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FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
For the fiscal year ended June 30, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period to
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Commission file number 0-7903
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Quixote Corporation
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(Exact name of registrant as specified in its charter)
DELAWARE 36-2675371
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE EAST WACKER DRIVE, CHICAGO, ILLINOIS 60601
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (312) 467-6755
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Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock ($.01-2/3 Par Value)
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K (X).
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference
to the price at which the stock was sold, or the average bid and asked prices
of such stock, as of a specified date within 60 days prior to the date of
filing.
$56,808,818 as of August 31, 1996
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Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
As of August 31, 1996 there were 7,961,680 shares of common stock outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
The definitive proxy statement relating to the Registrant's Annual Meeting of
Stockholders, to be held November 14, 1996, is incorporated by reference in
Part III to the extent described therein.
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TABLE OF CONTENTS
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PART I PAGE
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Item 1. Business................................................... 4-10
Item 2. Properties................................................. 11
Item 3. Legal Proceedings.......................................... 12-16
Item 4. Submission of Matters to a Vote of Security Holders........ 16
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters...................................... 17
Item 6. Selected Financial Data.................................... 18
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 18-21
Item 8. Financial Statements and Supplementary Data................ 21-36
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure...................... 36
PART III
Item 10. Directors and Executive Officers of the Registrant......... 37
Item 11. Executive Compensation..................................... 37
Item 12. Security Ownership of Certain Beneficial Owners
and Management........................................... 38
Item 13. Certain Relationships and Related Transactions............. 38
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports
on Form 8-K.............................................. 39-42
SIGNATURES............................................................. 43
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PART I
THE COMPANY
Quixote Corporation was originally incorporated under the laws of the State
of Delaware in 1969 as Energy Absorption Systems, Inc. In June, 1980, Energy
Absorption Systems, Inc. changed its name to Quixote Corporation. Unless
otherwise indicated herein, the terms "Quixote" and the "Company" refer to
Quixote Corporation and its subsidiaries.
Item 1. Business
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Quixote Corporation and its subsidiaries operate as a diversified technology
company which develops, manufactures and markets specialized products through
two industry segments. One segment is involved in the development,
manufacturing and marketing of energy-absorbing highway crash cushions and
related highway safety products for the protection of motorists and highway
workers in markets which include both domestic and international governmental
units. The Company's other segment manufactures music compact discs and
CD-ROM discs for the domestic entertainment, data storage, multimedia and
education markets.
As of June 30, 1996, Quixote Corporation and its subsidiaries employed 978
people.
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HIGHWAY SAFETY DEVICES
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Description of Business
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The patented highway crash cushions manufactured by Energy Absorption
Systems, Inc. (Energy) were first conceived and developed in 1969 in response
to the high number of fatalities and serious injuries suffered by occupants
of errant vehicles in collisions with roadside hazards, such as bridge
abutments, overpass piers, overhead sign supports, lane dividers, traffic
islands and toll booths. Since that time, various types of Energy's highway
crash cushions have been installed in front of thousands of life-threatening
roadside hazards. The Federal Highway Administration (FHWA) endorses the
installation of highway crash cushions as an effective safety program. Crash
cushions have saved over 21,000 lives since 1969.
Energy develops, manufactures and markets a line of patented highway crash
cushion systems and other barriers which absorb and dissipate the force of
impact in collisions between vehicles and fixed roadside objects. The
product lines utilize the principles of momentum transfer and kinetic energy
to safely decelerate errant vehicles. Energy absorption or energy
dissipation is accomplished by using different combinations of water,
aluminum and steel shapes, urethane foam systems, cardboard, plastic
structures, elastometric cylinders and sand.
The product lines can be generally divided into systems for construction
zones and permanent mounts. Product lines used primarily in construction and
work zones are: the truck mounted attenuator (TMA), the G-R-E-A-T (R) CZ
system and the Triton Barrier (R). Product lines used for permanent
applications are: the G-R-E-A-T (R) system, the Sandwich systems, the Low
Maintenance Attenuator (LMA), the BrakeMaster (R) system, the TREND (R)
system, the Sentre (R) system, the CushionWall (TM), the NEAT (TM) system and
the BarrierGate (R). The Energite (R) crash cushion system has been used in
both construction zone and permanent applications.
The performance characteristics of the product lines are formally submitted
to the US Federal Highway Administration to be approved as being eligible for
federal aid highway projects. All systems are approved as acceptable highway
hardware according to procedures in the National Cooperative Highway Research
Project number 230 or 350.
Energy does provide product education, selection and application assistance.
Energy generally does not perform site preparation or installation for any of
its products. Installation services must be obtained from others.
Spin-Cast Plastics, Inc., a wholly-owned subsidiary of Energy Absorption,
manufactures rotational molded plastic products including the Energite (R)
system, plastic components used in Energy's other product lines, as well as
custom designed plastic components for industrial products.
Safe-Hit Corporation, another wholly-owned subsidiary of Energy Absorption,
manufactures and markets a line of flexible sign and guide post systems and a
glare screen system. The guide posts are extruded from polypropylene, are
used to delineate a travel way, channelize vehicles or mark the location of
an object. The post features an in-ground anchor system that permits
inexpensive repair and replacement techniques. The glare screen system, also
made from polypropylene, is installed on top of median barriers to eliminate
the distraction of lights from an oncoming vehicle on roads where the inside
lanes are adjacent to the median barrier. Both products are covered by
patents.
In 1989, Energy acquired the world-wide patents and licensing agreements
covering the movable traffic barrier system of Quick-Steel Engineering PTY.
Ltd. of Botany, Australia. Energy received an 8% royalty on the sales of
such products by its licensees. Energy sold the patents and licenses to the
US licensee in March 1996.
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In July 1992, Energy purchased the stock of Composite Components, Inc. CCI
was a development-stage company organized to develop an Electro-Cured (TM)
system for the repair and rehabilitation of underground sewer pipes. CCI
perfected the process and made several successful installations, but elected
not to commercialize the process and ceased operations in 1996.
Competition and Marketing
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Energy's products are sold in all 50 U.S. states. Six regional managers
supervise Energy's 24 domestic distributors and make direct sales in areas
not covered by distributors. Although the Federal government provides
matching funds for the purchase of highway safety products made by state and
local governmental agencies, it is not a direct purchaser of Energy's
products. Energy sells its products principally to either distributors or to
contractors (on behalf of state and local governments) with less than 5% sold
directly to state and local government agencies. Safe-Hit's products are
sold by their own regional managers who supervise a large number of
distributors and make sales calls on certain state departments of
transportation and contracting firms. A number of other companies
manufacture flexible guide posts.
Many international governments are now beginning to recognize the need for
crash cushions as a method of reducing traffic fatalities. Energy's products
have been sold in 36 foreign countries. Energy's two international
consultants and 38 foreign agents make sales to municipal and national
governments and contractors who are responding to bids from the respective
governments.
Although Energy does experience competition in specific product lines,
particularly in the Energite, G-R-E-A-T and TMA lines, no other company
presently markets as broad a line of highway crash cushion systems designed
to shield as large a variety of fixed roadside hazards.
Government Policies
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The market for crash cushions is directly affected by federal, state and
local governmental policies. A substantial portion of Energy's sales is
ultimately financed by funds provided to the states by the federal
government. Historically, these funds have covered 75% to 90% of the cost of
highway safety projects on roads constructed or maintained with federal
assistance. Energy's sales could be adversely affected by a reduction in
federal assistance for highway safety projects. The Intermodal Surface
Transportation Efficiency Act of 1991, signed into law on December 18, 1991,
provides authorization for highways and highway safety. Total funding of
approximately $150 billion could be available over a six year period, but
there is no assurance that the total $150 billion will be available or will
be expended during the six year time period. The funds are distributed to
the states each year. The states must set aside 10 percent for safety
construction activities such as hazard elimination. In order for highway
devices to be eligible for federal funding, such devices must be approved by
the Federal Highway Administration. Energy is obligated to seek such
approval for improvements or upgrades to such devices and for any new devices.
Energy develops new products by working with federal and state highway
officials to determine highway traffic safety needs, and then designs
products to satisfy those needs. Energy is also active in promoting
cooperation among state highway agencies, contractors and engineers to
encourage comprehensive repair and maintenance of roadside crash attenuating
systems. In addition to developing new products within the impact technology
area, Energy is seeking to develop or to acquire new products which can be
sold through its existing distribution networks to its existing customers.
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Backlog
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As of June 30, 1996, 1995 and 1994, Energy had a backlog of unfilled orders
for highway safety devices of $8,591,000, $10,200,000 and $8,057,000,
respectively. The Company can usually fill an order within 6 to 8 weeks of
receipt.
Research and Development; Patents
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Energy conducts its own research, development and testing of new products
before introducing them to the marketplace. The expenditures for research
and development activities were $1,536,000, $1,545,000 and $1,972,000 in the
years 1996, 1995 and 1994, respectively.
Energy owns a number of U.S. and foreign patents covering its major highway
safety products. It actively seeks patent and trademark protection for new
developments.
Raw Materials
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The principal raw materials used in the production of highway safety devices
are plastic and plastic resins, steel, aluminum and wood components. These
raw materials are purchased from various suppliers and have been readily
available throughout the last year. Energy believes that adequate supplies
of these materials will continue to be available.
Major Customers
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No single customer represents a significant portion of Energy's highway
safety business.
Other
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In April 1995 Energy acquired a 40% interest in Quantic Industries, Inc. for
$6,700,000. Quantic is a manufacturer of electronic and pyrotechnic devices
for the aerospace and defense industries and has also developed a low-cost
proprietary initiator for automobile airbag systems. Energy sold its 40%
interest in May 1996 for $8,050,000.
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COMPACT DISC MANUFACTURING
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Description of Business
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In 1975, the Company established a venture in Anaheim, California to conduct
research on optical disc technology. In 1983, the venture, which was named
LaserVideo, Inc., was one of the first to manufacture an audio CD in the
United States. LaserVideo opened its second, significantly larger, CD
manufacturing facility in Huntsville, Alabama in 1986. In December, 1987
Quixote sold LaserVideo to LaserVideo Acquisition Corporation (LVAC), a
wholly owned subsidiary of Disctronics Australia Limited for $55,500,000,
consisting of $29,000,000 in cash and $26,500,000 in a note. As a result of
LVAC's failure to pay the note when due and after various legal actions and
agreements between the parties, LaserVideo was reacquired on May 1, 1990 and
renamed Disc Manufacturing, Inc. (DMI). The Company is involved in
litigation related to this reacquisition of DMI which is discussed in Item 3
Legal Proceedings in this Form 10-K.
DMI's principal activity is the manufacturing of optical discs. The optical
disc is a medium for storing audio, video, text or graphics information and
includes compact music discs (CD-Audio) and CD-ROM, as well as other types of
optical discs. DMI converts information, generally either music or data,
supplied by its customers, to optical disc format and then manufactures these
optical discs for its customers. In most cases, DMI will also package these
discs such that they would be ready for retail distribution. The advantage
of optical discs is that they provide superior sound quality to that of
competing audio media and can store vast amounts of information. One CD-ROM
can contain up to 650 megabytes of data, or the equivalent of 250,000 pages
of text.
During 1994, DMI began a three year expansion plan that increased its annual
capacity to approximately 200 million discs. In August 1994, DMI acquired a
218,000 square foot building in Anaheim, California to replace its smaller
existing facility located nearby. The total cost of the expansion including
the purchase of the new Anaheim building and equipment for both facilities
was approximately $50 million. During May 1995, DMI began producing CD's at
the new Anaheim facility.
Approximately 56% of DMI's revenues during 1996 were from the manufacturing
of CD-ROM's, 35% of revenues from CD manufacturing and the remainder from
services such as special mastering and other contract research and
development type activities.
DMI is one of the ten largest compact disc manufacturers in the United
States. DMI's plant in Huntsville, Alabama has a current annualized capacity
of approximately 150 million discs.
DMI's Anaheim facility has an annual production capacity of 50 million discs.
While the plant continues to produce CD's to meet west coast-based CD-ROM and
music companies' requirements, the facility also is used for contract
research and development of non-audio optical storage products.
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Competition and Marketing
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CD-Audio
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Six large multi-national music companies, known as the "majors", have
historically accounted for nearly 80 percent of the industry's U.S. music
sales. Each of these companies is vertically integrated to varying degrees.
The majors are as follows:
*WEA (Warner Elektra Atlantic, part of Time Warner);
*Sony Music (previously CBS Records);
*MCA (a subsidiary of Seagrams);
*Capitol/EMI (a subsidiary of Thorn/EMI of the United Kingdom);
*PolyGram (partially owned by NV Philips of Holland) and
*BMG/RCA (part of the Bertelsmann Group of West Germany).
Each of the majors has manufacturing facilities to produce discs for their
own needs, and in some cases, actively market for outside disc business as
well. Some of the majors use outside sources, as a complement to their own
facilities, to manufacture their music. While the majors account for about
80 percent of the U.S. music market, the remainder of the market is comprised
of a large group of small independent record companies. These independents
typically do not have their own manufacturing facilities. DMI markets CD's
through a direct sales force to the majors and to independent record labels.
Presently there are more than sixty CD manufacturers in the United States.
The Company believes DMI is one of the ten largest manufacturers and one of
the five largest independent manufacturers in the United States. Although
production capacity exceeds the anticipated calendar year 1996 shipments of
CD's, this excess capacity is utilized to meet the seasonal demands and short
turnaround times in the CD industry. DMI competes for CD business on price
and service. As CD capacities have increased, selling prices for CD's have
declined. This has adversely affected profit margins at DMI. The Company
expects selling prices to continue to decline within the foreseeable future.
CD-ROM
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The market for CD-ROM's is much more widely dispersed than music CD's and
includes publishers, consumer and commercial software distributors and other
companies that need a cost effective way to disseminate large amounts of data
with easy search and retrieval capabilities. There are more than 60
manufacturers of CD-ROM's in the United States. These manufacturers include
many of those that make music CD's and in addition include companies that
manufacture CD-ROM's exclusively. DMI sells CD-ROM's through a direct sales
force and value-added resellers. DMI competes on the basis of quality, price
and customer service. Selling prices are declining due to competitive
pressures. The Company expects a continued decline in selling prices which
will adversely affect profit margins at DMI.
Backlog
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As of June 30, 1996, 1995 and 1994 DMI had a backlog of unfilled orders
totaling $2,220,000, $3,552,000 and $2,033,000, respectively. Typically,
music and CD-ROM companies demand manufacturing turnaround times (the time
from which a sales order is received until that order is shipped) of ten days
or less. Because of this, DMI believes the size of the backlog is not an
effective indicator of its operating status.
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RESEARCH AND DEVELOPMENT; PATENTS
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DMI is actively involved in developing mastering equipment and replication
processes for the new Digital Versatile Disc (DVD) format. This two-sided,
dual layer product may ultimately hold up to 17 gigabytes of information. It
is expected to be particularly well suited for carrying movies or current
multi-disc CD-ROM applications. The industry launch of this product is
anticipated in the spring of 1997.
DMI has entered into licensing arrangements with certain companies holding
patents with respect to optical disc technology. These arrangements require
DMI to pay royalties on each disc produced. Other companies have sued DMI
for infringement related to their patents on optical disc technology. This
litigation is discussed more fully in Item 3 Legal Proceedings in this Form
10-K.
RAW MATERIALS
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The principal raw materials in the manufacturing of compact discs are
polycarbonate, aluminum, UV curable protective coating and ink. All items
are available from multiple sources and competitively priced. DMI believes
that adequate supplies of all materials will continue to be available in the
long term.
MAJOR CUSTOMERS
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DMI has manufactured CD's for all six of the major U.S. music companies. BMG
Music, which includes the RCA label, has historically been the largest single
customer of DMI, and accounts for 8%, 18% and 21% of Quixote Corporation's
annual consolidated revenue during the years ended June 30, 1996, 1995 and
1994, respectively. No other customer accounts for 10% or more of total
Company revenues.
During 1996, DMI lost BMG Music as its major customer. In September 1996, a
new agreement was reached with BMG Music for an unspecified volume which the
Company believes will be less than historical levels.
LEGAL TECHNOLOGIES
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During 1996, the Company discontinued the operations of its legal
technologies businesses, which had been involved in the development,
manufacture and sale of products and systems for the legal community. Under
multiple arrangements the Company sold certain assets of this segment for an
aggregate sales price of $5,981,000 and the assumption of certain
liabilities. Assets and liabilities retained by the Company at June 30, 1996
include accounts receivable, accounts payable, certain repetitive stress
injury litigation and liabilities under certain lease obligations.
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Item 2. PROPERTIES
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OWNED OR
LOCATION AVAILABLE SPACE PURPOSE LEASED
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One East Wacker Drive 19,000 sq. ft. Executive Offices Leased
Chicago, Illinois
250 Bamberg Drive 160,000 sq. ft. Manufacture of highway Owned
Pell City, Alabama safety devices
3617 Cincinnati Avenue 22,000 sq. ft. Warehouse and research Owned
Rocklin, California and development facility
for highway safety
devices
3300 N. Kenmore Street 81,000 sq. ft. Sale and manufacture of Owned
South Bend, Indiana highway safety devices
739 College Drive 28,000 sq. ft. Storage facility for Owned
South Bend, Indiana highway safety devices
1930 West Winton Avenue 20,000 sq. ft. Manufacture of highway Leased
Hayward, California safety devices
4905 Moores Mill Road 332,000 sq. ft. Manufacture of compact Owned
Huntsville, Alabama discs and CD-ROM's
3400 E. LaPalma Avenue 218,000 sq. ft. Manufacture of compact Owned
Anaheim, California discs and CD-ROM's
1409 Foulk Road 3,000 sq. ft. Sale of CD-ROM's Leased
Wilmington, Delaware
1025 North Brand Boulevard 1,500 sq. ft. Sale of Compact Discs Leased
Glendale, California
441 Lexington Avenue 1,000 sq. ft. Sale of compact discs Leased
New York, New York
1120 Cosby Way 31,000 sq. ft. Vacant - to be sold Owned
Anaheim, California
200 Corporate Pointe 19,800 sq. ft. Vacant - to be sublet Leased
Culver City, California
111 Bagby Street 8,100 sq. ft. Vacant - to be sublet Leased
Houston, Texas
225 West Washington 5,300 sq. ft. Sublet Leased
Chicago, Illinois
3000 Executive Parkway 5,000 sq. ft. Sublet Leased
San Ramon, California
431 Lakeview Court 4,300 sq. ft. Vacant - to be sublet Leased
Mt. Prospect, IL
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Note: Present facilities are believed to be adequate to support the Company's
current and anticipated requirements.
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Item 3. LEGAL PROCEEDINGS
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A. DMI - REACQUISITION RELATED LITIGATION. On January 17, 1989, in a case
entitled QUIXOTE CORPORATION v. LASERVIDEO ACQUISITION CORPORATION a/k/a LV
ACQUISITION CORP., DISCTRONICS AUSTRALIA LIMITED, AND QUATRO LIMITED, No.
89 CH 370, the Company filed suit in the Circuit Court of Cook County,
Illinois, County Department, Chancery Division after LaserVideo Acquisition
Corp. ("LVAC") defaulted on a $26.5 million note guaranteed by Quatro
Limited ("Quatro") and Disctronics Australia Limited. The note was part of
the payment due to Quixote in connection with the sale of its former
LaserVideo, Inc. (now known as "Disc Manufacturing, Inc." or "DMI")
subsidiary to the "Disctronics Group" (including Disctronics Limited,
Disctronics Australia Limited, Quatro, LVAC, and their affiliates).
On March 7, 1989, the Court entered a judgment in favor of the Company
against LVAC, Disctronics and Quatro in the amount of $26,500,000,
following the failure by the Disctronics Group to pay the amount due under
a February 3, 1989 agreed settlement order. The judgment additionally
entitled the Company to post-judgment interest of 10.5% per annum
compounded quarterly until the judgment was satisfied.
On March 17, 1989, the parties entered into an agreement pursuant to which,
among other things, the parties entered into agreed orders staying the
proceedings in the Illinois litigation and in a companion case filed in the
Court of Chancery of the State of Delaware, New Castle County, on March 8,
1989 and entitled Civil Action No. 10668, QUIXOTE CORPORATION v. LASERVIDEO
ACQUISITION CORPORATION, DISCTRONICS MANUFACTURING, INC., DISCTRONICS
LIMITED, DISCTRONICS AUSTRALIA LIMITED AND QUATRO LIMITED.
The Cook County and Delaware lawsuits were finally settled in December,
1989, when the parties entered into a comprehensive Work-Out Agreement
pursuant to which Quixote became a DMI shareholder. On April 30, 1990,
through the mechanisms established in the Work-Out Agreement, and as a
result of the failure of the Disctronics Group to exercise an option to
purchase Quixote's rights under the Work-Out Agreement, Quixote again
became the sole shareholder of DMI.
Since then, the following lawsuits have been filed and remain pending.
1. DISC MANUFACTURING, INC. ET AL. v. MASSEY ET AL., CV-90-H-01029-NE
(U.S. District Court for the Northern District of Alabama). On May 21,
1990, Quixote and DMI filed this lawsuit against Disctronics Limited,
Disctronics (US) Inc., Disctronics, Inc., Moray Investments Limited
("Moray"), Memory-Tech, Inc. ("Memory-Tech") and individuals Peter Massey,
Kevin Donovan, David Mackie, and Douglas Adams. This lawsuit alleges that
the individual defendants, each a DMI director until April 30, 1990, had in
concert with Disctronics Limited and its affiliated companies,
misappropriated DMI's corporate opportunity to acquire Memory-Tech, a
competing compact disc manufacturer located in Plano, Texas. Rather than
present this opportunity to DMI, the Disctronics Group and the individual
directors caused Disctronics Limited to acquire Memory-Tech through a new
subsidiary, Moray. While DMI and Memory-Tech were operated as an
integrated company between March 2, 1990 (the acquisition date of
Memory-Tech) and April 30, 1990, Memory-Tech competed with DMI after April
30, when Quixote gained control of DMI pursuant to the Work-Out
Agreement. In this lawsuit, Quixote and DMI sought a constructive trust
over Memory-Tech in favor of DMI, along with unspecified damages.
The lawsuit also alleges that the defendants had violated DMI's federal
trademark rights in the name "Disctronics", by operating Memory-Tech under
the "Disctronics" name in competition with DMI. DMI was known as
Disctronics Manufacturing, Inc. and used the trade name Disctronics, Inc.
from approximately
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June, 1988 until May 18, 1990. The complaint seeks both
money damages and equitable relief.
On June 11, 1990, the Court dismissed the claims against the individual
defendants because of a lack of federal jurisdiction, and declined to
exercise pendant jurisdiction over the state law corporate opportunity
claims. Currently, Quixote and DMI's federal trademark claims are their
only claims now pending in the federal district court action.
On December 31, 1991 the remaining corporate defendants filed affirmative
defenses to DMI's claims and certain of the defendants filed counterclaims
alleging breach of contract, economic duress, tortious interference with
contract and business relations, unjust enrichment, fraud, unfair
competition and seizure of corporate opportunity among other claims. On
January 17, 1992 DMI filed an answer and affirmative defenses to the
counterclaim and also moved to dismiss the counterclaim and affirmative
defenses, which motion was denied on February 10, 1992. On September 25,
1992, the Court dismissed all of the defendants' state law counterclaims,
in order to allow those claims to be resolved in the parallel state court
action. This left only the parties' federal trademark claims, which were
stayed, pending resolution of the state court action.
2. DISC MANUFACTURING, INC. ET AL. v. MASSEY ET AL., CV90-1214L (Madison
County Circuit Court, Alabama). On June 13, 1990, DMI and Quixote refiled
their state law corporate opportunity claims, along with a claim under the
Alabama trademark law, in the Circuit Court for Madison County, Alabama
(Huntsville), the jurisdiction in which DMI is located. Quixote and DMI
asked the Court to impose a constructive trust on Memory-Tech in addition
to an unspecified amount of damages. The Court initially granted a
temporary restraining order precluding defendants from transferring any
interest in Memory-Tech pending the Court's determination following a
preliminary injunction hearing. Following the preliminary injunction
hearing, on July 30, 1990, the Court granted the motion for preliminary
injunction. In connection with the preliminary injunction and pending the
final outcome of the action, Quixote and DMI were required to post a $6
million certificate of deposit as injunction security. The defendants
appealed the entry of the preliminary injunction and on May 15, 1992 the
Alabama Supreme Court reversed the trial court's issuance of the
injunction, remanding the case for further proceedings. Quixote's motion
for a rehearing was denied on July 10, 1992. On May 21, 1992 defendants
filed a Motion for Partial Summary Judgment on all counts of the complaint
asserting breaches of fiduciary duty and using as its basis the Alabama
Supreme Court decision.
In addition, on March 4, 1991, the corporate defendants filed a
counterclaim against Quixote, DMI and James H. DeVries. The counterclaim
was made in twelve counts, including breach of the covenant of good faith
and fair dealing, economic duress (as to the validity of the Work-Out
Agreement), tortious interference with contract and business relations,
unjust enrichment (also a claim with respect to the validity of the Work-Out
Agreement), fraud, breach of contract (not under the Work-Out Agreement),
account stated, claim for money had and received, unfair competition
(with respect to the "Disctronics" trademark), state dilution claim,
breach of fiduciary duty by Mr. DeVries and seizure of corporate
opportunity by Quixote, and a claim for wrongfully seeking injunctive
relief.
The counterclaim sought damages of $73.8 million, to invalidate the
Work-Out Agreement, punitive damages and other relief. The Company and DMI
filed motions to dismiss the counterclaim.
On September 9, 1992, Quixote and DMI filed three additional counts to
specifically enforce a Settlement Agreement reached in June, 1991. On June
21, 1993, the Court entered judgment against Quixote and DMI on those
settlement counts, in response to defendants' Motion for Summary Judgment.
Quixote and DMI filed a motion for reconsideration of that ruling.
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In April 1993, the Company and DMI filed a First Amended Complaint which
added claims for unjust enrichment, fraud and tortious interference.
Defendants moved to dismiss the First Amended Complaint.
In May 1995, the Circuit Court ruled on various outstanding motions. The
Court dismissed all of the Defendants' claims except the following claims:
tortious interference with contract and business relations; fraud; breach
of contract regarding a $300,000 escrow; a state dilution claim; and a
claim for wrongfully seeking injunctive relief.
In its May 1995 Order, the Court also dismissed all of the Company's and
DMI's corporate opportunity claims based on breaches of fiduciary duties,
along with the claims for unjust enrichment. The Court also denied the
Company's and DMI's motion for a new trial with respect to the Court's
prior summary judgment on the Company's and DMI's settlement-related
counts. This left two counts of the Company's and DMI's First Amended
Complaint in the case: a count for tortious interference with contract and
business relations and a count for fraud. Both parties appealed the
Court's May 1995 ruling. In September 1996 the Alabama Supreme Court ruled
on the appeal, reversing the dismissal of the Company's claims and
upholding the dismissal of all but one of the Defendants' claims which had
been at issue. Consequently, the Company and DMI have pending claims for
breach of fiduciary duty, tortious interference and fraud. The defendants
pending claims are for wrongful injunction, "palming off", fraud and breach
of contract.
In March 1996, the Court approved DMI's substitution of a $6,000,000 surety
bond backed by a $2,000,000 letter of credit to replace the certificate of
deposit posted with the Alabama Circuit Court as injunction security.
Court ordered mediations have not been successful.
B. REPETITIVE STRESS INJURY LITIGATION. Stenograph Corporation, a
discontinued operation, is one of a number of manufacturers of keyboard
and other equipment that have been sued by individuals for arm, wrist
and hand injuries, including carpal tunnel syndrome. All twenty-nine
cases filed to date against Stenograph, and in some cases the Company,
contend that the Stenograph machine (or other keyboard equipment) was
defectively designed and that Stenograph failed to provide adequate
warnings about how the equipment should be used to avoid injury. The
cases request actual damages, in some cases specified as ranging from
$500,000 to $1,000,000, and, in most of the cases, punitive damages, with
some cases specifying an amount of $10,000,000. All of the cases have
been referred to the Company's insurance carriers and, at this time,
the Company believes that liability resulting from these cases, if any,
(excluding punitive damages) will be covered by its insurance policies.
The cases are in the discovery stage.
C. RESORT VIDEO LTD. v. LASERVIDEO, INC. In September 1990, DMI was sued
by Resort Video, Ltd. in the Superior Court of the State of California
for the County of Los Angeles in an action entitled RESORT VIDEO, LTD. v.
LASERVIDEO, INC., No. 74659. Resort Video, a former start-up company,
claimed DMI failed to produce certain video discs on schedule, thereby
injuring its business. After a trial, on August 25, 1992, the jury
awarded Resort Video $975,000 in damages. DMI moved for a new trial
which was granted in October 1992. Plaintiff appealed that decision
and DMI cross-appealed the jury's decision. In June 1995 the California
Court of Appeals affirmed the trial court's order granting a new trial
based on excessive damages. Resort Video's petition for a rehearing was
denied. No trial date has been set.
D. THOMSON S.A. v TIME WARNER, ET AL. In February 1994, Disc Manufacturing,
Inc., Quixote Corporation and a number of other companies were sued by
Thomson S.A. of France in the United States District Court for the District
of Delaware in an action entitled THOMSON S.A. v. TIME WARNER, INC., ET
AL., No 94-83. The complaint charged that the defendants infringed four
Thomson patents by making and selling audio compact discs and requested an
order prohibiting defendants
- 14 -
<PAGE>
from making or selling compact discs which infringe on the patents.
No specified damages were asked for although the complaint asked
that damages be trebled because it alleged the infringement was
willful. In the fall of 1994, the Denon and Time Warner defendants
entered into consent judgments with the plaintiff. After a trial, in
July 1996, the jury found that the Thomson patents were invalid.
Thomson has moved for judgment as a matter of law or, in the
alternative, for a new trial and a decision is pending.
E. SHERRELL SEARS v. ENERGY ABSORPTION SYSTEMS, INC. In June 1994, the
Company, Energy Absorption Systems, and two employees or former
employees were sued in an action entitled SHERRELL AND ROY SEARS v.
ENERGY ABSORPTION SYSTEMS, INC., QUIXOTE CORPORATION, GERALD HAND,
KEN WIMMER, UPJOHN COMPANY, IPI ISOFOAM SYSTEMS AND RELIANCE
INSURANCE COMPANY ET AL., in the Circuit Court of St. Clair County,
Alabama, No:CV94-128. Plaintiff claimed that she suffered a miscarriage
caused by her exposure to fumes while working for Energy. The complaint
contained alternating theories of workmen's compensation, tort, product
liability, co-employee liability and/or negligent safety inspections.
No monetary award was specified. In March 1995, the workmen's
compensation claims against Energy were settled for a nominal amount.
In August 1995 the Court granted Energy's motion for summary judgment,
dismissing the claims against the Company and the Energy employees.
That decision was subsequently affirmed on appeal by the Alabama Supreme
Court.
F. JEFFREY SMITH v. ENERGY ABSORPTION SYSTEMS, INC. In February
1994, Energy was sued in an action entitled JEFFREY AND JODY SMITH
v. COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF TRANSPORTATION AND
ENERGY ABSORPTION SYSTEMS, INC., in the Court of Common Pleas of
Allegheny County, Pennsylvania, No. GD941220. The complaint alleges
that leaking fluid from a crash cushion manufactured by Energy
Absorption Systems caused plaintiff to lose control of his
motorcycle and incur injuries. No monetary award is specified. The
case has been referred to the Company's insurance carriers and discovery
is proceeding. At this time, the Company believes that liability
resulting from this case, if any, will be covered by its insurance
policies.
G. DISCOVISION ASSOCIATES v. DISC MANUFACTURING, INC. In January 1995,
Disc Manufacturing, Inc. was served in an action entitled
DISCOVISION ASSOCIATES v. DISC MANUFACTURING, INC., Case No.
95-21, U.S. District Court for the District of Delaware. The
complaint alleges that DMI is infringing six DiscoVision patents
and seeks injunctive relief and unspecified damages, including
punitive damages, against DMI. In August 1995, DiscoVision was granted
leave to amend its complaint to allege infringement by DMI of four
additional patents. Discovery is proceeding and trial is set to
begin in September 1997.
H. DISC MANUFACTURING, INC. v. PIONEER AND DISCOVISION. In January
1995, DMI filed a complaint against Pioneer Electronic Corp.,
Pioneer Electronics (USA) Inc., Pioneer Capital Inc., and
DiscoVision Associates in the U.S. District Court for the Central
District of California, Case No. 95-0306, alleging violations of the
antitrust laws and acts of unfair competition based on unlawful
activities and anticompetitive tactics involving patents related
to optical disc technology. DMI's complaint seeks damages,
including punitive damages, and injunctive relief. This case has
been transferred to the District Court in Delaware and consolidated
with DiscoVision Associates' case against DMI pending in that
jurisdiction (described in G. above).
I. ESTATE OF THIEL v. ENERGY ABSORPTION SYSTEMS, INC. In December
1994, Energy Absorption Systems, Inc. was served in an action
entitled FREDERICK W. THIEL AND MAUREEN THIEL v. SLATTERY
ASSOCIATES ET AL., Superior Court of New Jersey, Docket No.
MRS-L-1431-94. The complaint arises from a March 1992 accident in
which the decendent lost control of his car and allegedly struck one
of Energy's crash cushions. The complaint seeks unspecified damages
from Energy and numerous defendants, including the State of New
Jersey, the U.S. Federal
- 15 -
<PAGE>
Highway Administration and various other governmental entities. The Company
has referred the case to its insurance carrier and discovery is proceeding.
At this time, the Company believes that liability resulting from this case,
if any, will be covered by its insurance policies.
J. ENERGY ABSORPTION SYSTEMS, INC. v. ROADWAY SAFETY. In April 1993,
Energy filed suit in U.S. District Court for the Northern District
of Illinois in an action entitled ENERGY ABSORPTION SYSTEMS, INC.
v. ROADWAY SAFETY SERVICE, INC., No. 93C 2147 for infringement of
Energy's U.S. Patent No. 4,289,419 seeking damages and an
injunction. Roadway counterclaimed for a declaratory judgment of non-
infringement and invalidity. In February 1996 the Court entered
judgment in favor of Roadway, holding that Energy's patent was
invalid and not infringed and awarded attorneys' fees and costs to
Roadway. The Court later determined the award to be $280,386.
Energy has appealed and a decision is pending.
K. MICRO DYNAMICS v. STENOGRAPH CORPORATION. In 1994, Micro Dynamics,
Ltd. sued Stenograph Corporation d/b/a Integrated Information
Services, a discontinued operation, in an action entitled MICRO
DYNAMICS, LTD. v. COMPULITS, INC. AND STENOGRAPH CORPORATION, U.S.
District Court for the District of Maryland, Civil Action No.
CD-94-1805, for copyright infringement, trademark infringement,
disclosure and misappropriation of trade secrets and quantum meruit, all
arising from IIS' use of certain software licensed by Micro
Dynamics. Stenograph has denied the allegations and asserted
various affirmative defenses and a counterclaim for intentional
interference with two contracts between IIS and customers, unfair
competition, breach of contract and quantum meruit. Both sides
seek damages in excess of $1 million. Stenograph has filed a motion for
summary judgment on all of Micro Dynamics' claims and a decision
is pending. Discovery is proceeding on Stenograph's counterclaims.
L. ERNEST CHICO v. THE STATE OF INDIANA, ENERGY ABSORPTION SYSTEMS,
INC. AND HOOSIER COMPANY (Indiana Superior Court). On April 12,
1996 Energy Absorption Systems, Inc. was served in this action
which arises from an accident in which the plaintiff hit one of
Energy's crash cushions. The Company has referred the case to its
insurance carrier and at this time believes that liability resulting
from this case will be covered by its insurance policies.
M. XEROTEX ET AL. v. INTEGRATED INFORMATION SERVICES, Case No. 96 Civ.
681 (U.S. District Court for the District of New Jersey). In
February 1996, the Company was served in this action which arises
from the purchase of certain software by Integrated Information
Services, Inc. ("IIS") prior to the Company's sale of IIS. The
complaint alleges breach of contract by IIS for its alleged failure to
market the software and make contractual payments. IIS has
answered the complaint and asserted a counterclaim against
plaintiffs for breach of warranty, breach of contract, breach of
the implied covenant of good faith and fair dealing and breach of
the purchase agreement. Discovery is proceeding.
The Company is involved in other legal actions, believes it has
defenses for all claims, and is vigorously defending the actions.
In the opinion of management, based on the advice of legal counsel,
liabilities, if any, arising from the Company's legal actions should
not have a material effect on the Company's results of operations or
financial condition.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
There were no matters submitted to a vote of security holders during the fourth
quarter of fiscal 1996.
- 16 -
<PAGE>
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
- -------------------------------------------------------------------------------
The Company's common stock is quoted on the National Association of
Securities Dealers Automated Quotation System (NASDAQ) under the symbol
QUIX.
Set forth are the daily high and low last sales prices for the Company's
common stock for the periods indicated, as reported by the National
Quotations Bureau, Inc. These prices represent quotations between
dealers in securities, do not include retail markdowns or commissions,
and do not necessarily represent actual transactions.
<TABLE>
<CAPTION>
Quarter Ending 9/30 12/31 3/31 6/30
- -------------- ------- ------- -------- -------
<S> <C> <C> <C> <C>
FISCAL 1996
High $13-1/4 $ 12 $ 8-1/2 $ 8-1/2
Low 10-1/2 7-1/4 6 5-3/4
FISCAL 1995
High $22-1/4 $19-1/8 $12-1/2 $12-3/4
Low 17-1/2 10-15/16 9-1/4 9-1/4
</TABLE>
The current quoted price of the stock is listed daily in The Wall Street
Journal in the NASDAQ National Market System section. As of August 5,
1996, there were 1,900 shareholders of record.
DIVIDEND POLICY
- ---------------
During 1996, the Company declared semi-annual cash dividends of twelve
cents per share each. During 1995, the Company declared semi-annual
cash dividends of eleven cents per share each.
- 17 -
<PAGE>
Item 6. SELECTED FINANCIAL DATA
- --------------------------------
SELECTED FINANCIAL DATA
Dollar amounts in thousands, except per share data
<TABLE>
<CAPTION>
For the years ended June 30, 1996 1995 1994 1993 1992
- ---------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating results:
Net sales........................$ 129,159 $ 133,818 $ 126,618 $ 106,061 $ 94,591
Gross profit..................... 38,973 46,147 50,903 43,331 37,519
Selling and administrative expenses 29,231 25,612 23,233 20,002 15,303
Research and development expenses 1,536 1,545 1,978 2,092 1,391
Other income (expense)........... (4,702) (3,406) (2,395) (2,445) (3,357)
Earnings from continuing operations 2,574 10,707 15,623 10,302 10,028
Net earnings (loss).............. (9,892) 5,950 11,644 9,441 7,967
Cash dividends per common share.. .24 .22 .21 .20
Per share data:
Primary earnings from continuing
operations.....................$ .32 $ 1.32 $ 1.94 $ 1.31 $ 1.30
Net earnings (loss).............. (1.24) .73 1.44 1.20 1.03
Book value per common share...... 5.99 7.49 6.94 5.53 4.51
Weighted average common and common
equivalent shares outstanding 8,003,924 8,100,385 8,066,192 7,867,658 7,742,825
Financial position:
Total assets.....................$ 129,829 $ 164,835 $ 116,602 $ 104,591 $ 95,355
Working capital.................. 19,665 2,319 13,158 10,691 30,087
Net property, plant and equipment 88,326 87,031 53,534 53,343 46,639
Long-term debt, net.............. 58,000 68,000 38,975 40,000 47,187
Shareholders' equity............. 47,619 58,915 54,069 41,898 33,583
</TABLE>
Note: Operating results and financial position for all periods presented
have been restated to reflect the businesses of the Legal Technologies
segment as discontinued operations.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
1996 COMPARED TO 1995
- ---------------------
The Company's sales for 1996 decreased 3% to $129,159,000 from $133,818,000
in 1995 due to reduced sales at Disc Manufacturing, Inc. (DMI). Sales at DMI
decreased 6% in 1996 to $82,409,000 from $87,296,000 in 1995 due principally
to the loss of a major customer, BMG Music, during 1996. Sales to BMG Music
decreased $22,874,000 to $10,410,000 in 1996 from $33,284,000 in 1995. As a
result, CD-Audio unit sales decreased 40% in 1996 from 1995. CD-ROM unit
sales increased 78% during 1996 from 1995 reflecting continued growth in that
market. As a result of declines in the average unit selling price of these
products, CD-Audio sales dollars declined 42% and CD-ROM sales dollars only
increased 44% during 1996 from 1995. Sales at Energy Absorption for 1996
were $46,750,000, up slightly from $46,522,000 for 1995. Sales of Energy's
permanent crash cushions and parts increased but were largely offset by a
decrease in truck-mounted attenuator (TMA) sales.
- 18 -
<PAGE>
The gross profit margin in 1996 decreased to 30.2% from 34.5% in 1995
due to margin reductions at DMI. DMI's gross profit margin decreased as
a result of a decrease in the selling prices of its products,
particularly CD-ROM products, as well as from volume inefficiencies as a
result of its capacity expansion concurrent with the loss of a major
customer. DMI also had a reduction in gross profit margin due to a
change in packaging sales mix. The Company expects to experience
continued pressure on disc selling prices which may have a limiting
effect on its future gross profit margins. Energy Absorption's gross
profit margin for 1996 increased slightly due to a change in product mix
and to less outsourcing of component parts than in 1995.
Selling and administrative expenses in 1996 increased 14% to $29,231,000
from $25,612,000 in 1995. DMI's selling and administrative expenses
increased principally due to an increase in legal expense related to two
legal settlements and to an increase in bad debt expense as DMI's
customer mix has shifted from the larger music companies to smaller
CD-ROM companies. Energy Absorption's selling and administrative
expenses increased due to increased marketing expenses and to the
write-off of its investment in a sewer rehabilitation technology.
Research and development expenses in 1996 were $1,536,000 compared to
$1,545,000 in 1995. Research and development on Energy's sewer
rehabilitation technology was suspended in 1996 but was offset by an
increase in new product development at Energy that will result in the
introduction of a new generation of products that will meet or exceed
revised U.S. highway safety standards known as NCHRP 350.
Interest income in 1996 was $523,000 compared to $392,000 in 1995 due to
an increase in the rate of interest earned on its $6 million restricted
certificate of deposit. In the third quarter, this CD was redeemed and
replaced with a surety bond. Interest expense in 1996 increased 59% to
$6,130,000 from $3,859,000 in 1995. This was due to the increase in the
average long-term debt outstanding compared to last year. The Company
recognized a $1,634,000 gain on asset sales which include the sale of
its 40% interest in Quantic Industries, Inc. ($1,287,000) and from the
sale of a patent ($347,000). Other expenses in 1996 increased from 1995
due to an increase in goodwill amortization and from a decrease in
royalty income as a result of the patent sale.
During 1996 the Company discontinued the operations of its legal
technologies businesses, which had been involved in the development,
manufacture and sale of products and systems for the legal community.
As a result, the Company recorded a loss of $12,466,000 (net of income
tax benefits of $8,000,000) for the operating losses of these businesses
through the date of disposition and for the loss on their disposition.
These results are presented as discontinued operations in the Company's
Consolidated Statements of Operations. Under multiple arrangements the
Company sold certain assets of this segment for an aggregate sales price
of $5,981,000 and the assumption of certain liabilities. Assets and
liabilities retained by the Company at June 30, 1996 include accounts
receivable, accounts payable, certain repetitive stress injury
litigation and liabilities under certain lease obligations.
1995 COMPARED TO 1994
- ---------------------
The Company's sales for 1995 increased 6% to $133,818,000 from
$126,618,000 in 1994 due to revenue growth at both of the Company's
business segments. Sales at Energy Absorption for 1995 increased 7% to
$46,522,000 from $43,433,000 in 1994 due principally to the inclusion of
a full year of sales at Safe-Hit Corporation, a manufacturer of flexible
guide posts, acquired in December
- 19 -
<PAGE>
1993. Safe-Hit contributed sales of $5,304,000 in 1995 compared to sales
of $2,799,000 in 1994. DMI sales for 1995 increased 5% to $87,296,000
from $83,185,000 in 1994 due to increased unit sales of its CD-ROM
discs. CD-ROM unit sales in 1995 increased 53% from 1994 while CD-Audio
unit sales in 1995 increased 2% from 1994. These increases in unit
volumes were offset somewhat by declines in the average unit selling
prices of these products resulting in CD-ROM sales dollars increasing
21% from 1994 and CD-Audio sales dollars decreasing 5%.
The gross profit margin in 1995 decreased to 34.5% from 40.2% in 1994
due to margin reductions at DMI. DMI's gross profit margin decreased as
a result of a decrease in the average unit selling price of its
products, particularly CD-ROM products, due to competition. This was
offset somewhat by volume efficiencies. Energy Absorption's gross profit
margin decreased as a result of an unfavorable change in product mix and
to the outsourcing of several manufactured component parts. The
outsourcing of these component parts continued until Energy Absorption's
plant expansion was completed during the first half of fiscal 1996.
Energy Absorption's gross profit margin was also reduced due to lower
gross profit margins at Safe-Hit Corporation.
Selling and administrative expenses in 1995 increased 10% to $25,612,000
from $23,233,000 in 1994 attributable principally to DMI. DMI's selling
and administrative expenses increased due to increases in CD-ROM selling
and marketing expenses and additional legal expenses. Energy
Absorption's selling and administrative expenses also increased but to a
lesser extent due to the inclusion of selling and administrative
expenses at Safe-Hit Corporation.
Research and development expenses in 1995 decreased 22% to $1,545,000
compared to $1,978,000 in 1994. This was due to a decrease in R&D at
Energy Absorption as a result of reduced expenditures on its sewer
rehabilitation technology.
Interest income in 1995 was $392,000 compared to $298,000 in 1994
reflecting an increase in interest rates on invested funds. Interest
expense increased 26% in 1995 to $3,859,000 from $3,060,000 in 1994.
This was due principally to the increase in long-term debt but also to
an increase in interest rates. Other income in 1995 was $61,000, down
from income of $367,000 in 1994 as a result of a gain on the sale of a
stock investment which occurred in 1994.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company has cash of $2,250,000 and additional funds of $25,000,000
available under its bank arrangements. Operating activities were a
source of cash for the Company providing cash of $13,144,000.
Cash of $6,440,000 was used during 1996 for investing activities. The
Company's primary investing activity was the purchase of $24,419,000 in
plant and equipment. These capital expenditures were made primarily at
DMI for the final phase of its expansion program. The Company received
an aggregate of $15,991,000 in connection with the sales of its 40%
investment in Quantic Industries, Inc., its discontinued operations and
a patent.
In fiscal 1996, the Company began a strategy of discontinuing and disposing
of unprofitable businesses and dedicating its resources to maintain and
expand its more profitable businesses. The Company believes that this
strategy has had the effect of increasing earnings and improving both
financial position and liquidity. The discontinuation of Legal Technologies,
Inc. in September 1995 resulted in both the containment of losses ($7.6
million pretax in fiscal 1995) and cash outflows to support that business. In
addition, the resulting sale of the various LTI companies generated cash
proceeds of approximately $7 million during fiscal 1996.
Financing activities used cash of $6,529,000 principally from payments
made on both the Company's revolving credit note ($9,000,000) and
convertible debentures ($1,975,000) satisfying the Company's sinking
fund requirements for both fiscal 1996 and 1997. Proceeds from the
redemption of a certificate of deposit generated $6,000,000.
During 1997, the Company anticipates the need for approximately
$8,000,000 in cash for capital expenditures. The Company may also need
additional cash for the acquisition of businesses that complement its
existing operating segments.
- 20 -
<PAGE>
Also, each of the Company's operating segments will require additional
investments in working capital to maintain growth. These expenditures
will be financed either through cash generated from operations or from
borrowings on the Company's revolving credit note. The Company believes
its cash generated from operations and funds available under its
existing credit facility are sufficient for all planned operating and
capital requirements.
See note 11 to the Consolidated Financial Statements for discussion regarding
the Company's existing litigation.
IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET EFFECTIVE
- ---------------------------------------------------------------------
Reference is made to footnote #2 of the Notes to the Consolidated Financial
Statements.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
Report of Independent Accountants
To the Shareholders and the Board of Directors
of Quixote Corporation
We have audited the consolidated balance sheets of Quixote Corporation
and Subsidiaries as of June 30, 1996 and 1995, and the related
consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended June 30, 1996. We have
also audited the financial statement schedule listed in Park IV of Form
10-K, Item 14(a)2 for each of the three years in the period ended June
30, 1996. These financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Quixote Corporation and Subsidiaries as of June 30, 1996 and 1995, and
the consolidated results of their operations and their cash flows for
each of the three years in the period ended June 30, 1996 in conformity
with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information
required to be included therein.
/s/Coopers & Lybrand L.L.P.
Chicago, Illinois
August 12, 1996
- 21 -
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Dollar amounts in thousands, except per share data
<TABLE>
<CAPTION>
For the years ended June 30, 1996 1995 1994
- ---------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Net sales..............................$ 129,159 $ 133,818 $ 126,618
Cost of sales.......................... 90,186 87,671 75,715
---------- ---------- ----------
Gross profit........................... 38,973 46,147 50,903
Operating expenses:
Selling and administrative........... 29,231 25,612 23,233
Research and development............. 1,536 1,545 1,978
---------- ---------- ----------
30,767 27,157 25,211
---------- ---------- ----------
Operating profit....................... 8,206 18,990 25,692
---------- ---------- ----------
Other income (expense):
Interest income...................... 523 392 298
Interest expense..................... (6,130) (3,859) (3,060)
Gain on sale of assets............... 1,634
Other................................ (729) 61 367
---------- ---------- ----------
(4,702) (3,406) (2,395)
---------- ---------- ----------
Earnings from continuing operations
before provision for income taxes...... 3,504 15,584 23,297
Provision for income taxes............. 930 4,877 7,674
---------- ---------- ----------
Earnings from continuing operations.... 2,574 10,707 15,623
Discontinued operations:
Loss from operations, net of
income taxes........................ (1,553) (4,757) (3,979)
Loss on disposal, net of income taxes (10,913)
---------- ---------- ----------
Loss from discontinued operations.... (12,466) (4,757) (3,979)
---------- ---------- ----------
Net earnings (loss)....................$ (9,892) $ 5,950 $ 11,644
========== ========== ==========
Per share data:
Primary earnings per share:
Earnings from continuing operations.$ .32 $ 1.32 $ 1.94
========== ========== ==========
Net earnings (loss).................$ (1.24) $ .73 $ 1.44
========== ========== ==========
Average shares outstanding.......... 8,003,924 8,100,385 8,066,192
========== ========== ==========
Fully diluted earnings per share:
Earnings from continuing operations.$ .32 $ 1.28 $ 1.80
========== ========== ==========
Net earnings (loss).................$ (1.24) $ .73 $ 1.37
========== ========== ==========
Average shares outstanding.......... 8,951,562 9,151,701 9,203,492
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
- 22 -
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Dollar amounts in thousands, except per share data As of June 30,
1996 1995
---------- ----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.........................$ 2,250 $ 2,075
Accounts receivable, net of allowance
for doubtful accounts of $740 in 1996
and $810 in 1995................................ 22,433 24,564
Refundable income taxes........................... 3,016
Inventories....................................... 5,953 7,401
Deferred income tax assets........................ 2,643 1,582
Other current assets.............................. 1,223 779
---------- ----------
Total current assets........................... 37,518 36,401
Property, plant and equipment at cost:
Land.............................................. 6,773 6,325
Buildings and improvements........................ 29,574 24,354
Machinery and equipment........................... 102,995 94,830
Furniture and fixtures............................ 5,695 4,812
Leasehold improvements............................ 508 501
---------- ----------
145,545 130,822
Less accumulated depreciation and amortization.. (57,219) (43,791)
---------- ----------
88,326 87,031
Other assets, including $6,000 restricted
certificate of deposit in 1995.................... 3,985 21,502
Net assets of discontinued operations............... 19,901
---------- ----------
$ 129,829 $ 164,835
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt................. $ 975
Accounts payable..................................$ 3,648 15,715
Dividends payable................................. 946 861
Income taxes payable.............................. 4,110
Accrued expenses:
Payroll and commissions......................... 2,840 3,032
Accrued royalty................................. 1,155 972
Other........................................... 9,264 8,417
---------- ----------
Total current liabilities..................... 17,853 34,082
Long-term debt, net of current portion.............. 58,000 68,000
Net liabilities of discontinued operations.......... 4,428
Deferred income tax liabilities..................... 1,929 3,838
Commitments and contingent liabilities..............
Shareholders' equity:
Preferred stock, no par value; authorized
100,000 shares; none issued
Common stock, par value $.01-2/3; authorized
15,000,000 shares; issued 8,671,101 shares-1996
and 8,581,416 shares-1995....................... 145 143
Capital in excess of par value of stock........... 29,751 29,268
Retained earnings................................. 23,196 34,977
Treasury stock, at cost, 718,921 shares-1996
and 1995........................................ (5,473) (5,473)
---------- ----------
Total shareholders' equity.................... 47,619 58,915
---------- ----------
$ 129,829 $ 164,835
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-23-
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the three years
ended June 30, 1996
<S> <C> <C> <C> <C>
Capital in
Dollar amounts in thousands, Excess of Par Retained Treasury
except per share data Common Stock Value of Stock Earnings Stock
- ------------------------------------------------- ------------ -------------- -------- --------
Balances, July 1, 1993............................. 139 26,629 20,726 (5,596)
Exercise of options for 116,096 common shares...... 2 481 11,644
Net earnings - 1994................................
Declaration of semi-annual cash dividends
($0.10 per share and $0.11 per share)............ (1,621)
Issuance of 29,509 treasury shares for the
acquisition of Safe-Hit Corporation.............. 221 223
Issuance of 69,358 common shares pursuant to the
stock retirement plan............................ 1 1,195
Conversion of debentures into 1,315 common shares.. 25
------------ -------------- -------- --------
Balances, June 30,1994............................. 142 28,551 30,749 (5,373)
Exercise of options for 41,922 common shares....... 285
Net earnings - 1995................................ 5,950
Declaration of semi-annual cash dividends
($0.11 per share each)........................... (1,722)
Issuance of 34,679 shares pursuant to the stock
retirement plan.................................. 1 432
Purchase of 6,661 common shares at $15.01 per share (100)
------------ -------------- -------- --------
Balances, June 30,1995............................. 143 29,268 34,977 (5,473)
Exercise of options for 55,006 common shares....... 1 250
Net loss - 1996.................................... (9,892)
Declaration of semi-annual cash dividends
($0.12 per share each)........................... (1,889)
Issuance of 34,679 shares pursuant to the stock
retirement plan.................................. 1 233
------------ -------------- -------- --------
Balances, June 30, 1996
8,671,101 common shares and 718,921 treasury
shares..........................................$ 145 $ 29,751 $ 23,196 $ (5,473)
============ ============== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-24-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
DOLLAR AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Earnings from continuing operations......................................... $ 2,574 $ 5,950 $ 11,644
Adjustments to reconcile net earnings (loss) to net cash provided by
operating activities:
Depreciation and amortization............................................. 14,451 15,583 14,037
Provision for losses on accounts receivable............................... (71) (27) (423)
Deferred income taxes..................................................... (1,909) (1,081) 4
Changes in operating assets and liabilities:
Accounts receivable..................................................... 2,202 (68) (4,619)
Inventories............................................................. 1,448 (2,254) 370
Refundable income taxes................................................. (3,016)
Other current assets.................................................... (1,505) (528) 875
Accounts payable and accrued expenses................................... (1,769) 3,542 1,104
Income taxes payable.................................................... (4,110) 188 (1,993)
Gain on sale of Quantic Industries, Inc................................... (1,287)
Gain on sale of patent.................................................... (347)
Loss on sewer rehabilitation business..................................... 601
----------
Net cash from continuing operations....................................... 7,262
Discontinued operations
Loss from operations, net of income taxes................................. (1,553)
Loss on disposal, net of income taxes..................................... (10,913)
Depreciation and amortization............................................. 2,025
Changes in operating assets and liabilities:
Accounts receivable, net................................................ 9,698
Inventory............................................................... 3,027
Deferred taxes.......................................................... (855)
Other current assets.................................................... 660
Property, plant and equipment, net...................................... 6,394
Patents, net............................................................ 584
System software, net.................................................... 100
Goodwill................................................................ 1,296
Accounts payable........................................................ (2,820)
Accrued expenses........................................................ (5,227)
Lease obligations....................................................... 3,466
----------
Net cash from discontinued operations..................................... 5,882
---------- ---------- ----------
Net cash provided by operating activities............................. 13,144 21,305 20,999
---------- ---------- ----------
Investing activities:
Purchase of property, plant and equipment................................. (24,419) (38,415) (10,994)
Proceeds from sale of investment in Quantic Industries, Inc............... 8,050
Proceeds from sales of discontinued operations............................ 5,981
Proceeds from sale of patent.............................................. 1,960
Capitalized and purchased systems, design and software costs.............. (308) (1,529)
Decrease (Increase) in funds deposited with IDB trustee................... 2,719 (2,719)
Cash paid for acquired businesses and equity investments.................. (6,746) (8,075)
Other..................................................................... (731) (421)
---------- ---------- ----------
Net cash used in investing activities................................. (6,440) (48,609) (20,598)
---------- ---------- ----------
Financing activities:
Proceeds from revolving credit agreement.................................. 23,000 42,000 11,500
Payments on revolving credit agreement.................................... (32,000) (12,000) (13,800)
Payments on convertible debentures........................................ (1,975)
Proceeds from redemption of certificate of deposit........................ 6,000
Payment of semi-annual cash dividend...................................... (1,805) (1,714) (1,621)
Proceeds from exercise of common stock options............................ 251 285 483
Repurchase of common stock for treasury................................... (100)
---------- ---------- ----------
Net cash provided by (used in) financing activities................... (6,529) 28,471 (3,438)
---------- ---------- ----------
Net change in cash and cash equivalents................................... 175 1,167 (3,037)
Cash and cash equivalents at beginning of period.......................... 2,075 1,021 4,058
---------- ---------- ----------
Cash and cash equivalents at end of period................................ $ 2,250 $ 2,188 $ 1,021
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-25-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
Quixote Corporation and its subsidiaries operate as a diversified technology
company which develops, manufactures and markets specialized products through
two industry segments. One segment is involved in the development,
manufacturing and marketing of energy-absorbing highway crash cushions and
related highway safety products for the protection of motorists and highway
workers in principal markets which include both domestic and international
governmental units. The other segment manufactures music compact discs and CD-
ROM discs for the domestic entertainment, data storage, multimedia and education
markets.
2. ACCOUNTING POLICIES
The principal accounting policies of the Company are as follows:
CONSOLIDATION
The consolidated financial statements include the accounts of Quixote
Corporation and its wholly-owned subsidiaries.
CASH AND CASH EQUIVALENTS
Cash in excess of operating requirements may be invested in income-producing
investments generally having initial maturities of three months or less. These
investments are stated at cost, which approximates market value. The Company
considers these short-term instruments to be cash equivalents.
Cash and cash equivalents in the consolidated statement of cash flows for 1995
includes cash related to discontinued operations.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out method) or
market.
PROPERTY, PLANT AND EQUIPMENT
The Company capitalizes expenditures for major renewals and betterments and
charges current operations with the cost of maintenance and repairs. Provisions
for depreciation and amortization have been computed on the straight-line method
based on the expected useful lives of the assets as indicated below:
Buildings and improvements 20 to 40 years
Machinery and equipment 3 to 12 years
Furniture and fixtures 3 to 10 years
Leasehold improvements 5 to 10 years
Prior to 1996, machinery and equipment were depreciated over expected useful
lives of 3 to 10 years. The cost and accumulated depreciation and amortization
relating to assets retired or otherwise disposed of are eliminated from the
respective accounts at the time of retirement or other disposition and any
resulting gain or loss is credited or charged to earnings.
GOODWILL AND PATENTS
Goodwill and patents are amortized on a straight-line basis over lives of 7 to
17 years. The Company assesses at each balance sheet date whether there has
been a permanent impairment in the value of these assets. Such assessment
includes consideration of possible obsolescence, demand, new technology,
competition, and other
-26-
<PAGE>
pertinent economic factors and trends that may have an
impact on the value or remaining lives of these assets.
INCOME TAXES
The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial statement
and tax bases of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse. In addition, the
amount of any future tax benefits are reduced by a valuation allowance to the
extent such benefits are not expected to be fully realized.
FINANCIAL INSTRUMENTS
The fair value of cash and cash equivalents is assumed to approximate the
carrying value of these assets due to their short maturity. The fair value of
the Company's convertible debentures is estimated using available market
information.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NET ASSETS/LIABILITIES OF DISCONTINUED OPERATIONS
The Company reclassifies those assets and liabilities associated with a
discontinued business segment as a net amount under the caption "Net Assets (or
Liabilities) of Discontinued Operations" on the accompanying consolidated
balance sheet.
As of June 30, 1996, the Company retained the following (assets) and
liabilities related to the discontinued legal technologies operations:
<TABLE>
<S> <C>
Deferred Taxes........................................... $ (863)
Accounts Payable......................................... 100
Lease Obligations........................................ 4,275
Sales and other Taxes.................................... 150
Severance................................................ 400
Other.................................................... 366
---------
Net Liabilities of Discontinued Operations............... $ 4,428
---------
---------
</TABLE>
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Stock-Based Compensation. Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," encourages, but does not require,
companies to recognize compensation expense for grants of stock, stock options,
and other equity instruments to employees based on new fair value accounting
rules. Although expense recognition for employee stock-based compensation is
not mandatory, the pronouncement requires companies that choose not to adopt the
new fair value accounting, to disclose the pro-forma net income and earnings per
share under the new method. This new accounting principle is effective for the
Company's fiscal year ending June 30, 1997. The Company believes that adoption
will not have a material impact on its financial position or results of
operations.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." The statement
requires that long-lived assets and certain identifiable intangibles to be
held and used by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Impairment is evaluated by comparing future cash flows
(undiscounted and without interest charges) expected to result from the use
of the asset and its eventual disposition to the carrying amount of the
asset. This new accounting principle is effective for the Company's fiscal
year ending June 30, 1997. The Company believes that adoption will not have a
material impact on its financial position.
RECLASSIFICATIONS
Certain amounts for the years ended June 30, 1995 and 1994 were reclassified to
conform to the current year presentation.
NOTE 3. ACQUISITIONS, DISPOSITIONS AND DISCONTINUED OPERATIONS
In December 1993 the Company acquired the stock of Safe-Hit Corporation, a
manufacturer of flexible guide post systems and portable sign systems for
highway and parking lot applications. The operating results of Safe-Hit
Corporation have been included in the Company's consolidated results of
operations since the date of acquisition.
In April 1995 the Company acquired a 40% common stock interest in Quantic
Industries, Inc. for $6.7 million including expenses. The investment in
Quantic, a manufacturer of electronic and pyrotechnic devices, was accounted for
under the equity method of accounting. The cost in excess of the Company's pro
rata share of the net assets of Quantic (approximately $4 million) is included
in other assets in 1995. In May 1996, the Company agreed to sell its 40%
interest to the majority shareholders in Quantic for $8,050,000 cash. A gain of
$1,287,000 was realized on the sale and is included in other income for 1996.
-27-
<PAGE>
In January 1996, Energy Absorption sold to Barrier Systems, Inc. certain patents
related to its movable traffic barrier system. The sale price of $1,960,000
resulted in a gain of $347,000 which is included in other income for 1996.
During 1996 the Company discontinued the operations of its legal technologies
businesses, which had been involved in the development, manufacture and sale of
products and systems for the legal community. Under multiple arrangements the
Company sold certain assets and liabilities for an aggregate sales price of
$5,981,000. Assets and liabilities retained by the Company at June 30, 1996
include accounts receivable, accounts payable, certain repetitive stress injury
litigation as well as liabilities under certain lease obligations. These
remaining assets and liabilities are valued based upon management's estimates,
utilizing current available information as of the balance sheet date. It is
reasonably possible, however, that these estimates could change in the near
term.
The results of operations of the legal technologies segment and the loss on its
disposition are presented as discontinued operations in the accompanying
consolidated statements of operations. The income tax benefits for the results
of discontinued operations for the years ended 1996, 1995 and 1994 are $725,000,
$1,652,000 and $1,479,000 respectively. The loss on disposal of $10,913,000 is
net of income tax benefits of $7,275,000. Net sales for the discontinued
businesses were $27,510,000 (1996), $51,593,000 (1995) and $50,320,000 (1994).
The accompanying consolidated balance sheets and consolidated statements of
operations have been restated in order to present the legal technologies segment
as a discontinued operation for accounting purposes.
NOTE 4. INVENTORIES
Inventories consist of the following at June 30:
Dollar amounts in thousands 1996 1995
- ---------------------------------------- ---------- ----------
Finished goods.......................... $ 944 $ 1,172
Work in process......................... 1,052 1,034
Raw materials........................... 3,957 5,195
---------- ----------
$ 5,953 $ 7,401
---------- ----------
NOTE 5. LONG-TERM DEBT
Long-term debt consists of the following at June 30:
Dollar amounts in thousands 1996 1995
- ---------------------------------------- ---------- ----------
Revolving credit facility due October 31,
1998, interest at variable rates.........$ 40,000 $ 49,000
8% Convertible subordinated debentures
due 2011, interest due semi-annually,
principal payable in annual sinking
fund installments of $1,000.............. 18,000 19,975
---------- ----------
Total long-term debt..................... 58,000 68,975
Less current portion..................... (975)
---------- ----------
Long-term debt, net......................$ 58,000 $ 68,000
---------- ----------
-28-
<PAGE>
The Company has a three-year unsecured revolving credit agreement with three
banks. The agreement provides a $65 million credit facility and contains both
fixed and floating interest rate options, at the prime rate or lower, and
contains affirmative and negative covenants including requirements that the
Company maintain certain financial ratios and be profitable from continuing
operations each year. The agreement may be extended one additional year on each
anniversary date upon mutual consent of the Company and the banks. At any time
during the three years, the Company may elect to convert the loan to a four year
term with equal quarterly principal payments due throughout the term to amortize
the loan in full.
In August 1995, the Company obtained a $10,000,000 short-term loan with the bank
group which was replaced with an increase in its revolving credit facility. In
the third quarter of 1996, the Company violated certain covenants of its
revolving credit facility including the earnings and leverage covenants. The
Company received a waiver for these covenant violations and, in addition,
reached an agreement with the banks to amend certain future covenants and to cap
the credit facility at $65 million, formerly $70 million.
The 8% debentures are convertible by the holders at any time prior to maturity
into shares of common stock of the Company at a conversion price of $19.00 per
share. They are redeemable at the option of the Company at par plus accrued
interest and are subordinate to all senior indebtedness of the Company and all
obligations under various leases. Unamortized costs incurred in issuing the 8%
convertible subordinated debentures were $464,000 and $552,000 at June 30, 1996
and 1995, respectively, and are included in other assets. These costs are being
amortized over the term of the agreement. During 1996 the Company satisfied its
sinking fund requirements for both 1996 and 1997 through the purchase of its
bonds on the open market. The gain of $257,000 is included in other income in
1996. The fair value of the 8% convertible debentures outstanding at June 30,
1996 is estimated to be $15,840,000.
The aggregate amount of maturities of long-term debt for the four years
subsequent to 1997 assuming renewal of the revolving credit note is as follows:
$1,000,000 in 1998, $1,000,000 in 1999, $1,000,000 in 2000 and $1,000,000 in
2001.
NOTE 6. STOCK OPTIONS AND STOCK TRANSACTIONS
The Company has stock option plans for directors and employees, providing for
grants of options as may be determined by the Audit/Compensation Committee of
the Board of Directors. Options under the Long-Term Stock Ownership Incentive
Plan and the Director Stock Option Plan are to be granted at no less than 100%
of the current market price at the date of the grant. No charges are made to
earnings in connection with the options.
Information for the year ended June 30, 1996 with respect to options under the
Company's plan is as follows:
Number Option Price
of Shares per Share
--------- ------------------
Shares under option:
July 1, 1995...................... 947,142 $ 4.25 to $21.00
Granted........................... 201,000 6.88 to 12.38
Exercised......................... (55,333) 4.25 to 6.88
Canceled or expired............... (194,860) 4.25 to 12.88
---------
June 30, 1996..................... 897,949 $ 4.25 to $21.00
=========
-29-
<PAGE>
Options outstanding at June 30, 1996 are exercisable for common shares as
follows: 758,948 in 1997, 72,000 in 1998 and 67,001 in 1999. As of June 30,
1996, the Company has 2,104,494 common shares reserved for various conversion
privileges and options.
NOTE 7. SHAREHOLDER RIGHTS PLAN
The Company has a Shareholder Rights Plan (the Plan) which was established to
deter coercive takeover tactics and to prevent an acquirer from gaining control
of the Company without offering a fair price to all of the Company's
stockholders. The Plan calls for stockholders of record on July 25, 1988 to
receive a dividend distribution of one right for each outstanding share of the
Company's common stock. Each share issued after that date is also granted a
right. Each right entitles the holder, upon the occurrence of certain events,
to purchase a unit consisting of one one-thousandth of a share of Series A
Junior Participating Preferred Stock, no par value, for $25 per unit. In
addition, if an acquiring person becomes the beneficial owner of more than 20
percent of the Company's outstanding common stock, each right will entitle the
holder (other than such acquiring person) to receive, upon exercise, common
stock of the Company having a value equal to two times the exercise price of the
right or $50.
If after an acquiring person becomes the beneficial holder of more than 20
percent of the Company's outstanding common stock, the Company is acquired in
a merger or other business combination in which the Company would not be the
surviving corporation, or 50% or more of the Company's assets or earning
power is sold, each holder shall have the right to receive, upon exercise,
common stock of the acquiring corporation having a value equal to two times
the exercise price of the right or $50. The Company may redeem the rights in
whole, for $.01 per right, under certain circumstances.
NOTE 8. STOCK RETIREMENT PLAN
The Company's Long-Term Stock Ownership Incentive Plan contains a provision for
a retirement stock award program for certain key executives of the Company. The
award consists of shares of the Company's common stock and cash ending with the
fiscal year in which the executive attains his or her 62nd birthday. In order
to receive each year's stock award, the executive must remain employed with the
Company through the end of the fiscal year, unless excused by reason of death or
other involuntary termination. Participants are also required to retain the
shares awarded for as long as they are employed by the Company or until age 65.
The size of each participant's annual award is determined under accepted
actuarial principles to provide a retirement income based upon a percentage of
the executive's projected compensation and length of service at retirement, but
only if the Company's stock price appreciates at a sustained target rate. The
Plan resulted in a charge to earnings of $463,000 (1996), $766,000 (1995) and
$1,239,000 (1994).
-30-
<PAGE>
NOTE 9. INCOME TAXES
The income tax provision (benefit) from continuing operations is comprised of
the following for the three years ended June 30:
Dollar amounts in thousands 1996 1995 1994
-------- -------- --------
Current:
Federal............................$ 3,050 $ 5,154 $ 5,072
State.............................. 850 708 1,681
-------- -------- --------
3,900 5,862 6,753
-------- -------- --------
Deferred:
Federal............................ (2,302) (763) 714
State.............................. (668) (222) 207
-------- -------- --------
$ (2,970) $ (985) $ 921
-------- -------- --------
Provision for income taxes.........$ 930 $ 4,877 $ 7,674
======== ======== ========
The components of the net deferred tax asset (liability) are as follows at June
30:
Dollar amounts in thousands 1996 1995
-------- --------
Deferred tax assets:
Accounts receivable allowance.....................$ 296 $ 293
Inventory valuation............................... 769 754
Compensated absences and medical claims........... 591 596
Tax over book basis in affiliates................. 1,509 1,496
Capital loss carryforwards........................ 967 1,589
Other liabilities and reserves.................... 2,272 1,422
Net operating loss carryforwards.................. 2,951 3,238
Provision for discontinued operations............. 2,742 1,887
Valuation allowance............................... (4,356) (5,321)
Other............................................. 38 30
-------- --------
Total assets....................................$ 7,779 $ 5,984
======== ========
Deferred tax liabilities:
Book over tax basis of capital assets.............$ 4,323 $ 6,353
-------- --------
Total liabilities...............................$ 4,323 $ 6,353
-------- --------
Net deferred tax asset (liability)..............$ 3,456 $ (369)
======== ========
The valuation allowance relates principally to potential benefits from deferred
tax assets that the Company estimates may not be realizable, including portions
of tax over book basis in affiliates, capital loss carryforwards, net operating
loss carryforwards, and tax credit carryforwards. The decrease in the valuation
allowance is due to the expiration of unutilized net operating loss
carryforwards and to the utilization of capital loss carryforwards which
previously were not expected to be realized. At June 30, 1996, certain
subsidiaries of the Company have approximately $7,400,000 of net operating loss
carryforwards for tax purposes which arose in periods prior to acquisition by
the Company. These carryforwards expire in years from 1997 through 2005. In
addition, the Company has approximately $2,400,000 in capital loss
carryforwards, substantially all of which will expire in 1997 and 1998.
- 31 -
<PAGE>
The net deferred tax asset (liability) is presented on the balance sheet as
follows at June 30:
Dollar amounts in thousands 1996 1995
-------- --------
Current deferred tax asset........................$ 2,643 $ 1,582
Noncurrent deferred tax liability................. (1,929) (3,838)
-------- --------
Net deferred tax asset (liability)
of continuing operations........................ 714 (2,256)
Current deferred tax asset of
discontinued operations......................... 2,742 1,887
-------- --------
Total net deferred tax asset (liability)..........$ 3,456 $ (369)
======== ========
The current deferred tax asset of discontinued operations is netted against the
net liabilities of discontinued operations in the liability section of the
balance sheet.
The Income tax (benefit) provision differed from the taxes calculated at the
statutory federal tax rate as follows for the three years ended June 30:
Dollar amounts in thousands 1996 1995 1994
-------- -------- --------
Taxes at statutory rate..........................$ 1,191 $ 6,099 $ 8,441
State income taxes............................... 120 321 1,246
Gain on equity investment........................ (207)
Utilization of capital loss carryforwards........ (561)
Other, including adjustment of estimates......... 180 (1,543) (1,806)
-------- -------- --------
Income tax (benefit) provision...................$ 930 $ 4,877 $ 7,674
======== ======== =========
NOTE 10. EARNINGS PER SHARE
Primary earnings per share is computed by dividing the net earnings for each
period by the weighted average number of common and common equivalent shares
outstanding.
Fully diluted earnings per share is computed based on the assumption that all of
the convertible debentures are converted into common shares. Under this
assumption, the weighted average number of shares is increased accordingly and
net earnings is increased by the amount of interest expense and amortization of
deferred debenture costs relating to the convertible debentures, less income tax
benefits. Since the effect is anti-dilutive in 1996 and 1995, the amount
reported is the same as primary earnings per share.
NOTE 11. COMMITMENTS AND CONTINGENT LIABILITIES
Aggregate rental expense under operating leases, principally for office and
manufacturing facilities used in continuing operations was $844,000 in 1996,
$764,000 in 1995 and $634,000 in 1994. These operating leases include options
for renewal or purchase of the leased property. Annual minimum future rentals
for lease commitments related to continuing operations range from approximately
$700,000 in 1997 to $300,000 in 2001, an aggregate of $2,000,000 through 2001.
The Company has employment agreements with certain executives, which are
designed to retain the services of key employees and to provide for continuity
of management in the event of an actual or threatened change in control of the
Company. Upon occurrence of a triggering event after a change in control, as
defined, the Company would be liable for payment of benefits under these
agreements.
- 32 -
<PAGE>
In 1990, Disc Manufacturing, Inc. (DMI) and the Company filed lawsuits in the
federal and state courts in Alabama against the Disctronics Group, the former
owners of DMI, relating to DMI's misappropriated corporate opportunity to
acquire Memory-Tech, a competing compact disc manufacturer located in Plano,
Texas, and certain trademark infringement claims. In response to the two
Alabama suits, the Disctronics Group filed counterclaims alleging breach of
contract, economic duress, fraud, unfair competition and seizure of corporate
opportunity, among others. The Disctronics Group also filed an action in
Dallas, Texas which was subsequently dismissed. In 1990, the Alabama state
court issued a preliminary injunction in favor of the Company and DMI,
precluding the Disctronics Group from transferring any interest in Memory-Tech
and other restrictions.
In connection with this injunction, the Company and DMI were required to post a
$6,000,000 certificate of deposit as injunction security. In March 1996, the
Circuit Court approved DMI's substitution of a $6,000,000 surety bond backed by
a $2,000,000 letter of credit to replace the certificate of deposit.
In May 1992, the Alabama Supreme Court reversed the judge's 1990 order granting
preliminary injunction. In September 1992, Quixote filed additional counts
seeking to enforce a settlement agreement reached in June 1991. The court ruled
against the Company and DMI on those counts, in response to the Disctronics
Group's motion for summary judgment. The Company and DMI sought reconsideration
of that ruling, which the court denied in May 1995. The Company also amended
its complaint to add claims for unjust enrichment, fraud and tortious
interference, which the defendants moved to dismiss.
In a May 1995 order, the court dismissed many of the defendants' and the
Company's claims. Subsequent to the May 1995 order, defendants filed a
notice of appeal and the Company has cross-appealed. The decision of the
Alabama Supreme Court is pending. Court-appointed mediation has not been
successful.
Several companies holding patents related to optical disc technology have
contacted the Company to request that DMI enter into licensing arrangements
with them, and two companies have filed suits against DMI for patent
infringement in Delaware federal court. In one of the cases, a federal
jury ruled that the plaintiff's patents were invalid. In the other case,
DMI filed a lawsuit against the plaintiff for antitrust violations and
DMI's lawsuit has been consolidated with the plaintiff's patent case for
all purposes. Discovery is proceeding. Royalties requested by the patent
holder could result in a significant cost to DMI and in reduced future
margins if licensing arrangements were required under the terms proposed by
the patent holder.
In September 1990, DMI was sued by a start-up business that claimed DMI
failed to produce certain videodiscs on schedule, thereby injuring its
business. After a trial, on August 25, 1992, the jury awarded the
plaintiff $975,000 in damages. In October 1992, the court granted DMI's
motion for a new trial which was subsequently affirmed by the appellate
court. No trial date has been set.
Stenograph Corporation, a discontinued operation, and a number of
manufacturers of keyboards and related equipment have been sued by
individuals for repetitive stress injuries. The 29 cases against
Stenograph, and in some cases the Company, request damages ranging from
$500,000 to $1,000,000, and in most cases, punitive damages, with some
plaintiffs claiming an amount of $10,000,000. All cases have been referred
to the Company's insurance carriers and the Company believes that any
liability (excluding punitive damages) will be covered under its insurance
policies. The Company does not believe there are grounds for the
imposition of punitive damages and intends to vigorously defend all claims.
The Company is involved in these and other legal actions common to its
businesses. The Company has recorded loss contingencies where appropriate
within the guidelines established by Statement of Financial Accounting
Standards No. 5 "Accounting for Contingencies". The Company believes it has
defenses for all such claims and is vigorously defending the actions. In the
opinion of management, based on the advice of legal counsel,
- 33 -
<PAGE>
liabilities, if any, arising from these legal actions should not have a material
effect on the Company's results of operations or financial condition.
NOTE 12. SUPPLEMENTAL CASH FLOW STATEMENT DISCLOSURES
Cash paid for interest was $6,105,000 (1996), $4,015,000 (1995) and $3,360,000
(1994). Cash paid for income taxes was $1,495,000 (1996), $4,116,000 (1995) and
$7,878,000 (1994).
Purchases of property, plant and equipment of $9,225,000 which are included in
accounts payable at June 30, 1995 were paid during 1996.
NOTE 13. INDUSTRY SEGMENT INFORMATION
The Company's operations are comprised of two industry segments: the
manufacture and sale of energy absorbing highway safety devices and the
manufacture and sale of compact discs.
Interest income on corporate investments, interest expense, and certain
unallocated corporate expenses have not been added or deducted from earnings
from continuing operations before income taxes. Identifiable assets by segment
are those assets that are used in the Company's operations by each industry
segment. Corporate assets are principally cash and cash equivalents, and
equipment.
Substantially all the sales of highway safety devices are to contractors
providing product and services to federal, state and local governmental units.
Sales of the compact disc segment to the recording industry comprised 35%
(1996), 58% (1995) and 64% (1994) of the segments sales. The Company derived
approximately 8% (1996), 18% (1995) and 21% (1994) of consolidated net sales
from a single customer in the compact disc segment.
- 34 -
<PAGE>
Dollar amounts in thousands 1996 1995 1994
-------- -------- --------
Net Sales:
Highway safety devices..................$ 46,750 $ 46,522 $ 43,433
Compact discs........................... 82,409 87,296 83,185
-------- -------- --------
Total.................................$129,159 $133,818 $126,618
======== ======== ========
Earnings (Loss) from Continuing Operations
Before Income Taxes:
Highway safety devices..................$ 11,640 $ 11,797 $ 11,906
Compact discs........................... (2,529) 8,655 15,508
-------- -------- --------
Subtotal.............................. 9,111 20,452 27,414
Unallocated corporate................... (1,401) (1,355)
Interest income
(expense), net......................... (5,607) (3,467) (2,762)
-------- -------- --------
Total.................................$ 3,504 $ 15,584 $ 23,297
======== ======== ========
Identifiable Assets at Year-End:
Highway safety devices..................$ 28,079 $ 35,809 $ 26,971
Compact discs........................... 93,673 97,888 62,719
Corporate............................... 8,077 11,237 8,594
-------- -------- --------
Total.................................$129,829 $144,934 $ 98,284
======== ======== ========
Depreciation and Amortization Expenses:
Highway safety devices..................$ 1,733 $ 1,676 $ 1,421
Compact discs........................... 12,657 9,732 8,300
Corporate............................... 61 124 126
-------- -------- --------
Total.................................$ 14,451 $ 11,532 $ 9,847
======== ======== ========
Capital Expenditures:
Highway safety devices..................$ 3,703 $ 3,107 $ 1,433
Compact discs........................... 11,483 41,115 8,033
Corporate............................... 8 33 6
-------- -------- --------
Total.................................$ 15,194 $ 44,255 $ 9,472
======== ======== ========
- 35 -
<PAGE>
NOTE 14. QUARTERLY AND FINANCIAL DATA (UNAUDITED):
Summarized quarterly financial data for years 1996 and 1995 follows:
<TABLE>
<CAPTION>
Three Months Ended
Dollar amounts in thousands,
except per share data. 9/30 12/31 3/31 6/30
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1996
Net sales............................$ 37,643 $ 36,067 $ 26,426 $29,023
Gross profit......................... 11,759 9,669 6,586 10,959
Earnings (loss) from continuing
operations......................... 1,769 452 (1,801) 2,154
Loss from discontinued operations.... (12,331) (135)
-------- -------- -------- --------
Net earnings (loss)..................$(10,562) $ 317 $ (1,801) $ 2,154
======== ======== ======== ========
Primary earnings (loss) per share:
Continuing operations..............$ .22 $ .06 $ (.23) $ .27
-------- -------- -------- --------
Net earnings (loss)................$ (1.32) $ .04 $ (.23) $ .27
======== ======== ======== ========
Fully diluted earnings (loss)
per share:
Continuing operations..............$ .22 $ .06 $ (.23) $ .26
-------- -------- -------- --------
Net earnings (loss)................$ (1.32) $ .04 $ (.23) $ .26
======== ======== ======== ========
<CAPTION>
Three Months Ended
Dollar amounts in thousands,
except per share data 9/30 12/31 3/31 6/30
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1995
Net sales............................$ 33,768 $ 34,315 $ 32,393 $33,342
Gross profit......................... 12,508 11,721 11,190 10,728
Earnings from continuing
operations......................... 3,052 2,481 2,320 2,854
Loss from discontinued operations.... (964) (1,604) (611) (1,578)
-------- -------- -------- --------
Net earnings.........................$ 2,088 $ 877 $ 1,709 $ 1,276
======== ======== ======== ========
Primary earnings per share:
Continuing operations..............$ .37 $ .31 $ .28 $ .36
-------- -------- -------- --------
Net earnings.......................$ .25 $ .11 $ .21 $ .16
======== ======== ======== ========
Fully diluted earnings
per share:
Continuing operations..............$ .36 $ .30 $ .28 $ .34
-------- -------- -------- --------
Net earnings.......................$ .25 $ .11 $ .21 $ .16
======== ======== ======== ========
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
- ------------------------------------------------------------------------
None.
-36-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
Some of the information required in response to this item regarding Directors
of the Registrant is set forth under "Election of Directors" on pages 2 and 3
of the Registrant's Definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on November 14, 1996 to be filed with the Commission
on or about October 2, 1996 and is incorporated herein by reference.
The executive officers of the Company, their ages and offices held by each
during fiscal 1996 are as follows:
Philip E. Rollhaus, Jr. 61 Chairman, Chief Executive Officer & Director -
Quixote Corporation
Chairman, Energy Absorption Systems, Inc. and
Disc Manufacturing, Inc.
Leslie J. Jezuit 50 President and Chief Operating Officer -
Quixote Corporation
James H. DeVries 64 Executive Vice President, General Counsel,
Secretary & Director
Myron R. Shain 56 Executive Vice President - Finance & Treasurer
President, Disc Manufacturing, Inc.
George D. Ebersole 60 President, Energy Absorption Systems, Inc.
Mr. Rollhaus has been the Chairman and Chief Executive Officer and a Director
of the Company since its formation in July 1969.
Mr. Jezuit joined the Company as President and Chief Operating Officer of
Quixote Corporation in 1996. Prior to that time, Mr. Jezuit served as
President and Chief Operating Officer of RobertShaw Controls Company.
Mr. DeVries joined the Company as Vice President in 1982. Mr. DeVries has
been a Director of the Company since its formation.
Mr. Shain joined the Company as Controller in April 1972, was elected
Treasurer in 1975, Vice President in 1981 and Executive Vice President -
Finance in 1986. Mr. Shain was elected President of Disc Manufacturing, Inc.
in May 1990.
Mr. Ebersole joined the Company as President of Energy Absorption Systems,
Inc. in 1980.
There is no family relationship between any of the officers described above.
Except as set forth in Item 3, none of the officers described above are party
or otherwise involved in any legal proceedings adverse to the Company or its
subsidiaries.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
The information required in response to this item is set forth under the
caption "Renumeration of Directors and Executive Officers" of the
Registrant's Definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on November 14, 1996 to be filed with the Commission
on or about October 2, 1996 and is incorporated herein by reference.
-37-
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
The information required in response to this item is set forth under the
caption "Stock Ownership by Certain Beneficial Owners" of the Registrant's
Definitive Proxy Statement for the Annual Meeting of Stockholders to be held
on November 14, 1996 to be filed with the Commission on or about October 2,
1996 and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
The information required in response to this item is set forth under the
caption "Certain Transactions and Business Relationships" of the Registrant's
Definitive Proxy Statement for the Annual Meeting of Stockholders to be held
on November 14, 1996 to be filed with the Commission on or about October 2,
1996 and is incorporated herein by reference.
-38-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
----------------------------------------------------------------
Item Page Number in
Number This Report
- ------ --------------
(a).1. Financial Statements
--------------------
Report of Independent Accountants 21
Consolidated Statements of Operations for the
years ended June 30, 1996, 1995 and 1994 22
Consolidated Balance Sheets as of June 30,
1996 and 1995 23
Consolidated Statements of Shareholders'
Equity for the years ended June 30, 1996,
1995 and 1994 24
Consolidated Statements of Cash Flows for the
years ended June 30, 1996, 1995 and 1994 25
Notes to Consolidated Financial Statements 26-36
(a).2. Financial Statement Schedule
-----------------------------
The financial statement schedule listed under Item 14(d) is filed
as part of this annual report. All other schedules have been
omitted because the required information is included in the
consolidated financial statements or notes thereto or because they
are not applicable or not required.
(a).3. The exhibits listed under Item 14(c) are filed as part of
this annual report.
(b). Reports on Form 8-K
-------------------
On May 1, 1996, the Company filed a Form 8-K/A Amendment submitting
pro forma financial information required in connection with a
report on Form 8-K filed March 4, 1996, reporting the sale of
certain assets of Stenograph Corporation and its divisions,
Integrated Information Services and Litigation Sciences.
(c). Exhibits
--------
*Management contract or compensatory plan or agreement
3.(a) Restated Certificate of Incorporation dated June 27,
1980; Certificate of Amendment to Certificate of Incorporation
dated November 17, 1981; Certificate of Amendment to Certificate of
Incorporation dated February 15, 1985; Certificate of Amendment to
Certificate of Incorporation dated February 25, 1986; and
Certificate of Designations, Preferences and Rights
- 39 -
<PAGE>
of Series A Junior Participating Preferred Stock dated July 27,
1988, filed as Exhibit 3(a) to the Company's Form 10-K Report for
the fiscal year ended June 30, 1991, File No. 0-7903, and
incorporated herein by reference.
(b) Restated By-Laws of the Company as amended through
January 23, 1996,filed as Exhibit 3(b) to the Company's Form 10-Q
Report for the quarter ended March 31, 1996, File No. 0-7903, and
incorporated herein by reference.
4.(a) Indenture under the Trust Indenture Act of 1939 between
the Company and LaSalle National Bank dated April 15, 1986, filed
as Exhibit 4(b) to the Company's Form 10-Q Report for the quarter
ended March 31, 1986, File No. 0-7903, and incorporated herein by
reference.
(b) Rights Agreement dated as of July 15, 1988, between the
Company and First National Bank of Boston, as Rights Agent, filed
as Exhibit 1 to the Company's Form 8-A Registration Statement dated
July 25, 1988, File No. 0-7903, and incorporated herein by
reference.
10.(a) Loan Agreement ("Loan Agreement") dated as of June 26,
1992 among the Company, Energy Absorption Systems, Inc. ("Energy"),
Disc Manufacturing, Inc. ("DMI"), Stenograph Corporation
("Stenograph"), The Northern Trust Company ("Northern"), NBD Bank,
N.A. ("NBD") and LaSalle National Bank ("LaSalle") and First
Amendment thereto dated as of June 30, 1992, filed as Exhibit 10(a)
to the Company's Form 10-K Report for the fiscal year ended June
30, 1992, file No. 0-7903, and incorporated herein by reference;
Second Amendment to Loan Agreement dated as of May 28, 1993 and
Third Amendment to Loan Agreement dated as of June 26, 1993, filed
as Exhibit 10(a) to the Company's Form 10-K Report for the fiscal
year ended June 30, 1993, File No. 0-7903, and incorporated herein
by reference; Fourth Amendment to Loan Agreement dated as of May
31, 1994, filed as Exhibit 10(a), to the Company's Form 10-K Report
for the fiscal year ended June 30, 1994, File No. 0-7903, and
incorporated herein by reference; Fifth Amendment to Loan
Agreement dated as of December 1, 1994, filed as Exhibit 10(a) to
the Company's Form 10-Q for the quarter ended December 31, 1994,
File No. 0-7903, and incorporated herein by reference; Sixth
Amendment to Loan Agreement dated as of April 3, 1995, filed as
Exhibit 10(a) to the Company's Form 10-Q Report for the quarter
ended March 31, 1995, File No. 0-7903, and incorporated herein by
reference; Seventh Amendment to Loan Agreement dated as of
November 10, 1995, filed as Exhibit 10(a) to the Company's Form
10-Q Report for the quarter ended December 31, 1995, File No.
0-7903, and incorporated herein by reference; Eighth Amendment to
Loan Agreement effective as of March 31, 1996, filed herewith;
Revolving Credit Notes dated as of March 31, 1996 from the Company
and its subsidiaries to the Northern, NBD and LaSalle, filed
herewith; Guaranty Agreement by and between DMI and the First
Alabama Bank dated as of March 31, 1993, filed as Exhibit 10(a) to
the Company's Form 10-K Report for the fiscal year ended June 30,
1993, File No. 0-7903, and incorporated herein by reference.
(b)* 1981 Employee Incentive Stock Option Plan, as amended
through June 3, 1988, filed as Exhibit 4.4 to the Company's Form
S-8 Registration Statement No. 33-22289, and incorporated herein by
reference; Amendment dated February 12, 1989 to the Employee
Incentive Stock Option Plan, filed as Exhibit 10(c) to the
Company's Form 10-K Report for the fiscal year ended June 30, 1989,
File No. 0-7903, and incorporated herein by reference.
(c)* 1991 Incentive Stock Option Plan, filed as Exhibit 4(a)
to the Company's S-8 Registration Statement No. 33-50428, and
incorporated herein by reference.
(d)* Restated 1972 Director Stock Option Plan, as amended through
- 40 -
<PAGE>
June 3, 1988, filed as Exhibit 4.3 to the Company's S-8
Registration Statement No. 33-22289, and incorporated herein by
reference; Amendment dated February 12, 1989 to the Restated
Director Stock Option Plan, filed as Exhibit 10(d) to the Company's
Form 10-K Report for the fiscal year ended June 30, 1989, File No.
0-7903, and incorporated herein by reference.
(e)* 1991 Director Stock Option Plan, filed as Exhibit 4(b)
to the Company's S-8 Registration Statement No. 33-50428, and
incorporated herein by reference.
(f)* 1993 Long-Term Stock Ownership Incentive Plan, filed as
Exhibit 4(a) to the Company's S-8 Registration Statement No.
33-74488, and incorporated herein by reference; Retirement Award
Agreements for Philip E. Rollhaus, Jr., James H. DeVries, Myron R.
Shain and George D. Ebersole, dated June 30, 1993 and as amended on
August 23, 1996, filed herewith.
(g) Lease Agreement between the Company and United
Insurance Company of America ("Company Lease") dated July 2, 1993,
filed as Exhibit 10(j) to the Company's Form 10-K Report for the
fiscal year ended June 30, 1993, File No. 0-7903, and incorporated
herein by reference; Lease Amendment to Company Lease dated as of
May 17, 1994, filed as Exhibit 10(h) to the Company's Form 10-K
Report for the fiscal year ended June 30, 1994, File No. 0-7903,
and incorporated herein by reference; Second Amendment to Company
Lease dated January 30, 1995 and Third Amendment to Company Lease
dated December 15, 1995, filed as Exhibits 10(b) and 10(c) to the
Company's Form 10-Q Report for the quarter ended December 31, 1995,
File No. 0-7903, and incorporated herein by reference; Amended and
Restated Lease Agreement dated as of September 1, 1987 by and
between the Industrial Development Board of the City of Huntsville,
Alabama, (the "Board") and LaserVideo, Inc. (now known as Disc
Manufacturing Inc. ("DMI")), filed as Exhibit 10(g) to the
Company's Form 10-K Report for the fiscal year ended June 30, 1990,
File No. 0-7903, and incorporated herein by reference; Series 1991
Amendment to Lease Agreement dated as of April 1, 1991 by and
between DMI and the Board, filed as Exhibit 10(i) to the Company's
Form 10-K Report for the fiscal year ended June 30, 1991, File No.
0-7903, and incorporated herein by reference; Series 1993 Amendment
to Lease Agreement dated as of March 1, 1993 by and between DMI and
the Board and Financing Statement, filed as Exhibit 10(j) to the
Company's Form 10-K Report for the fiscal year ended June 30, 1993,
File No. 0-7903, and incorporated herein by reference; Office Lease
between Amberjack, Ltd. and Litigation Sciences, Inc. dated July 2,
1990, and Lease Agreement between Coventry Fund III, Ltd. and
Litigation Sciences, Inc. dated July 30, 1990, filed as Exhibit
10(a) to the Company's Form 10-Q Report for the quarter ended
December 31, 1993, File No. 0-7903 and incorporated herein by
reference; First Amendment to Office Lease between Amberjack Ltd.
and Stenograph Corporation dated as of June 23, 1994, filed as
Exhibit 10(h) to the Company's Form 10-K Report for the fiscal year
ended June 30, 1994, File No. 0-7903, and incorporated herein by
reference.
(h)* Employment agreements dated as of June 24, 1991 between
the Company and each of Messrs. Philip E. Rollhaus, Jr., James H.
DeVries and Myron R. Shain, filed as Exhibit 10(k) to the Company's
Form 10-K Report for the fiscal year ended June 30, 1991, File No.
0-7903, and incorporated herein by reference; Key Employee
Severance Agreement between the Company and George D. Ebersole;
Trust Agreement dated March 3, 1989 between the Company and The
Northern Trust Company, as trustee, filed as Exhibits 28.4 and
28.5, respectively, to the Company's Form 8-K Report dated April
14, 1989, and incorporated herein by reference; Amendment to Trust
Agreement dated November 9, 1989, filed as Exhibit 10(j) to the
Company's Form 10-K Report for the fiscal year ended June 30, 1990,
File No. 0-7903, and incorporated herein by reference; Amendment to
Trust Agreement dated as of June 13, 1991, filed as Exhibit 10(k)
to the
- 41 -
<PAGE>
Company's Form 10-K Report for the fiscal year ended June
30, 1991, File No. 0-7903, and incorporated herein by reference;
Letter Agreement dated December 15, 1995 between the Company and
Leslie J. Jezuit, filed as Exhibit 10(d) to the Company's Form 10-Q
Report for the quarter ended December 31, 1995, File No. 0-7903,
incorporated herein by reference; Key Employee Severance Agreement
dated as of April 30, 1996 between the Company and Leslie J.
Jezuit, filed as Exhibit 10(a) to the Company's Form 10-Q Report
for the quarter ended March 31, 1996, File No. 0-7903, and
incorporated herein by reference.
(i) Summary Plan Description for the Incentive Savings Plan
of the Company Amended and Restated to Reflect Provisions Effective
July 1, 1993, filed as Exhibit 10(j) to the Company's Form 10-K
Report for the fiscal year ended June 30, 1994, File No. 0-7903,
and incorporated herein by reference.
(j) Agreements between the Company, Philip E. Rollhaus, Jr.
and Yukio Endo dated May 5, 1986, filed as Exhibit 10(a) to the
Company's Form 10-Q Report for the quarter ended March 31, 1986,
File No. 0-7903, and incorporated herein by reference.
(k) Disposition and Development Agreement dated August 30,
1994 by and among The Anaheim Redevelopment Agency, the City of
Anaheim and Disc Manufacturing, Inc., filed as Exhibit 10(p) to the
Company's Form 10-K Report for the fiscal year ended June 30, 1994,
File No. 0-7903, and incorporated herein by reference.
(l) Agreement for Purchase and Sale dated February 13, 1996
between Stenograph Acquisition Corp., IIS Acquisition Corp.,
Pettibone Corp., and Quixote Corporation, Stenograph Corporation,
Legal Technologies, Inc., Legal Technologies Limited and Integrated
Information Services filed as Exhibit 2.1 to the Company's 8-K
Report dated March 4, 1996, File No. 0-7903, and incorporated
herein by reference.
(m) Agreement for Purchase and Sale dated January 25, 1996
between Stenograph Corporation and LSI Acquisition, Inc. filed as
Exhibit 2.2 to the Company's 8-K Report dated March 4, 1996, File
No. 0-7903, and incorporated herein by reference.
(n) Agreement for Purchase and Sale of Assets dated July 3,
1996 between Integrated Information Services, Inc., Pettibone
Corporation, Quixote Corporation and Discovery Products, Inc.,
filed herewith.
11. Statement regarding computation of earnings per share
21. Subsidiaries of the Company
23. Consent of Coopers & Lybrand, L.L.P. as Independent
Certified Public Accountants
27. Financial Data Schedule
(d) Schedules:
---------
II - Valuation and Qualifying Accounts and Reserves
- 42 -
<PAGE>
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunder duly authorized
QUIXOTE CORPORATION
(Registrant)
Dated: February 24, 1997 By: /s/Philip E. Rollhaus, Jr.
-------------------------- --------------------------------
Philip E. Rollhaus, Jr., Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/Philip E. Rollhaus, Jr.
- --------------------------- Chairman and Director February 24, 1997
Philip E. Rollhaus, Jr. (Chief Executive Officer)
/s/Leslie J. Jezuit
- --------------------------- President and Chief Operating February 24, 1997
Leslie J. Jezuit Officer
/s/Daniel P. Gorey
- --------------------------- Vice President, Chief Financial February 24, 1997
Daniel P. Gorey Officer and Treasurer (Chief
Accounting and Financial Officer)
/s/James H. DeVries
- --------------------------- Executive Vice President and February 24, 1997
James H. DeVries Secretary, Director
/s/William G. Fowler
- --------------------------- Director February 24, 1997
William G. Fowler
/s/Lawrence C. McQuade
- --------------------------- Director February 24, 1997
Lawrence C. McQuade
- --------------------------- Director
David S. Ruder
/s/Robert D. van Roijen, Jr.
- --------------------------- Director February 24, 1997
Robert D. van Roijen, Jr.
</TABLE>
- 43 -
<PAGE>
QUIXOTE CORPORATION & SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the years ended June 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Column A Column B Column C Column D(a) Column E
- -------- -------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Additions
Balance at Charged to Balance at
Beginning of Costs and End of
Description Period Expenses Deductions Period
- ----------- ------------ ---------- ----------- ---------
Deducted from
Receivables:
Allowance for
Doubtful Accounts:
Year ended
June 30, 1996 $ 810,000 $ 530,000 $ 600,000 $ 740,000
========== ========== ========== ==========
Year ended
June 30, 1995 $ 665,000 $ 463,000 $ 318,000 $ 810,000
========== ========== ========== ==========
Year ended
June 30, 1994 $ 520,000 $ 631,000 $ 486,000 $ 665,000
========== ========== ========== ==========
</TABLE>
NOTES:
(a) Column D represents accounts written off as uncollectable, net of
collections on accounts previously written off.
- 44 -
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBITS
---------------------- -------------------------------------------
<S> <C>
10(a) EIGHTH AMENDMENT TO LOAN AGREEMENT EXECUTED AS OF
JUNE 4, 1996 AND EFFECTIVE MARCH 31, 1996.
10(a) REVOLVING CREDIT NOTES DATED MARCH 31. 1996.
10(f) RETIREMENT AWARD AGREEMENTS
10(f) AMENDED RETIREMENT AWARD AGREEMENTS DATED
AUGUST 23, 1996.
10(n) AGREEMENT FOR PURCHASE AND SALE OF ASSETS
DATED JULY 3, 1996.
11 STATEMENT REGARDING COMPUTATION OF EARNINGS
PER SHARE.
21 SUBSIDIARIES OF THE COMPANY.
23 CONSENT OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS.
27 FINANCIAL DATA SCHEDULE
</TABLE>
- 45 -
<PAGE>
EXECUTION COPY
EIGHTH AMENDMENT TO LOAN AGREEMENT
THIS EIGHTH AMENDMENT TO LOAN AGREEMENT ("Eighth Amendment"), executed
as of June 4, 1996 and effective as of March 31, 1996, is by and among QUIXOTE
CORPORATION, a Delaware corporation ("Quixote"), ENERGY ABSORPTION SYSTEMS,
INC., a Delaware corporation ("EAS"), DISC MANUFACTURING, INC., a Delaware
corporation ("DMI"), LEGAL TECHNOLOGIES, INC., a Delaware corporation ("LTI"),
QUIXOTE STENO CORPORATION (f/k/a Stenograph Corporation), a Delaware corporation
("Stenograph"), DISCOVERY PRODUCTS, INC. (f/k/a Stenograph Legal Services,
Inc.), a Delaware corporation ("SLS"), SPIN-CAST PLASTICS, INC., an Indiana
corporation ("Spin-Cast"), COURT TECHNOLOGIES, INC., a Delaware corporation
("Court"), COMPOSITE COMPONENTS, INC., a Delaware corporation ("CCI"), QUIXOTE
IIS CORPORATION (f/k/a Integrated Information Services, Inc.), a Delaware
corporation ("IIS"), QUIXOTE LSI CORPORATION (f/k/a Litigation Sciences, Inc.),
a Delaware corporation ("LSI"), and SAFE-HIT CORPORATION, a Nevada corporation
("Safe-Hit"), the lenders ("Lenders") named in the Loan Agreement referred to
below, and THE NORTHERN TRUST COMPANY, an Illinois banking corporation
("Northern"), as agent for the Lenders (Northern, in such capacity, being
"Agent"). Quixote, EAS, DMI, LTI, Stenograph, SLS, Spin-Cast, Court, CCI, IIS,
LSI, and Safe-Hit are individually and collectively referred to herein as
"Borrower".
RECITALS
A. Quixote, EAS, DMI, Stenograph, SLS, Spin-Cast, Court, CCI, IIS,
LTI, LSI, Safe-Hit, Agent and Lenders are parties to that certain Loan Agreement
dated as of June 26, 1992, as amended by a First Amendment to Loan Agreement
dated as of June 30, 1992, as further amended by a Second Amendment to Loan
Agreement dated as of May 28, 1993, as further amended by a Third Amendment to
Loan Agreement dated as of June 26, 1993, as further amended by a Fourth
Amendment to Loan Agreement dated May 31, 1994, as further amended by a Fifth
Amendment to Loan Agreement dated December 15, 1994, as further amended by a
Sixth Amendment to Loan Agreement dated April 3, 1995 and as further amended by
a Seventh Amendment to Loan Agreement dated November 10, 1995 (as so amended and
as the same may be hereafter amended, restated, supplemented or otherwise
modified, the "Loan Agreement").
B. Effective January 31, 1996, Litigation Sciences, Inc. changed its
corporate name to Quixote LSI Corporation.
C. Effective May 15, 1996, Stenograph Corporation changed its
corporate name to Quixote Steno Corporation.
D. Effective May 15, 1996, Integrated Information Services, Inc.
changed its corporate name to Quixote IIS Corporation.
<PAGE>
E. Subject to the terms, covenants, conditions and representations
set forth herein and at the request of Borrower, the Lenders wish to waive
certain Defaults and/or Events of Default under the Loan Agreement.
F. Pursuant to the terms of the Loan Agreement and at the request of
Borrower, the parties wish to further amend the Loan Agreement.
G. In consideration of the mutual agreements contained herein, and
subject to the terms and conditions hereof, the parties hereto agree as follows:
1. AMENDMENTS TO LOAN AGREEMENT.
1.1 TERMS USED. Terms used but not otherwise defined herein are used
with the same meanings as provided therefor in the Loan Agreement.
1.2 SECTION 1 OF THE LOAN AGREEMENT. Section 1 of the Loan Agreement
is hereby amended by deleting the definition of Maximum Revolving Credit Loan
and inserting the following in its stead:
"'Maximum Revolving Credit Loan' shall mean an amount equal to
$65,000,000, subject to reduction as provided in Section 2.4."
1.3 ADDITIONS TO SECTION 1 OF THE LOAN AGREEMENT. Section 1 of the
Loan Agreement is hereby further amended by adding the following definitions
thereto in their proper alphabetical order:
"'Adjusted EBITDA to Debt Service Payments Ratio' shall mean, for any
fiscal period, the ratio of (a) (i) EBITDA during such fiscal period MINUS
(ii) Capital Expenditures during such fiscal period to (b) the sum of (i)
Interest Expense during such fiscal period PLUS (ii) regularly scheduled
payments of principal on Funded Debt during such fiscal period, in each
case as determined in accordance with GAAP for Quixote and its Subsidiaries
on a consolidated basis.
"EBITDA" shall mean, for any fiscal period, (i) Consolidated Net
Income PLUS (ii) to the extent deducted in determining Consolidated Net
Income, Interest Expense and taxes (as stated in Quixote and its
Subsidiaries' consolidated statement of income) PLUS (iii) to the extent
deducted in determining Consolidated Net Income, depreciation, amortization
and other similar non-cash charges.
"Interest Expense" shall mean, for any fiscal period, the interest
expense of Quixote and its Subsidiaries (as determined in accordance with
GAAP on a consolidated basis) for such period in respect of Funded Debt,
excluding the amortization of capitalized debt transaction costs."
-2-
<PAGE>
1.4 SECTION 2.1 OF THE LOAN AGREEMENT. Section 2.1 of the Loan
Agreement is hereby amended by deleting the first and second sentences of such
Section and inserting the following in its stead:
"The maximum aggregate amount of the Revolving Credit Loan to be made
by each Lender (such Lender's "Revolving Credit Loan Commitment") shall be
the amount set below such Lender's name on the signature pages to the
Eighth Amendment to Loan Agreement effective as of March 31, 1996. The
aggregate principal amount of the Revolving Credit Loan Commitments is
$65,000,000."
1.5 SECTION 6.3(b) OF THE LOAN AGREEMENT. Section 6.3 of the Loan
Agreement is hereby amended by deleting subsection (b) thereof and inserting the
following in its stead:
"(b) (i) at the end of the Fiscal Quarter ending June 30, 1996, a
positive Consolidated Net Income for such Fiscal Quarter, (ii) at the end
of the Fiscal Quarter ending September 30, 1996, for the two Fiscal Quarter
period then ended, a positive Consolidated Net Income and (iii) at the end
of each succeeding Fiscal Quarter, for the three Fiscal Quarter period then
ended, a positive Consolidated Net Income (in each case certified by
Quixote at the end of such Fiscal Quarter)."
1.6 SECTION 6.3(e) OF THE LOAN AGREEMENT. Section 6.3 of the Loan
Agreement is hereby amended by deleting subsection (e) thereof and inserting the
following in its stead:
"(e)(i) at the end of the Fiscal Quarter ending June 30, 1996, for
such Fiscal Quarter, an Adjusted EBITDA to Debt Service Payments Ratio
equal to or greater than 1.75 to 1.0, (ii) at the end of the Fiscal Quarter
ending September 30, 1996, for the two Fiscal Quarter period then ended, an
Adjusted EBITDA to Debt Service Payments Ratio equal to or greater than
1.75 to 1.0, (iii) at the end of the Fiscal Quarter ending December 31,
1996, for the three Fiscal Quarter period then ended, an Adjusted EBITDA to
Debt Service Payments Ratio equal to or greater than 1.75 to 1.0, (iv) at
the end of each of the Fiscal Quarters ending on March 31, 1997, June 30,
1997 and September 30, 1997, for the four Fiscal Quarter period then ended,
an Adjusted EBITDA to Debt Service Payments Ratio equal to or greater than
1.75 to 1.0 and (v) at the end of each Fiscal Quarter ending on or after
December 31, 1997, for the four Fiscal Quarter period then ended, an
Adjusted EBITDA to Debt Service Payments Ratio equal to or greater than
2.0 to 1.0 (in each case certified by Quixote at the end of each Fiscal
Quarter)."
1.7 SECTION 7.1 OF THE LOAN AGREEMENT. Section 7.1 of the Loan
Agreement is hereby amended by deleting the term "50%" from the ninth line
thereof and inserting the term "30%" in its stead.
1.8 SECTION 7.9 OF THE LOAN AGREEMENT. Section 7.9 of the Loan
Agreement is hereby amended by deleting it and inserting the following in its
stead:
-3-
<PAGE>
"7.9 CAPITAL EXPENDITURES. Borrower shall not and shall not permit
any of its Subsidiaries to make Capital Expenditures within any Fiscal Year
that, in the aggregate, shall exceed (i) for the 1996 Fiscal Year, the
lesser of (A) $20,000,000 or (B) the sum of Quixote's Consolidated Net
Income attributable to its continuing operations plus depreciation and
amortization for the 1996 Fiscal Year and (ii) for the 1997 Fiscal Year and
each Fiscal Year thereafter, the lesser of (A) $12,000,000 or (B) the sum
of Quixote's Consolidated Net Income plus depreciation and amortization for
such Fiscal Year."
1.9 EXHIBIT B TO THE LOAN AGREEMENT. Exhibit B to the Loan Agreement
is hereby amended by deleting it in its entirety and inserting in lieu thereof a
new Exhibit B, which is attached hereto as Annex 1.
1.10 REFERENCES TO STENOGRAPH, IIS AND LSI. The Loan Agreement
is hereby amended as follows:
(a) effective as of January 31, 1996, all references to "LSI" shall
be deemed references to Quixote LSI Corporation (f/k/a Litigation Sciences,
Inc.);
(b) effective as of May 15, 1996, all references to "Stenograph"
shall be deemed references to Quixote Steno Corporation (f/k/a Stenograph
Corporation); and
(c) effective as of May 15, 1996, all references to "IIS" shall be
deemed references to Quixote IIS Corporation (f/k/a Integrated Information
Services, Inc.).
2. WAIVER. Subject to the terms, covenants, conditions and
representations set forth herein, the Lenders hereby waive any and all Defaults
or Events of Default caused by Borrower's failure to comply with the terms of
subsections 6.3(b) and 6.3(e) of the Loan Agreement during the Fiscal Quarter
ending March 31, 1996. This waiver shall be limited precisely as written and
shall not be deemed to prejudice the Lenders' rights and remedies with respect
to any future Defaults or Events of Default.
3. REPRESENTATION AND WARRANTIES. In order to induce the Lenders to
enter into this Eighth Amendment, each Borrower represents and warrants that:
3.1 The representations and warranties set forth in Section 4 of the
Agreement, as hereby amended, are true, correct and complete on the date hereof
as if made on and as of the date hereof and that there exists no Default of
Event of Default on the date hereof (other than as specifically waived in
Section 2 hereof).
3.2 The execution and delivery by each Borrower of this Eighth
Amendment has been duly authorized by proper corporate proceedings of each
Borrower and this Eighth Amendment, and the Agreement, as amended by this Eighth
Amendment, constitutes a valid and binding obligation of each Borrower.
-4-
<PAGE>
3.3 Neither the execution and delivery by each Borrower of this
Eighth Amendment, nor the consummation of the transactions herein contemplated,
nor compliance with the provisions hereof will violate any law, rule,
regulation, order, writ, judgment, injunction, decree or award binding on any
Borrower or any Borrower's articles of incorporation or by-laws or the
provisions of any indenture, instrument or agreement to which any Borrower is a
party or is subject, or by which it or its property, is bound, or conflict with
or constitute a default thereunder.
4. EFFECTIVE DATE. This Eighth Amendment shall become effective as of
the effective date first above written (the "Effective Date") upon receipt by
the Agent of (i) five (5) copies of this Amendment duly executed by each
Borrower, the Agent and all Lenders, (ii) Revolving Credit Notes executed by
each Borrower in favor of each of the Lenders substantially in the form of ANNEX
1 hereto (the "Replacement Notes"), (iii) copies for each Lender of a
certificate executed by each Borrower certifying (a) board resolutions
authorizing the execution and delivery of this Eighth Amendment and the
Replacement Notes and authorizing the borrowings contemplated thereby and (b)
incumbency, and (iv) a $24,000 closing fee.
5. REFERENCE TO LOAN AGREEMENT. From and after the Effective Date
hereof, each reference in the Loan Agreement to "this Agreement", "hereof", or
"hereunder" or words of like import, and all references to the Loan Agreement in
any and all agreements, instruments, documents, notes, certificates and other
writings of every kind and nature shall be deemed to mean the Loan Agreement, as
amended by this and all previous Amendments.
6. MISCELLANEOUS.
6.1 Except as specifically set forth herein, the Loan Agreement and
all provisions of contained therein shall remain and continue in full force and
effect.
6.2 The execution delivery and effectiveness of this Eighth Amendment
shall not, except as expressly provided in Section 2 hereof, operate as a waiver
of (i) any right, power or remedy of the Lenders or the Agent under the Loan
Agreement or any of the other Loan Documents, or (ii) any Default or Event of
Default under the Loan Agreement or any of the other Loan Documents.
6.3 This Eighth Amendment shall be governed by, and construed and
enforced in accordance with, the laws of the State of Illinois applicable to
contracts made and performed in such State, without regard to the principles
thereof regarding conflict of laws.
6.4 This Eighth Amendment may be executed in any number of separate
counterparts, each of which shall, collectively and separately, constitute one
agreement.
[signature page follows]
-5-
<PAGE>
IN WITNESS WHEREOF, this Eighth Amendment has been duly executed as of
June 4, 1996 and when effective shall be effective as of March 31, 1996.
THE NORTHERN TRUST COMPANY,
as Agent and as Lender
By: /s/ Robert T. Jank
---------------------------------------
Name: Robert T. Jank
Title: Vice President
Revolving Credit Loan
Commitment: $21,666,668
LA SALLE NATIONAL BANK,
as Lender
By: /s/ Betty T. Latson
---------------------------------------
Name: Betty T. Latson
Title: First Vice President
Revolving Credit Loan
Commitment: $21,666,666
NBD BANK,
as Lender
By: /s/ Peter K. Gillespie
---------------------------------------
Name: Peter K. Gillespie
Title: Vice President
Revolving Credit Loan
Commitment: $21,666,666
-6-
<PAGE>
QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC.
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
--------------------------------------- ----------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: Executive Vice President - Finance Title: Vice President
DISC MANUFACTURING, INC. QUIXOTE STENO CORPORATION
(f/k/a Stenograph Corporation)
By: /s/ Myron R.Shain By: /s/ Myron R. Shain
--------------------------------------- ----------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: President Title: Vice President
LEGAL TECHNOLOGIES, INC. DISCOVERY PRODUCTS
(f/k/a Stenograph
Legal Services, Inc.)
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
--------------------------------------- ----------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: Vice President Title: Vice President
QUIXOTE IIS CORPORATION SPIN-CAST PLASTICS, INC.
(f/k/a Intergrated Information
Services, Inc.)
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
--------------------------------------- ----------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: Vice President Title: Vice President
-7-
<PAGE>
QUIXOTE LSI CORPORATION COURT TECHNOLOGIES, INC.
(f/k/a Litigation Sciences, Inc.)
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
--------------------------------------- ----------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: Vice President Title: Vice President
SAFE-HIT CORPORATION COMPOSITE COMPONENTS, INC.
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
--------------------------------------- ----------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: Vice President Title: Vice President
-8-
<PAGE>
EXHIBIT 1 TO
EIGHTH AMENDMENT
----------------
EXHIBIT B
---------
FORM OF
REVOLVING CREDIT NOTE
---------------------
$____________ Chicago, Illinois
March 31, 1996
FOR VALUE RECEIVED, the undersigned, QUIXOTE CORPORATION, a Delaware
corporation, ENERGY ABSORPTION SYSTEMS, INC., a Delaware corporation, DISC
MANUFACTURING, INC., a Delaware corporation, LEGAL TECHNOLOGIES, INC., a
Delaware corporation, QUIXOTE STENO CORPORATION (f/k/a Stenographic
Corporation) a Delaware corporation, DISCOVERY PRODUCTS, INC, (f/k/a Stenograph
Legal Services, Inc.), a Delaware corporation, SPIN-CAST PLASTICS, INC., an
Indiana corporation, COURT TECHNOLOGIES, INC., a Delaware corporation, COMPOSITE
COMPONENTS, INC., a Delaware corporation, QUIXOTE IIS CORPORATION
(f/k/a Integrated Information Services, Inc.), a Delaware corporation, and
QUIXOTE LSI CORPORATION (f/k/a Litigation Sciences, Inc.), a Delaware
corporation, SAFE-HIT CORPORATION, a Nevada corporation (each individually a
"Borrower" and collectively, the "Borrowers"), hereby JOINTLY AND SEVERALLY
PROMISE TO PAY to the order of_________________, a ___________ corporation
("Lender"), or its registered assigns, at ________________, or at such other
place as the holder of this Note may designate from time to time in writing, in
lawful money of the United States of America and in immediately available funds,
the principal amount of ________________________ Dollars ($________), or such
lesser principal amount as may be outstanding pursuant to the Loan Agreement
(as hereinafter defined) with respect to the Revolving Credit Loan, together
with interest on the unpaid principal amount of this note outstanding from time
to time.
This Note is a Revolving Credit Note issued pursuant to Section 2.1(b) of
that certain Loan Agreement dated as of June 26, 1992, as amended, among
each of the Borrowers, the "Lenders" (as defined therein) and The Northern
Trust Company, as agent for such Lenders (the "Loan Agreement"), and is
entitled to the benefit and security of the "Loan Documents" (as defined in
the Loan Agreement) provided for therein, to which reference is hereby made
for a statement of all of the terms and conditions under which the loan
evidenced hereby is made. All capitalized terms herein, unless otherwise
defined, shall have the meanings ascribed to them in the Loan Agreement.
The principal amount of the indebtedness evidenced hereby shall be
payable in the amounts and on the dates specified in the Loan Agreement.
Interest thereon, less any taxes payable by withholding, shall be paid until
such principle amount is paid in full at such interest rates and at such
times as are specified in the Loan Agreement.
<PAGE>
If any payment on this Note becomes due and payable on a day other than
a Business Day, the maturity thereof shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest thereon
shall be payable at the then applicable rate during such extension.
Upon and after the occurrence of an Event of Default, this Note shall or
may, as provided in the Loan Agreement, and without demand, notice or legal
process of any kind, become or be declared immediately due and payable.
The right to receive principal of, and stated interest on, this Note may
only be transferred through Borrower's book entry system.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrower.
This Note shall be interpreted, governed by, and construed in accordance
with the laws of the State of Illinois.
THIS REVOLVING CREDIT NOTE HAS BEEN ISSUED IN SUBSTITUTION AND REPLACEMENT OF
THAT CERTAIN REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $_______ DATED
NOVEMBER 10,1995 (WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF
THAT CERTAIN REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $_______ DATED
MAY 31, 1994) AND NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO DEEM PAID OR
FORGIVEN THE UNPAID PRINCIPAL AMOUNT OF, OR UNPAID ACCRUED INTEREST ON, SAID
NOTE AT THE TIME OF ITS REPLACEMENT BY THIS NOTE.
IN WITNESS WHEREOF, the parties hereto have caused this Revolving Credit
Note to be executed by their duly authorized officers as of the day and year
first written above.
QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC.
By:___________________________ By:_____________________________
Name: Myron R. Shain Name: Myron R. Shain
Title: Executive Vice President - Finance Title: Vice President
-2-
<PAGE>
DISC MANUFACTURING, INC. QUIXOTE STENO CORPORATION
(f/k/a Stenograph Corporation)
By:___________________________ By:_____________________________
Name: Myron R. Shain Name: Myron R. Shain
Title: President Title: Vice President
LEGAL TECHNOLOGIES, INC. DISCOVERY PRODUCTS
(f/k/a Stenograph Legal
Services, Inc.)
By:___________________________ By:_____________________________
Name: Myron R. Shain Name: Myron R. Shain
Title: Vice President Title: Vice President
QUIXOTE IIS CORPORATION SPIN-CAST PLASTICS, INC.
(f/k/a Integrated Information
Services, Inc)
By:___________________________ By:_____________________________
Name: Myron R. Shain Name: Myron R. Shain
Title: Vice President Title: Vice President
-3-
<PAGE>
QUIXOTE LSI CORPORATION COURT TECHNOLOGIES, INC.
(f/k/a Litigation Sciences, Inc.)
By:___________________________ By:_____________________________
Name: Myron R. Shain Name: Myron R. Shain
Title: Vice President Title: Vice President
SAFE-HIT CORPORATION COMPOSITE COMPONENTS, INC.
By:___________________________ By:_____________________________
Name: Myron R. Shain Name: Myron R. Shain
Title: Vice President Title: Vice President
-4-
<PAGE>
Ex. 10(b)
REVOLVING CREDIT NOTE
(LASALLE NATIONAL BANK)
$21,666,666 Chicago, Illinois
March 31, 1996
FOR VALUE RECEIVED, the undersigned, QUIXOTE CORPORATION, a Delaware
corporation, ENERGY ABSORPTION SYSTEMS, INC., a Delaware corporation, DISC
MANUFACTURING, INC., a Delaware corporation, LEGAL TECHNOLOGIES, INC., a
Delaware corporation, QUIXOTE STENO CORPORATION (f/k/a Stenograph Corporation),
a Delaware Corporation, DISCOVERY PRODUCTS, INC. (f/k/a Stenograph Legal
Services, Inc.), a Delaware corporation, SPIN-CAST PLASTICS, INC., an Indiana
corporation, COURT TECHNOLOGIES, INC., a Delaware corporation, COMPOSITE
COMPONENTS, INC., a Delaware corporation, QUIXOTE IIS CORPORATION (f/k/a
Integrated Information Services, Inc.), a Delaware corporation, QUIXOTE LSI
CORPORATION (f/k/a Litigation Sciences, Inc.), a Delaware corporation, and SAFE-
HIT CORPORATION, a Nevada corporation (each individually a "Borrower" and
collectively, the "Borrowers"), hereby JOINTLY AND SEVERALLY PROMISE TO PAY to
the order of LASALLE NATIONAL BANK, a national banking association ("Lender"),
or its registered assigns, at Fifty South LaSalle Street, or at such other place
as the holder of this Note may designate from time to time in writing, in lawful
money of the United States of America and in immediately available funds, the
principal amount of Twenty-One Million Six Hundred Sixty-Six Thousand Six
Hundred Sixty-Six Dollars ($21,666,666), or such lesser principal amount as may
be outstanding pursuant to the Loan Agreement (as hereinafter defined) with
respect to the Revolving Credit Loan, together with interest on the unpaid
principal amount of this note outstanding from time to time.
This Note is a Revolving Credit Note issued pursuant to Section 2.1(b)
of that certain Loan Agreement dated as of June 26, 1992, as amended, among each
of the Borrowers, the "Lenders" (as defined therein) and The Northern Trust
Company, as agent for such Lenders (the "Loan Agreement"), and is entitled to
the benefit and security of the "Loan Documents" (as defined in the Loan
Agreement) provided for therein, to which reference is hereby made for a
statement of all of the terms and conditions under which the loan evidenced
hereby is made. All capitalized terms herein, unless otherwise defined, shall
have the meanings ascribed to them in the Loan Agreement.
The principal amount of the indebtedness evidenced hereby shall be
payable in the amounts and on the dates specified in the Loan Agreement.
Interest thereon, less any taxes payable by withholding, shall be paid until
such principal amount is paid in full at such interest rates and at such times
as are specified in the Loan Agreement.
If any payment on this Note becomes due and payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
<PAGE>
Upon and after the occurrence of an Event of Default, this Note shall
or may, as provided in the Loan Agreement, and without demand, notice or legal
process of any kind, become or be declared immediately due and payable.
The right to receive principal of, and stated interest on, this Note
may only be transferred through Borrower's book entry system.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrower.
This Note shall be interpreted, governed by, and construed in
accordance with the laws of the State of Illinois.
THIS REVOLVING CREDIT NOTE HAS BEEN ISSUED IN SUBSTITUTION AND REPLACEMENT OF
THAT CERTAIN REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $23,333,333 DATED
NOVEMBER 10, 1995 (WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF
THAT CERTAIN REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $21,600,000 DATED
MAY 31, 1994) AND NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO DEEM PAID OR
FORGIVEN THE UNPAID PRINCIPAL AMOUNT OF, OR UNPAID ACCRUED INTEREST ON, SAID
NOTE AT THE TIME OF ITS REPLACEMENT BY THIS NOTE.
IN WITNESS WHEREOF, the parties hereto have caused this Revolving
Credit Note to be executed by their duly authorized officers as of the day and
year first written above.
QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC.
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
--------------------------------------- --------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: Executive Vice President - Finance Title: Vice President
DISC MANUFACTURING, INC. QUIXOTE STENO CORPORATION
(f/k/a Stenograph Corporation)
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
--------------------------------------- --------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: President Title: Vice President
<PAGE>
LEGAL TECHNOLOGIES, INC. DISCOVERY PRODUCTS
(f/k/a Stenograph Legal
Services, Inc.)
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
--------------------------------------- --------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: Vice President Title: Vice President
QUIXOTE IIS CORPORATION SPIN-CAST PLASTICS, INC.
(f/k/a Intergrated Information
Services, Inc.)
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
--------------------------------------- --------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: Vice President Title: Vice President
QUIXOTE LSI CORPORATION COURT TECHNOLOGIES, INC.
(f/k/a Litigation Sciences, Inc.)
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
--------------------------------------- --------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: Vice President Title: Vice President
SAFE-HIT CORPORATION COMPOSITE COMPONENTS, INC.
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
--------------------------------------- --------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: Vice President Title: Vice President
<PAGE>
REVOLVING CREDIT NOTE
(NBD BANK)
$21,666,666 Chicago, Illinois
March 31, 1996
FOR VALUE RECEIVED, the undersigned, QUIXOTE CORPORATION, a Delaware
corporation, ENERGY ABSORPTION SYSTEMS, INC., a Delaware corporation, DISC
MANUFACTURING, INC., a Delaware corporation, LEGAL TECHNOLOGIES, INC., a
Delaware corporation, QUIXOTE STENO CORPORATION (f/k/a Stenograph Corporation),
a Delaware Corporation, DISCOVERY PRODUCTS, INC. (f/k/a Stenograph Legal
Services, Inc.), a Delaware corporation, SPIN-CAST PLASTICS, INC., an Indiana
corporation, COURT TECHNOLOGIES, INC., a Delaware corporation, COMPOSITE
COMPONENTS, INC., a Delaware corporation, QUIXOTE IIS CORPORATION (f/k/a
Integrated Information Services, Inc.), a Delaware corporation, QUIXOTE LSI
CORPORATION (f/k/a Litigation Sciences, Inc.), a Delaware corporation, and SAFE-
HIT CORPORATION, a Nevada corporation (each individually a "Borrower" and
collectively, the "Borrowers"), hereby JOINTLY AND SEVERALLY PROMISE TO PAY to
the order of NBD BANK, an Illinois banking corporation ("Lender"), or its
registered assigns, at Fifty South LaSalle Street, or at such other place as the
holder of this Note may designate from time to time in writing, in lawful money
of the United States of America and in immediately available funds, the
principal amount of Twenty-One Million Six Hundred Sixty-Six Thousand Six
Hundred Sixty-Six Dollars ($21,666,666), or such lesser principal amount as may
be outstanding pursuant to the Loan Agreement (as hereinafter defined) with
respect to the Revolving Credit Loan, together with interest on the unpaid
principal amount of this note outstanding from time to time.
This Note is a Revolving Credit Note issued pursuant to Section 2.1(b)
of that certain Loan Agreement dated as of June 26, 1992, as amended, among each
of the Borrowers, the "Lenders" (as defined therein) and The Northern Trust
Company, as agent for such Lenders (the "Loan Agreement"), and is entitled to
the benefit and security of the "Loan Documents" (as defined in the Loan
Agreement) provided for therein, to which reference is hereby made for a
statement of all of the terms and conditions under which the loan evidenced
hereby is made. All capitalized terms herein, unless otherwise defined, shall
have the meanings ascribed to them in the Loan Agreement.
The principal amount of the indebtedness evidenced hereby shall be
payable in the amounts and on the dates specified in the Loan Agreement.
Interest thereon, less any taxes payable by withholding, shall be paid until
such principal amount is paid in full at such interest rates and at such times
as are specified in the Loan Agreement.
If any payment on this Note becomes due and payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
<PAGE>
Upon and after the occurrence of an Event of Default, this Note shall
or may, as provided in the Loan Agreement, and without demand, notice or legal
process of any kind, become or be declared immediately due and payable.
The right to receive principal of, and stated interest on, this Note
may only be transferred through Borrower's book entry system.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrower.
This Note shall be interpreted, governed by, and construed in
accordance with the laws of the State of Illinois.
THIS REVOLVING CREDIT NOTE HAS BEEN ISSUED IN SUBSTITUTION AND REPLACEMENT OF
THAT CERTAIN REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $23,333,333 DATED
NOVEMBER 10, 1995 (WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF
THAT CERTAIN REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $16,800,000 DATED
MAY 31, 1994) AND NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO DEEM PAID OR
FORGIVEN THE UNPAID PRINCIPAL AMOUNT OF, OR UNPAID ACCRUED INTEREST ON, SAID
NOTE AT THE TIME OF ITS REPLACEMENT BY THIS NOTE.
IN WITNESS WHEREOF, the parties hereto have caused this Revolving
Credit Note to be executed by their duly authorized officers as of the day and
year first written above.
QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC.
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
-------------------------------- --------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: Executive Vice Title: Vice President
President - Finance
DISC MANUFACTURING, INC. QUIXOTE STENO CORPORATION
(f/k/a Stenograph Corporation)
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
-------------------------------- --------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: President Title: Vice President
<PAGE>
LEGAL TECHNOLOGIES, INC. DISCOVERY PRODUCTS
(f/k/a Stenograph Legal
Services, Inc.)
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
-------------------------------- --------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: Vice President Title: Vice President
QUIXOTE IIS CORPORATION SPIN-CAST PLASTICS, INC.
(f/k/a Intergrated Information
Services, Inc.)
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
-------------------------------- --------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: Vice President Title: Vice President
QUIXOTE LSI CORPORATION COURT TECHNOLOGIES, INC.
(f/k/a Litigation Sciences, Inc.)
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
-------------------------------- --------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: Vice President Title: Vice President
SAFE-HIT CORPORATION COMPOSITE COMPONENTS, INC.
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
-------------------------------- --------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: Vice President Title: Vice President
<PAGE>
REVOLVING CREDIT NOTE
(THE NORTHERN TRUST COMPANY)
$21,666,668 Chicago, Illinois
March 31, 1996
FOR VALUE RECEIVED, the undersigned, QUIXOTE CORPORATION, a Delaware
corporation, ENERGY ABSORPTION SYSTEMS, INC., a Delaware corporation, DISC
MANUFACTURING, INC., a Delaware corporation, LEGAL TECHNOLOGIES, INC., a
Delaware corporation, QUIXOTE STENO CORPORATION (f/k/a Stenograph Corporation),
a Delaware Corporation, DISCOVERY PRODUCTS, INC. (f/k/a Stenograph Legal
Services, Inc.), a Delaware corporation, SPIN-CAST PLASTICS, INC., an Indiana
corporation, COURT TECHNOLOGIES, INC., a Delaware corporation, COMPOSITE
COMPONENTS, INC., a Delaware corporation, QUIXOTE IIS CORPORATION (f/k/a
Integrated Information Services, Inc.), a Delaware corporation, QUIXOTE LSI
CORPORATION (f/k/a Litigation Sciences, Inc.), a Delaware corporation, and SAFE-
HIT CORPORATION, a Nevada corporation (each individually a "Borrower" and
collectively, the "Borrowers"), hereby JOINTLY AND SEVERALLY PROMISE TO PAY to
the order of THE NORTHERN TRUST COMPANY, an Illinois banking corporation
("Lender"), or its registered assigns, at Fifty South LaSalle Street, or at such
other place as the holder of this Note may designate from time to time in
writing, in lawful money of the United States of America and in immediately
available funds, the principal amount of Twenty-One Million Six Hundred Sixty-
Six Thousand Six Hundred Sixty-Eight Dollars ($21,666,668), or such lesser
principal amount as may be outstanding pursuant to the Loan Agreement (as
hereinafter defined) with respect to the Revolving Credit Loan, together with
interest on the unpaid principal amount of this note outstanding from time to
time.
This Note is a Revolving Credit Note issued pursuant to Section 2.1(b)
of that certain Loan Agreement dated as of June 26, 1992, as amended, among each
of the Borrowers, the "Lenders" (as defined therein) and The Northern Trust
Company, as agent for such Lenders (the "Loan Agreement"), and is entitled to
the benefit and security of the "Loan Documents" (as defined in the Loan
Agreement) provided for therein, to which reference is hereby made for a
statement of all of the terms and conditions under which the loan evidenced
hereby is made. All capitalized terms herein, unless otherwise defined, shall
have the meanings ascribed to them in the Loan Agreement.
The principal amount of the indebtedness evidenced hereby shall be
payable in the amounts and on the dates specified in the Loan Agreement.
Interest thereon, less any taxes payable by withholding, shall be paid until
such principal amount is paid in full at such interest rates and at such times
as are specified in the Loan Agreement.
If any payment on this Note becomes due and payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
<PAGE>
Upon and after the occurrence of an Event of Default, this Note shall
or may, as provided in the Loan Agreement, and without demand, notice or legal
process of any kind, become or be declared immediately due and payable.
The right to receive principal of, and stated interest on, this Note
may only be transferred through Borrower's book entry system.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrower.
This Note shall be interpreted, governed by, and construed in
accordance with the laws of the State of Illinois.
THIS REVOLVING CREDIT NOTE HAS BEEN ISSUED IN SUBSTITUTION AND REPLACEMENT OF
THAT CERTAIN REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $23,333,334 DATED
NOVEMBER 10, 1995 (WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF
THAT CERTAIN REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $21,600,000 DATED
MAY 31, 1994) AND NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO DEEM PAID OR
FORGIVEN THE UNPAID PRINCIPAL AMOUNT OF, OR UNPAID ACCRUED INTEREST ON, SAID
NOTE AT THE TIME OF ITS REPLACEMENT BY THIS NOTE.
IN WITNESS WHEREOF, the parties hereto have caused this Revolving
Credit Note to be executed by their duly authorized officers as of the day and
year first written above.
QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC.
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
--------------------------- ---------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: Executive Vice President - Finance Title: Vice President
DISC MANUFACTURING, INC. QUIXOTE STENO CORPORATION
(f/k/a Stenograph Corporation)
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
--------------------------- ---------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: President Title: Vice President
<PAGE>
LEGAL TECHNOLOGIES, INC. DISCOVERY PRODUCTS
(f/k/a Stenograph Legal Services, Inc.)
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
--------------------------- ------------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: Vice President Title: Vice President
QUIXOTE IIS CORPORATION SPIN-CAST PLASTICS, INC.
(f/k/a Intergrated Information Services, Inc.)
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
-------------------------- -----------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: Vice President Title: Vice President
QUIXOTE LSI CORPORATION COURT TECHNOLOGIES, INC.
(f/k/a Litigation Sciences, Inc.)
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
-------------------------- -----------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: Vice President Title: Vice President
SAFE-HIT CORPORATION COMPOSITE COMPONENTS, INC.
By: /s/ Myron R. Shain By: /s/ Myron R. Shain
-------------------------- -----------------------------
Name: Myron R. Shain Name: Myron R. Shain
Title: Vice President Title: Vice President
<PAGE>
EX. 10(f)
RETIREMENT AWARD AGREEMENT
This Retirement Award Agreement ("Agreement") is entered into as of this
30th day of June, 1993 between QUIXOTE CORPORATION ("the Company"), a Delaware
corporation whose principal place of business is Chicago, Illinois, and PHILIP
E. ROLLHAUS, JR, of Chicago, Illinois ("Employee").
RECITALS
WHEREAS, the Board of Directors of the Company adopted the Quixote
Corporation 1993 Long-Term Stock Ownership Incentive Plan (the "Long-Term Plan")
by amending and restating the Quixote Corporation 1991 Incentive Stock Option
Plan, which is subject to approval by the stockholders of the Company, and;
WHEREAS, the Long-Term Plan authorizes the Audit/Compensation Committee of
the Board of Directors (the "Committee") to select certain employees of the
Company or any of its subsidiaries who are key executives and who have completed
ten years of continuous service for the Company or its subsidiaries to receive
Retirement Awards; and
WHEREAS, the Long-Term Plan provides that Retirement Awards may be in the
form of Retirement Stock Awards and Retirement Cash Awards as those terms are
defined in the Long-Term Plan; and
WHEREAS, the Committee has selected the Employee as a grantee of a
Retirement Award subject to the terms and conditions set forth in this
Agreement; and
WHEREAS, the Long-Term Plan requires that any Retirement Awards be
documented by a written agreement with such terms and conditions as the
Committee may determine.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties agree as follows:
1. GRANT OF RETIREMENT AWARD
<PAGE>
(a) Subject to the other terms and conditions of this Agreement and the
Long-Term Plan, the Company hereby grants to Employee an aggregate Retirement
Stock Award of 91,530 shares of the Company common stock, $.01 2/3 par value
(the "Stock"), to be issued and delivered to Employee as fully paid and non-
assessable Stock on the following Issuance Dates in the following amounts:
Number of
Issuance Date Shares
June 30, 1993 18,306 shares
June 30, 1994 18,306 shares
June 30, 1995 18,306 shares
June 30, 1996 18,306 shares
June 30, 1997 18,306 shares
(b) The Company shall issue and deliver the shares set forth in paragraph
(a) above to the Employee on each Issuance Date only if on such date the
Employee is employed by the Company or its subsidiaries. Notwithstanding the
immediately preceding sentence, the Company shall issue and deliver the shares
set forth above on an Issuance Date to the Employee even if the Employee is not
employed by the Company or its subsidiaries on such Issuance Date solely because
the Employee's employment was terminated during the fiscal year ending on that
Issuance Date by reason of the Employee's death, disability or other involuntary
termination of employment (excluding termination for cause). The Company will
deliver to the Employee a Certificate with respect to that number of shares
issued and delivered as of the Issuance Date.
2. GRANT OF RETIREMENT CASH AWARD
(a) Subject to the other terms and conditions of this Agreement and the
Long-Term Plan, the Company hereby grants to the Employee a Retirement Cash
Award for the sole purpose of paying federal and state income taxes arising from
the issuance and delivery of Retirement Awards to the Employee pursuant to this
Agreement, calculated as follows:
(i) As of each Issuance Date, the Employee will receive a Retirement
Cash Award equal to the product of (x) the Current Market Price of the
Retirement Stock Award issued and delivered on that Issuance Date and (y) the
percentage which is equal to 1 less the maximum marginal federal and state
income tax rate then in effect (the "Retirement Cash Award Formula").
<PAGE>
(ii) The Retirement Cash Award calculated for the Employee as of the
initial Issuance Date of June 30, 1993 pursuant to the Retirement Cash Award
Formula is as set forth on Schedule 1.
A Retirement Cash Award shall only be paid in connection with the issuance
and delivery of Retirement Stock under this Agreement. The Retirement Cash
Award Formula may be changed by the Committee in its discretion.
(b) A Retirement Cash Award shall not be paid directly to the Employee,
but shall be paid to the appropriate federal and state tax officials by the
Company on behalf of Employee. The Company will give the Employee written
evidence of such payment.
(c) For purposes of this Agreement, the parties agree that, given both the
level of activity in the public trading of the Company's Stock and the price
volatility of the Stock, the fair market value of the Stock shall mean the
Current Market Price. The term "Current Market Price" of the Stock means the
average of the daily closing prices for the thirty consecutive business days
commencing no more than forty five business days before the day in question.
The closing price for each day shall be the last reported sale price determined
in the regular way or, in case no such reported sales takes place on such day,
the average of the last reported bid and asked prices determined the regular
way, in either case in the principal national securities exchange in which the
Stock is admitted to trading a listed, or if not listed or admitted to trading
on any national securities exchange, the average of the closing bid and asked
prices as reported by NASDAQ or other similar organization if NASDAQ is no
longer reporting such information, or if not so available, the fair market price
is determined by the Board.
3. RESTRICTIONS ON THE RIGHT TO SELL OR TRANSFER RETIREMENT STOCK
(a) As a condition of this Award, the Employee agrees that he will not
sell, transfer, pledge, hypothecate, or otherwise transfer any Retirement Stock
he receives pursuant to this Agreement during the period he is employed by the
Company or its subsidiaries; provided, however, following the earlier of (i) the
termination of the employment of the Employee with the Company or its
subsidiaries, or (ii) the Employee's attaining age 65 (whether or not the
Employee actually retires from employment), these restrictions shall terminate.
The Employee agrees that the Company shall instruct its transfer agent to place
a legend on each share certificate representing the Retirement Stock with
respect to such restrictions in substantially the following form, and the
Company shall cause such certificates to be issued
<PAGE>
without a legend when the applicable restrictions have terminated as provided
herein:
The sale, transfer, pledge, hypothecation or other
transfer of the shares represented by this Certificate
are subject to the terms and conditions of a
Retirement Award Agreement dated as of June 30,
1993 by and between Quixote Corporation and
Philip E. Rollhaus, Jr.. The Retirement Award
Agreement provides that the restrictions shall
automatically expire upon the earlier of (i) the
termination of Mr. Rollhaus' employment by
Quixote Corporation or its subsidiaries, or (ii) Mr.
Rollhaus' attaining 65 years of age.
(b) Notwithstanding anything in this Section 3 to the contrary, the
Employee agrees that he will not sell, transfer, pledge, hypothecate, or
otherwise transfer any Retirement Stock he receives pursuant to this Agreement,
during the period prior to, and during the six-month period following, the
meeting of the stockholders of the Company at which the Long-Term Plan is
approved by stockholders.
(c) Unless on an Issuance Date, there is in the opinion of Company's
counsel a valid and effective registration statement under the Securities Act of
1933, as amended, and an appropriate qualification and registration under
applicable state securities law with respect to the Retirement Stock to be
issued and delivered, the Employee agrees, prior to the issuance and delivery of
the Retirement Stock, to provide the Company a representation that he is
acquiring the Stock for his own account for investment and not with a view to,
or for sale in connection with, the resale or distribution of any such Stock and
shall provide such other representations and covenants to the Company as may, in
the opinion of its counsel, be required. In the event that any Retirement Stock
issued is not so registered, then the Employee agrees that the certificates
representing the Retirement Stock shall bear a restrictive legend, and that stop
transfer instructions shall be issued to Company's transfer agents until such
time as the Retirement Stock is registered.
(d) If at any time the Committee determines, in its discretion, that the
listing, registration or qualification of the Retirement Stock upon any
securities exchange or under any state or federal law, or that the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the granting of the Award or in connection
with the issuance of Retirement Stock thereunder, the Award may not be granted
in whole or in part unless such listing, registration, qualification,
<PAGE>
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Committee.
4. STOCKHOLDER RIGHTS AND ADJUSTMENTS TO STOCK
(a) The Employee shall not by reason of any Retirement Stock Award or by
reason of this Agreement have any right as a stockholder of the Company with
respect to the shares of Stock to which the Company has agreed to issue and
deliver to the Employee in the future until such time as the Retirement Stock
has been actually issued and delivered to the Employee. Except as provided in
the Long-Term Plan, no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to an Issuance Date for such
Retirement Stock, and all adjustments to the Retirement Stock by reason of a
stock dividend, merger, consolidation or otherwise shall be made in accordance
with the terms of the Long-Term Plan.
(b) This Agreement shall not affect in any way the right or power of the
Company to make adjustments, reclassification, reorganizations or changes of its
capital or business structure or to merge, consolidate, dissolve, liquidate,
sell or transfer all or any part of its business or assets.
5. NO EMPLOYMENT RIGHTS
Neither the establishment of the Long-Term Plan nor the granting of this
Award nor the execution of this Agreement shall be construed to give the
Employee the right to remain employed by the Company or any of its subsidiaries,
or to any benefits not specifically provided by the Long-Term Plan or by this
Agreement, or in any manner modify the right of the Company or any of its
subsidiaries to modify, amend or terminate any of its employee benefit plans or
other arrangements available to Employee. The Company and or any of its
subsidiaries may at any time dismiss the Employee from employment free from any
liability or any claim under the Long-Term Plan.
6. SUCCESSORS AND ASSIGNS
The Award shall be binding in accordance with its terms upon any successors
of the Company and upon the heirs, executors, administrators and successors of
Employee.
7. GOVERNING LAW
<PAGE>
This Agreement and the Retirement Award shall be governed by and construed
in accordance with the laws of the State of Illinois relating to contracts made
and to be performed in that state.
8. TERMINATION
(a) This Agreement shall terminate upon the earlier of (i) July 1, 1998 or
(ii) the date of termination of the Employee's employment with the Company or
subsidiaries.
9. NOTICES
All notices, certificates or other communication shall be sufficiently
given when given in writing and mailed by first class mail, postage prepaid,
with proper address as indicated below. Any of such parties may be written
notice given to the other party designate any address or addresses to which
notices, certificates or other communications to them shall be sent when
required as contemplated by this Agreement. Until otherwise provided by the
respective parties, all notices, certificates and communications to each of the
parties shall be addressed as follows:
To the Company: Quixote Corporation
One East Wacker Drive
Suite 3000
Chicago, Illinois 60601
Attn.: President
With a copy to: _____________________________
_____________________________
_____________________________
_____________________________
To the Employee: Philip E. Rollhaus, Jr.
1500 Lake Shore Drive 11A
Chicago, IL 60610
10. PRE-REQUISITE STOCKHOLDER APPROVAL
The Company and the Employee agree that, notwithstanding any of the
provisions herein, this Agreement shall become null and void in the event the
stockholders of the Company fail to approve the adoption of the Long-Term Plan.
If the stockholders fail to approve the Long-Term Plan, neither
<PAGE>
the Company nor the Employee shall have any rights under this Agreement or under
the Long-Term Plan.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the day and year first above written.
QUIXOTE CORPORATION
By: /s/ Philip E. Rollhaus, Jr.
Its: President
ATTEST:
/s/ Joan R. Riley
/s/ Philip E. Rollhaus, Jr.
---------------------------
Philip E. Rollhaus, Jr.
<PAGE>
SCHEDULE 1
The initial Retirement Cash Award payable as of June 30, 1993, is $190,204,
calculated as follows:
A x B x C = $190,204, where:
A = Number of Shares Issued
B = Current Market Value on June 30, 1993
C = 100% - 42.6% which is the percentage equal to sum of maximum
marginal federal and state income tax rates.
<PAGE>
RETIREMENT AWARD AGREEMENT
This Retirement Award Agreement ("Agreement") is entered into as of this
30th day of June, 1993 between QUIXOTE CORPORATION ("the Company"), a Delaware
corporation whose principal place of business is Chicago, Illinois, and JAMES H.
DEVRIES, of Winnetka, Illinois ("Employee").
RECITALS
WHEREAS, the Board of Directors of the Company adopted the Quixote
Corporation 1993 Long-Term Stock Ownership Incentive Plan (the "Long-Term Plan")
by amending and restating the Quixote Corporation 1991 Incentive Stock Option
Plan, which is subject to approval by the stockholders of the Company, and;
WHEREAS, the Long-Term Plan authorizes the Audit/Compensation Committee of
the Board of Directors (the "Committee") to select certain employees of the
Company or any of its subsidiaries who are key executives and who have completed
ten years of continuous service for the Company or its subsidiaries to receive
Retirement Awards; and
WHEREAS, the Long-Term Plan provides that Retirement Awards may be in the
form of Retirement Stock Awards and Retirement Cash Awards as those terms are
defined in the Long-Term Plan; and
WHEREAS, the Committee has selected the Employee as a grantee of a
Retirement Award subject to the terms and conditions set forth in this
Agreement; and
WHEREAS, the Long-Term Plan requires that any Retirement Awards be
documented by a written agreement with such terms and conditions as the
Committee may determine.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties agree as follows:
1. GRANT OF RETIREMENT AWARD
<PAGE>
(a) Subject to the other terms and conditions of this Agreement and the
Long-Term Plan, the Company hereby grants to Employee an aggregate Retirement
Stock Award of 32,410 shares of the Company common stock, $.01 2/3 par value
(the "Stock"), to be issued and delivered to Employee as fully paid and non-
assessable Stock on the following Issuance Dates in the following amounts:
Number of
Issuance Date Shares
June 30, 1993 6,482 shares
June 30, 1994 6,482 shares
June 30, 1995 6,482 shares
June 30, 1996 6,482 shares
June 30, 1997 6,482 shares
(b) The Company shall issue and deliver the shares set forth in paragraph
(a) above to the Employee on each Issuance Date only if on such date the
Employee is employed by the Company or its subsidiaries. Notwithstanding the
immediately preceding sentence, the Company shall issue and deliver the shares
set forth above on an Issuance Date to the Employee even if the Employee is not
employed by the Company or its subsidiaries on such Issuance Date solely because
the Employee's employment was terminated during the fiscal year ending on that
Issuance Date by reason of the Employee's death, disability or other involuntary
termination of employment (excluding termination for cause). The Company will
deliver to the Employee a Certificate with respect to that number of shares
issued and delivered as of the Issuance Date.
2. GRANT OF RETIREMENT CASH AWARD
(a) Subject to the other terms and conditions of this Agreement and the
Long-Term Plan, the Company hereby grants to the Employee a Retirement Cash
Award for the sole purpose of paying federal and state income taxes arising from
the issuance and delivery of Retirement Awards to the Employee pursuant to this
Agreement, calculated as follows:
(i) As of each Issuance Date, the Employee will receive a Retirement
Cash Award equal to the product of (x) the Current Market Price of the
Retirement Stock Award issued and delivered on that Issuance Date and (y) the
percentage which is equal to 1 less the maximum marginal federal and state
income tax rate then in effect (the "Retirement Cash Award Formula").
<PAGE>
(ii) The Retirement Cash Award calculated for the Employee as of the
initial Issuance Date of June 30, 1993 pursuant to the Retirement Cash Award
Formula is as set forth on Schedule 1.
A Retirement Cash Award shall only be paid in connection with the issuance
and delivery of Retirement Stock under this Agreement. The Retirement Cash
Award Formula may be changed by the Committee in its discretion.
(b) A Retirement Cash Award shall not be paid directly to the Employee,
but shall be paid to the appropriate federal and state tax officials by the
Company on behalf of Employee. The Company will give the Employee written
evidence of such payment.
(c) For purposes of this Agreement, the parties agree that, given both the
level of activity in the public trading of the Company's Stock and the price
volatility of the Stock, the fair market value of the Stock shall mean the
Current Market Price. The term "Current Market Price" of the Stock means the
average of the daily closing prices for the thirty consecutive business days
commencing no more than forty five business days before the day in question.
The closing price for each day shall be the last reported sale price determined
in the regular way or, in case no such reported sales takes place on such day,
the average of the last reported bid and asked prices determined the regular
way, in either case in the principal national securities exchange in which the
Stock is admitted to trading a listed, or if not listed or admitted to trading
on any national securities exchange, the average of the closing bid and asked
prices as reported by NASDAQ or other similar organization if NASDAQ is no
longer reporting such information, or if not so available, the fair market price
is determined by the Board.
3. RESTRICTIONS ON THE RIGHT TO SELL OR TRANSFER
RETIREMENT STOCK
(a) As a condition of this Award, the Employee agrees that he will not
sell, transfer, pledge, hypothecate, or otherwise transfer any Retirement Stock
he receives pursuant to this Agreement during the period he is employed by the
Company or its subsidiaries; provided, however, following the earlier of (i) the
termination of the employment of the Employee with the Company or its
subsidiaries, or (ii) the Employee's attaining age 65 (whether or not the
Employee actually retires from employment), these restrictions shall terminate.
The Employee agrees that the Company shall instruct its transfer agent to place
a legend on each share certificate representing the Retirement Stock with
respect to such restrictions in substantially the following form, and the
Company shall cause such certificates to be issued
<PAGE>
without a legend when the applicable restrictions have terminated as provided
herein:
The sale, transfer, pledge, hypothecation or other
transfer of the shares represented by this Certificate
are subject to the terms and conditions of a
Retirement Award Agreement dated as of June 30,
1993 by and between Quixote Corporation and
James H. DeVries. The Retirement Award
Agreement provides that the restrictions shall
automatically expire upon the earlier of (i) the
termination of Mr. DeVries' employment by
Quixote Corporation or its subsidiaries, or (ii) Mr.
DeVries' attaining 65 years of age.
(b) Notwithstanding anything in this Section 3 to the contrary, the
Employee agrees that he will not sell, transfer, pledge, hypothecate, or
otherwise transfer any Retirement Stock he receives pursuant to this Agreement,
during the period prior to, and during the six-month period following, the
meeting of the stockholders of the Company at which the Long-Term Plan is
approved by stockholders.
(c) Unless on an Issuance Date, there is in the opinion of Company's
counsel a valid and effective registration statement under the Securities Act of
1933, as amended, and an appropriate qualification and registration under
applicable state securities law with respect to the Retirement Stock to be
issued and delivered, the Employee agrees, prior to the issuance and delivery of
the Retirement Stock, to provide the Company a representation that he is
acquiring the Stock for his own account for investment and not with a view to,
or for sale in connection with, the resale or distribution of any such Stock and
shall provide such other representations and covenants to the Company as may, in
the opinion of its counsel, be required. In the event that any Retirement Stock
issued is not so registered, then the Employee agrees that the certificates
representing the Retirement Stock shall bear a restrictive legend, and that stop
transfer instructions shall be issued to Company's transfer agents until such
time as the Retirement Stock is registered.
(d) If at any time the Committee determines, in its discretion, that the
listing, registration or qualification of the Retirement Stock upon any
securities exchange or under any state or federal law, or that the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the granting of the Award or in connection
with the issuance of Retirement Stock thereunder, the Award may not be granted
in whole or in part unless such listing, registration, qualification,
<PAGE>
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Committee.
4. STOCKHOLDER RIGHTS AND ADJUSTMENTS TO STOCK
(a) The Employee shall not by reason of any Retirement Stock Award or by
reason of this Agreement have any right as a stockholder of the Company with
respect to the shares of Stock to which the Company has agreed to issue and
deliver to the Employee in the future until such time as the Retirement Stock
has been actually issued and delivered to the Employee. Except as provided in
the Long-Term Plan, no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to an Issuance Date for such
Retirement Stock, and all adjustments to the Retirement Stock by reason of a
stock dividend, merger, consolidation or otherwise shall be made in accordance
with the terms of the Long-Term Plan.
(b) This Agreement shall not affect in any way the right or power of the
Company to make adjustments, reclassification, reorganizations or changes of its
capital or business structure or to merge, consolidate, dissolve, liquidate,
sell or transfer all or any part of its business or assets.
5. NO EMPLOYMENT RIGHTS
Neither the establishment of the Long-Term Plan nor the granting of this
Award nor the execution of this Agreement shall be construed to give the
Employee the right to remain employed by the Company or any of its subsidiaries,
or to any benefits not specifically provided by the Long-Term Plan or by this
Agreement, or in any manner modify the right of the Company or any of its
subsidiaries to modify, amend or terminate any of its employee benefit plans or
other arrangements available to Employee. The Company and or any of its
subsidiaries may at any time dismiss the Employee from employment free from any
liability or any claim under the Long-Term Plan.
6. SUCCESSORS AND ASSIGNS
The Award shall be binding in accordance with its terms upon any successors
of the Company and upon the heirs, executors, administrators and successors of
Employee.
7. GOVERNING LAW
<PAGE>
This Agreement and the Retirement Award shall be governed by and construed
in accordance with the laws of the State of Illinois relating to contracts made
and to be performed in that state.
8. TERMINATION
(a) This Agreement shall terminate upon the earlier of (i) July 1, 1998 or
(ii) the date of termination of the Employee's employment with the Company or
subsidiaries.
9. NOTICES
All notices, certificates or other communication shall be sufficiently
given when given in writing and mailed by first class mail, postage prepaid,
with proper address as indicated below. Any of such parties may be written
notice given to the other party designate any address or addresses to which
notices, certificates or other communications to them shall be sent when
required as contemplated by this Agreement. Until otherwise provided by the
respective parties, all notices, certificates and communications to each of the
parties shall be addressed as follows:
To the Company: Quixote Corporation
One East Wacker Drive
Suite 3000
Chicago, Illinois 60601
Attn.: President
With a copy to:
___________________________________
___________________________________
___________________________________
___________________________________
To the Employee: James H. DeVries
467 Willow Road
Winnetka, IL 60093
10. PRE-REQUISITE STOCKHOLDER APPROVAL
The Company and the Employee agree that, notwithstanding any of the
provisions herein, this Agreement shall become null and void in the event the
stockholders of the Company fail to approve the adoption of the Long-Term Plan.
If the stockholders fail to approve the Long-Term Plan, neither
<PAGE>
the Company nor the Employee shall have any rights under this Agreement or under
the Long-Term Plan.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the day and year first above written.
QUIXOTE CORPORATION
By: /s/ Myron R. Shain
Its: Executive Vice President-Finance
ATTEST:
/s/ Joan R. Riley
/s/ James H. DeVries
--------------------
James H. DeVries
<PAGE>
SCHEDULE 1
The initial Retirement Cash Award payable as of June 30, 1993, is $67,350,
calculated as follows:
A x B x C = $67,350, where:
A = Number of Shares Issued
B = Current Market Value on June 30, 1993
C = 100% - 42.6% which is the percentage equal to sum of maximum
marginal federal and state income tax rates.
<PAGE>
RETIREMENT AWARD AGREEMENT
This Retirement Award Agreement ("Agreement") is entered into as of this
30th day of June, 1993 between QUIXOTE CORPORATION ("the Company"), a Delaware
corporation whose principal place of business is Chicago, Illinois, and MYRON R.
SHAIN, of Palos Hills, Illinois ("Employee").
RECITALS
WHEREAS, the Board of Directors of the Company adopted the Quixote
Corporation 1993 Long-Term Stock Ownership Incentive Plan (the "Long-Term Plan")
by amending and restating the Quixote Corporation 1991 Incentive Stock Option
Plan, which is subject to approval by the stockholders of the Company, and;
WHEREAS, the Long-Term Plan authorizes the Audit/Compensation Committee of
the Board of Directors (the "Committee") to select certain employees of the
Company or any of its subsidiaries who are key executives and who have completed
ten years of continuous service for the Company or its subsidiaries to receive
Retirement Awards; and
WHEREAS, the Long-Term Plan provides that Retirement Awards may be in the
form of Retirement Stock Awards and Retirement Cash Awards as those terms are
defined in the Long-Term Plan; and
WHEREAS, the Committee has selected the Employee as a grantee of a
Retirement Award subject to the terms and conditions set forth in this
Agreement; and
WHEREAS, the Long-Term Plan requires that any Retirement Awards be
documented by a written agreement with such terms and conditions as the
Committee may determine.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties agree as follows:
1. GRANT OF RETIREMENT AWARD
<PAGE>
(a) Subject to the other terms and conditions of this Agreement and the
Long-Term Plan, the Company hereby grants to Employee an aggregate Retirement
Stock Award of 46,000 shares of the Company common stock, $.01 2/3 par value
(the "Stock"), to be issued and delivered to Employee as fully paid and non-
assessable Stock on the following Issuance Dates in the following amounts:
Number of
Issuance Date Shares
------------- ---------
June 30, 1993 4,600 shares
June 30, 1994 4,600 shares
June 30, 1995 4,600 shares
June 30, 1996 4,600 shares
June 30, 1997 4,600 shares
June 30, 1998 4,600 shares
June 30, 1999 4,600 shares
June 30, 2000 4,600 shares
June 30, 2001 4,600 shares
June 30, 2002 4,600 shares
(b) The Company shall issue and deliver the shares set forth in paragraph
(a) above to the Employee on each Issuance Date only if on such date the
Employee is employed by the Company or its subsidiaries and the term of this
Agreement has not been terminated pursuant to Section 8(b). Notwithstanding the
immediately preceding sentence, the Company shall issue and deliver the shares
set forth above on an Issuance Date to the Employee even if the Employee is not
employed by the Company or its subsidiaries on such Issuance Date solely because
the Employee's employment was terminated during the fiscal year ending on that
Issuance Date by reason of the Employee's death, disability or other involuntary
termination of employment (excluding termination for cause). The Company will
deliver to the Employee a Certificate with respect to that number of shares
issued and delivered as of the Issuance Date.
2. GRANT OF RETIREMENT CASH AWARD
(a) Subject to the other terms and conditions of this Agreement and the
Long-Term Plan, the Company hereby grants to the Employee a Retirement Cash
Award for the sole purpose of paying federal and state income taxes arising from
the issuance and delivery of Retirement Awards to the Employee pursuant to this
Agreement, calculated as follows:
<PAGE>
(i) As of each Issuance Date, the Employee will receive a Retirement
Cash Award equal to the product of (x) the Current Market Price of the
Retirement Stock Award issued and delivered on that Issuance Date and (y) the
percentage which is equal to 1 less the maximum marginal federal and state
income tax rate then in effect (the "Retirement Cash Award Formula").
(ii) The Retirement Cash Award calculated for the Employee as of the
initial Issuance Date of June 30, 1993 pursuant to the Retirement Cash Award
Formula is as set forth on Schedule 1.
A Retirement Cash Award shall only be paid in connection with the issuance
and delivery of Retirement Stock under this Agreement. The Retirement Cash
Award Formula may be changed by the Committee in its discretion.
(b) A Retirement Cash Award shall not be paid directly to the Employee,
but shall be paid to the appropriate federal and state tax officials by the
Company on behalf of Employee. The Company will give the Employee written
evidence of such payment.
(c) For purposes of this Agreement, the parties agree that, given both the
level of activity in the public trading of the Company's Stock and the price
volatility of the Stock, the fair market value of the Stock shall mean the
Current Market Price. The term "Current Market Price" of the Stock means the
average of the daily closing prices for the thirty consecutive business days
commencing no more than forty five business days before the day in question.
The closing price for each day shall be the last reported sale price determined
in the regular way or, in case no such reported sales takes place on such day,
the average of the last reported bid and asked prices determined the regular
way, in either case in the principal national securities exchange in which the
Stock is admitted to trading a listed, or if not listed or admitted to trading
on any national securities exchange, the average of the closing bid and asked
prices as reported by NASDAQ or other similar organization if NASDAQ is no
longer reporting such information, or if not so available, the fair market price
is determined by the Board.
3. RESTRICTIONS ON THE RIGHT TO SELL OR TRANSFER RETIREMENT STOCK
(a) As a condition of this Award, the Employee agrees that he will not
sell, transfer, pledge, hypothecate, or otherwise transfer any Retirement Stock
he receives pursuant to this Agreement during the period he is employed by the
Company or its subsidiaries; provided, however, following
<PAGE>
the earlier of (i) the termination of the employment of the Employee with the
Company or its subsidiaries, or (ii) the Employee's attaining age 65 (whether or
not the Employee actually retires from employment), these restrictions shall
terminate. The Employee agrees that the Company shall instruct its transfer
agent to place a legend on each share certificate representing the Retirement
Stock with respect to such restrictions in substantially the following form, and
the Company shall cause such certificates to be issued without a legend when the
applicable restrictions have terminated as provided herein:
The sale, transfer, pledge, hypothecation or other
transfer of the shares represented by this Certificate
are subject to the terms and conditions of a
Retirement Award Agreement dated as of June 30,
1993 by and between Quixote Corporation and
Myron R. Shain. The Retirement Award
Agreement provides that the restrictions shall
automatically expire upon the earlier of (i) the
termination of Mr. Shain's employment by
Quixote Corporation or its subsidiaries, or (ii) Mr.
Shain's attaining 65 years of age.
(b) Notwithstanding anything in this Section 3 to the contrary, the
Employee agrees that he will not sell, transfer, pledge, hypothecate, or
otherwise transfer any Retirement Stock he receives pursuant to this Agreement,
during the period prior to, and during the six-month period following, the
meeting of the stockholders of the Company at which the Long-Term Plan is
approved by stockholders.
(c) Unless on an Issuance Date, there is in the opinion of Company's
counsel a valid and effective registration statement under the Securities Act of
1933, as amended, and an appropriate qualification and registration under
applicable state securities law with respect to the Retirement Stock to be
issued and delivered, the Employee agrees, prior to the issuance and delivery of
the Retirement Stock, to provide the Company a representation that he is
acquiring the Stock for his own account for investment and not with a view to,
or for sale in connection with, the resale or distribution of any such Stock and
shall provide such other representations and covenants to the Company as may, in
the opinion of its counsel, be required. In the event that any Retirement Stock
issued is not so registered, then the Employee agrees that the certificates
representing the Retirement Stock shall bear a restrictive legend, and that stop
transfer instructions shall be issued to Company's transfer agents until such
time as the Retirement Stock is registered.
<PAGE>
(d) If at any time the Committee determines, in its discretion, that the
listing, registration or qualification of the Retirement Stock upon any
securities exchange or under any state or federal law, or that the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the granting of the Award or in connection
with the issuance of Retirement Stock thereunder, the Award may not be granted
in whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.
4. STOCKHOLDER RIGHTS AND ADJUSTMENTS TO STOCK
(a) The Employee shall not by reason of any Retirement Stock Award or by
reason of this Agreement have any right as a stockholder of the Company with
respect to the shares of Stock to which the Company has agreed to issue and
deliver to the Employee in the future until such time as the Retirement Stock
has been actually issued and delivered to the Employee. Except as provided in
the Long-Term Plan, no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to an Issuance Date for such
Retirement Stock, and all adjustments to the Retirement Stock by reason of a
stock dividend, merger, consolidation or otherwise shall be made in accordance
with the terms of the Long-Term Plan.
(b) This Agreement shall not affect in any way the right or power of the
Company to make adjustments, reclassification, reorganizations or changes of its
capital or business structure or to merge, consolidate, dissolve, liquidate,
sell or transfer all or any part of its business or assets.
5. NO EMPLOYMENT RIGHTS
Neither the establishment of the Long-Term Plan nor the granting of this
Award nor the execution of this Agreement shall be construed to give the
Employee the right to remain employed by the Company or any of its subsidiaries,
or to any benefits not specifically provided by the Long-Term Plan or by this
Agreement, or in any manner modify the right of the Company or any of its
subsidiaries to modify, amend or terminate any of its employee benefit plans or
other arrangements available to Employee. The Company and or any of its
subsidiaries may at any time dismiss the Employee from employment free from any
liability or any claim under the Long-Term Plan.
6. SUCCESSORS AND ASSIGNS
<PAGE>
The Award shall be binding in accordance with its terms upon any successors
of the Company and upon the heirs, executors, administrators and successors of
Employee.
7. GOVERNING LAW
This Agreement and the Retirement Award shall be governed by and construed
in accordance with the laws of the State of Illinois relating to contracts made
and to be performed in that state.
8. TERMINATION
(a) This Agreement shall terminate upon the earlier of (i) July 1, 1998 or
(ii) the date of termination of the Employee's employment with the Company or
subsidiaries, unless extended pursuant to section 8(b) below.
(b) Unless on or before March 1 of each year commencing March 1, 1994, the
Company notifies the Employee in writing that the Company does not intend to
extend the term of this Agreement, the term of this Agreement shall
automatically be extended for an additional period of one year; provided,
however, under no circumstances shall the term of this Agreement extend beyond
July 1, 2002.
9. NOTICES
All notices, certificates or other communication shall be sufficiently
given when given in writing and mailed by first class mail, postage prepaid,
with proper address as indicated below. Any of such parties may be written
notice given to the other party designate any address or addresses to which
notices, certificates or other communications to them shall be sent when
required as contemplated by this Agreement. Until otherwise provided by the
respective parties, all notices, certificates and communications to each of the
parties shall be addressed as follows:
To the Company: Quixote Corporation
One East Wacker Drive
Suite 3000
Chicago, Illinois 60601
Attn.: President
With a copy to: _____________________________
_____________________________
_____________________________
_____________________________
<PAGE>
To the Employee: Myron R. Shain
9723 Hickory Crest
Palos Hills, IL 60465
10. PRE-REQUISITE STOCKHOLDER APPROVAL
The Company and the Employee agree that, notwithstanding any of the
provisions herein, this Agreement shall become null and void in the event the
stockholders of the Company fail to approve the adoption of the Long-Term Plan.
If the stockholders fail to approve the Long-Term Plan, neither the Company nor
the Employee shall have any rights under this Agreement or under the Long-Term
Plan.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the day and year first above written.
QUIXOTE CORPORATION
By: /s/ James H. DeVries
Its: Executive Vice President
ATTEST:
/s/ Joan R. Riley
/s/ Myron R. Shain
------------------
Myron R. Shain
<PAGE>
SCHEDULE 1
The initial Retirement Cash Award payable as of June 30, 1993, is $47,795,
calculated as follows:
A x B x C = $47,795, where:
A = Number of Shares Issued
B = Current Market Value on June 30, 1993
C = 100% - 42.6% which is the percentage equal to sum of maximum
marginal federal and state income tax rates.
<PAGE>
RETIREMENT AWARD AGREEMENT
This Retirement Award Agreement ("Agreement") is entered into as of this
30th day of June, 1993 between QUIXOTE CORPORATION ("the Company"), a Delaware
corporation whose principal place of business is Chicago, Illinois, and GEORGE
D. EBERSOLE, of Palos Heights, Illinois ("Employee").
RECITALS
WHEREAS, the Board of Directors of the Company adopted the Quixote
Corporation 1993 Long-Term Stock Ownership Incentive Plan (the "Long-Term Plan")
by amending and restating the Quixote Corporation 1991 Incentive Stock Option
Plan, which is subject to approval by the stockholders of the Company, and;
WHEREAS, the Long-Term Plan authorizes the Audit/Compensation Committee of
the Board of Directors (the "Committee") to select certain employees of the
Company or any of its subsidiaries who are key executives and who have completed
ten years of continuous service for the Company or its subsidiaries to receive
Retirement Awards; and
WHEREAS, the Long-Term Plan provides that Retirement Awards may be in the
form of Retirement Stock Awards and Retirement Cash Awards as those terms are
defined in the Long-Term Plan; and
WHEREAS, the Committee has selected the Employee as a grantee of a
Retirement Award subject to the terms and conditions set forth in this
Agreement; and
WHEREAS, the Long-Term Plan requires that any Retirement Awards be
documented by a written agreement with such terms and conditions as the
Committee may determine.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties agree as follows:
1. GRANT OF RETIREMENT AWARD
<PAGE>
(a) Subject to the other terms and conditions of this Agreement and the
Long-Term Plan, the Company hereby grants to Employee an aggregate Retirement
Stock Award of 37,037 shares of the Company common stock, $.01 2/3 par value
(the "Stock"), to be issued and delivered to Employee as fully paid and non-
assessable Stock on the following Issuance Dates in the following amounts:
Number of
Issuance Date Shares
June 30, 1993 5,291 shares
June 30, 1994 5,291 shares
June 30, 1995 5,291 shares
June 30, 1996 5,291 shares
June 30, 1997 5,291 shares
June 30, 1998 5,291 shares
June 30, 1999 5,291 shares
(b) The Company shall issue and deliver the shares set forth in paragraph
(a) above to the Employee on each Issuance Date only if on such date the
Employee is employed by the Company or its subsidiaries and the term of this
Agreement has not been terminated pursuant to Section 8(b). Notwithstanding the
immediately preceding sentence, the Company shall issue and deliver the shares
set forth above on an Issuance Date to the Employee even if the Employee is not
employed by the Company or its subsidiaries on such Issuance Date solely because
the Employee s employment was terminated during the fiscal year ending on that
Issuance Date by reason of the Employee's death, disability or other involuntary
termination of employment (excluding termination for cause). The Company will
deliver to the Employee a Certificate with respect to that number of shares
issued and delivered as of the Issuance Date.
2. GRANT OF RETIREMENT CASH AWARD
(a) Subject to the other terms and conditions of this Agreement and the
Long-Term Plan, the Company hereby grants to the Employee a Retirement Cash
Award for the sole purpose of paying federal and state income taxes arising from
the issuance and delivery of Retirement Awards to the Employee pursuant to this
Agreement, calculated as follows:
(i) As of each Issuance Date, the Employee will receive a Retirement
Cash Award equal to the product of (x) the Current Market Price of the
Retirement Stock Award issued and delivered on that Issuance Date and (y) the
percentage which is equal to 1 less the maximum marginal
<PAGE>
federal and state income tax rate then in effect (the "Retirement Cash Award
Formula").
(ii) The Retirement Cash Award calculated for the Employee as of the
initial Issuance Date of June 30, 1993 pursuant to the Retirement Cash Award
Formula is as set forth on Schedule 1.
A Retirement Cash Award shall only be paid in connection with the issuance
and delivery of Retirement Stock under this Agreement. The Retirement Cash
Award Formula may be changed by the Committee in its discretion.
(b) A Retirement Cash Award shall not be paid directly to the Employee,
but shall be paid to the appropriate federal and state tax officials by the
Company on behalf of Employee. The Company will give the Employee written
evidence of such payment.
(c) For purposes of this Agreement, the parties agree that, given both the
level of activity in the public trading of the Company's Stock and the price
volatility of the Stock, the fair market value of the Stock shall mean the
Current Market Price. The term "Current Market Price of the Stock means the
average of the daily closing prices for the thirty consecutive business days
commencing no more than forty five business days before the day in question.
The closing price for each day shall be the last reported sale price determined
in the regular way or, in case no such reported sales takes place on such day,
the average of the last reported bid and asked prices determined the regular
way, in either case in the principal national securities exchange in which the
Stock is admitted to trading a listed, or if not listed or admitted to trading
on any national securities exchange, the average of the closing bid and asked
prices as reported by NASDAQ or other similar organization if NASDAQ is no
longer reporting such information, or if not so available, the fair market price
is determined by the Board.
3. RESTRICTIONS ON THE RIGHT TO SELL OR TRANSFER RETIREMENT STOCK
(a) As a condition of this Award, the Employee agrees that he will not
sell, transfer, pledge, hypothecate, or otherwise transfer any Retirement Stock
he receives pursuant to this Agreement during the period he is employed by the
Company or its subsidiaries; provided, however, following the earlier of (i) the
termination of the employment of the Employee with the Company or its
subsidiaries, or (ii) the Employee's attaining age 65 (whether or not the
Employee actually retires from employment), these restrictions shall terminate.
The Employee agrees that the Company shall instruct its transfer agent to place
a legend on each share certificate representing the
<PAGE>
Retirement Stock with respect to such restrictions in substantially the
following form, and the Company shall cause such certificates to be issued
without a legend when the applicable restrictions have terminated as provided
herein:
The sale, transfer, pledge, hypothecation or other
transfer of the shares represented by this Certificate
are subject to the terms and conditions of a
Retirement Award Agreement dated as of June 30,
1993 by and between Quixote Corporation and
George D. Ebersole. The Retirement Award
Agreement provides that the restrictions shall
automatically expire upon the earlier of (i) the
termination of Mr. Ebersole's employment by
Quixote Corporation or its subsidiaries, or (ii) Mr.
Ebersole's attaining 65 years of age.
(b) Notwithstanding anything in this Section 3 to the contrary, the
Employee agrees that he will not sell, transfer, pledge, hypothecate, or
otherwise transfer any Retirement Stock he receives pursuant to this Agreement,
during the period prior to, and during the six-month period following, the
meeting of the stockholders of the Company at which the Long-Term Plan is
approved by stockholders.
(c) Unless on an Issuance Date, there is in the opinion of Company's
counsel a valid and effective registration statement under the Securities Act of
1933, as amended, and an appropriate qualification and registration under
applicable state securities law with respect to the Retirement Stock to be
issued and delivered, the Employee agrees, prior to the issuance and delivery of
the Retirement Stock, to provide the Company a representation that he is
acquiring the Stock for his own account for investment and not with a view to,
or for sale in connection with, the resale or distribution of any such Stock and
shall provide such other representations and covenants to the Company as may, in
the opinion of its counsel, be required. In the event that any Retirement Stock
issued is not so registered, then the Employee agrees that the certificates
representing the Retirement Stock shall bear a restrictive legend, and that stop
transfer instructions shall be issued to Company's transfer agents until such
time as the Retirement Stock is registered.
(d) If at any time the Committee determines, in its discretion, that the
listing, registration or qualification of the Retirement Stock upon any
securities exchange or under any state or federal law, or that the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the granting of the Award or in connection
with the issuance of Retirement Stock thereunder, the Award may not be
<PAGE>
granted in whole or in part unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Committee.
4. STOCKHOLDER RIGHTS AND ADJUSTMENTS TO STOCK
(a) The Employee shall not by reason of any Retirement Stock Award or by
reason of this Agreement have any right as a stockholder of the Company with
respect to the shares of Stock to which the Company has agreed to issue and
deliver to the Employee in the future until such time as the Retirement Stock
has been actually issued and delivered to the Employee. Except as provided in
the Long-Term Plan, no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to an Issuance Date for such
Retirement Stock, and all adjustments to the Retirement Stock by reason of a
stock dividend, merger, consolidation or otherwise shall be made in accordance
with the terms of the Long-Term Plan.
(b) This Agreement shall not affect in any way the right or power of the
Company to make adjustments, reclassification, reorganizations or changes of its
capital or business structure or to merge, consolidate, dissolve, liquidate,
sell or transfer all or any part of its business or assets.
5. NO EMPLOYMENT RIGHTS
Neither the establishment of the Long-Term Plan nor the granting of this
Award nor the execution of this Agreement shall be construed to give the
Employee the right to remain employed by the Company or any of its subsidiaries,
or to any benefits not specifically provided by the Long-Term Plan or by this
Agreement, or in any manner modify the right of the Company or any of its
subsidiaries to modify, amend or terminate any of its employee benefit plans or
other arrangements available to Employee. The Company and or any of its
subsidiaries may at any time dismiss the Employee from employment free from any
liability or any claim under the Long-Term Plan.
6. SUCCESSORS AND ASSIGNS
The Award shall be binding in accordance with its terms upon any successors
of the Company and upon the heirs, executors, administrators and successors of
Employee.
7. GOVERNING LAW
<PAGE>
This Agreement and the Retirement Award shall be governed by and construed
in accordance with the laws of the State of Illinois relating to contracts made
and to be performed in that state.
8. TERMINATION
(a) This Agreement shall terminate upon the earlier of (i) July 1, 1998 or
(ii) the date of termination of the Employee's employment with the Company or
subsidiaries, unless extended pursuant to section 8(b) below.
(b) Unless on or before March 1 of each year commencing March 1, 1994, the
Company notifies the Employee in writing that the Company does not intend to
extend the term of this Agreement, the term of this Agreement shall
automatically be extended for an additional period of one year; provided,
however, under no circumstances shall the term of this Agreement extend beyond
July 1, 1999.
9. NOTICES
All notices, certificates or other communication shall be sufficiently
given when given in writing and mailed by first class mail, postage prepaid,
with proper address as indicated below. Any of such parties may be written
notice given to the other party designate any address or addresses to which
notices, certificates or other communications to them shall be sent when
required as contemplated by this Agreement. Until otherwise provided by the
respective parties, all notices, certificates and communications to each of the
parties shall be addressed as follows:
To the Company: Quixote Corporation
One East Wacker Drive
Suite 3000
Chicago, Illinois 60601
Attn.: President
With a copy to: _____________________________
_____________________________
_____________________________
_____________________________
To the Employee: George D. Ebersole
7831 Foresthill Lane
Palos Heights, IL 60463
<PAGE>
10. PRE-REQUISITE STOCKHOLDER APPROVAL
The Company and the Employee agree that, notwithstanding any of the
provisions herein, this Agreement shall become null and void in the event the
stockholders of the Company fail to approve the adoption of the Long-Term Plan.
If the stockholders fail to approve the Long-Term Plan, neither the Company nor
the Employee shall have any rights under this Agreement or under the Long-Term
Plan.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the day and year first above written.
QUIXOTE CORPORATION
By: /s/ James H. DeVries
Its: Executive Vice President
ATTEST:
/s/ Joan R. Riley
/s/ George D. Ebersole
----------------------
George D. Ebersole
<PAGE>
SCHEDULE 1
The initial Retirement Cash Award payable as of June 30, 1993, is $54,975,
calculated as follows:
A x B x C = $54,975, where:
A = Number of Shares Issued
B = Current Market Value on June 30, 1993
C = 100% - 42.6% which is the percentage equal to sum of maximum marginal
federal and state income tax rates.
<PAGE>
AMENDED RETIREMENT AWARD AGREEMENT
This Amended Retirement Award Agreement ("Amendment Agreement") is entered
into as of this 23rd day of August, 1996 between QUIXOTE CORPORATION (the
"Company"), a Delaware corporation whose place of business is in Chicago,
Illinois, and PHILIP E. ROLLHAUS, JR. of Chicago, Illinois ("Employee").
RECITALS:
WHEREAS, the Company and the Employee are parties to a Retirement Award
Agreement entered into as of June 30, 1993 ("Agreement"), which provides for
certain retirement awards, including a retirement cash award (as those terms are
defined) in the Quixote Corporation 1993 Long-Term Stock Ownership Incentive
Plan (the "Long-Term Plan");
WHEREAS, the formula for determining the retirement cash award provided in
Section 2 of the Agreement is inconsistent with the Long-Term Plan and its
purposes;
WHEREAS, the parties agree that the Agreement should be amended to reflect
accurately the formula for determining the retirement cash award.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties agree as follows:
1. Section 2 of the Agreement should be amended as of June 30, 1993 to
read as follows:
(a) Subject to the other terms and conditions of this Agreement
and the Long-Term Plan, the Company hereby grants to the Employee a
Retirement Cash Award for the sole purpose of paying federal and state
income taxes arising from the issuance and delivery of Retirement
Awards to the Employee pursuant to this Agreement, calculated as
follows: As of each Issuance Date, the Employee will receive a
Retirement Cash Award equal to the quotient of (x) the Current Market
Price of the Retirement Stock Award issued and delivered on that
Issuance Date divided by (y) the percentage which is equal to 1 minus
the maximum marginal federal and state income tax rate, less the
Current Market Price of the Retirement Stock Award (the "Retirement
Cash Award Formula").
A Retirement Cash Award shall only be paid in connection with the
issuance and delivery of Retirement Stock under this
<PAGE>
Agreement. The Retirement Cash Award Formula may be changed by the
Committee in its discretion.
(b) A Retirement Cash Award shall not be paid directly to the
Employee, but shall be paid to the appropriate federal and state tax
officials by the Company on behalf of Employee. The Company will give
the Employee written evidence of such payment.
(c) For purposes of this Agreement, the parties agree that,
given both the level of activity in the public trading of the
Company's Stock and the price volatility of the Stock, the fair market
value of the Stock shall mean the Current Market Price. The term
"Current Market Price" of the Stock means the average of the daily
closing prices for the thirty consecutive business days commencing no
more than forty five business days before the day in question. The
closing price for each day shall be the last reported sale price
determined in the regular way or, in case no such reported sales takes
place on such day, the average of the last reported bid and asked
prices determined the regular way, in either case in the principal
national securities exchange in which the Stock is admitted to trading
a listed, or if not listed or admitted to trading on any national
securities exchange, the average of the closing bid and asked prices
as reported by NASDAQ or other similar organization if NASDAQ is no
longer reporting such information, or if not so available, the fair
market price is determined by the Board.
2. Except as provided in Section 1, above, there shall be no other
changes to the Agreement.
IN WITNESS WHEREOF, the Company and Employee have executed this Amendment
Agreement as of the day and year first above written.
QUIXOTE CORPORATION PHILIP E. ROLLHAUS, JR.
By: /s/ Philip E. Rollhaus Jr. /s/ Philip E. Rollhaus Jr.
--------------------------- ---------------------------
Its: Chairman and Chief Executive Officer
----------------------------
ATTEST:
/s/ Joan R. Riley
- ---------------------------------
<PAGE>
AMENDED RETIREMENT AWARD AGREEMENT
This Amended Retirement Award Agreement ("Amendment Agreement") is entered
into as of this 23rd day of August, 1996 between QUIXOTE CORPORATION (the
"Company"), a Delaware corporation whose place of business is in Chicago,
Illinois, and JAMES H. DEVRIES of Winnetka, Illinois ("Employee").
RECITALS:
WHEREAS, the Company and the Employee are parties to a Retirement Award
Agreement entered into as of June 30, 1993 ("Agreement"), which provides for
certain retirement awards, including a retirement cash award (as those terms are
defined) in the Quixote Corporation 1993 Long-Term Stock Ownership Incentive
Plan (the " Long-Term Plan");
WHEREAS, the formula for determining the retirement cash award provided in
Section 2 of the Agreement is inconsistent with the Long-Term Plan and its
purposes;
WHEREAS, the parties agree that the Agreement should be amended to reflect
accurately the formula for determining the retirement cash award.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties agree as follows:
1. Section 2 of the Agreement should be amended effective as of June 30,
1993 to read as follows:
(a) Subject to the other terms and conditions of this Agreement
and the Long-Term Plan, the Company hereby grants to the Employee a
Retirement Cash Award for the sole purpose of paying federal and state
income taxes arising from the issuance and delivery of Retirement
Awards to the Employee pursuant to this Agreement, calculated as
follows: As of each Issuance Date, the Employee will receive a
Retirement Cash Award equal to the quotient of (x) the Current Market
Price of the Retirement Stock Award issued and delivered on that
Issuance Date divided by (y) the percentage which is equal to 1 minus
the maximum marginal federal and state income tax rate, less the
Current Market Price of the Retirement Stock Award (the "Retirement
Cash Award Formula").
A Retirement Cash Award shall only be paid in connection with the
issuance and delivery of Retirement Stock under this
<PAGE>
Agreement. The Retirement Cash Award Formula may be changed by the
Committee in its discretion.
(b) A Retirement Cash Award shall not be paid directly to the
Employee, but shall be paid to the appropriate federal and state tax
officials by the Company on behalf of Employee. The Company will give
the Employee written evidence of such payment.
(c) For purposes of this Agreement, the parties agree that, given
both the level of activity in the public trading of the Company's
Stock and the price volatility of the Stock, the fair market value of
the Stock shall mean the Current Market Price. The term "Current
Market Price" of the Stock means the average of the daily closing
prices for the thirty consecutive business days commencing no more
than forty five business days before the day in question. The closing
price for each day shall be the last reported sale price determined in
the regular way or, in case no such reported sales takes place on such
day, the average of the last reported bid and asked prices determined
the regular way, in either case in the principal national securities
exchange in which the Stock is admitted to trading a listed, or if not
listed or admitted to trading on any national securities exchange, the
average of the closing bid and asked prices as reported by NASDAQ or
other similar organization if NASDAQ is no longer reporting such
information, or if not so available, the fair market price is
determined by the Board.
2. Except as provided in Section 1, above, there shall be no other
changes to the Agreement.
IN WITNESS WHEREOF, the Company and Employee have executed this Amendment
Agreement as of the day and year first above written.
QUIXOTE CORPORATION JAMES H. DeVRIES
By: /s/ Philip E. Rollhaus Jr. /s/ James H. DeVries
----------------------------- ---------------------------
Its: Chairman and Chief Executive Officer
-----------------------------
ATTEST:
/s/ Joan R. Riley
- -------------------------
<PAGE>
AMENDED RETIREMENT AWARD AGREEMENT
This Amended Retirement Award Agreement ("Amendment Agreement") is entered
into as of this 23rd day of August, 1996 between QUIXOTE CORPORATION (the
"Company"), a Delaware corporation whose place of business is in Chicago,
Illinois, and MYRON R. SHAIN of Palos Hills, Illinois ("Employee").
RECITALS:
WHEREAS, the Company and the Employee are parties to a Retirement Award
Agreement entered into as of June 30, 1993 ("Agreement"), which provides for
certain retirement awards, including a retirement cash award (as those terms are
defined) in the Quixote Corporation 1993 Long-Term Stock Ownership Incentive
Plan (the "Long-Term Plan");
WHEREAS, the formula for determining the retirement cash award provided in
Section 2 of the Agreement is inconsistent with the Long-Term Plan and its
purposes;
WHEREAS, the parties agree that the Agreement should be amended to reflect
accurately the formula for determining the retirement cash award.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties agree as follows:
1. Section 2 of the Agreement should be amended effective as of June 30,
1993 to read as follows:
(a) Subject to the other terms and conditions of this Agreement
and the Long-Term Plan, the Company hereby grants to the Employee a
Retirement Cash Award for the sole purpose of paying federal and state
income taxes arising from the issuance and delivery of Retirement
Awards to the Employee pursuant to this Agreement, calculated as
follows: As of each Issuance Date, the Employee will receive a
Retirement Cash Award equal to the quotient of (x) the Current Market
Price of the Retirement Stock Award issued and delivered on that
Issuance Date divided by (y) the percentage which is equal to 1 minus
the maximum marginal federal and state income tax rate, less the
Current Market Price of the Retirement Stock Award (the "Retirement
Cash Award Formula").
A Retirement Cash Award shall only be paid in connection with the
issuance and delivery of Retirement Stock under this
<PAGE>
Agreement. The Retirement Cash Award Formula may be changed by the
Committee in its discretion.
(b) A Retirement Cash Award shall not be paid directly to the
Employee, but shall be paid to the appropriate federal and state tax
officials by the Company on behalf of Employee. The Company will give
the Employee written evidence of such payment.
(c) For purposes of this Agreement, the parties agree that, given
both the level of activity in the public trading of the Company's
Stock and the price volatility of the Stock, the fair market value of
the Stock shall mean the Current Market Price. The term "Current
Market Price" of the Stock means the average of the daily closing
prices for the thirty consecutive business days commencing no more
than forty five business days before the day in question. The closing
price for each day shall be the last reported sale price determined in
the regular way or, in case no such reported sales takes place on such
day, the average of the last reported bid and asked prices determined
the regular way, in either case in the principal national securities
exchange in which the Stock is admitted to trading a listed, or if not
listed or admitted to trading on any national securities exchange, the
average of the closing bid and asked prices as reported by NASDAQ or
other similar organization if NASDAQ is no longer reporting such
information, or if not so available, the fair market price is
determined by the Board.
2. Except as provided in Section 1, above, there shall be no other
changes to the Agreement.
IN WITNESS WHEREOF, the Company and Employee have executed this Amendment
Agreement as of the day and year first above written.
QUIXOTE CORPORATION MYRON R. SHAIN
By: /s/ Philip E. Rollhaus Jr. /s/ Myron R. Shain
--------------------------- ---------------------------
Its: Chairman and Chief Executive Officer
---------------------------
ATTEST:
/s/ Joan R. Riley
- -------------------------
<PAGE>
AMENDED RETIREMENT AWARD AGREEMENT
This Amended Retirement Award Agreement ("Amendment Agreement") is entered
into as of this 23rd day of August, 1996 between QUIXOTE CORPORATION (the
"Company"), a Delaware corporation whose place of business is in Chicago,
Illinois, and GEORGE D. EBERSOLE of Palos Heights, Illinois ("Employee").
RECITALS:
WHEREAS, the Company and the Employee are parties to a Retirement Award
Agreement entered into as of June 30, 1993 ("Agreement"), which provides for
certain retirement awards, including a retirement cash award (as those terms are
defined) in the Quixote Corporation 1993 Long-Term Stock Ownership Incentive
Plan (the "Long-Term Plan");
WHEREAS, the formula for determining the retirement cash award provided in
Section 2 of the Agreement is inconsistent with the Long-Term Plan and its
purposes;
WHEREAS, the parties agree that the Agreement should be amended to reflect
accurately the formula for determining the retirement cash award.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties agree as follows:
1. Section 2 of the Agreement should be amended effective as of June 30,
1993 to read as follows:
(a) Subject to the other terms and conditions of this Agreement
and the Long-Term Plan, the Company hereby grants to the Employee a
Retirement Cash Award for the sole purpose of paying federal and state
income taxes arising from the issuance and delivery of Retirement
Awards to the Employee pursuant to this Agreement, calculated as
follows: As of each Issuance Date, the Employee will receive a
Retirement Cash Award equal to the quotient of (x) the Current Market
Price of the Retirement Stock Award issued and delivered on that
Issuance Date divided by (y) the percentage which is equal to 1 minus
the maximum marginal federal and state income tax rate, less the
Current Market Price of the Retirement Stock Award (the "Retirement
Cash Award Formula").
A Retirement Cash Award shall only be paid in connection with the
issuance and delivery of Retirement Stock under this
<PAGE>
Agreement. The Retirement Cash Award Formula may be changed by the
Committee in its discretion.
(b) A Retirement Cash Award shall not be paid directly to the
Employee, but shall be paid to the appropriate federal and state tax
officials by the Company on behalf of Employee. The Company will give
the Employee written evidence of such payment.
(c) For purposes of this Agreement, the parties agree that,
given both the level of activity in the public trading of the
Company's Stock and the price volatility of the Stock, the fair market
value of the Stock shall mean the Current Market Price. The term
"Current Market Price" of the Stock means the average of the daily
closing prices for the thirty consecutive business days commencing no
more than forty five business days before the day in question. The
closing price for each day shall be the last reported sale price
determined in the regular way or, in case no such reported sales takes
place on such day, the average of the last reported bid and asked
prices determined the regular way, in either case in the principal
national securities exchange in which the Stock is admitted to trading
a listed, or if not listed or admitted to trading on any national
securities exchange, the average of the closing bid and asked prices
as reported by NASDAQ or other similar organization if NASDAQ is no
longer reporting such information, or if not so available, the fair
market price is determined by the Board.
2. Except as provided in Section 1, above, there shall be no other
changes to the Agreement.
IN WITNESS WHEREOF, the Company and Employee have executed this Amendment
Agreement as of the day and year first above written.
QUIXOTE CORPORATION GEORGE D. EBERSOLE
By: /s/ Philip E. Rollhaus Jr. /s/ George D. Ebersole
----------------------------- ---------------------------
Its: Chairman and Chief Executive Officer
-----------------------------
ATTEST:
/s/ Joan R. Riley
- -------------------------
<PAGE>
Ex. 10(n)
AGREEMENT
FOR
PURCHASE AND SALE OF ASSETS
THIS AGREEMENT is made and entered into this 3rd day of July, 1996, by
and between Integrated Information Services, Inc., a Nevada corporation ("IIS")
and Pettibone Corporation, a Delaware corporation, (collectively, IIS and
Pettibone Corporation are referred to herein as the "Buyer"), on the one hand
and Quixote Corporation, a Delaware corporation ("Parent"), Discovery Products,
Inc., a Delaware corporation ("DPI"), on the other hand (collectively, DPI and
Parent are referred to herein as the "Selling Entities").
WHEREAS, through DPI, Parent is engaged in the business of development
and sale of software for searching and annotating depositions and trial
transcripts (the "Business");
WHEREAS, the Selling Entities lease certain facilities in 431 Lakeview
Court, Suite E. Mt. Prospect, Illinois 60056 (the "Facility") at which the
Business is conducted;
WHEREAS, Buyer desires to purchase from the Selling Entities and the
Selling Entities desire to sell to Buyer the assets and business of the
Business;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements herein contained, the parties agree as follows:
ARTICLE I
THE TRANSACTION
1.1 PURCHASE AND SALE OF ASSETS. Upon the terms and subject to the
conditions of this Agreement, at the Closing, the Selling Entities shall sell,
transfer, assign and deliver to the Buyer (or its affiliated designee), and the
Buyer (or its affiliated designee) shall purchase, accept and receive, all
right, title and interest in and to the Purchased Assets (as defined below).
1.2 PURCHASED ASSETS. The "Purchased Assets" means (i) all of the
Business, (ii) all of the assets used in the operation of the Business, and
(iii) all of the assets, properties and rights of DPI, including the following:
(a) all tools, machinery and equipment, office furniture and office
<PAGE>
equipment; (b) all computer software programs, source codes, object codes,
information systems, program specifications and related material and
documentation and any and all licenses and copies thereof and rights thereto
(the "Software"); (c) all information in the nature of know-how, trade
secrets, inventions, processes, designs, devices and related information and
documentation (the "Technical Information"); (d) all patents, trademarks,
trade names, trade styles, logos, product designations and service marks and
all applications (pending or in process) and registrations therefor and
licenses thereof, including the name Discovery Products, Inc. and Stenograph
Legal Services, Inc. and all associated goodwill (the "Intellectual
Property"); (e) all packaging inventory, Software manuals, Initialize
Software protect devices, Software diskettes and Software protect devices;
(f) all documents and records relating to the Business and the Purchased
Assets; (g) all records relating to those employees subsequently hired by
Buyer; (h) all permits, licenses, approvals, registrations, authorizations
and indicia of authority and pending applications for any thereof ("Licenses
and Permits"); and (i) all contractual rights and interests of the applicable
Selling Entity under the contracts referred to in SCHEDULE 1.3(a).
The definition of Purchased Assets shall not include the following (the
"Excluded Assets"): (a) all interests in real property and real property leases,
(b) all interests in personal property leases, (c) all inventory (other than
packaging, Software manuals, PC board to program or initialize Software protect
devices, Software diskettes and Software protect devices), (d) all cash and cash
equivalents, (e) all accounts and notes receivable, (f) all security deposits
and prepaid expenses, and (g) all interests in the stock of Court Technologies,
Inc. and all of its assets, including intellectual property.
1.3 LIABILITIES AND OBLIGATIONS. Buyer shall not assume and
shall not be liable or responsible for any debt, obligation or liability of or
relating to the Facility, the Business, the Purchased Assets, any Selling Entity
or otherwise of any kind, whether known or unknown, contingent, absolute, or
otherwise, except for obligations under the agreements described on
SCHEDULE 1.3(a) to the extent obligations thereunder are required to be
performed after the end of the Closing Date, were incurred in the ordinary
course of business and do not relate to any failure to perform, improper
performance or other breach by any Selling Entity prior to the end of the
Closing Date (the "Assumed Liabilities"). IIS agrees to timely discharge and
perform all of the Assumed Liabilities.
1.4 EXCLUDED LIABILITIES. Except for the Assumed Liabilities,
each Selling Entity agrees to timely discharge and
-2-
<PAGE>
perform all of its liabilities and obligations related to the Business or the
Purchased Assets payable after Closing as they become due, including the
following (the foregoing, including the following being the "Excluded
Liabilities"): (a) liabilities and obligations relating to products sold prior
to the end of the Closing Date, including product liability claims and claims
for damages to person or property; (b) liabilities and obligations for any
products sold prior to the end of the Closing Date that do not comply with
applicable warranties or that are otherwise defective; (c) liabilities and
obligations relating to any federal, foreign, state, county and other tax
returns, reports and declarations of every nature (including income, employment,
excise, property, sales and use taxes); (d) liabilities and obligations relating
to any Plan (as hereinafter defined), as well as any and all claims of and
obligations to (including wages, salary and overtime) employees of the Business
to the extent related to the period through the end of the Closing Date or
otherwise related to the acts of the Selling Entities except for severance
liabilities arising from Buyer's failure to offer employment as required by
SECTION 7.1; and (e) liabilities and obligations to the Selling Entities and
their Affiliates (as hereinafter defined) except as arising pursuant to this
Agreement.
The Buyer agrees that any benefits, rights, actions, settlements, or assets
arising from any of the Excluded Liabilities and not the Purchased Assets or the
Assumed Liabilities shall belong exclusively to the Selling Entities, and Buyer
hereby waives any right or claim thereto.
ARTICLE II
CONSIDERATION FOR TRANSFER
2.1 CONSIDERATION. The aggregate consideration for the Purchased
Assets shall be as follows (the "Purchase Price"):
(a) Three Hundred Thousand Dollars ($300,000); and
(b) the assumption of the Assumed Liabilities by IIS.
2.2 TRANSFER TAXES. At Closing, the Selling Entities shall pay or
provide for the transfer taxes and sales taxes payable as a result of the
transfer of the Purchased Assets provided for herein.
-3-
<PAGE>
2.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the Selling Entities and the Purchased Assets as provided on an
Allocation Schedule in form provided by Buyer to the Selling Entities promptly
after Closing (the "Allocation Schedule"). Buyer and the Selling Entities agree
(i) to jointly complete and timely file Form 8594, and any other required
reports in accordance with SECTION 1060 of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder, with their respective
federal income tax returns for the tax year in which the Closing Date occurs
(and any amended Form 8594, if necessary) in accordance with the Allocation
Schedule and (ii) that no party will take a position on any report, return, or
other documents filed with any governmental authority in any judicial or
administrative proceeding, that is in any manner inconsistent with the
Allocation Schedule.
ARTICLE III
THE CLOSING AND TRANSFER OF ASSETS
3.1 CLOSING. The transfer of assets contemplated by this Agreement
shall be effective as of the end of the Closing Date, as hereafter defined (the
"Closing") and shall occur at the offices of McDermott, Will & Emery, 227 West
Monroe Street, Chicago, Illinois at 10:00 A.M. on July 3, 1996 or at such other
time or place as may be mutually agreed upon by the parties (the "Closing
Date").
3.2 DELIVERIES BY BUYER. At the Closing, Buyer shall deliver (or
cause to be delivered) the following:
(a) $300,000 payable by wire transfer of immediately available
funds;
(b) such other instruments or documents as may be necessary or
appropriate to carry out the transactions contemplated hereby.
3.3 DELIVERIES BY THE SELLING ENTITIES. At the Closing, the Selling
Entities shall deliver the following:
(a) a bill (or bills) of sale in the form provided by Buyer;
(b) the Consents referred to in SECTION 6.6;
-4-
<PAGE>
(c) patent, trademark and copyright assignments for items
included in the Purchased Assets in form provided by Buyer;
(d) such other instruments or documents as may be necessary or
appropriate to carry out the transactions contemplated by this
Agreement.
At the Closing, the Selling Entities shall have taken all steps necessary to
place the Buyer in actual possession and operating control of the Business and
the Purchased Assets. The Selling Entities shall allow employees, agents or
representatives of the Buyer access to the Facility ("Access") in order to take
delivery of the Purchased Assets. Access will be made available during regular
business hours from the date of Closing until 5:00 p.m. July 19, 1996.
3.4 CLOSING AGREEMENTS. At the Closing, the parties shall execute,
acknowledge and deliver such other instruments or documents as may be necessary
or appropriate to carry out the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE SELLING ENTITIES
The Selling Entities hereby jointly and severally represent and
warrant to Buyer, as of the date hereof, and as of the Closing Date, as set
forth below. For purposes of this Agreement, "Material Adverse Effect" shall
mean any effect which is materially adverse to the operations (as presently
conducted), assets, liabilities, condition (financial or otherwise) or to each
Selling Entity's knowledge the prospects of the Purchased Assets, the Business
or the Facilities.
4.1 AUTHORITY. Each Selling Entity has the full corporate right,
power and authority, without the consent of any other person, to execute and
deliver this Agreement and the agreements it is hereby contemplated to execute
and to carry out the transactions contemplated hereby and thereby, including the
transfer of each of the Purchased Assets. All corporate and other acts or
proceedings required to be taken by each Selling Entity to authorize the
execution, delivery and performance of this Agreement and all agreements and
transactions contemplated hereby have been duly and properly taken.
-5-
<PAGE>
4.2 VALIDITY. This Agreement has been, and the agreements and other
documents to be delivered by each Selling Entity at Closing will be, duly
executed and delivered and constitute the valid and legally binding obligations
of each Selling Entity enforceable in accordance with their respective terms.
4.3 VIOLATIONS AND APPROVALS. The execution and delivery of this
Agreement and the agreements contemplated hereby and the consummation of the
transactions contemplated hereby and thereby will not (immediately, upon
notice, with the passage of time or both) result in the creation of any lien,
charge or encumbrance of any kind or the termination or acceleration of any
obligation of or relating to the Business or the Purchased Assets and are not
prohibited by, do not and will not violate or conflict with any provision of,
and do not and will not (immediately, upon notice, with the passage of time or
both) constitute a default under or a breach of (i) the charter or by-laws of
any Selling Entity, (ii) any note, bond, indenture, contract, agreement, permit,
license or other instrument to which any Selling Entity is a party or, by which
any Selling Entity, the Business or the Purchased Assets are bound, (iii) any
order, writ, injunction, decree or judgment of any court or governmental agency
applicable to any Selling Entity, the Business, or the Purchased Assets or (iv)
any law, rule or regulation applicable to any Selling Entity, the Business or
the Purchased Assets. Except as set forth on SCHEDULE 4.3, and consents to
assignment and other consents that are obtained in connection with the Closing,
no approval, authorization, registration, consent, order or other action of or
filing with any person, including any court, administrative agency or other
governmental authority of any country, is required for the execution and
delivery by each Selling Entity of this Agreement or the agreements contemplated
hereby or the consummation of the transactions contemplated hereby and thereby.
4.4 DUE ORGANIZATION. Each Selling Entity is a corporation duly
organized and validly existing under the laws of its state or jurisdiction of
incorporation. Each Selling Entity, as applicable, has full power and authority
and all requisite rights, licenses, permits and franchises to own and operate
the Purchased Assets and to carry on the Business. For purposes of the
Business, the applicable Selling Entities are duly qualified to do business in
Illinois. DPI is qualified to do business in California. The Selling Entities
are not required to be qualified to do business in any other state.
4.5 FINANCIAL STATEMENTS AND TAXES. The financial statements of the
Business for the year ended June 30, 1995 and
-6-
<PAGE>
the ten months ended April 30, 1996 attached hereto as SCHEDULE 4.5 (the
"Financial Statements") are (a) in accordance with the books of account and
records of the Selling Entities, (b) fair presentations of the financial
condition and the results of operations as of the dates and for the periods
indicated and (c) prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods covered thereby
(except as specified therein and except for the lack of footnotes, and in the
case of interim Financial Statements subject to year-end audit adjustments
consisting only of normally recurring accruals which in the aggregate are not
material). All federal, foreign, state, county and other tax returns, reports
and declarations of every nature (including income, employment, excise,
property, sales and use taxes) required to be filed by or on behalf of the
Selling Entities (as it relates to the Business) and the Business have been
filed and such returns are complete and accurate in all material respects and
disclose all taxes required to be paid for the periods covered thereby. All
taxes required to be paid, withheld or accrued by the Selling Entities (as
related to the Business) and the Business and any deficiency assessments,
penalties and interest have been paid, withheld or accrued. All tax payments
related to employees, including income tax withholding, FICA, FUTA, unemployment
and worker's compensation, required to be made by the Selling Entities (relating
to the Business) and the Business have been fully and properly paid, withheld,
accrued or recorded. There are no outstanding federal, state or local tax
audits related to the Business.
4.6 INTERIM CHANGE. Except as set forth in SCHEDULE 4.6, since
November 30, 1995, the Selling Entities have operated the Business in the
ordinary course, consistent with past operations, and there has not been any of
the following in connection with the Business: (a) any event resulting in, or
that is reasonably likely to result in, a Material Adverse Effect; (b) any
material change in significant personnel or relationships with third parties,
including suppliers, customers and others; (c) any damage to or destruction of
a material asset, or any disposition of assets or transfers of assets from any
Facility, other than sales of finished goods and use and disposal of assets in
the ordinary course of business on terms consistent with past practice; or (d)
any agreement to take any of the foregoing actions.
4.7 PURCHASED ASSETS. The Selling Entities are the sole and
exclusive legal and equitable owner of all right, title and interest in and have
good and marketable title to all of the Purchased Assets free and clear of the
interests and rights of any other party. None of the Purchased Assets are
subject to any
-7-
<PAGE>
lease, license, security interest, mortgage, pledge, lien, charge, encumbrance,
claim, covenant or restriction of any kind or character. The Purchased Assets
are in good repair, order and condition (reasonable wear and tear excepted), are
suitable for the purposes for which they are presently being used, and are
adequate to meet all present and reasonably anticipated requirements of the
Business as the Selling Entities conduct the Business. The Purchased Assets
will furnish Buyer with all of the capacity and rights to operate the Business
in the same manner as presently operated by the Selling Entities.
4.8 ENVIRONMENTAL MATTERS. Each of the Selling Entities is currently
complying in all respects with its obligations under all laws relating to the
environment in connection with the operation of its Business, its occupancy of
its Facilities and otherwise. No environmentally hazardous materials have ever
been released, unlawfully generated, treated, stored, or disposed of or in
connection with the Business.
4.9 SOFTWARE AND INFORMATION SYSTEMS. SCHEDULE 4.9 sets forth an
accurate and complete list and summary description of all the Software.
SCHEDULE 4.9 identifies or describes (i) Software which is owned by the Selling
Entities; and (ii) Software which is licensed to the Selling Entities by third
parties. Except as provided on SCHEDULE 4.9, with respect to the Software that
is reflected as being owned by one or more of the Selling Entities:
(a) all Software documentation for the end user is reasonably
current, accurate and sufficient in detail and content to identify,
explain the nature and permit the intended use thereof;
(b) all source codes, object codes and source code comments
included in the Software are sufficient to the extent reasonably
necessary to enable Buyer to maintain and modify the Software, using
persons skilled in the programming language, operating systems, and
hardware involved;
(c) Except for Incorporated Products (as hereinafter defined),
the applicable Selling Entity has good, sole, and marketable right,
title, and interest in and to the Software (including the exclusive
right to make, copy, sell, exploit, and provide to others the use of
the Software and all derivative works thereof) free and clear of any
liens, claims, encumbrances and adverse rights of every kind, nature,
and description. The applicable Selling Entity is in actual and sole
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possession of and will transfer to Buyer at Closing all copies of the source
code, source code comments and object code (except for copies of object code
held by licensees) and other proprietary rights included in the Software.
SCHEDULE 4.9 lists all current and former employees of the Selling Entities who
were authors of the Software and to the knowledge of the Selling Entities any
other person or entity who materially participated in the development of the
Software or any portion thereof or performed any work related to the Software
(such authors and other persons or entities are collectively referred to as the
"Software Authors"). Each Software Author identified as "internal" made his
contribution to the Software within the scope of employment with the applicable
Selling Entity, as "work made for hire." Except for the Incorporated Products,
the Software and every portion thereof is an original creation of the Software
Authors (or other persons not having any rights thereto) and does not contain
any source code or portions of source code (including any "canned program")
created by any parties other than the Software Authors (or other persons not
having any rights thereto). The Selling Entities have not, by any acts or
omissions, or by acts or omissions of affiliates, directors, officers,
employees, agents, or representatives caused any of their proprietary rights in
the Software, including copyrights, trademarks, and trade secrets to be
transferred, diminished, or adversely affected to any material extent.
(d) Except as set forth in SCHEDULE 4.9:
(i) there are no defects or errors in the Software,
which defects or errors could materially and adversely
affect Buyer's or any licensee's use of the Software or the
functioning of the Software in accordance with the
specifications for the Software published by the applicable
Selling Entity or provided to customers, the Software has
all the features described in the user manuals or
advertisements and materials made available to the
applicable Selling Entity's customers; and the Software does
not contain any "back door," "time bomb," "Trojan horse,"
"worm," "drop dead device," "virus" (as these terms are
commonly used in the computer software industry), or other
software routines or
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hardware components designed to permit unauthorized access, to disable
or erase software, hardware, or data in a manner unauthorized by, and
contrary to the intentions of, the user, or to perform any other
similar unauthorized destructive type of functions;
(ii) no person or entity other than the applicable
Selling Entity has any interest of any kind or nature in or
with respect to the Software, including the right to use,
make, copy, sell, exploit and provide to others the use of,
the Software and all derivative works thereof, and no
government funding or university or college facilities were
used in the development of the Software, and the Software
was not developed pursuant to an agreement giving any person
or entity rights to the Software, and no situation, matter,
or agreement exists that would preclude Buyer from making
any change to the Software or combining it with other
software in any lawful manner;
(iii) all copies of copyrighted Software contain
copyright legends; the Selling Entities have no knowledge
that any third party is violating or has violated any of the
applicable Selling Entity's proprietary rights in the
Software; other than license fees for Incorporated Products,
no third party has any interest in, or right to compensation
from the Selling Entities by reason of, the use,
exploitation, or sale of the Software; there are no
restrictions on the ability of the Selling Entities (or any
successor or assignee of the Selling Entities, including
Buyer) to use or otherwise exploit the Software, and such
use or exploitation does not and will not obligate the
Selling Entities (or any successor or assignee of the
Selling Entities, including Buyer) to pay any royalty, fee,
or other compensation to any person or entity other than
license fees for Incorporated Products; and the Selling
Entities have not received any notice and do not have any
knowledge of any complaint,
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assertion, threat, or allegation inconsistent with the preceding
statements in this paragraph; and
(iv) the Software has been licensed for use by third
parties only pursuant to the terms of the standard license
agreement in form attached to SCHEDULE 4.9.
(e) The Selling Entities have delivered or will deliver at
Closing all of their records with respect to Software fixes (including
fixes currently in progress), problem lists, maintenance of the
Software, and customer complaints, and all warranty claims (including
any pending claims) related to the Software all of which are described
in SCHEDULE 4.9. Except as set forth in SCHEDULE 4.9, there are no
representations and warranties that have been made with respect to the
Software.
(f) SCHEDULE 4.9 contains a complete list of all third party
software and patent rights which are a component of or incorporated in
or specifically required to develop or support any of the Software
("Incorporated Products"), and a list of all restrictions on the
Selling Entities' unrestricted right to use, incorporate or distribute
the Incorporated Products. The Selling Entities are not in violation
of any license, sublicense or agreement with respect to an
Incorporated Product.
(g) No person or entity is entitled to receive the source code
for any Software for any reason; and the Selling Entities have not
disclosed the source code for any Software to any third party except
as set forth on SCHEDULE 4.9. Prior to Closing, no employee,
Consultant or agent of the Selling Entities has improperly used, taken
or copied the Software.
4.10 CUSTOMERS AND SUPPLIERS. The Selling Entities have no knowledge
of any fact, condition or event which would cause Buyer's relationship with any
customer or supplier to be materially and adversely different than the current
relationship of such supplier with respect to the Business.
4.11 EMPLOYEES. The Selling Entities have delivered to Buyer
accurate and complete information in writing containing, with respect to the
Business:
(a) a list of all employees (including name, title and
position);
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(b) the employee's length of service; and
(c) the compensation (including terms of payment, bonuses,
commissions and deferred compensation, as well as any benefits) of
each employee.
With respect to the Business, except as set forth on SCHEDULE 4.11, (i) there
have not been in the past five years and are not pending any labor disputes, any
work stoppages, request for representations, pickets or work slow-downs due to
labor disagreements, (ii) there are and have been no unresolved violations of
any local, state, or federal laws respecting the employment of any employees,
including the National Labor Relations Act, the Fair Labor Standards Act, the
Americans with Disabilities Act, wage-payment laws, laws prohibiting employment
discrimination, and laws addressing workplace safety and health; (iii) there is
no unfair labor practice, charge or complaint pending, unresolved or, to the
knowledge of the Selling Entities, threatened before the National Labor
Relations Board; (iv) there is no employment handbook, personnel policy manual,
or similar document that creates prospective employment rights or obligations;
(v) the employees of the Business are not covered by any collective bargaining
agreement; (vi) each Selling Entity has provided or will timely provide prior to
Closing all notices required by law to be given prior to Closing of the
transactions contemplated by this Agreement to all local, state, or federal
labor, wage-payment, equal employment opportunity, unemployment-insurance and
related agencies; (vii) each Selling Entity has paid or properly accrued in the
ordinary course of business all wages and compensation due to employees,
including all vacations or vacation pay, holidays or holiday pay, sick days or
sick pay, and bonuses; and (viii) the transactions contemplated by this
Agreement will not create liability under any local, state, or federal law
respecting reductions in force or the impact on employees on plant closing or
sales of businesses.
4.12 EMPLOYEE BENEFIT PLANS. For purposes hereof, a "Plan" shall
mean any employee benefit plan, contract or arrangement, established, maintained
or contributed to by one of the Selling Entities with respect to the employees
of the Business. All Plans have been administered in accordance with applicable
law and the terms thereof. Buyer will not incur any liability under any Plan as
a result of the transactions contemplated hereby.
4.13 LICENSES AND PERMITS. SCHEDULE 4.13 contains an accurate and
complete list and summary description of each License and Permit. The Licenses
and Permits are valid and in full force and effect, no violations of any Selling
Entity in
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respect of the Business exist in respect thereof and there are not pending, or
to the knowledge of any Selling Entity, threatened any proceedings or
circumstances which could result in the termination, revocation, limitation or
impairment of any License or Permit in respect of the Business. The Licenses
and Permits included in the Purchased Assets are all of such items that are
necessary to own the Purchased Assets and conduct the Business as presently
owned, operated or conducted except for such items where failure to have such
item could not result in any material expense or liability and that can be
readily obtained without any material cost. Except as set forth as described in
SCHEDULE 4.13, all Licenses and Permits are freely assignable to Buyer without
the consent or approval of any third party, unless provided otherwise on
SCHEDULE 4.13. No violations of any Selling Entity or its agents have been
recorded in respect of any Licenses and Permits in the past three years, and the
Selling Entities know of no basis therefor.
4.14 MATERIAL CONTRACTS. SCHEDULE 4.14 hereto sets forth an
accurate, correct and complete list of all contracts, instruments, commitments,
agreements, arrangements and understandings including all amendments and
supplements thereto, relating to the Business, to which any Selling Entity is a
party or is bound, or by which any of the assets of any Selling Entity are
subject or bound (i) which involve benefits or obligations with a value
individually or in the aggregate, of $15,000 or more, or (ii) which otherwise
involve any of the following types of contracts (the items in (i) and (ii) being
collectively referred to herein as the "MATERIAL CONTRACTS"):
(a) any sales, license, service or distribution agreements and
contracts;
(b) all agreements, arrangements or understandings, written or
oral (the "Employment Contracts"), regarding services to be rendered,
terms and conditions of employment, confidentiality and assignment of
inventions;
(c) all licenses, agreements, contracts and other instruments
affecting the Intellectual Property or the Software;
(d) all agreements and contracts containing requirements or
"take or pay" provisions;
(e) all agreements and contracts with state, federal, local,
regulatory or other governmental entities;
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(f) all agreements and contracts not to compete or otherwise
restricting activities;
(g) all agreements and contracts containing a provision to
indemnify any party or assume any tax, environmental or other
liability; and
(h) any other contract, commitment, agreement, arrangement or
understanding which provides for payment or performance by any party
thereto having an aggregate value of $15,000 or more or which is
otherwise material to the Business.
All Material Contracts are valid, binding and enforceable in
accordance with their terms and are in full force and effect and none of the
parties to any Material Contract are in breach of, violation of, or in default
under the terms of any such Material Contract except for such breaches,
violations and defaults which can be readily cured by Buyer and which will not
result any material expense or liability. No event has occurred which with
notice or passage of time or both would result in a breach of, violation of, or
in default under, the terms of any Material Contract. The consummation of the
transactions contemplated hereby, without notice to or consent or approval of
any party, will not constitute a breach of, violation of, or default under any
provision of any Material Contract. Except as set forth on SCHEDULE 4.14, there
is no adverse claim on the rights of any Selling Entity under any Material
Contract. None of the rights of any Selling Entity under any Material Contract
will be impaired by the consummation of the transactions contemplated by this
Agreement (except for such impairments as can be readily cured by Buyer without
any material expense or liability), and all of such rights will be enforceable
by Buyer after the Closing Date without the consent or agreement of any other
party, including all rights to renew the applicable Material Contract. The
Selling Entities have delivered accurate, correct and complete copies of each
Material Contract to Buyer.
4.15 INTELLECTUAL PROPERTY. SCHEDULE 4.15 sets forth an accurate and
complete list and summary description of all Intellectual Property and contains
an indication of any renewals, taxes or fees due in respect thereof within
ninety (90) days of the Closing Date. Except as set forth in SCHEDULE 4.15,
with respect to the Intellectual Property, (i) the applicable Selling Entity is
the sole and exclusive owner and has the sole and exclusive right to use the
Intellectual Property and no other person has any interest in any Intellectual
Property; (ii) no action, suit, proceeding or investigation has been instituted
and is pending, unresolved or, to Selling Entity's knowledge,
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threatened; (iii) none of the Intellectual Property or products or methods of
the Business interferes with, infringes upon, conflicts with or otherwise
violates the rights of others or, to the knowledge of the Selling Entities, is
being interfered with or infringed upon by others, and none is subject to any
outstanding order, decree or judgment except for such infringements, conflicts
or violations as could not result in any material expense or liability and which
can be readily cured by Buyer without any material expense or liability; (iv)
there are no royalty, commission or similar arrangements, and no licenses,
sublicenses or agreements, pertaining to any of the Intellectual Property or
products or methods of the Business; (v) the Selling Entities have not agreed to
indemnify any person for or against any infringement of or by the Intellectual
Property or the Purchased Assets; (vi) all registrable items of Intellectual
Property currently being used are properly registered under applicable law; and
(vii) the Intellectual Property constitutes all such assets, properties and
rights which are used in or necessary for the conduct of the operations of the
Business and the Facility as currently conducted. Except as set forth on
SCHEDULE 4.15, all rights of the applicable Selling Entity in and to the
Intellectual Property are transferable to Buyer as contemplated herein without
any consent or other approval. Buyer has been provided with accurate and
complete copies or written descriptions of all studies, opinions and searches of
which the Selling Entities have knowledge relating to any Intellectual Property
or any infringement of or by any Intellectual Property, all of which are listed
on SCHEDULE 4.15.
4.16 TECHNICAL INFORMATION. SCHEDULE 4.16 sets forth an accurate and
complete list and summary description of all Technical Information. All
Technical Information:
(a) is owned solely and exclusively by the applicable Selling
Entity or available for use by Buyer without payment to any person;
and
(b) is documented in a manner comparable to that of similarly
situated businesses and in condition for conveyance to and readily
useable by Buyer.
All Technical Information and any copies thereof shall be delivered to Buyer at
Closing. There is no violation of any patents, trademarks, trade secret rights,
copyrights or other proprietary rights by, or with respect to, the Technical
Information. Buyer has been provided with accurate and complete copies or
written descriptions of all studies, opinions and searches of which the Selling
Entities have knowledge relating to
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any Technical Information or any infringement of or by any Technical
Information, all of which are listed on SCHEDULE 4.16.
4.17 LEGAL PROCEEDINGS. The Selling Entities are not engaged in or a
party to or, to the knowledge of any Selling Entity, threatened with any
dispute, action, suit or other proceeding relating to the Business or any of the
Purchased Assets. To the knowledge of the Selling Entities, no basis exists for
any such proceeding which could have a Material Adverse Effect. The Selling
Entities have no knowledge of any investigation threatened or contemplated by
any governmental or regulatory authority.
4.18 COMPLIANCE WITH LAW. As of and prior to the Closing, the
Business, each Facility and the Purchased Assets conform to all applicable
statutes, codes, laws, ordinances, rules and regulations and each Selling Entity
has complied with all such statutes, codes, laws, ordinances, rules and
regulations as they apply to the Business and where the failure of such
compliance can be readily cured and will not result in any material liability or
expense. Neither the Selling Entities, nor, to the knowledge of the Selling
Entities, any employee or representative thereof has made any unlawful
gratuities or other payments (or taken similar actions) for the purpose of
benefiting the Selling Entities with respect to the Business.
4.19 BROKERS. The Selling Entities have not retained any broker,
finder or agent or incurred any liability or obligation for any brokerage fees,
commissions or finders fees with respect to this Agreement or the transactions
contemplated hereby, except for those to whom Buyer will have no liability or
obligation.
4.20 DISCLOSURE. The representations and warranties of the Selling
Entities contained in this Agreement and each agreement, attachment, schedule,
certificate or other written statement delivered pursuant to this Agreement or
in connection with the transactions contemplated herein and therein are accurate
and complete in all material respects, and do not contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements and information contained herein or therein not misleading.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BUYER
Each Buyer hereby represents and warrants to the Selling Entities as
of the date hereof, and as of the Closing Date, as set forth below.
5.1 AUTHORITY. Buyer has full corporate right, power and authority,
without the consent of any other person, to execute and deliver this Agreement
and the agreements contemplated hereby and to consummate the transactions
contemplated hereby and thereby. All corporate and other acts or proceedings
required to be taken by Buyer to authorize the execution, delivery and
performance of this Agreement and the agreements contemplated hereby and all
transactions contemplated hereby and thereby have been duly and properly taken.
5.2 VALIDITY. This Agreement has been, and the agreements and other
documents to be delivered at Closing will be, duly executed and delivered by
Buyer and will constitute lawful, valid and legally binding obligations of
Buyer, enforceable in accordance with their respective terms.
5.3 VIOLATIONS AND APPROVALS. The execution and delivery of this
Agreement and the agreements contemplated hereby and the consummation of the
transactions contemplated hereby and thereby will not (immediately, with notice,
the passage of time or both) result in the creation of any lien, charge or
encumbrance or the acceleration of any indebtedness or other obligation of Buyer
and are not prohibited by, do not violate or conflict with any provision of, and
do not and will not (immediately, with notice, the passage of time or both)
result in a default under or a breach of (i) the charter or by-laws of Buyer,
(ii) any contract, agreement, permit, license or other instrument to which Buyer
is a party or by which it is bound, (iii) any order, writ, injunction, decree or
judgment of any court or governmental agency, or (iv) any law, rule or
regulation applicable to Buyer, except for such creations, terminations,
violations, conflicts, breaches, defaults, charges or encumbrances which, in the
aggregate will not have an adverse effect on Buyer's ability to consummate the
transactions contemplated hereby.
5.4 BROKERS. Buyer has not retained any broker or finder or incurred
any liability or obligation for any brokerage fees, commissions or finders fees
with respect to this Agreement or the transactions contemplated hereby.
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5.5 DUE ORGANIZATION. Each Buyer is a corporation duly organized and
validly existing under the laws of its state of incorporation and has full
corporate power and authority to acquire and operate each Facility and to own,
lease and operate the Purchased Assets and to carry on the Business.
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS OF
SELLING ENTITIES AND BUYER
The Selling Entities jointly and severally hereby agree to keep,
perform and fully discharge the following covenants and agreements.
6.1 FURTHER ASSURANCES; COOPERATION. From time to time, after
Closing at Buyer's request and without further consideration, the Selling
Entities shall execute, acknowledge and deliver such documents, instruments or
assurances and take such other actions as Buyer may reasonably request with
respect to assigning, conveying and transferring to Buyer any of the Purchased
Assets.
6.2 RECORDS AND DOCUMENTS. Following the Closing Date, the Selling
Entities shall retain and grant to Buyer and its representatives, at Buyer's
request (and subject to Buyer's reimbursement of the Selling Entities out-of-
pocket expenses), access to and the right to make or obtain copies of those
records and documents related to the Business or the Purchased Assets,
possession of which is retained by the Selling Entities, as may be necessary or
useful in connection with Buyer's operation of the Business after the Closing.
If during the seven year period following Closing, the Selling Entities elect to
dispose of such records, the Selling Entities shall first give Buyer sixty (60)
days' written notice, during which period Buyer shall have the right to obtain
the records without further consideration; PROVIDED, HOWEVER, that the Selling
Entities shall have no liability to Buyer for disposal of any record unless done
intentionally in contravention of this Section. If reasonably necessary, the
Selling Entities shall also make reasonably available their employees and agents
to provide information related to the Business, or the Purchased Assets on the
same basis.
6.3 CONSUMMATION. Subject to the terms and conditions provided
herein, the Selling Entities and the Buyers agree to use all reasonable efforts
to take, or cause to be taken all actions and to do, or cause to be done all
things necessary, proper or
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advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by the Agreement in accordance with its terms.
The Selling Entities and the Buyer shall not take any action inconsistent with
their obligations hereunder or which would hinder or delay the consummation of
the transactions contemplated hereby.
6.4 NONCOMPETITION AND NONDISCLOSURE.
6.4.1 NONCOMPETITION. In order to protect the value of the
Business and the Purchased Assets, each Selling Entity and its Affiliates
(collectively, the "Seller Group") agrees for three (3) years from the Closing
Date, not to (i) engage, directly or indirectly, in any manner in the Business
anywhere in the United States or Europe, (ii) directly or indirectly engage in
any activity that competes with the Business anywhere in the United States or
Europe, (iii) solicit any customer of the Business for products or services
directly or indirectly competitive with the Business and (iv) attempt in any
way, directly or indirectly, to obtain for itself, or others, or to divert from
Buyer and its subsidiaries and affiliates, any rights benefits, sales or profits
arising out of or in connection with the Purchased Assets or the Business. For
purposes hereof, an "Affiliate" means any entity controlling, controlled by or
under common control with another entity or person.
6.4.2 NONDISCLOSURE. After the Closing, except as required by
law or court order, the Seller Group will not disclose, or use directly or
indirectly, to, or for the benefit of any person or entity other than Buyer, any
Technical Information or confidential information, data or materials related to
the Business.
6.4.3 BREACH. The Seller Group agrees that any breach of
SECTIONS 6.4.1 or 6.4.2 above will result in irreparable damage to Buyer for
which Buyer will have no adequate remedy at law, and, therefore if such a breach
should occur, the Seller Group consents to any temporary or permanent injunction
or decree of specific performance by any court of competent jurisdiction in
favor of Buyer enjoining any such breach, without prejudice to any other right
or remedy to which Buyer shall be entitled. In the event that any portion of
this SECTION 6.4 shall be determined by any court of competent jurisdiction to
be unenforceable by reason of its being extended over too great a period of time
or too large a geographic area or over too great a range of activities, it shall
be interpreted to extend only over the maximum lesser period of time, geographic
area, or range of activities as to which it may be enforceable. Each of the
covenants herein shall be deemed a separate and severable
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covenant. In the event any member of the Seller Group breaches any provision of
this SECTION 6.4, Buyer shall be entitled to recover all costs of enforcement,
including reasonable attorneys' fees.
6.5 CHANGE OF NAMES. Within ten (10) business days after the
Closing, DPI will provide evidence to Buyer that it has taken all necessary
action and made all necessary state filings to change its corporate name to
"Quixote DPI Corporation". The Selling Entities will terminate the use of any
and all "d/b/a's" currently used by DPI.
6.6 CONSENTS. The Selling Entities have obtained consents necessary
to assign the contracts described on SCHEDULE 6.6 prior to Closing and will
obtain consents necessary to assign all other contracts described on
SCHEDULE 1.3(a) as promptly as practicable after Closing.
___________________________
Buyer hereby agrees to keep, perform and fully discharge the following
covenants and agreements:
6.7 RECORDS AND DOCUMENTS. Following the Closing Date, Buyer shall
grant to each Selling Entity and its representatives, at the Selling Entity's
request (and subject to the Selling Entity's reimbursement of Buyer's out-of-
pocket expenses), access to and the right to make or obtain copies of those
records and documents related to the Business or the Purchased Assets,
possession of which is transferred to Buyer, as may be reasonably necessary for
the Selling Entity's tax, employee benefit, collection of receivables or
financial reporting obligations or other investigation required by law or, for
the Selling Entity's dealing with, handling or discharging of any debt,
obligation or liability of or relating to the Business or the Purchased Assets
which is not an Assumed Liability. If during the seven year period following
Closing, the Buyer elects to dispose of such records, the Buyer shall first give
the Selling Entities written notice, during which period the Selling Entities
shall have the right to obtain the records without further consideration;
PROVIDED, HOWEVER, that the Buyer shall have no liability to the Selling
Entities for disposal of any record unless done intentionally in contravention
of this Section. If reasonably necessary, Buyer shall also make reasonably
available its employees to provide information for the same purposes on the same
basis.
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ARTICLE VII
EMPLOYEES
7.1 CONTINUED ASSOCIATION WITH THE BUSINESS. Buyer will offer
employment to at least 3 employees of the Business. The Selling Entities will
use all reasonable efforts to retain all present employees through the Closing.
None of the Selling Entities nor their Affiliates have or will offer employment
to any of such 3 employees in respect of any period after Closing. Buyer shall
not incur any liability or obligation with respect to any employee that does not
accept employment with Buyer. The Buyer shall use reasonable efforts to request
each employee that accepts employment to confirm the acceptance of employment in
writing. Buyer will not incur as a result of the transfer of the Purchased
Assets, any present, future or contingent liability or obligation to pay any
pension benefits, medical benefits, compensation for loss of employment or other
compensation or benefits to any employee terminated at or prior to Closing. The
employees of the Business hired by Buyer are referred to herein as the "Buyer
Employees".
7.2 SECTION 401(k) PLANS. The Selling Entities have made all
existing payment options available to the employees of the Business
participating in any applicable 401(K) Plan. As soon as practicable after the
Closing Date, the parties will transfer the account balances of Buyer Employees
from the trustee of the Quixote 401(k) Plan (the "Quixote 401(k) Plan") to the
trustee of the Pettibone 401(k) Plan. The Selling Entities will take all action
necessary so that Buyer Employees will be fully vested in their accounts in the
Quixote 401(k) Plan as of the Closing Date. Assets of the Quixote 401(k) Plan
equal to the sum of the account balances of the Buyer Employees in such plan as
of the last day of the month coincident with or immediately preceding the date
of transfer (the "Transfer Date") shall be transferred to the Pettibone 401(k)
Plan as soon as practicable following the Closing Date and the Selling Entities
shall be responsible for determining whether the correct amount of balances are
transferred to the Pettibone 401(k) Plan. The transfer will be made after any
distributions that Buyer Employees are entitled to receive under the Quixote
401(k) Plan before the Transfer Date have been made and after Buyer presents to
the Selling Entities a copy of a current IRS favorable determination letter or
other evidence that the Pettibone 401(k) Plan is a "qualified" plan within the
meaning of Section 401(a) of the Internal Revenue Code. The Selling Entities
will allow each Buyer Employee to elect any benefit option available under the
Quixote 401(k) Plan, and transfers to the Pettibone 401(k) Plan will occur only
if such employee elects such a transfer.
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The transfer will be made in cash. The Selling Entities represent that the
transfer described in this Section shall be made in accordance with Section
414(l) of the Internal Revenue Code.
7.3 COBRA OBLIGATIONS. The Selling Entities shall retain all
liabilities, perform all obligations and maintain all insurance under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") with respect to
its employees and former employees of the Business and their covered dependents,
whether or not such employees accept employment with Buyer.
7.4 SEVERANCE. The Selling Entities shall be liable for any
severance, separation or similar liabilities, that are payable (i) to any person
whose right to severance or separation benefits arises as a result of the
transactions contemplated by this Agreement, (ii) to any person whose employment
with a Selling Entity was terminated prior to the Closing, and (iii) to any
employee of any of the Selling Entities not hired by Buyer (a "Seller
Employee"). Buyer shall be liable for any severance, separation or similar
liabilities for all Buyer Employees under Buyer's employment policies and
procedures.
7.5 WORKERS COMPENSATION. The Selling Entities shall be liable for
the administration and payment of all workers' compensation liabilities and
benefits with respect to (i) Buyer Employees to the extent resulting from
claims, events, circumstances, exposures, conditions or occurrences occurring
prior to the Closing Date, and (ii) Seller Employees. Buyer shall be
responsible for the administration and payment of all workers' compensation
liabilities and benefits with respect to Buyer Employees resulting from claims
reported following the Closing Date, to the extent resulting from events,
circumstances, exposures, conditions, or occurrences after the Closing Date.
7.6 HEALTH BENEFITS. The Selling Entities shall be liable for the
administration and payment of all health and welfare liabilities and benefits
under the Plans with respect to (i) Buyer Employees to the extent resulting from
claims, events, circumstances, exposures, conditions or occurrences occurring
through the end of the Closing Date, and (ii) Seller Employees. Buyer shall be
responsible for the administration and payment of all health and welfare
liabilities and benefits under the Buyer's benefit programs with respect to
Buyer Employees resulting from claims reported following the Closing Date, to
the extent resulting from events, circumstances, exposures, conditions, or
occurrences after the end of the Closing Date. The Selling Entities shall
retain responsibility for health and welfare benefits and liabilities for any
disabled employees of the
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<PAGE>
Business and disabled dependents of employees of the Business until such persons
are no longer disabled.
ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
8.1 SURVIVAL. All covenants and agreements contained in this
Agreement or in any agreement or other document delivered pursuant hereto shall
be deemed to be material and to have been relied upon by the parties hereto and
shall survive the Closing and be enforceable until the covenant or agreement has
been fully performed. Unless otherwise specified, the representations and/or
warranties contained in this Agreement or in any agreement or other document
delivered pursuant hereto shall be deemed to be material and to have been relied
upon by the parties hereto and shall survive the Closing for a period ending two
years from the Closing Date, provided that (i) the representations and
warranties in the following Sections shall survive and be enforceable
indefinitely: Section 4.1, Section 4.2, the first sentence of Section 4.4, the
first sentence of Section 4.7, Section 5.1, Section 5.2, Section 5.5, and (ii)
the representations and warranties in SECTION 4.9 shall survive for two years
and (iii) the representations and warranties in Section 4.6 as to tax matters
only, shall survive until expiration of the applicable statutes of limitation
and any extensions thereof. Any claim for indemnification under the
representations and warranties that survive for a period of time that is
asserted in writing within the survival period shall survive until resolved or
judicially determined. The representations and warranties set forth in this
Agreement or in any agreement or other document delivered pursuant hereto shall
not be affected by any investigation, verification or examination by any party
hereto or by anyone on behalf of any such party. The survival period for the
representations and warranties shall in no way affect Buyer's responsibility to
indemnify the Selling Entities with respect to the Assumed Liabilities, nor the
Selling Entities responsibility to indemnify Buyer for the Excluded Liabilities.
8.2 INDEMNIFICATION. Buyer shall jointly and severally indemnify and
hold harmless the Selling Entities, from and against any and all loss,
diminution in value, damage, cost, expense (including court costs and attorneys'
fees and expenses and costs of investigation), suit, action, claim, deficiency,
liability or obligation related to, caused by or arising from (i) any
misrepresentation, breach of warranty or failure to fulfill any covenant or
agreement of Buyer contained herein or in any agreement or other document
delivered pursuant hereto; (ii) any and all claims of third parties made based
upon facts alleged
-23-
<PAGE>
that, if true, would have constituted such a misrepresentation, breach or
failure; and (iii) the Assumed Liabilities. The Selling Entities shall jointly
and severally indemnify and hold harmless Buyer, from and against any and all
loss, diminution in value, damage, cost, expense (including court costs and
attorneys' fees and expenses and costs of investigation), suit, action, claim,
deficiency, liability or obligation related to, caused by or arising from (i)
any misrepresentation, breach of warranty or failure to fulfill any covenant or
agreement of any Selling Entity contained herein or in any agreement or other
document delivered pursuant hereto; (ii) any and all claims of third parties
made based upon facts alleged that, if true, would constitute such a
misrepresentation, breach or failure; (iii) the Excluded Liabilities. The party
seeking indemnification shall give written notice to the indemnifying party of
the facts and circumstances giving rise to any claim for indemnification. All
rights contained in this Article are cumulative and are in addition to all other
rights and remedies which are otherwise available, pursuant to the terms of this
Agreement or applicable law. All indemnification rights shall be deemed to
apply in favor of the indemnified party's officers, directors, representatives,
subsidiaries, affiliates, successors and assigns.
8.3 GENERAL. Neither the Selling Entities nor the Buyer shall have
any right to indemnification for any breach of representation or warranty
hereunder until it has claims of at least $5,000 in the aggregate and then the
indemnifying party or parties shall only be responsible for claims in excess of
the first $5,000.
ARTICLE IX
GENERAL PROVISIONS
9.1 AMENDMENTS AND WAIVER. No amendment, waiver or consent with
respect to any provision of this Agreement shall in any event be effective,
unless the same shall be in writing and signed by the parties hereto, and then
such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
9.2 NOTICES. All notices, requests, consents, demands and other
communications hereunder must be in writing and shall be delivered in person, by
courier service or by telecopy, telegram or telex as follows:
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<PAGE>
(a) If to the Selling Entities: With copies to:
Quixote Corporation McBride Baker & Coles
One East Wacker Drive 500 W. Madison Street
Chicago, Illinois 60601 40th Floor
Telephone No.: (312) 467-6755 Chicago, IL 60621
Telecopy No.: (312) 467-0197 Telephone No.: (312) 715-5700
Attn: James H. DeVries Telecopy No.: (312) 993-9350
Attn: Anne Hamblin Schiave, P.C.
(b) If to Buyer: With copies to:
Integrated Information Services, Inc. McDermott, Will & Emery
c/o Heico Acquisitions 227 West Monroe Street
5600 Three First National Plaza Chicago, IL 60606
Chicago, Illinois 60602 Telephone No.: (312) 372-2000
Telephone No.: (312) 419-8220 Telecopy No.: (312) 984-3669
Telecopy No.: (312) 419-9417 Attn: Stanley H. Meadows, P.C.
Attn.: Michael E. Heisley
Notice shall be deemed given when sent or delivered as provided herein. Any
party may change its address or add or change parties for receiving notice by
written notice given to the others named above.
9.3 EXPENSES. Except as otherwise expressly provided herein, each
party to this Agreement shall pay its own costs and expenses in connection with
the transactions contemplated hereby.
9.4 RULES OF CONSTRUCTION. The word "including" shall mean
including, without limitation. The Article, Section and other headings
contained herein are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
9.5 COUNTERPARTS. This Agreement may be executed (which may be by
facsimile with hard copy by express delivery) in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
9.6 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to
the benefit of the parties named herein and their respective successors and
assigns. The Selling Entities may not
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<PAGE>
assign any rights, benefits, duties or obligations under this Agreement. Each
Buyer may assign its rights, benefits, duties and obligations to an affiliated
corporation or a purchaser of the Business.
9.7 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein contain the entire agreement and understanding among the parties with
respect to the transactions contemplated hereby and supersede all other
agreements, understandings and undertakings among the parties on the subject
matter hereof.
9.8 ANNOUNCEMENTS. No announcement of the specific terms of this
Agreement shall be made by any party without the written approval of the other
party (which approval shall not be unreasonably withheld), except filings
required to be made with the Securities and Exchange Commission and as otherwise
required by applicable law or rules of a national securities exchange.
9.9 PARTIAL INVALIDITY. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
9.10 APPLICABLE LAW. This Agreement shall be interpreted in
accordance with the substantive laws of the State of Illinois applicable to
contracts made and to be performed wholly within said State.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by a duly authorized officer all as of the date first
written above.
INTEGRATED INFORMATION QUIXOTE CORPORATION
SERVICES, INC.
By: /s/ Michael J. Felvy By: /s/ Daniel P. Gorey
------------------------- -------------------------------
Its: Vice President Its: Vice President and Controller
------------------------- -------------------------------
PETTIBONE CORPORATION DISCOVERY PRODUCTS, INC.
By: /s/ Larry Gies By: /s/ Daniel P. Gorey
------------------------- -------------------------------
Its: Executive V.P. - CFO Its: Vice President
------------------------- -------------------------------
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<PAGE>
QUIXOTE CORPORATION & SUBSIDIARIES
EXHIBIT 11 - COMPUTATION OF NET EARNINGS PER AVERAGE
COMMON AND COMMON EQUIVALENT SHARE
For the year ended June 30, 1996
Fully
Primary Diluted
------- -------
Net loss as reported ($9,892,000) ($9,892,000)
Add interest expense and deferred
charge (net of income taxes) assuming
conversion of debentures 886,000 (a)
------------ ------------
Adjusted net loss for
computation (A) ($9,892,000) ($9,006,000)
============ ============
Average common shares outstanding
would be adjusted for the additional
shares that would be issued assuming
conversion of the debentures and
exercise of stock options as follows:
Weighted average shares outstanding 7,875,585 7,875,585
Shares assumed issued upon conversion
of debentures 947,638
Incremental shares outstanding
assuming exercise of stock options
and warrants using the treasury
stock method 128,034 128,034
Shares issuable under retirement plan 305 305
--------- ---------
Average common and common equivalent
shares outstanding (B) 8,003,924 8,951,562
============ ============
Loss per common and common
equivalent share outstanding (A/B) ($1.24) ($1.01)
======= =======
NOTE:
(a) The net loss for the fully diluted calculation is adjusted for interest
expense and deferred charge amortization, assuming exercise of the
conversion privilege on the 8% convertible debentures.
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<PAGE>
QUIXOTE CORPORATION & SUBSIDIARIES
EXHIBIT 11 - COMPUTATION OF NET EARNINGS PER AVERAGE
COMMON AND COMMON EQUIVALENT SHARE
For the year ended June 30, 1995
<TABLE>
<CAPTION>
Fully
Primary Diluted
------- -------
<S> <C> <C>
Net earnings as reported $5,950,000 $5,950,000
Add interest expense and deferred
charge (net of income taxes) assuming
conversion of debentures 981,000 (a)
---------- ----------
Adjusted net earnings for
computation (A) $5,950,000 $6,931,000
========== ==========
Average common shares outstanding
would be adjusted for the additional
shares that would be issued assuming
conversion of the debentures and
exercise of stock options and
warrants as follows:
Weighted average shares outstanding 7,819,537 7,819,537
Shares assumed issued upon conversion
of debentures 1,051,316
Incremental shares outstanding
assuming exercise of stock options
and warrants using the treasury
stock method 280,848 280,848
---------- ---------
Average common and common equivalent
shares outstanding (B) 8,100,385 9,151,701
========== ==========
Earnings per common and common
equivalent share outstanding (A/B) $ .73 $ .76
===== =====
</TABLE>
NOTE:
(a) Net earnings for the fully diluted calculation is adjusted for interest
expense and deferred charge amortization, assuming exercise of the
conversion privilege on the 8% convertible debentures.
47
<PAGE>
QUIXOTE CORPORATION & SUBSIDIARIES
EXHIBIT 11 - COMPUTATION OF NET EARNINGS PER AVERAGE
COMMON AND COMMON EQUIVALENT SHARE
For the year ended June 30, 1994
Fully
Primary Diluted
------- -------
Net earnings as reported $11,644,000 $11,644,000
Add interest expense and deferred
charge (net of income taxes) assuming
conversion of debentures 981,000 (a)
----------- -----------
Adjusted net earnings for
computation (A) $11,644,000 $12,625,000
=========== ==========
Average common shares outstanding
would be adjusted for the additional
shares that would be issued assuming
conversion of the debentures and
exercise of stock options and
warrants as follows:
Weighted average shares outstanding 7,680,192 7,680,192
Shares assumed issued upon conversion
of debentures 1,051,316
Incremental shares outstanding
assuming exercise of stock options
and warrants using the treasury
stock method 386,000 471,984
--------- ---------
Average common and common equivalent
shares outstanding (B) 8,066,192 9,203,492
=========== ==========
Earnings per common and common
equivalent share outstanding (A/B) $1.44 $1.37
===== =====
NOTE:
(a) Net earnings for the fully diluted calculation is adjusted for interest
expense and deferred charge amortization, assuming exercise of the
conversion privilege on the 8% convertible debentures.
- 48 -
<PAGE>
EXHIBIT 21
QUIXOTE CORPORATION & SUBSIDIARIES
SUBSIDIARIES OF THE COMPANY
as of June 30, 1996
Jurisdiction
Under Which
QUIXOTE CORPORATION (PARENT) Organized
- ---------------------------- -------------
Disc Manufacturing, Inc. Delaware
Energy Absorption Systems, Inc. Delaware
Composite Components, Inc. Delaware
E-Tech Testing Services, Inc. Delaware
Safe-Hit Corporation Nevada
Spin-Cast Plastics, Inc. Indiana
LaserVideo Acquisition Corporation Delaware
Legal Technologies, Inc. Delaware
Litigation Communications, Inc. Delaware
Quixote Steno Corporation Delaware
Quixote DPI Corporation Delaware
Court Technologies, Inc. Delaware
Quixote IIS Corporation Delaware
Quixote Limited United Kingdom
Quixote LSI Corporation Delaware
Myriad Entertainment, Inc. Delaware
QualAir Corporation Delaware
Quixote Foreign Sales Corporation U.S. Virgin Islands
Quixote Research Corporation Delaware
All of the subsidiaries listed above are wholly-owned by Quixote except as
follows:
Energy Absorption Systems, Inc. is the sole shareholder of Composite
Components, Inc., E-Tech Testing Services, Inc., Safe-Hit Corporation and
Spin-Cast Plastics, Inc.
Legal Technologies, Inc. is the sole shareholder of Litigation
Communications, Inc. and Quixote Steno Corporation.
Quixote Steno Corporation is the sole shareholder of Quixote DPI
Corporation, Quixote IIS Corporation, Quixote Limited and Quixote LSI
Corporation.
Quixote DPI Corporation is the sole shareholder of Court Technologies, Inc.
The Company owns all of the preferred stock of LaserVideo Acquisition
Corporation (LVAC) and shares voting power with respect to the outstanding
common stock. The preferred stock has voting rights and represents 50% of
the voting stock of LVAC.
- 49 -
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements on
Form S-8 (File Nos. 2-76697, 33-1805, 33-22289, 33-50248 and 33-74488) and the
registration statements on Form S-3 (Files Nos. 2-96502 and 33-14873 Amendment
No. 1) of our reports, dated August 12, 1996, accompanying the consolidated
financial statements and financial statement schedules of Quixote Corporation
and Subsidiaries as of June 30, 1996 and 1995, and for each of the years ended
June 30, 1996, 1995 and 1994, which report is included in this Annual Report on
Form 10-K/A of Quixote Corporation.
/s/ Coopers & Lybrand L.L.P.
Chicago, Illinois
February 24, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 2,250,000
<SECURITIES> 0
<RECEIVABLES> 23,173,000
<ALLOWANCES> 740,000
<INVENTORY> 5,953,000
<CURRENT-ASSETS> 37,518,000
<PP&E> 145,545,000
<DEPRECIATION> 57,219,000
<TOTAL-ASSETS> 129,829,000
<CURRENT-LIABILITIES> 17,853,000
<BONDS> 58,000,000
0
0
<COMMON> 145,000
<OTHER-SE> 47,474,000
<TOTAL-LIABILITY-AND-EQUITY> 129,829,000
<SALES> 129,159,000
<TOTAL-REVENUES> 129,159,000
<CGS> 90,186,000
<TOTAL-COSTS> 90,186,000
<OTHER-EXPENSES> 30,767,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,130,000
<INCOME-PRETAX> 3,504,000
<INCOME-TAX> 930,000
<INCOME-CONTINUING> 2,574,000
<DISCONTINUED> (12,466,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,892,000)
<EPS-PRIMARY> (1.24)
<EPS-DILUTED> (1.24)
</TABLE>
