<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:
/X/ Preliminary proxy statement
/ / 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,
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
1
<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, 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 $3,623 in matching
contributions by the Company under the Company's 401(k) Plan.
STOCK OPTION GRANTS IN FISCAL YEAR 1997
The following table shows the options granted to the named Executive
Officers during fiscal 1997 and the potential realizable value of those grants
(on a pre-tax basis) determined in accordance with SEC rules. The information in
this table shows how much the named Executive Officers may eventually realize in
future dollars under three hypothetical situations: if the price of the
Company's Common Stock does not increase, and if the stock gains 5% or 10% in
value per year, compounded over the life of the options. These amounts represent
assumed rates of appreciation, and are not intended to forecast future
appreciation of the Company's Common Stock.
The options described in this table have exercise prices equal to the fair
market value of a share of Common Stock on the date they were granted. Unless
the Company's stock price appreciates and the recipient continues to be employed
until the options vest, the options will have no value.
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------- POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK
% OF TOTAL PRICE APPRECIATION FOR OPTION TERM(2)
OPTIONS -----------------------------------------------------------
GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE
GRANTED IN FISCAL PRICE EXPIRATION 0%
NAME (#) (1) YEAR ($/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
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<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
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.
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<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 1,025,000
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.
Subject to certain limitations in place to comply with certain federal
securities laws, options may be granted to any employee (including officers) of
the Company or of any of its Subsidiaries; provided, however, that ISOs (as
defined below) may not be granted to any person who is not an employee of the
Company or a Subsidiary on the date of the grant; and provided further, that
Retirement Awards (as defined below) may be granted only to key executives who
have
14
<PAGE>
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 that requirement.
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.
15
<PAGE>
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 the aggregate, $100,000. Such fair market
value shall be determined as of the date on which the ISOs are granted.
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
16
<PAGE>
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 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
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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 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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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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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 detail 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
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<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 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
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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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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 reduced coverages of such policies 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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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 6.1%
Leslie J. Jezuit................................................... 104,000 1.3%
James H. DeVries(7)................................................ 223,556 2.7%
Myron R. Shain..................................................... 65,030 *
George D. Ebersole................................................. 97,757 1.2%
William G. Fowler(8)............................................... 159,034 1.9%
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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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
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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.
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.
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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:________
