265,000 shares of the Company's Common
Stock to the Long-Term Plan, with 165,000 additional shares of Common Stock
reserved and available for delivery on account of options and 100,000 additional
shares of Common Stock reserved and available for delivery on account of
Retirement Stock Awards.
Common Stock issued under the Long-Term Plan may be either newly issued
shares, shares purchased on the open market, treasury shares or any combination
thereof. In addition, certain benefits under the Long-Term Plan may be payable
in cash.
PLAN ADMINISTRATION
Except for certain duties and responsibilities expressly reserved by the
Board or delegated to another committee pursuant to the terms of the Long-Term
Plan, the Long-Term Plan will be administered by a committee of the Board
composed of not less than three directors who are not employees of the Company
(the "Committee"). The Committee under the Long-Term Plan is the
Audit/Compensation Committee, whose members are identified on page 12.
Among other things, the Committee has exclusive discretion (subject to the
provisions of the Long-Term Plan): to select the persons to whom, and the times
when, Awards are to be granted, as well as the type, size and terms of such
Awards; within certain limits, to modify the terms of any Award which has been
granted; to interpret the Long-Term Plan and prescribe rules and regulations
thereunder; to accelerate the exercisability of, and to waive the restrictions
and conditions applicable to, Awards; and, subject to certain restrictions, to
extend the time during which Awards may be exercised, but not beyond 10 years
after the Grant Date of an Award. The determinations of the Committee are
conclusive and final. No Committee member is liable for any action or
determination made in good faith.
AWARDS UNDER THE LONG-TERM PLAN
STOCK OPTIONS. The Long-Term Plan provides both for incentive stock options
("ISOs") specifically tailored to the provisions of the Internal Revenue Code of
1986 (the "Code") and for options not qualifying as ISOs ("Non-Qualified
Options"), each of which may (but need not) be granted in conjunction with other
Awards.
Pursuant to the Long-Term Plan, the Committee shall determine the exercise
price to be paid by an optionee (the "Option Price") for each share issued in
connection with an ISO or a Non-Qualified Option (collectively referred to as
"Options"). The Option Price cannot be less than 100% of the Current Market
Value of the Common Stock on the Grant Date. Payment of the Option Price may be
made in cash or through the exchange of Common Stock held by the optionee for at
least six months. The Committee may allow a grantee to use a Company loan to
fund the amounts needed for the Option Price.
The fair market value of stock subject to ISOs granted under the Long-Term
Plan and exercisable for the first time by a grantee during a particular
calendar year shall not exceed, in
15
<PAGE>
the aggregate, $100,000. Such fair market value shall be determined as of the
date on which the ISOs are granted. Non-Qualified Options are not subject to
this restriction.
If an optionee ceases to be employed by the Company or any Subsidiary for
any reason other than his death, total disability or retirement, the optionee
may, at the discretion of the Committee, be granted the right to exercise any
Option at any time within thirty (30) days after such termination, to the extent
the right to exercise such option has accrued, such Option has not previously
been exercised and such Option has not expired; PROVIDED, HOWEVER, that if the
optionee's employment is terminated by the Company or any Subsidiary for cause,
fraud, breach of fiduciary duty, or other dishonesty, the optionee's rights to
exercise any option shall expire on the last day of his employment. If an
optionee retires and such optionee has been in the employ of the Company or a
Subsidiary continuously from the date such Option was granted until retirement,
the optionee may, within the three (3) month period after such retirement,
exercise such Option to the extent that such three month period is included in
the remainder of the applicable Option's term. If an optionee dies or becomes
totally disabled while employed by the Company or a Subsidiary and previously
has not fully exercised his or her Options, his or her Options may be exercised
to the extent that those Options had not previously been exercised, at any time
within one year after his death or disability (absent earlier expiration of the
Option) by the optionee or his legally appointed guardian, in the case of
disability, or in the case of an optionee's death, by the executors or
administrators of his or her estate or the person who acquires the Option
directly from the optionee by bequest or inheritance.
RETIREMENT AWARDS. Under the Long-Term Plan, the Committee may make awards
of Company Common Stock ("Retirement Stock Awards") and cash sufficient to pay
the federal, state and other taxes arising from such awards ("Retirement Cash
Awards") to provide a retirement benefit for senior executives of the Company
and its Subsidiaries. The Retirement Stock Awards and Retirement Cash Awards are
collectively referred to as "Retirement Awards".
Each Retirement Award is made pursuant to a written agreement between the
Company and the executive which provides for the award of a set aggregate amount
of Retirement Stock to be issued in at least five equal annual installments,
together with a Retirement Cash Award in an amount to be calculated annually in
accordance with a formula determined by the Committee and set forth in the
agreement. Dividends are paid only on Retirement Stock which has been issued and
delivered to an executive. In order to receive an annual issuance of a
Retirement Award, the executive must be employed by the Company or its
Subsidiaries on the last day of the Company's fiscal year in which such stock is
issued except in case of death, disability or termination of employment other
than for cause. The executive may not sell or transfer any Retirement Stock he
receives while he is employed by the Company or its Subsidiaries. The transfer
restrictions lapse on the earlier of the date (i) when the executive's
employment is terminated or (ii) when the executive reaches his normal
retirement age, regardless of whether he actually retires at that time.
AMENDMENT AND TERMINATION
The Long-Term Plan terminates on the tenth anniversary of its effective
date, but Options may not be granted under the Long-Term Plan after August 19,
2001. The Board of Directors may from time to time, insofar as permitted by law,
suspend, revise or amend the Long-Term Plan in any respect whatsoever except
that, without the approval of the stockholders, no such revision or amendment
shall: (1) change the number of shares subject to the Long-Term Plan; (2) change
the designation of the class of employees eligible to receive Awards; (3)
decrease the price at which Options may be granted; (4) remove the
administration of the Long-Term Plan from the Committee; (5) render any
Committee member eligible to receive an Award under the Long-Term Plan while
serving on the Committee; (6) extend the period during which Awards may
16
<PAGE>
be granted; or (7) amend the Long-Term Plan in any manner that will cause the
Options issued under it to fail to qualify as ISOs. The Board of Directors is
specifically directed to revise, modify or amend the Long-Term Plan, without the
approval of the stockholders, as may be necessary to satisfy the requirements of
the Internal Revenue Code, as amended, to assure that the Options granted
thereunder may be treated as ISOs. Termination of the Long-Term Plan will not
affect any Awards then outstanding.
OTHER TERMS AND CONDITIONS
For purposes of the Long-Term Plan, the "Current Market Price" of the
Company's Common Stock is the average of the daily closing prices for such
Common Stock for the thirty (30) business days preceding the referenced date.
Awards granted under the Long-Term Plan will be evidenced by written
agreements consistent with the Long-Term Plan in such form as the Committee may
prescribe. Neither the Long-Term Plan nor such agreements confer any right to
continued employment upon any grantee.
Awards (other than shares of Retirement Stock) are generally
non-transferable other than by will or the laws of descent and may be exercised,
during a grantee's lifetime, only by the grantee. Restrictions with respect to
Retirement Stock are described above.
Adjustments in the amount of Awards issuable under the Long-Term Plan and in
any Awards outstanding may be made in order to preserve the benefits or
potential benefits intended to be made available to participants, in the event
of merger, consolidation, reorganization, the sale of all or substantially all
of the assets of the Company, recapitalization, reclassification, stock splits,
stock dividends or similar events.
The holder of an Award will have no rights as a stockholder with respect to
any shares of Common Stock covered by such Award until the date the Common Stock
relating to such Award is issued and delivered to such holder.
VOTING INFORMATION FOR THE PROPOSAL
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present in person or represented by proxy and entitled to
vote at the Annual Meeting is required to approve the amendment to the Long-Term
Plan.
RECOMMENDATION
The Board believes that adoption of the amendment of the Long-Term Plan is
advisable both to increase the share authorization for stock-based plans and to
provide the Company with greater flexibility in the types of incentives that may
be awarded to employees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE LONG-TERM
PLAN.
17
<PAGE>
APPROVAL OF THE AMENDMENT
OF THE QUIXOTE CORPORATION
1991 DIRECTOR STOCK OPTION PLAN
The Board of Directors has adopted, subject to approval of the stockholders,
certain amendments to the 1991 Director Stock Option Plan (the "Director Plan").
The first amendment increases the aggregate number of shares available for grant
under the Director Plan from 299,445 shares to 419,445 shares, an increase of
120,000 shares, to assure that an adequate number of shares is available for
grant during the remaining term of the Director Plan. There are currently no
shares available for grant under the Director Plan. The Director Plan expires
August 19, 2001. A second amendment is intended to permit Directors to exercise
options notwithstanding the fact they have failed to serve one year after the
date of grant, only in the event of a change of control of the Company.
The purpose of the Director Plan is to provide the Company's Directors with
an opportunity to increase their equity ownership in the Company and thereby tie
their economic interests to other stockholders' interests. The Company's Board
of Directors and management believe that properly designed options for the
Company's Common Stock also provides a valuable inducement to qualified persons
to become and remain affiliated with the Company as Directors. The Company's
management believes that the Company's future success and profitability will
depend to a great extent on its ability to continue to attract and retain highly
qualified individuals as Directors.
Because the granting of options under the provisions of the amended Director
Plan will be entirely within the discretion of the Board of Directors or a
committee designated by it, it is not possible to designate the number of
options to be granted to individual Directors under the amended Director Plan.
It is expected that the number of optionees under the amended Director Plan will
not exceed six persons. In fiscal 1997, there was one grant to each Director of
options to purchase 2,000 shares of Common Stock at $9.00 per share.
The following is a summary of the principal provisions of the Director Plan.
Capitalized terms used in this summary which are not defined herein have the
meanings ascribed to them in the Director Plan. A copy of the Director Plan will
be available at the forthcoming Annual Meeting of Stockholders or in advance of
the meeting to any stockholder to whom this Proxy Statement is furnished upon
written or oral request directed to: Joan R. Riley, General Counsel, Quixote
Corporation, One East Wacker Drive, Chicago, Illinois 60601; telephone number
(312) 467-6755.
GENERAL INFORMATION
Under the Director Plan, the Board of Directors is authorized to grant
options to Directors subject to limitations of the Plan, including the
limitation that no Director may be granted options for more than 90,000 shares.
The Director Plan provides that any option requires continued service as a
Director for at least one year from the date of grant as a condition of
exercise, and such options may thereafter be exercised as the Board of Directors
determines. The amendment to the Director Plan will permit Directors to exercise
options in the event of a change-in-control of the Company, notwithstanding the
fact that he or she has failed to serve as a Director for one year from the date
of grant.
The purchase price of the shares covered by an option granted under the
Director Plan cannot be less than 100% of the current market price of the shares
at the date of grant. Current market price is deemed to be the average of the
daily closing prices of the Common Stock for the 30 consecutive business days
before the date of grant.
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<PAGE>
The Director Plan gives the Board the discretion to determine when options
may be exercised. Options granted under the Director Plan cannot have a term of
more than ten years. Only Directors who are also employees of the Company are
eligible to receive incentive stock options (ISOs) within the meaning of the
Internal Revenue Code under the Director Plan. See the discussion regarding ISOs
at page 15, "Awards Under the Long-Term Plan".
There are currently six Directors eligible to participate in the Director
Plan. An optionee electing to exercise an option must, at the time of exercise,
pay the full price of the shares being purchased. Payment of the purchase price
may be made in cash or in the Company's Common Stock valued at fair market value
on the date of exercise. In the event of a change in control of the Company (as
defined in the Plan), the Director Plan currently gives each optionee the right,
within 30 days of such change in control, to exercise his options whether the
option is otherwise exercisable, if the Director has served as a Director for at
least one year since the date of grant. The amendment to the Director Plan will
revise this provision to permit an optionee to exercise an option after a
change-in-control, notwithstanding his failure to serve as a Director for at
least one year since the date of grant of that option.
SCOPE OF THE DIRECTOR PLAN
The Director Plan provided that an aggregate of 299,445 shares of the
Company's Common Stock were available and reserved for delivery on account of
options granted pursuant to the Plan. If an option expires or terminates without
having been exercised, the shares of Common Stock associated with that option
shall become available for other option grants. The proposed amendment will add
120,000 shares of the Company's Common Stock to the Director Plan to be reserved
and available for delivery on the account of options.
PLAN ADMINISTRATION
The Plan shall be administered by a Committee appointed by the Board of
Directors of the Company which shall consist of all members of the Board of
Directors unless the Board names other individuals to serve on the Committee.
The Committee shall from time to time, at its discretion, recommend to the Board
of Directors with respect to option grants and proposed optionees.
Interpretation and construction of the provisions of the Plan or of any option
granted pursuant to it by the Committee are final unless otherwise determined by
the Board of Directors. No member of the Board of Directors or the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any option granted thereunder.
AMENDMENT AND TERMINATION OF THE PLAN
Options may not be granted under the Director Plan after August 19, 2001.
The Board of Directors may from time to time, insofar as permitted by law,
suspend, discontinue, revise or amend the Director Plan in any respect
whatsoever except that, without the approval of the stockholders, no such
revision or amendment shall; (1) change the number of shares subject to the
Director Plan; (2) change the designation of the individuals eligible to receive
options; (3) decrease the price at which options may be granted; (4) remove the
administration of the Director Plan from the Committee; or (5) extend the period
during which options may be granted. The Board of Directors is specifically
directed to revise, modify or amend the Director Plan, without the approval of
the stockholders, as may be necessary to satisfy the requirements of the
Internal Revenue Code, as amended, to assure that the Options granted thereunder
may be treated as ISOs. Termination of the Director Plan will not affect any
options then outstanding.
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<PAGE>
VOTING INFORMATION FOR THE PROPOSAL
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present in person or represented by proxy and entitled to
vote at the Annual Meeting is required to approve the amendment to the Director
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE DIRECTOR
PLAN.
FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS
GRANTED UNDER THE LONG-TERM AND DIRECTOR PLANS
The following discussion is intended as a brief summary of the federal
income tax treatment of the Options granted under the Long-Term Plan and the
Director Plan (together, the "Plans"), under the laws and regulations in effect
as of the date of this proxy statement. Because this discussion does not
consider all income tax aspects of the Plans, optionees should consult their own
tax advisors as to the federal, state and local income tax consequences relating
to their particular situations.
The granting of a Non-Qualified Option authorized under the Plans will not
be a taxable event. Non-Qualified Options include options which do not qualify
as ISOs. When a Non-Qualified Option is exercised, the optionee generally will
be taxed on an amount of compensation income equal to the excess of the market
value of the option shares at the time of exercise over the amount paid for such
shares. However, under certain circumstances, the income of an optionee who
exercises a Non-Qualified Option and is subject to Section 16(b) of the
Securities Exchange Act of 1934 (the "1934 Act") may be measured on the basis of
the market value of the Option shares as of the date such option is no longer
subject to suit under Section 16(b) of the 1934 Act, unless the optionee makes
an election under Section 83(b) of the Internal Revenue Code of 1986, as amended
(the "Code"), within thirty (30) days of the exercise of the Non-Qualified
Option. Upon the sale or other disposition of Non-Qualified Option shares, the
difference between the proceeds received and the sum of the option price plus
the compensation income recognized as described above will be capital gain or
loss. While compensation income is subject to federal income tax at a maximum
rate of 39.6%, capital gains recognized by individuals are now taxed at various
rates following the recent enactment of the Taxpayer Relief Act of 1997 (the
"1997 Tax Act"); the taxation of capital gains is discussed below. Capital
losses will be deductible against capital gains, if any, plus up to $3,000 of
other income; individuals may carry forward any unused capital losses
indefinitely.
The Plans authorize the granting of ISOs to key employees of the Company.
ISOs are intended to qualify as "incentive stock options" as defined in Section
422 of the Code. Generally, the optionee recognizes no income on the grant or
the exercise of an ISO. If the shares acquired by the exercise of an ISO are
disposed more than two years from the Grant Date and more than one year from the
date of exercise, the optionee will recognize a capital gain or loss measured by
the difference between the sale proceeds and the option price. If the ISO shares
are sold before the end of the above described holding periods, however, the
optionee will recognize compensation income in an amount equal to the difference
between the lesser of the market value of the shares on the date of exercise or
the sale price of such shares and the Option Price, with the balance of any
remaining gain taxed as capital gain.
In the year of exercise of an ISO, an individual optionee must increase his
or her alternative minimum taxable income by an amount equal to the difference
between the market price of the Company Common Stock subject to the ISO on the
date of exercise and the option price for
20
<PAGE>
purposes of computing liability for the alternative minimum tax. A taxpayer's
alternative minimum taxable income is subject to the alternative minimum tax,
which can now be as high as 28% but is payable only to the extent it exceeds the
taxpayer's regular income tax.
The 1997 Tax Act provides revised holding periods and tax rates for capital
gains. The date on which an asset is sold or otherwise disposed will determine
the applicable holding period and tax rate. While "short-term" capital gains
that are taxed at regular income tax rates (which can be as high as 39.6%), more
favorable tax treatment is accorded to "long-term" capital gains. Assets
disposed of prior to July 29, 1997 must have been held for more than 12 months
for long-term capital gain rates to apply; for sales or exchanges after July 28,
1997, the most favorable long-term capital gain rates will apply only if the
asset was held for more than 18 months.
The maximum tax rate applicable to long-term capital gains from the sale or
exchange of asset prior to May 7, 1997, is 28%. However, for assets, such as
option shares acquired under the Plans, which are sold or exchanged after May 6,
1997, long-term capital gains will be taxed at a maximum rate of 20%. Moreover,
individuals in the 15% income tax bracket (e.g., for the 1997 tax year, single
filers with $24,650 or less of taxable income or married persons filing jointly
with taxable income of $41,000 or less) will pay tax at a maximum rate of 10% on
their long-term capital gains recognized after May 6, 1997. (If an asset is sold
after July 28, 1997, and was held for more than 12 months but not more than 18
months, any capital gain from the sale will be taxed at a maximum rate of 28%).
The maximum rate on long-term capital gains will be reduced to 18% (8% for
individuals in the 15% income tax bracket) for assets sold or exchanged after
December 31, 2000, and held for more than five years; however, the 18% rate will
only apply to the disposition of assets acquired after December 31, 2000, and
for purposes of determining eligibility for this lower rate, the holding period
of option shares will begin on the date that the option is granted. The lower
tax rates provided by the 1997 Tax Act will also apply for purposes of the
alternative minimum tax.
Optionees may, at the discretion of the Committee in the case of the
Long-Term Plan, or the Board in the case of the Director Plan, pay all or part
of the exercise price for their Options by delivering Company Common Stock
already owned by them. Based on a Revenue Ruling published by the Internal
Revenue Service in 1980, if shares of Company Common Stock already owned by an
optionee are used to pay the exercise price of a Non-Qualified Option, no gain
or loss will be recognized with respect to the disposition of the previously
owned shares. However, the tax basis of the shares delivered as payment will
carry over to the shares received upon the exercise of the Option, share for
share, to the extent the number of shares received equals the number of shares
delivered as payment. The optionee will recognize ordinary income equal to the
fair market value on the exchange date of the balance of shares received in the
exchange (the number of shares received in excess of the number of shares
delivered). The tax basis of these shares will be equal to the taxable income
recognized by the optionee in the exchange.
Under proposed Treasury Department Regulations, an optionee who exercises an
ISO by surrendering previously acquired Company Common Stock generally will not
recognize taxable gain or loss upon the exchange. The optionee's tax basis of
the shares delivered as payment will carry over to the equivalent number of
shares received and the tax basis in the remaining shares will be zero. All
shares received will be subject to the holding period restrictions applicable to
ISOs; upon the disposition of any such shares prior to the expiration of these
holding periods, the shares with the lowest tax basis will be deemed to be
disposed of first. If payment of the exercise price of an ISO is made with
Company Common Stock acquired by an earlier exercise of an ISO that has not been
held by the optionee for the applicable holding periods, the optionee will
recognize ordinary income to the same extent as if the surrendered stock had
been sold in a premature disposition of shares subject to an ISO, but will
realize no capital gain or loss in the
21
<PAGE>
exchange. However, the stock acquired by this exercise of an ISO will qualify
for favorable tax treatment.
The Company will be entitled to claim a tax deduction for the amount of
compensation income recognized by an optionee upon the exercise of a
Non-Qualified Option. No such deduction will be available to Company as the
result of the exercise of an ISO unless the ISO shares are sold or disposed
before the relevant holding periods expire, in which case Company would be
allowed a tax deduction equal to the compensation income recognized by the
optionee.
Neither the Long-Term Plan nor the Director Plan is qualified under Section
401(a) of the Code or is subject to any provisions of the Employee Retirement
Income Security Act of 1974.
THE PRECEDING DISCUSSION DOES NOT COVER ALL POSSIBLE FEDERAL INCOME TAX
CONSEQUENCES, AND IS INTENDED ONLY AS A SUMMARY THEREOF. GRANTEES SHOULD CONSULT
THEIR OWN TAX ADVISORS WITH RESPECT TO FEDERAL AND STATE TAX CONSEQUENCES.
AMENDMENT OF CERTIFICATE OF INCORPORATION
WITH RESPECT TO THE LIABILITY OF DIRECTORS
In connection with the Company's re-direction of its business after the sale
of the disc manufacturing and legal technologies businesses, the Company is
trying to reduce expense levels. As part of its plan to reduce expenses, the
Board of Directors has determined that it is in the Company's best interest to
take advantage of the statutory authority under the General Corporation Law of
the State of Delaware (the "Delaware GCL") which permits Delaware corporations
to include in their certificate of incorporation a provision limiting or
eliminating the potential monetary liability of directors to the corporation or
its stockholders for breach of their fiduciary duties as directors. By amending
the Company's Certificate of Incorporation to limit the liability of directors,
the Company will be able to reduce the amount of director and officer insurance
coverage the Company must provide. Accordingly, the Board of Directors has voted
to approve an amendment (the "Proposed Amendment") to the Company's Certificate
of Incorporation set forth at Annex A and to recommend its approval and adoption
by the stockholders.
PROPOSED AMENDMENT
As permitted by the Delaware GCL, the Proposed Amendment would relieve
directors from personal liability to the Company or its stockholders for
monetary damages for breach of their duty of care (which requires directors to
exercise informed business judgment in the discharge of their duties). Thus, if
adopted by the stockholders, the Proposed Amendment would relieve directors of
liability for negligence, including gross negligence, in the performance of
their duty of care. Directors would continue to be potentially liable for any
breach of their duty of loyalty; for acts or omissions not in good faith or
involving intentional misconduct or a knowing violation of the law; for the
willful or negligent payment of unlawful dividends or unlawful stock repurchases
or redemptions; and for any transaction in which the director received an
improper personal benefit. Moreover, stockholders' rights to seek equitable
remedies (such as an action to enjoin or rescind a transaction involving a
breach of the director's duty of care) would remain unimpaired, though it should
be noted that there can be no assurance that equitable remedies may always be
available or practical in particular cases. The Proposed Amendment would not
apply to any act or omission occurring prior to the effective date, to claims
against a director arising out of his role as an officer (or in any other
capacity except as a director), or to a director's responsibilities and
potential liability for monetary damages or other relief under other laws,
including federal securities laws.
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<PAGE>
In order to afford the Company the benefits of the Delaware GCL, the Board
of Directors has approved, and recommends that the stockholders adopt, the
following resolution to amend the Company's Certificate of Incorporation:
NOW, THEREFORE, BE IT RESOLVED, that the Company's Certificate of
Incorporation shall be amended by adding a provision eliminating the
personal liability of a director to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, such
amendment to be in the form attached as Annex A to the Company's Proxy
Statement dated September 29, 1997; provided that such provision shall
not eliminate the liability of a director: (A) for any breach of the
director's duty of loyalty to the Company or its stockholders; (B) for
acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law; (C) with respect to
liabilities imposed by Section 174 of the Delaware General Corporation
Law regarding unlawful payment of dividends or unlawful purchase or
redemption of stock; or (D) for any transaction from which the director
derived an improper personal benefit.
The Board of Directors recognizes that adoption of the Proposed Amendment
may have the effect of reducing the likelihood of derivative litigation against
directors, and also may discourage or deter stockholders from bringing a lawsuit
against directors for breach of their duty of care, even though such an action,
if successful, might benefit the Company and its stockholders. Since the
Proposed Amendment limits the potential liability of directors, they have a
personal interest in the adoption of the proposal, and stockholders should
recognize that they would be giving up a cause of action against directors for
breach of their duty of care. Moreover, to the extent director liability could
be established, the limitation on actions against directors is at the expense of
stockholders' potential right of recovery.
The Board of Directors has determined that it is in the best interests of
the Company to amend the Certificate of Incorporation as permitted by the
Delaware GCL, and specifically, to adopt the Proposed Amendment. The Company
currently maintains directors' and officers' liability insurance, but the
premiums for that coverage can be reduced. Moreover, future changes in the
market for directors' and officers' liability insurance, the cost of such
policies and the scope of coverages available could make adequate insurance
costly for the Company to maintain in the future.
Finally, the Board of Directors believes that the diligence exercised by
directors stems primarily from their desire to act in the best interests of the
Company, and not from a fear of monetary damage awards. Consequently, the Board
of Directors believes that the level of scrutiny and care exercised by directors
will not be diminished by the adoption of the Proposed Amendment. The management
of the Company is not aware of any claims alleging breach of fiduciary duty by
any director of the Company.
Approval by the affirmative vote of the holders of 60% of the outstanding
shares of Common Stock is required for adoption of the Proposed Amendment. If
such vote is obtained, the Proposed Amendment will become effective upon filing
of the requisite Certificate of Amendment with the Secretary of State of
Delaware. For purposes of the vote on the Proposed Amendment, abstentions and
broker non-votes will have the effect as votes against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED
AMENDMENT.
APPROVAL OF AUDITORS
The Directors have recommended that the stockholders approve Coopers &
Lybrand L.L.P., a certified public accounting firm, as independent auditors for
the Company. A representative of
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<PAGE>
Coopers & Lybrand L.L.P. is expected to be present at the Annual Meeting and
will have an opportunity to make an independent statement if he or she desires
to do so. The representative is expected to be available to respond to
appropriate questions.
The affirmative vote of the holders of a majority of the outstanding shares
of the Company's Common Stock represented at the meeting and entitled to vote is
necessary to approve Coopers & Lybrand L.L.P. as the Company's auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE APPROVING COOPERS & LYBRAND L.L.P.
AS THE COMPANY'S AUDITORS.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The chart below sets forth, as of September 2, 1997, information to the best
of the Company's knowledge with respect to the persons who beneficially owned in
excess of five percent of the Company's Common Stock; the total number of shares
of the Company's Common Stock beneficially owned by each Director and named
Executive Officer; and the total number of shares of the Company's Common Stock
beneficially owned by the Directors and Executive Officers of the Company, as a
group.
<TABLE>
<CAPTION>
AMOUNT APPROXIMATE
NAME OF BENEFICIALLY PERCENTAGE
BENEFICIAL OWNER OWNED(1) OF CLASS(1)
- ------------------------------------------------------------------- ----------- ---------------
<S> <C> <C>
Ryback Management Corp.(2)......................................... 704,500 8.8%
Heartland Advisors, Inc.(3)........................................ 696,900 8.7%
Brinson Partners, Inc.(4).......................................... 604,200 7.6%
Wisconsin State Investment Board(5)................................ 506,100 6.3%
Dimensional Fund Advisors(6)....................................... 490,100 6.1%
FMR Corp........................................................... 423,700 5.3%
Philip E. Rollhaus, Jr.(7)......................................... 523,961 6.4%
Leslie J. Jezuit................................................... 104,000 1.2%
James H. DeVries(7)................................................ 223,556 2.8%
Myron R. Shain..................................................... 65,030 *
George D. Ebersole................................................. 97,757 1.2%
William G. Fowler(8)............................................... 159,034 2.0%
Lawrence C. McQuade................................................ 43,500 *
Robert D. van Roijen, Jr........................................... 32,500 *
Directors and Executive Officers as a group (10 persons including
those individuals named above)(7)(8).............................. 1,318,989 16.4%
</TABLE>
- ------------------------
* Less than one percent (1%).
(1) The shares reported in the above table include shares of Common Stock which
can be acquired within 60 days of September 2, 1997, through the exercise of
options ("Option Shares") as follows: Mr. Rollhaus - 209,060 shares; Mr.
Jezuit - 80,000 shares; Mr. DeVries - 72,210 shares; Mr. Shain - 7,765
shares; Mr. Ebersole - 34,710 shares; Mr. Fowler - 73,500 shares; Mr.
McQuade - 41,500 shares; Mr. van Roijen - 26,500 shares; and Directors and
Executive Officers as a group - 591,040 shares. Each individual's Option
Shares are also included in the number of shares of the Company issued and
outstanding for purposes of calculating the percentage ownership of each
individual in accordance with the rules and regulations of the Exchange Act.
Certain of these persons also have options not exercisable within 60 days of
September 2, 1997, by which they can acquire the following additional shares
of Common Stock: Mr. Rollhaus - 25,000 shares; Mr. Jezuit - 24,445 shares;
Mr. Ebersole -
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<PAGE>
10,000 shares; and Directors and Executive Officers as a group - 78,000
shares. These shares are not included in the above table or in the
percentage ownership calculations.
(2) Based upon information set forth in a Schedule 13F filing for the period
ending March 30, 1997. Shares held by Lindner Growth Fund, a registered
investment company, comprise the figure set forth for Ryback Management
Corporation. The address for Ryback Management Corporation is 7711
Carondelet Avenue, Box 16900, St. Louis, Missouri 63105.
(3) Based upon information set forth in a Schedule 13F filing for the period
ending June 30, 1997. Shares held in Heartland Value Fund, a series of
Heartland Group, Inc., are included in the figures set forth for Heartland
Advisors, Inc. The address of Heartland Advisors, Inc. is 790 North
Milwaukee Street, Milwaukee, Wisconsin 53202.
(4) Based upon information set forth in a Schedule 13G filing dated February 12,
1997. Shares owned by Brinson Trust Company, Brinson Holdings, Inc., SBC
Holding (USA), Inc. and Swiss Bank Corporation are included in the figures
set forth for Brinson Partners, Inc. The address for Brinson Partners, Inc.
is 209 South LaSalle, Chicago, Illinois 60604-1295.
(5) Based on information set forth in a Schedule 13G filing dated January 21,
1997. The address for the Wisconsin State Investment Board is P.O. Box 7842,
Madison, Wisconsin 53707.
(6) Based upon information set forth in a Schedule 13G filing dated February 5,
1997. Dimensional Fund Advisors Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of 490,100 shares
of Quixote Corporation stock as of December 31, 1996, all of which shares
are held in portfolios of DFA Investment Dimensions Group Inc., a registered
open-end investment company, or in series of the DFA Investment Trust
Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional Fund Advisors Inc. serves as
investment manager. Dimensional disclaims beneficial ownership of all such
shares. The address for Dimensional is 1299 Ocean Avenue, Santa Monica,
California 90401.
(7) Messrs. Rollhaus and DeVries may be deemed to be the beneficial owner of
1,000 and 5,492 shares of Common Stock, respectively, owned by their family
members. These shares are not included in the above table. Messrs. Rollhaus
and DeVries disclaim beneficial ownership of these shares.
(8) Mr. Fowler has a beneficial interest in 890 shares of Common Stock held by
his retirement plan. These shares are not included in the above table.
MISCELLANEOUS
STOCKHOLDER PROPOSALS FOR THE ANNUAL MEETING TO BE HELD IN 1998
Under the rules and regulations of the Securities and Exchange Commission,
proposals of stockholders intended to be presented at the Annual Meeting to be
held in 1998 must be received by the Company on or before May 15, 1998, to be
considered for inclusion in the Company's proxy statement relative to that
meeting. Such proposals should be in writing and sent to Ms. Joan R. Riley,
Secretary--Quixote Corporation, One East Wacker Drive, Chicago, IL 60601.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and Executive Officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Executive
Officers, Directors and greater than ten percent shareholders are
25
<PAGE>
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on review of the copies of such reports furnished to the
Company and written representations that no other reports were required during
fiscal year 1997, the Company believes that all Section 16(a) filing
requirements applicable to the Company's Officers and Directors and ten percent
shareholders were complied with by such persons.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
The Company will be pleased to make its Annual Report on Form 10-K, as filed
with the Securities and Exchange Commission, available without charge to
interested parties. Written requests for the report should be directed to Ms.
Joan R. Riley, Secretary--Quixote Corporation, One East Wacker Drive, Chicago,
IL 60601.
26
<PAGE>
ANNEX A
ARTICLE TENTH
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware, as the same exists or hereafter may be amended, or (iv) for
any transaction from which the director derived an improper personal benefit. If
the General Corporation Law of the State of Delaware hereafter is amended to
authorize the further elimination or limitation of the liability of directors,
then the liability of a director of the Corporation, in addition to the
limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the amended General Corporation Law of the State of
Delaware. Any repeal or modification of this Article by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.
27
<PAGE>
SKU# 0524-PS-97
<PAGE>
QUIXOTE CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Philip E. Rollhaus, Jr. and Joan R. Riley
as proxies with full power of substitution and hereby directs them to vote the
stock of the undersigned at the Annual Meeting of Stockholders of Quixote
Corporation to be held in the Assembly Room at The Northern Trust Company, 50
South LaSalle Street, Chicago, Illinois, Wednesday, November 19, 1997, at 10:00
a.m. Central Standard Time, and at any adjournments thereof, as indicated on the
proposals set forth on the reverse side of this Proxy.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED, OR IF NO
DIRECTION IS INDICATED, IT WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS AND
"FOR" PROPOSALS 2, 3, 4 and 5. Discretionary authority is conferred by the
Proxy to vote on all matters, other than those specified on the reverse side,
which may properly come before the meeting or any adjournment thereof.
PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE>
QUIXOTE THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
/x/ Please mark votes
as in this example.
1. Election of Directors
NOMINEES: James H. DeVries, Lawrence C. McQuade and Leslie J. Jezuit
FOR WITHHELD
/ / / /
/ /___________________________________
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. Approving the amendment of the
1993 Long-Term Stock Ownership / / / / / /
Incentive Plan.
3. Approving the amendment of the
1991 Director Stock Option Plan. / / / / / /
4. Approving the amendment of the
Certificate of Incorporation. / / / / / /
5. Approving the selection of Coopers
& Lybrand, L.L.P. as independent / / / / / /
auditors of the Company.
6. Transaction of such other business
as may properly come before the
meeting and any adjournments
thereof.
Mark Here For / / Mark Here If You / /
Address Change Plan To Attend
And Note At Left The Meeting
Please date and sign as name is imprinted hereon, including designation as
executor, trustee, etc. if applicable. A corporation must sign in its name by
the president or other authorized officers. All co-owners must sign.
Signature:_______________ Date:_______ Signature:_______________ Date:________
<PAGE>
Exhibit 10(c)
QUIXOTE CORPORATION
1991 DIRECTOR STOCK OPTION PLAN
Amended August 28, 1997
1. PURPOSE
This Stock Option Plan (the "Plan") is intended as an incentive to
encourage stock ownership by certain Directors of QUIXOTE CORPORATION (the
"Corporation") so that they may acquire or increase their proprietary
interest in the success of the Corporation and to encourage them to continue
to render their services to the Corporation as Directors. It is further
intended that options granted pursuant to this Plan may constitute "incentive
stock options" within the meaning of Section 422A of the Internal Revenue
Code, as amended (the "Code"), if they satisfy the various requirements
specified under Code Sec. 422A. Otherwise, options granted pursuant to this
Plan shall be "nonqualified stock options".
2. ADMINISTRATION
The Plan shall be administered by a committee appointed by the Board of
Directors of the Corporation (the "Committee"). The Committee shall consist
of all members of the Corporation's Board of Directors unless the Board
adopts a resolution naming other individuals to serve on the Committee. The
Board of Directors may from time to time remove members from, or add members
to, the Committee. Vacancies on the Committee, howsoever caused, shall be
filled by the Board of Directors. The Committee shall select one of its
members as Chairman and shall hold meetings at such times and places as it
may determine. A majority of the Committee at which a quorum is present, or
acts reduced to or approved in writing by a majority of the members of the
Committee, shall be the valid acts of the Committee. The Committee shall from
time to time at its discretion recommend to the Board of Directors with
respect to the Directors who shall be granted options and the amount of stock
to be optioned to each.
The interpretation and construction by the Committee of any provisions of
the Plan or of any option granted under it shall be final unless otherwise
determined by the Board of Directors. No member of the Board of Directors or
the Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any option granted under it.
3. ELIGIBILITY
The persons who shall be eligible to receive options shall be Directors
of the Corporation as the Board of Directors shall select from time to time
from among those nominated by the Committee, provided however, that only
Directors who are also employees of the Corporation shall be eligible to
receive "incentive stock options" under this Plan. An optionee may hold more
than one option, but only on the terms and subject to the restrictions
hereafter set forth. No person shall be eligible to receive an option for a
larger number of shares of stock than is recommended for him by the
Committee, and in no event shall any optionee in any calendar year receive
options under this Plan for stock with an aggregate fair market value
(determined at the time of the grant of the option) in excess of the
limitations set forth in Section 5(b) of the Plan. The number of shares of
stock with respect to which
<PAGE>
option rights under the Plan may be granted to any individual during the term
of the Plan shall not exceed 90,000 shares, subject to adjustment as provided
in Section 5(g) of the Plan.
4. STOCK
The stock subject to options under the Plan shall be shares of the
Corporation's authorized but unissued or reacquired $.01-2/3 par value common
stock, hereafter sometimes called Common Stock. The aggregate number of
shares that may be issued under options shall not exceed 419,445 shares of
Common Stock. The limitations established by each of the preceding sentences
shall be subject to adjustment as provided in Section 5(g) of the Plan.
In the event that any outstanding option under the Plan for any reason
expires or is terminated, the shares of Common Stock allocable to the
unexercised portion of such option may again be subjected to an option under
the Plan.
5. TERMS AND CONDITIONS OF OPTIONS
Stock options granted under the Plan shall be authorized by the Board of
Directors and shall be evidenced by agreements in such form as the Committee
shall from time to time recommend and the Board of Directors shall from time
to time approve, which agreements shall comply with and be subject to the
following terms and conditions:
(a) OPTIONEE'S AGREEMENT
Each optionee shall agree to render to the Corporation his services
as a Director (1) for a period of one year from the date of the option, or
(2) until his death, whichever first occurs, but such agreement shall not
impose upon the Corporation any obligation to retain the optionee in any
capacity for any period; provided, however, the agreement shall permit an
optionee to exercise the option after a "change of control" (as defined at
Section 5(g)) notwithstanding the optionee's failure to have served as a
Director for one year from the date of grant.
(b) Number of Shares
Each option shall state the number of shares to which it pertains.
Options granted under this Plan may be considered "incentive stock options"
as defined in Code Sec. 422A to the extent that the aggregate fair market
value of stock (determined at the time the option is granted) with respect to
which any such option is exercisable for the first time in a calendar year is
not more than $100,000.
(c) Option Price
Each option shall state the option price, which shall be not less
than 100% of the current market price of the shares of Common Stock of the
Corporation on the date of the granting of the option; provided, that in the
event an optionee owns stock representing more than ten percent of the voting
power or value of the stock of the Corporation on the date of grant, the
option price of an option which is intended to qualify as an "incentive stock
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<PAGE>
option" shall not be less than 110% of the current market price of the shares
on the date of grant. The current market price of the Common Stock at any
date shall be deemed to be the average of the daily closing prices for the
thirty (30) consecutive business days before the date in question. The
closing price for each day shall be the last reported sale price determined
in the regular way or, in case no such reported sale takes place on such day,
the average of the last reported bid and asked prices determined in the
regular way, in either case on the principal national securities exchange on
which the Common Stock is admitted to trading or listed, or if not listed or
admitted to trading on any national securities exchange, the average of
highest reported bid and lowest reported asked prices as reported by NASDAQ
or other similar organization if NASDAQ is no longer reporting such
information, or if not so available, the fair market price as determined by
the Board of Directors. Subject to the foregoing, the Board of Directors and
the Committee shall have full authority and discretion in fixing the option
price and be fully protected in doing so.
(d) Medium and Time of Payment
The option price is to be paid in full in United States dollars upon
the exercise of the option and may be paid in cash or by check, or with the
approval of the Committee, by the optionee tendering to the Corporation shares
of common stock of the Corporation owned by him and having a fair market value
(determined at the time the Corporation receives written notice of the
optionee's election to exercise the option) equal to the aggregate exercise
price of the options being exercised. With the approval of the Board of
Directors, the optionee may borrow from the Corporation all or any portion of
the funds needed to pay the option price on such terms and conditions as the
Committee deems appropriate, provided that: (1) the interest rate for any such
loan by the Corporation shall not be less than the "applicable federal rate" (as
defined by Code Section 1274(d)(1)(A) in effect on the date of such loan or any
other rate as necessary to avoid the imputation of interest under the Code or
other applicable law, (2) proceeds of the loan are used solely to pay the
exercise price of an option granted pursuant to this Plan, and (3) the optionee
executes a promissory note and such other documents as the Committee deems
appropriate to evidence the optionee's indebtedness to the Corporation.
(e) Term and Exercise of Options
Subject to this Section 5(e) and Sections 5(f) and 5(g) of this
Plan, no option shall be exercised either in whole or in part prior to twelve
months from the date it is granted. Subject to the right of cumulation
provided in this Section 5(e), each option granted pursuant to the Plan shall
be exercisable to the extent provided for in the agreement between the
Corporation and each optionee as determined by the Committee in its
discretion. The Committee may provide, however, for the exercise of options
after the initial twelve month period, either as to an increased percentage
of shares per year or as to all remaining shares, if the optionee shall, with
the approval of the Corporation, retire as a Director of the Corporation. To
the extent not exercised, installments shall accumulate and be exercisable,
in whole or in part, in any subsequent period, prior to the expiration of the
term described in the next sentence of this Section 5(e). No option shall be
exercisable after the expiration of ten years from the date it is granted,
provided that in the event the optionee owned stock representing more than
ten
3
<PAGE>
percent (10%) of the voting power or value of the stock of the Corporation on
the date the option was granted, any option which is intended to qualify as
an "incentive stock option" must be exercised within five (5) years from the
date of grant. During the optionee's lifetime, the options granted under this
Plan may be exercised only by him.
(f) Death of Optionee and Transfer of Option
If the optionee shall die and shall not have fully exercised the
option, the entire unexercised portion of the option may be exercised within
one year from the date of the optionee's death by the executors or
administrators of the optionee or by any person or persons who shall have
acquired the option directly from the optionee by bequest or inheritance,
subject to the condition that no option shall be exercisable after the
expiration of ten years (five years for an option which is intended to
qualify as an "incentive stock option" to an optionee who owned more than ten
percent of the value or voting power of the stock of the Corporation on the
date of grant) from the date it is granted.
No option shall be assignable or transferable by the optionee
otherwise than by will or the laws of descent and distribution.
(g) Recapitalization
Subject to any required action by the stockholders, the number of
shares of Common Stock covered by each outstanding option, and the price per
share thereof in each such option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock of the
Corporation resulting from a subdivision or consolidation of shares or the
payment of a stock dividend (but only on the Common Stock) or any other
increase or decrease in the number of such shares effected without receipt of
consideration by the Corporation.
Subject to any required action by the stockholders, if the
Corporation shall be the surviving corporation in any merger or
consolidation, each outstanding option shall pertain to and apply to the
securities to which a holder of the number of shares of Common Stock subject
to the option would have been entitled. A dissolution or liquidation of the
Corporation, or a merger or consolidation in which the Corporation is not the
surviving corporation, or a change in control of the Corporation, as defined,
shall cause each optionee to have the right to exercise his option in whole
or in part, notwithstanding the provisions of Section 5(e) above: (i)
immediately prior to such dissolution or liquidation or merger or
consolidation in which the Corporation is not the surviving corporation, and
thereafter; or (ii) after such change of control.
"Change of control" of the Corporation shall mean a change in
control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended ("Exchange Act"); provided that, without
limitation, such a change in control shall be deemed to have occurred if (i)
any "person" (as such term is used in Section 13(d) and 14(d) of the Exchange
Act) is, or becomes, the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Corporation
4
<PAGE>
representing twenty percent (20%) or more of the combined voting power of the
Corporation's then outstanding securities; or, (2) during any period of two
consecutive years, individuals who at the beginning of such period constitute
all members of the Board of Directors of the Corporation who are not employed
by the Corporation (the "Outside Directors") shall cease for any reason to
constitute at least a majority of the Outside Directors unless the election
of each Outside Director, who was not an Outside Director at the beginning of
the period, was approved by a vote of at least two-thirds (2/3) of the
Directors then still in office who were Directors at the beginning of the
period; or, (3) there shall be consummated (A) any consolidation or merger of
the Corporation in which the Corporation is not the continuing or surviving
corporation or pursuant to which shares of the Corporation's Common Stock
would be converted into cash, securities or other property, other than a
merger of the Corporation in which the holders of the Corporation's Common
Stock immediately prior to the merger have the same proportionate ownership
of common stock of the surviving corporation immediately after the merger, or
(B) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all, or substantially all, of the assets
of the Corporation or, (4) the stockholders of the Corporation approve a plan
or proposal for the liquidation or dissolution of the Corporation.
To the extent that the foregoing adjustments relate to stock or
securities of the Corporation, such adjustments shall be made by the
Committee, whose determination in that respect shall be final and binding and
conclusive; provided that each option granted pursuant to this Plan which
could qualify as an "incentive stock option" shall not be adjusted in a
manner that causes the option to fail to continue as an "incentive stock
option" within the meaning of Code Section 422A.
Except as hereinbefore expressly provided in this Section 5(g), the
optionee shall have no rights by reason of any subdivision or consolidation
of shares of stock of any class or the payment of any stock dividend or any
other increase or decrease in the number of shares of stock of any class or
by reason of any change of control, dissolution, liquidation, merger, or
consolidation or spin-off of assets or stock of another corporation, and any
issue of the Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to the option.
The grant of an option pursuant to the Plan shall not affect in any
way the right of power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve, liquidate, sell, or transfer
all or any part of its business or assets.
5
<PAGE>
(h) Rights as a Stockholder
An optionee or a transferee of an option shall have no rights as a
stockholder with respect to any shares covered by his option until the date
of the issuance of a stock certificate to him for such shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for which the
record date is prior to the date such stock certificate is issued, except as
provided in Section 5(g) hereof.
(i) Modification, Extension and Renewal of Options
Subject to the terms and conditions and within the limitations of
the Plan, the Committee, with the approval of the Board of Directors, may
modify, extend or renew outstanding options granted under the Plan, or accept
the surrender of outstanding options (to the extent not theretofore
exercised) and authorize the granting of new options in substitution therefor
(to the extent not theretofore exercised). The Board of Directors shall not,
however, modify any outstanding options so as to specify a lower price or
accept the surrender of outstanding options and authorize the granting of new
options in substitution therefor specifying a lower price. Notwithstanding
the foregoing however no modification of an option shall, without the consent
of the optionee, alter or impair any rights or obligations under any option
theretofore granted under the Plan.
(j) Investment Purpose
Each option under the Plan shall be granted on the condition that
the stock purchased shall be held for investment purposes, and not with a
view to resale or distribution except that in the event the stock subject to
such option is registered under the Securities Act of 1933, as amended, or in
the event a resale of such stock without such registration would otherwise be
permissible, such condition shall be inoperative if in the opinion of counsel
for the Corporation such condition is not required under the Securities Act
of 1933 or any other applicable law, regulation, or rule of any governmental
agency.
(k) Other Provisions
The option agreements authorized under the Plan shall contain such
other provisions, including, without limitation, restrictions upon the
exercise of the option, as the Committee and the Board of Directors of the
Corporation shall deem advisable.
6. TERM OF PLAN
Options may be granted under the Plan from time to time within a period
of ten years from the date the Plan is adopted, or the date the Plan is
approved by the Stockholders, whichever is earlier.
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<PAGE>
7. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
Directors or as members of the Committee, the members of the Committee shall
be indemnified by the Corporation against the reasonable expenses, including
attorneys' fees actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any option
granted thereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Corporation) or paid by them in satisfaction of a judgment
except in relation to matters as to which it shall be adjudged in such
action, suit or proceeding that such Committee member is liable for
negligence or misconduct in the performance of his duties; provided that
within sixty (60) days after institution of any such action, suit or
proceeding a Committee member shall in writing offer the Corporation the
opportunity at its own expense, to handle and defend the same.
8. AMENDMENT OF THE PLAN
Upon recommendation of the Committee, the Board of Directors of the
Corporation may, insofar as permitted by law, from time to time, with respect
to any shares at the time not subject to options, suspend or discontinue the
Plan or revise or amend it in any respect whatsoever except that without
approval of the stockholders, no such revision or amendment shall change the
number of shares subject to the Plan, change the designation of the
individuals eligible to receive options, decrease the price at which options
may be granted, remove the administration of the Plan from the Committee, or
extend the period during which options may be granted.
The Board of Directors of the Corporation shall, from time to time,
revise, modify, or amend the Plan, in part or in total, without approval of
the stockholders, as may be necessary to satisfy the requirements of the Code
such that certain stock options which are granted under the Plan may qualify
as "incentive stock options" as defined in Code Section 422A and any
amendments or revisions thereof.
9. APPLICATION OF FUNDS
The proceeds received by the Corporation from the sale of Common Stock
pursuant to options will be used for general corporate purposes.
10. NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation upon the optionee to
exercise such option.
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Date Plan was adopted by Board of Directors: August 19, 1991
Date Plan was approved by Stockholders: November 19, 1991
Date Plan was amended by Board of Directors: June 25, 1997
Date Plan was amended by Board of Directors: August 28, 1997
Date amended Plan was approved by Stockholders: 1997
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8
<PAGE>
Exhibit 10(d)-1
QUIXOTE CORPORATION
1993 LONG-TERM STOCK OWNERSHIP INCENTIVE PLAN
As Amended August 28, 1997
THE PLAN. Quixote Corporation, a Delaware corporation (the "Company"),
hereby amends and restates the substantive provisions of the Quixote
Corporation 1991 Incentive Stock Option Plan (the "1991 Plan"), to establish
the Quixote Corporation 1993 Long-Term Stock Ownership Incentive Plan as set
forth herein and as may from time to time be amended (the "Plan"), in order
to add provisions which will provide the Company with the ability to provide
its senior executives with stock-based retirement benefits linked to
increases in the value of the Company's Stock. The Plan is effective as of
June 30, 1993 subject to the approval by a majority of the stockholders at
the first annual meeting of stockholders held after the Effective Date.
Until such time as stockholder approval of the Plan is obtained, the 1991
Plan will continue to exist and operate independently of the Plan. Options
granted and outstanding under the 1991 Plan following stockholder approval of
the Plan shall be governed by the provisions of the Plan. Nothing in this
Plan is intended to, or shall be deemed to, modify, amend or alter any of the
rights and benefits of holders of options granted under the 1991 Plan or
provide any additional benefits to such holders.
1. PURPOSE
The purposes of the Plan are to encourage selected employees of the
Company and its Subsidiaries who are capable of having an impact on the
performance of the Company to acquire a long-term proprietary interest in the
growth and performance of the Company, to generate an increased incentive to
contribute to the Company's future success and prosperity (thus enhancing the
value of the Company for the benefit of its stockholders), and to enhance the
ability of the Company and its Subsidiaries to attract and retain qualified
individuals upon whom the sustained progress, growth, and profitability of
the Company depend. It is further intended that options issued pursuant to
this Plan shall constitute "incentive stock options" within the meaning of
Sec. 422A of the Internal Revenue Code (such options are referred to herein
as "Incentive Stock Options"). In the event that stock options granted
pursuant to this Plan do not satisfy the requirements specified under
Internal Revenue Code Sec. 422A, such options shall be "nonqualified stock
options."
2. DEFINITIONS
As used in the Plan, terms defined immediately after their use shall have
the respective meanings provided by such definitions and the terms set forth
below shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "Affiliate" is a person that directly or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with the Company.
(b) "Award" means options, Retirement Stock Awards or Retirement
Cash Awards granted under the Plan.
<PAGE>
(c) "Award Agreement" has the meaning specified in Section 4(b)(v).
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
References to a particular section of the Code shall include references to
successor provisions.
(f) "Committee" means the committee of the Board appointed pursuant
to Section 4.
(g) "Company" has the meaning set forth in the introductory
paragraph.
(h) "Current Market Price" of the Stock means at any date the
average of the daily closing prices for thirty (30) consecutive business days
commencing no more than forty-five (45) business days before the day in
question. The closing price for each day shall be the last reported sales
price determined in the regular way or, in case no such reported sales takes
place on such day, the average of the last reported bid and asked prices
determined in the regular way, in either case on the principal national
securities exchange on which the Stock is admitted to trading or listed, or
if not listed or admitted to trading on any national securities exchange, the
average of the closing bid and asked prices as reported by NASDAQ or other
similar organization if NASDAQ is no longer reporting such information, or if
not so available, the fair market price as determined by the Board.
(i) "Disability" means, as relates to the exercise of an Incentive
Stock Option after termination of employment, a disability within the meaning
of Section 22(e)(3) of the Code, and for all other purposes, a mental or
physical condition which, in the opinion of the Committee, renders a Grantee
unable or incompetent to carry out the job responsibilities which such
Grantee held or the tasks to which such Grantee was assigned at the time the
disability was incurred, and which is expected to be permanent or for an
indefinite duration exceeding one year.
(j) "Effective Date" means June 30, 1993; provided that the Plan
and any Retirement Awards granted prior to the 1993 annual meeting of the
Company's stockholders are subject to approval of the Plan by the
stockholders at such annual meeting.
(k) "Grant Date" means the date on which the Committee grants the
Award or such later date as specified in advance by the Committee; provided
however, that references to the Grant Date of an option under this Plan
shall, with respect to options granted under the 1991 Plan prior to
stockholder approval of the Plan, refer to the date of grant of such option
under the 1991 Plan.
(l) "Grantee" means an individual who has been granted an Award.
(m) "Including" or "includes" means "including, without
limitation," or "includes, without limitation."
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<PAGE>
(n) "1934 Act" means the Securities Exchange Act of 1934, as
amended. References to a particular section of, or rule under, the 1934 Act
shall include references to successor provisions.
(o) "Option Price" means the per share purchase price of Stock
subject to an option.
p) "Plan" has the meaning set forth in the introductory paragraph.
(q) "Retirement" means a termination of employment with the Company
and its Subsidiaries any time after attaining age 60.
(r) "SEC" means the Securities and Exchange Commission.
(s) "Section 16 Grantee" means a person subject to potential
liability under Section 16(b) of the 1934 Act with respect to transactions
involving equity securities of the Company.
(t) "Stock" means the common stock of the Company, $0.01-2/3 par
value.
(u) "Subsidiary" means (i) with respect to Incentive Stock Options,
a corporation as defined in Section 424(f) of the Code with the Company being
treated as the employer corporation for purposes of this definition, and (ii)
for all other purposes any entity in which the Company directly or through
intervening subsidiaries owns at least a majority interest of the total
combined voting power or value of all classes of stock or, in the case of an
unincorporated entity, at least a majority in the capital and profits.
(v) "10% Owner" means a person who owns stock (including stock
treated as owned under Section 424(d) of the Code) possessing more than 10%
of the total combined voting power of all classes of stock of the Company.
3. SCOPE OF THE PLAN
(a) An aggregate of One Million and Fifteen Thousand (1,015,000)
shares of Stock are hereby made available and reserved for delivery on
account of Awards and the exercise of Awards, with Six Hundred Sixty Five
Thousand (665,000) shares of Stock being made available and reserved for
delivery on account of options and Three Hundred Fifty Thousand (350,000)
shares of stock being made available and reserved for delivery on account of
Retirement Stock Awards. The limitations established by the preceding
sentences shall be subject to adjustment as provided in Section 18 of the
Plan.
Such shares may be treasury shares, newly issued shares, or shares
purchased on the open market (including private purchases) in accordance with
applicable securities laws, or any combination of the foregoing, as may be
determined from time to time by the Board or the Committee.
(b) To the extent an Award shall expire or terminate for any reason
without having been exercised in full (including a cancellation and re-grant of
an option), or shall be forfeited, without, in either case, the
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<PAGE>
Grantee having enjoyed any of the benefits of Stock ownership (other than
voting rights or dividends that are also forfeited), the shares of Stock
(including Retirement Stock) associated with such Award shall become
available for other Awards.
(c) For purposes of this Section 3,
(i) The aggregate number of shares covered by a Retirement
Award Agreement shall be counted on the Grant Date of such Award (without
respect to the timing of the Company's obligation to issue and deliver such
shares) against the aggregate number of shares of Stock available for
granting Retirement Stock Awards under the Plan; and
(ii) the shares of Stock underlying outstanding options
(without respect to any vesting schedule) shall be counted while the Award is
outstanding against the aggregate number of shares of Stock available for
granting Awards under the Plan; and
(iii) in the event of a stock-for-stock exercise of an
option, the gross number of shares of Stock subject to the option exercised,
not the net number of shares actually issued upon exercise shall be counted
against the aggregate number of shares of Stock available for granting Awards
under the Plan.
4. ADMINISTRATION
(a) Subject to Section 4(b), the Plan shall be administered by a
committee ("Committee") which shall consist of not less than three persons
who are Directors of the Company and who are not employees of the Company.
Membership on the Committee shall be subject to such other limitations as the
Board deems appropriate to permit transactions in Stock pursuant to the Plan
to be exempt from liability under Section 16(b) of the 1934 Act pursuant to
Rule 16b-3 thereunder. Unless the Board adopts a resolution naming other
individuals to serve on the Committee, the Committee shall consist of all
Directors of the Company who are not employees of the Company. The Board may
from time to time remove members from, or add members to the Committee.
Vacancies on the Committee, however caused, shall be filled by the Board.
The Committee shall select one of its members as Chairman, and shall hold
meetings at such times and places as it may determine. A majority of the
Committee at which a quorum is present, or acts approved in writing by all of
the members of the Committee, shall be the valid acts of the Committee. No
member of the Committee shall be eligible to receive any grant of any Awards
under this Plan.
(b) The Committee, unless otherwise determined by the Board, shall
have full and final authority, in its discretion, but subject to the express
provisions of the Plan, as follows:
(i) to grant Awards;
(ii) to determine (A) when Awards may be granted, and (B)
whether or not specific Awards shall be identified with other specific
Awards, and if so, whether they shall be exercisable cumulatively with or
alternatively to such other specific Awards;
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<PAGE>
(iii) to interpret the Plan and to make all determinations
necessary or advisable for the administration of the Plan;
(iv) to prescribe, amend, and rescind rules and regulations
relating to the Plan, including rules with respect to the exercisability and
non-forfeitability of Awards upon the termination of employment of a Grantee;
(v) to determine the terms and provisions and any restrictions
or conditions (including specifying such performance criteria as the
Committee deems appropriate, and imposing restrictions with respect to Stock
acquired upon exercise of an option or Retirement Award, which restrictions
may continue beyond the Grantee's termination of employment) of the written
agreements by which all Awards shall be evidenced ("Award Agreements") which
need not be identical and, with the consent of the Grantee where required by
contract law, to modify any such Award Agreement at any time;
(vi) to impose, incidental to an Award, conditions with respect
to competitive employment or other activities, to the extent such conditions
do not conflict with the Plan;
(vii) to cancel, with the consent of the Grantee,
outstanding Awards and to grant new Awards in substitution therefor;
(viii) to accelerate the exercisability of, and to
accelerate or waive any or all of the restrictions and conditions applicable
to any Award or any group of Awards;
(ix) subject to Section 6(c), to extend the time during which
any Award or group of Awards may be exercised;
(x) to make such adjustments or modifications to Awards to
Grantees working outside the United States as are necessary and advisable to
fulfill the purposes of the Plan which are not in conflict with the Plan; and
(xi) to impose such additional conditions, restrictions, and
limitations upon the grant, exercise or retention of Awards as the Committee
may, before or concurrently with the grant thereof, deem appropriate,
including requiring simultaneous exercise of related identified Awards, and
limiting the percentage of Awards which may from time to time be exercised by
a Grantee.
The determination of the Committee on all matters relating to the Plan or
any Award Agreement shall be conclusive and final. No member of the
Committee or the Board shall be liable for any action or determination made
in good faith with respect to the Plan or any Award.
(c) The Board may, in its discretion, reserve to itself or delegate
to another committee of the Board, any or all of the authority and
responsibility of the Committee with respect to Awards to Grantees who are
not Section 16 Grantees at the time any such delegated authority or
responsibility is exercised. Such other committee may consist of two or more
Directors who may, but need not be, officers or employees of the Company or
of any of its
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Subsidiaries. To the extent that the Board has reserved to itself or
delegated to such other committee the authority and responsibility of the
Committee, all references to the Committee in the Plan shall be to the Board
or such other committee.
5. ELIGIBILITY
Awards may be granted to any key employee (including any officer) of the
Company or any of its Subsidiaries; provided, however, that Retirement Awards
may be granted only to executive officers of the Company or its Subsidiaries
who have completed 10 years of continuous service for the Company or its
Subsidiaries; provided further that the Committee may, under appropriate
circumstances and in its discretion, waive the requirement of ten years
continuous service for a particular executive officer. In selecting the
individuals to whom Awards may be granted, as well as in determining the
number of shares of Stock subject to, and the other terms and conditions
applicable to, each Award, the Committee shall take into consideration such
factors as it deems relevant in promoting the purposes of the Plan.
6. TERMS AND CONDITIONS OF OPTION GRANTS
Stock options granted by the Committee pursuant to the Plan shall be
evidenced by Award Agreements in such form as the Committee shall from time
to time approve, which agreements shall comply with and be subject to the
following terms and conditions:
(a) Each option shall state the number of shares to which it
pertains.
(b) The Option Price of any option shall not be less than 100% of
the Current Market Price of the Stock on the Grant Date.
(c) Any option granted under this Plan may be considered a
Incentive Stock Option to the extent that it:
(i) shall only be granted to individuals who are employed by
the Company or any of its Subsidiaries on the Grant Date;
(ii) shall not be granted to a 10% Owner unless the Option
Price is at least 110% of the Current Market Price of the Stock subject to
such option on the Grant Date and shall be exercisable for a period of not
more than five (5) years from the Grant Date;
(iii) except as provided in (ii) above, shall be
exercisable for a period of not more than 10 years from the Grant Date, and
shall be subject to earlier termination as provided herein or in the
applicable Award Agreement;
(iv) shall not have an aggregate fair market value (determined
for each Incentive Stock Option at its Grant Date) of Stock with respect to
which Incentive Stock Options are exercisable for the first time by such
Grantee during any calendar year (under the Plan and any other employee stock
option plan of the Grantee's employer or any parent or Subsidiary
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thereof determined in accordance with the provisions of Section 422 of the
Code), which exceeds $100,000; and
(v) shall require the Grantee to notify the Company of any
disposition of any Stock issued pursuant to the exercise of the Incentive Stock
Option under the circumstances described in Section 421(b) of the Code (relating
to certain disqualifying dispositions), within 10 days of such disposition.
Subject to the foregoing, the Committee shall have full authority and
discretion in fixing the Option Price and the terms and conditions of the
option Awards and shall be fully protected in doing so.
(d) All options shall be granted on or before August 19, 2001.
(e) Options shall not be assignable or transferable other than by
will or the laws of descent and distribution and may be exercised during the
Grantee's lifetime only by the Grantee; provided, however, that the Grantee
may, to the extent provided in the Plan in any manner specified by the
Committee, designate in writing a beneficiary to exercise his/her option
after the Grantee's death.
(f) Subject to Section 4(b)(viii) and such terms and conditions as
the Committee may impose, each option shall be exercisable in one or more
installments. Each option shall be exercised by delivery to the Company of
written notice of intent to purchase a specific number of shares of Stock
subject to the option. The Option Price of any shares of Stock as to which
an option shall be exercised shall be paid in full at the time of the
exercise. Payment may, at the election of the Grantee, be made in any one or
any combination of the following:
(i) United States dollars in cash or by check;
(ii) Stock held by the Grantee for at least 6 months prior to
exercise of the option, valued at its Current Market Price on the date of
written notice of optionee's election to exercise the option; or
(iii) with the approval of the Committee, shares of
Retirement Stock held by the Grantee for at least 6 months prior to exercise of
the option, valued at the Current Market Price of a share of Stock on the date
of exercise.
(g) Except as expressly provided in this Plan or the Award
Agreement, no option may be exercised prior to twelve months from its Grant
Date. Subject to the right of cumulation provided in the next sentence of
this Section 6(g), each option shall be exercisable to the extent provided
for in the Award Agreement as determined by the Committee in its discretion.
To the extent not exercised, installments shall accumulate and be
exercisable, in whole or in part, in any subsequent period, prior to the
expiration of the term described in the Award Agreement, provided that no
option may be exercised more than ten years from its Grant Date.
Notwithstanding the preceding sentence, in the event that the optionee is a
10% Owner (determined on the Grant Date) of the Company, no option intended
to qualify as an Incentive Stock Option may be exercised more than five years
from the date it
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is granted. During the lifetime of the optionee, the option shall be
exercisable only by him and shall not be assignable or transferable by him
and no other person shall acquire any rights therein.
(h) In the event that an optionee shall cease to be employed by the
Company for any reason other than his death, Disability, or Retirement,
subject to the condition that no option shall be exercisable after the
expiration of ten years from its Grant Date (five years for an option which
is intended to qualify as an Incentive Stock Option that is granted to a 10%
Owner on the Grant Date), such optionee may, at the discretion of the
Committee, be granted the right to exercise the option at any time within
thirty (30) days after such termination of employment to the extent his right
to exercise such option had not expired pursuant to Section 6(g) of this
Plan, had vested and had not previously been exercised; provided, however,
that if the employment of the optionee is terminated by the Company or any of
its Subsidiaries for cause, fraud, breach of fiduciary duty, or other
dishonesty, the optionee's rights to exercise the option otherwise provided
herein shall expire on the last day of his employment. Whether authorized
leave of absence or absence for military or governmental service, or any
other reason, shall constitute termination of employment, for the purposes of
the Plan, shall be determined by the Committee, which determination shall be
final and conclusive.
(i) (i) In the event an optionee terminates his employment with
the Company or any Subsidiary because of a Disability, the Disabled optionee
or a lawfully appointed custodian thereof may exercise an option granted
pursuant to this Plan for a period of twelve months from the date of
termination of employment to the extent his right to exercise such option had
not expired pursuant to Section 6(g) of this Plan and had not previously been
exercised at the date of such termination.
(ii) If the employment of an optionee with the Company or any
Subsidiary is terminated by reason of the optionee's Retirement and the
optionee has been in the employ of either the Company or a Subsidiary
continuously from the date such option was granted until such Retirement
(except for leaves of absence approved in writing by the President of the
Company or the President of the Subsidiary for which the optionee works), the
entire unexercised portion of such option may be exercised by the optionee at
any time or times in whole or in part during the three-month period after
such retirement to the extent that such three-month period is included in the
remainder of such option's term.
(j) If the optionee shall die while in the employ of the Company or
any Subsidiary and shall not have fully exercised the option, the unexercised
portion of an option may be exercised at any time within one year after the
optionee's death by the executors or administrators of the optionee or by any
person or persons who shall have acquired the option directly from the
optionee by bequest or inheritance, subject to the condition that no option
shall be exercisable after the expiration of ten years from its Grant Date
(five years for an optionee under an Incentive Stock Option who is a 10%
Owner on the Grant Date).
No option shall be transferable by the optionee otherwise than by
will or the laws of descent and distribution.
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7. TERMS AND CONDITIONS OF RETIREMENT AWARDS
Grants of Stock and cash Awards intended to fund retirement benefits for
senior executives (the "Retirement Stock Awards" and "Retirement Cash Awards"
(each more fully described below), respectively, and collectively the
"Retirement Awards") pursuant to the Plan shall be authorized by the
Committee and shall be evidenced by agreements in such form as the Committee
shall from time to time approve (each a "Retirement Award Agreement"), which
agreements shall comply with and be subject to the following terms and
conditions:
(a) The Committee may grant Retirement Awards to any individual
eligible under Section 5 to receive such Retirement Awards.
(b) The Committee shall, in its discretion, determine the amount,
if any, that a Grantee shall pay for shares of Retirement Stock. Awards
shall be granted for no cash consideration or for such minimal cash
consideration as may be required by applicable law. If any such cash
consideration is required, payment shall be made in full by the Grantee
before the delivery of the shares and in any event no later than 10 days
after the Grant Date for such shares. In the discretion of the Committee and
to the extent permitted by law, payment may also be made in accordance with
Section 11.
(c) Each Retirement Award Agreement shall state the number of
shares of Stock and the amount of cash to which it pertains.
(d) The Retirement Award Agreement shall provide for an aggregate
Award of Retirement Stock which the Company will agree to issue and deliver
to the Grantee. Such Retirement Stock Award will be issued and delivered to
the Grantee in equal annual installments commencing with the Grant Date and
continuing over a period of years to be determined by the Committee and set
forth in the Retirement Award Agreement, subject to the requirement that the
Grantee be employed by the Company or any Subsidiary on the last day of the
fiscal year in which Retirement Stock is issued and delivered; provided
however, the Retirement Award Agreement may include a provision which excepts
from this requirement the Grantee's death, disability or other involuntary
termination of employment (excluding for cause) which occurs during the same
fiscal year. Unless otherwise provided in the Agreement, the Retirement Award
Agreement will have an initial term of five (5) years. In its discretion,
the Committee may provide that the term of a Retirement Award Agreement be
automatically extended for additional one-year periods until the Company
gives the Grantee notice of its intention not to extend the Agreement at the
end of its then-current term.
(e) The Grantee may not sell, transfer, pledge, hypothecate, or
otherwise transfer any shares of Retirement Stock he or she receives under
the Plan during any period in which he or she is employed by the Company or
any Subsidiary; provided, however, that following the earlier of (i)
termination of the employment of the Grantee with the Company or any
Subsidiary or (ii) the Grantee's attainment of normal retirement age (whether
or not Grantee actually retires), all such restrictions with respect to
Retirement Stock which has been issued and delivered to such Grantee prior to
such time shall terminate. Notwithstanding the above, no Grantee may sell,
transfer, pledge,
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hypothecate any shares of Retirement Stock he or she receives during the six
months immediately following the later of Grant Date or the date the Plan is
approved by the Company's stockholders unless the Grantee dies before the
expiration of the six month period. Each share of Retirement Stock subject
to such restrictions shall bear an appropriate legend specifying that such
share is non-transferable and subject to the restrictions set forth in the
Plan and the Retirement Award Agreement. When all applicable restrictions
have ended, the Company shall cause certificates for such shares to be issued
or reissued without such legend.
(f) In connection with any Retirement Stock Award, the Committee
may grant cash bonus awards ("Retirement Cash Awards") to Grantees solely in
order to, and in an amount it determines will, cover the federal and state
income tax liability, and any other tax liability, to the Grantee, created
by, or arising in connection with, the receipt of the Retirement Award by the
Grantee. The Retirement Award Agreement shall provide that Retirement Cash
Awards will be calculated annually at the time of the issuance of an annual
installment of Retirement Stock to which the Retirement Cash Award relates by
using the same maximum marginal federal and state income tax percentage which
was used in the prior year and the Current Market Price of the Retirement
Stock being issued in such year on the date of such issuance (unless the
Committee approves an adjustment to that formula).
(g) The Retirement Award shall be issued and delivered to the
Grantee in accordance with the terms set forth in the Retirement Award
Agreement; provided, however, that the Company shall have no obligation to
issue or deliver any Retirement Award under a Retirement Award Agreement to
any Grantee following (i) the termination of his employment with the Company
or its Subsidiaries or (ii) any breach of the Grantee's obligations under the
Retirement Award Agreement.
(h) Any other provision of the Plan or the Retirement Award
Agreement to the contrary notwithstanding, the Committee may at any time
remove or limit any restrictions, if it determines that conditions, including
but not limited to, changes in the economy, changes in competitive
conditions, changes in laws or government regulations, changes in generally
accepted accounting principles, changes in the Company's accounting policies,
acquisitions or dispositions, or the occurrence of other unusual, unforseen,
or extraordinary events, so warrant.
(i) Notwithstanding the fact that the Company delivers notice of
its intention not to extend the term of a Retirement Award Agreement at the
end of its then current term (if such Agreement provides for such a notice),
the Company shall remain obligated to issue and deliver all scheduled annual
Retirement Awards in accordance with the Retirement Award Agreement.
8. NOTIFICATION UNDER CODE SECTION 83(b)
The Committee may, on the Grant Date or any later date, prohibit a
Grantee from making the election described in this Section 8. If the
Committee has not prohibited such Grantee from making such election, and the
Grantee, in connection with the exercise of any option or the grant of
Retirement Stock, makes the election permitted under Section 83(b) of the
Code (i.e., an election to include in such Grantee's gross income in the year
of
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transfer the amounts specified in Section 83(b) of the Code), such Grantee
shall notify the Company of such election within 10 days of filing notice of
the election with the Internal Revenue Service, in addition to any filing and
notification required pursuant to regulations issued under the authority of
Section 83(b) of the Code.
9. MANDATORY WITHHOLDING OF TAXES
(a) Whenever under the Plan, cash or shares of Stock are to be
delivered upon exercise or payment of an Award or any other event occurs
which subjects the Grantee to income taxes with respect to rights and
benefits hereunder, the Company shall be entitled to require as a condition
of delivery of the Award (i) that the Grantee remit an amount sufficient to
satisfy all federal, state, and local withholding tax requirements related
thereto, (ii) the withholding of such sums from compensation otherwise due to
the Grantee or from any shares of Stock due to the Grantee under the Plan, or
(iii) any combination of the foregoing.
(b) If any disqualifying disposition described in Section 6(c)(v)
is made with respect to shares of Stock acquired by exercising an Incentive
Stock Option granted pursuant to the Plan or any election described in
Section 8 is made, then the person making such disqualifying disposition or
election shall remit to the Company an amount sufficient to satisfy all
federal, state, and local withholding taxes thereby incurred; provided that,
in lieu of or in addition to the foregoing, the Company shall have the right
to withhold such sums from compensation otherwise due to the Grantee or from
any shares of Stock due to the Grantee under the Plan.
10. LOANS
With the approval of the Committee, the Grantee may borrow from the
Company all or any portion of the funds needed to pay the Option Price or to
pay for Retirement Stock on such terms and conditions as the Committee deems
appropriate, provided that (i) the interest rate for any such loan by the
Company shall not be less than the "applicable federal rate" (as defined by
Code Section 1274(d)(1)(A)) in effect on the date of such loan or any other
rate as necessary to avoid the imputation of interest under the Code or other
applicable law, (ii) proceeds of the loan are used solely to pay either the
exercise price of an option or to pay for Retirement Stock granted pursuant
to this Plan, and (iii) the Grantee executes a promissory note and such other
documents as the Committee deems appropriate to evidence the Grantee's
indebtedness to the Company, and pledges the Stock received in exchange for
such borrowed funds as Collateral for such loan.
11. SECURITIES LAW MATTERS
(a) If the Committee deems it necessary to comply with the
Securities Act of 1933, Committee may require a written investment intent
representation by the Grantee and may require that a restrictive legend be
affixed to certificates for shares of Stock.
(b) If, based upon the opinion of counsel for the Company, the
Committee determines that the exercise or non-forfeitability of, or delivery
of benefits pursuant to, any Award would violate any applicable provision of
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(i) federal or state securities laws or (ii) the listing requirements of any
national securities exchange on which are listed any of the Company's equity
securities, then the Committee may postpone any such exercise,
non-forfeitability or delivery, as the case may be, but the Company shall use
its best efforts to cause such exercise, non-forfeitability or delivery to
comply with all such provisions at the earliest practicable date.
(c) With respect to Section 16 Grantees, transactions under this
Plan are intended to comply with all applicable conditions of Rule 16b-3 or
its successors under the 1934 Act. To the extent that any provision of the
Plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the
Committee.
12. FUNDING; RESERVES
Cash benefits payable under the Plan to any person shall be paid directly
by the Company. The Company shall not be required to fund, or otherwise
segregate assets to be used for payment of, cash benefits under the Plan.
Neither the Plan nor any Award shall create or be construed to create a trust
or separate fund of any kind or a fiduciary relationship between the Company
or any Subsidiary and a Grantee or any other person. To the extent that any
person acquires a right to receive payments from the Company or any
Subsidiary pursuant to an Award, such right shall be no greater than the
right of an unsecured general creditor of the Company or any Subsidiary. The
Board shall cause the Company to reserve shares of Stock from its authorized
but unissued shares for the purpose of making available shares of Stock to
fund the Awards.
13. NO EMPLOYMENT RIGHTS
Neither the establishment of the Plan, nor the granting of any Award nor
the execution of an Award Agreement shall be construed to (a) give any
Grantee the right to remain employed by the Company or any of its
Subsidiaries or to any benefits not specifically provided by the Plan or an
Award Agreement, or (b) in any manner modify the right of the Company or any
of its Subsidiaries to modify, amend, or terminate any of its employee
benefit plans. Further, the Company or Subsidiary may at any time dismiss a
Grantee from employment, free from any liability, or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement.
14. RIGHTS AS A STOCKHOLDER
A Grantee shall not, by reason of any Award have any right as a
stockholder of the Company with respect to the shares of Stock which may be
deliverable in the future upon exercise of such Award, or otherwise as
provided in an Award Agreement, until Stock has been actually issued and
delivered to the Grantee. Shares of Retirement Stock issued and delivered to
a Grantee in accordance with the Retirement Award Agreement shall confer on
the Grantee all rights of a stockholder of the Company, except as otherwise
provided in the Plan or the specific Retirement Award Agreement.
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15. NATURE OF PAYMENTS
Any and all grants, payments of cash, or deliveries of shares of Stock
hereunder shall constitute special incentive payments to the Grantee and
shall not be taken into account in computing the amount of salary or
compensation of the Grantee for the purposes of determining any pension,
retirement, death or other benefits under (a) any pension, retirement,
profit-sharing, bonus, life insurance or other employee benefit plan of the
Company or any of its Subsidiaries or (b) any agreement between the Company
or any Subsidiary, on the one hand, and the Grantee, on the other hand,
except as such plan or agreement shall otherwise expressly provide.
16. NON-UNIFORM DETERMINATIONS
Determinations made by the Committee or the Board under the Plan do not
need to be uniform and may be made by the Committee or the Board selectively
among persons who receive, or are eligible to receive, Awards (whether or not
such persons are similarly situated). Without limiting the generality of the
foregoing, the Committee shall be entitled, among other things, to make
non-uniform and selective determinations and to enter into non-uniform and
selective Award Agreements, as to (a) the identity of the Grantees, (b) the
terms and provisions of Awards, and (c) the treatment under Section 13 of
terminations of employment. Notwithstanding the foregoing, the Committee's
interpretation of Plan provisions shall be uniform as to similarly situated
Grantees.
17. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION
(a) Subject to any required action by the Stockholders, the
Committee shall make such adjustment, as it shall deem equitable, to any or
all of:
(i) the aggregate numbers of shares of Stock available under
Sections 3(a) and 3(b);
(ii) the number of shares of Stock subject to an option or
shares of Retirement Stock covered by an Award;
(iii) the Option Price;
(iv) the Retirement Cash Award;
(v) any other terms or provisions of any outstanding grants of
options or Retirement Awards:
to reflect a stock dividend, stock split, reverse stock split, share
combination, recapitalization, merger, consolidation, acquisition of property
or shares, separation, asset spin-off, reorganization, stock rights offering,
liquidation or similar event, of or by the Company, or, if deemed
appropriate, the Committee may make provisions for a cash payment to the
holder of an outstanding Award; provided, however, if the Company shall be
the surviving corporation in any merger or consolidation, each outstanding
option or Award Agreement shall pertain to and apply to the securities to
which a holder of the number of shares of Stock subject to the option or
Award Agreement would have been entitled; and provided further, upon a
dissolution or liquidation of the Company, or a merger or consolidation in
which the Company is not the
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surviving corporation, or a change in control of the Company, as defined in
subsection (b) below, each optionee shall have the right to exercise his
option in whole or in part notwithstanding the provisions of Section 6(g)
above: (i) immediately prior to such dissolution or liquidation or merger or
consolidation in which the Company is not the surviving corporation, and
thereafter; or (ii) after such change of control. However, with respect to
Awards of Incentive Stock Options no such adjustment shall be authorized to
the extent that the authority to make such adjustments would cause the Plan
to violate Section 422(b)(1) of the Code or any successor provision thereto
and the number of shares subject to any Award denominated in shares of Stock
shall always be a whole number.
(b) "Change of control" of the Company shall mean a change in
control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934 ("Exchange Act"); provided that, without limitation,
such a change in control shall be deemed to have occurred if: (i) any person
(as that term is defined in Section 13(d) and Section 14(d) of the Exchange
Act) is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 20 percent, or more of the combined
voting power of the Company's then outstanding securities; or (ii) during any
period of two consecutive years, individuals who at the beginning of such
period constitute all members of the Board who are not employed by the
Company (the "Outside Directors") shall cease for any reason to constitute at
least a majority of the Outside Directors, unless the election of each
Outside Director, who was not an Outside Director at the beginning of such
period, was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of such period; or, (iii)
there shall be consummated (A) any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant
to which shares of the Company's Common Stock would be converted into cash,
securities or other property, other than a merger of the Company in which the
holders of the Company's Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (B) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company, or, (iv) the stockholders
of the Company approve a plan or proposal for the liquidation or dissolution
of the Company.
(c) In the event of a change in the Stock of the Company as
presently constituted, which is limited to a change of all of its authorized
shares with par value into the same number of shares with a different par
value or without par value, the shares resulting from any such change shall
be deemed to be the Stock within the meaning of the Plan.
(d) Except as hereinbefore expressly provided in this Section 18,
the Grantee shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class or the payment of any stock
dividend or any other increase or decrease in the number of shares of stock
of any class or by reason of any change of control, dissolution, liquidation,
merger, or consolidation or spin-off of assets or stock of another
corporation, and any issue of the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall not affect,
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and no adjustment by reason thereof shall be made with respect to, the number
or price of shares of Stock subject to Awards.
The grant of an Award pursuant to the Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge,
consolidate, dissolve, liquidate, sell, or transfer all or any part of its
business or assets.
18. AMENDMENT OF THE PLAN
Upon recommendation of the Committee, the Board of Directors of the
Company may insofar as permitted by law, from time to time, with respect to
any shares at the time not subject to options or Award Agreements, suspend or
discontinue the Plan or revise or amend it in any respect whatsoever except
that, without approval of the stockholders, no such revision or amendment
shall: change the number of shares subject to the Plan; change the
designation of the class of employees eligible to receive Awards; decrease
the price at which Options may be granted; remove the administration of the
Plan from the Committee other than as expressly provided by the Plan; extend
the period during which Awards may be granted; or render any member of the
Committee eligible to receive an Awards under the Plan while serving thereon.
Furthermore, the Plan may not without the approval of the stockholders be
amended in any manner that will cause Options issued under it to fail to
qualify as Incentive Stock Options.
Except as provided in this Section 19, the Board shall, from time to
time, revise, modify, or amend the Plan, in part or in total, without
approval of the stockholders, as may be necessary to satisfy the requirements
of the Code and any amendments or revisions thereof, such that certain stock
options which are granted under the Plan may qualify as Incentive Stock
Options, and to satisfy all other applicable laws and regulations.
19. TERMINATION OF THE PLAN
The Plan shall terminate on the tenth (10th) anniversary of the Effective
Date or at such earlier time as the Board may determine. Any termination,
whether in whole or in part, shall not affect any Award then outstanding
under the Plan.
20. OTHER COMPENSATION PLANS
Nothing contained in the Plan shall prevent the Company or any Affiliate
from adopting or continuing in effect other or additional compensation
arrangements, and such arrangements may be either generally applicable or
applicable only in specific cases.
21. NO ILLEGAL TRANSACTIONS
The Plan and all Awards granted pursuant to it are subject to all laws
and regulations of any governmental authority which may be applicable
thereto; and notwithstanding any provision of the Plan or any Award, Grantees
shall not be entitled to exercise Awards or receive the benefits thereof and
the Company shall not be obligated to deliver any Stock or pay any benefits
to a
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Grantee if such exercise, delivery, receipt or payment of benefits would
constitute a violation by the Grantee or the Company of any provision of any
such law or regulation.
22. CONTROLLING LAW
The law of the State of Illinois, except its law with respect to choice
of law and except as to matters relating to corporate law (in which case the
corporate law of the State of Delaware shall control), shall be controlling
in all matters relating to the Plan.
23. TAX LITIGATION
The Company shall have the right, but not the obligation, to contest, at
its expense, any tax ruling or decision, administrative or judicial, on any
issue that is related to the Plan and that the Company believes to be
important to Grantees and to conduct any such contest or any litigation
arising therefrom to a final decision.
24. SEVERABILITY
If all or any part of the Plan is declared by any court or governmental
authority to be unlawful or invalid, such unlawfulness or invalidity shall
not serve to invalidate any portion of the Plan not declared to be unlawful
or invalid. Any Section or part of a Section so declared to be unlawful or
invalid shall, if possible, be construed in a manner in which will give
effect to the terms of such Section or part of a Section to the fullest
extent possible while remaining lawful and valid.
25. INDEMNIFICATION
Each person who is or at any time serves as a member of the Board or the
Committee shall be indemnified and held harmless by the Company against and
from: (i) any loss, cost, liability or expense, including attorneys' fees
actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, that
may be imposed upon or reasonably incurred by such person in connection with
or resulting from any claim, action, suit, or proceeding to which such person
may be a party or in which such person may be involved by reason of any
action or failure to act under the Plan; and (ii) any and all amounts paid by
such person in satisfaction of judgment in any such action, suit or
proceeding relating to the Plan. Each person covered by this indemnification
provision shall give the Company an opportunity, at its own expense, to
handle and defend the same before such person undertakes to handle and defend
it on such person's own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the By-Laws of the Company, as a matter of law, or
otherwise, or any power that the Company may have to indemnify such person or
hold such person harmless.
26. RELIANCE ON REPORTS
Each member of the Board and the Committee shall be fully justified in
relying or acting in good faith upon any report made by the independent
public
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accountants of, or counsel for, the Company and upon any other information
furnished in connection with the Plan. In no event shall any person who is
or shall have been a member of the Board or the Committee be liable for any
determination made or other action taken or any failure to act in reliance
upon any such report or information or for any action taken, including the
furnishing of information, or failure to act, if done in good faith.
27. EXPENSES
The Company shall bear all expenses of administering the Plan.
28. TITLES AND HEADINGS
The titles and headings of the sections in the Plan are for convenience of
reference only, and in the event of any conflict, the text of the Plan, rather
than such titles or headings, shall control.
29. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Stock pursuant to any
Awards will be used for general corporate purposes.
Date Plan was adopted by Board of Directors: June 30, 1993
Date Plan was approved by Stockholders: November 16, 1993
Date Plan was amended by Board of Directors: June 25, 1997
Date Plan was amended by Board of Directors: August 28, 1997
Date amended Plan was approved by Stockholders: 1997
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