<PAGE>
FORM 10-K
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, 1998
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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.
$95,489,239 as of August 28, 1998
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TABLE OF CONTENTS
<TABLE>
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PART I PAGE
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Item 1. Business...................................................... 3-6
Item 2. Properties.................................................... 7
Item 3. Legal Proceedings............................................. 8-11
Item 4. Submission of Matters to a Vote of Security Holders........... 11
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters......................................... 12
Item 6. Selected Financial Data....................................... 13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 14-18
Item 8. Financial Statements and Supplementary Data................... 18-33
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure......................... 33
PART III
Item 10. Directors and Executive Officers of the Registrant............ 34
Item 11. Executive Compensation........................................ 34
Item 12. Security Ownership of Certain Beneficial Owners
and Management.............................................. 35
Item 13. Certain Relationships and Related Transactions................ 35
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K................................................. 35-38
SIGNATURES................................................................ 39
</TABLE>
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PART I
THE COMPANY
Quixote Corporation was incorporated under the laws of the State of Delaware
in 1969 originally 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 develop, manufacture and market
energy-absorbing highway crash cushions and other highway safety products for
the protection of motorists and highway workers to both domestic and
international markets.
As of June 30, 1998, Quixote Corporation and its subsidiaries employed 409
people.
HIGHWAY SAFETY DEVICES
- ----------------------
Description of Business
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The Company's business is highway and transportation safety with its current
operating subsidiaries concentrating on safety problems and their solutions
for the highways. There are two broad categories of products for improving
safety on the roads: products which minimize the severity of crashes that
occur and products designed to prevent crashes from occurring.
In the category of reducing the severity of crashes, the patented highway
crash cushions manufactured by the Company 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
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 an estimated 29,000 lives since 1969.
The Company 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, steel, urethane foam systems, cardboard, plastic structures,
elastometric cylinders and sand.
Roadway Safety Service, Inc., acquired during fiscal 1998, markets two lines
of highway crash cushions as well as a special purpose vehicle arresting
system. Roadway's products, also, use the principles of momentum transfer and
kinetic energy to safely decelerate errant vehicles. The crash cushions
consist of either a two-piece sand filled barrel or a series of polyethylene
cylinders connected by a steel cable. The cylinders collapse on impact and
then begin to regain their original shape. Both products are easy to
assemble and provide a low cost way to protect motorists. The vehicle
arresting system consists of a net attached to energy-absorbing steel tape
reels which cause vehicles to come to a controlled stop.
Sales for products that reduce the severity of crashes that occur were
$46,858,000, $38,670,000 and $39,515,000 in 1998, 1997 and 1996,
respectively.
The Company also manufactures and sells products that prevent crashes and
help control the flow of traffic. The Company manufactures and markets a
line of flexible sign and guide
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post systems and a glare screen system through distributors and catalog
offerings. The guide posts are extruded from polypropylene and are used to
delineate a travel way, channel vehicles or mark the location of an object.
The post features a patented 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 oncoming vehicles on roads where the inside lanes
are adjacent to the median barrier. Sales of these crash prevention products
for 1998, 1997 and 1996 were $5,811,000, $4,577,000 and $5,325,000,
respectively.
Highway Information Systems, Inc. (HIS), acquired in April 1998, manufactures
and markets two different types of highway advisory radio systems that help
control the flow of traffic by informing motorists of accidents and traffic
delays. HIS has two principal products, a stationary system, the "Hiway
Max-TM-" and a mobile system, the "Solar Max-TM-". The Hiway Max is intended
to be used near long-term construction sites, a public arena, or other
frequently congested traffic areas. The Solar Max is easily transported and
is intended for short-term or emergency uses. Both systems use AM radio
frequencies to communicate messages to motorists about traffic, road
conditions and weather. The messages may be pre-recorded or may be updated
real-time through a phone line. Sales for HIS for the quarter ended June 30,
1998 were $641,000.
The Company also manufactures plastic components for industrial products.
Sales of these products for 1998, 1997 and 1996 were $2,678,000, $1,790,000
and $1,910,000, respectively.
Products can be further broken down into permanent and construction zone
applications and, as such, are sold to those market segments. Most of the
products for permanent and construction zone applications are approved as
acceptable highway hardware according to procedures in the National
Cooperative Highway Research Program number 230 or 350 which provide various
test levels depending on the application. This approval is gained after a
formal submission to the FHWA makes the products eligible for federal funds
for highway projects.
The Company's products all have patented features and include the
truck-mounted attenuator-Registered Trademark- (TMA-TM-), the
QuadGuard-Registered Trademark-System, the CushionWall-TM- , the
BarrierGate-Registered Trademark-, the Energite System-Registered Trademark-,
the Triton Barrier-Registered Trademark-, the REACT 350-Registered
Trademark-, the Fitch Universal Module-Registered Trademark- and the Dragnet
VAS-Registered Trademark-.
The Company provides product education, selection and application assistance.
The Company generally does not perform site preparation or installation for
any of its products. They are performed through a distributor/contractor
network.
Competition and Marketing
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The Company's products are sold in all 50 U.S. states. Regional managers
supervise 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 the Company's domestic products.
The Company 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 48 domestic distributors
and make sales calls on certain state departments of transportation and
contracting firms.
Many international governments are now beginning to recognize the need for
crash cushions as a method of reducing traffic fatalities. The Company's
products are sold internationally through a network of 44 distributors who
make sales to municipal and national governments and contractors who are
responding to bids from their respective governments. International sales for
1998 were $4.5 million.
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The Company does experience competition in specific crash cushion product
lines, particularly in the sand barrel, QuadGuard, REACT 350 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 as
the Company. A number of other companies manufacture flexible sign and guide
post systems. There are several companies that manufacture and sell highway
advisory radio systems. The Company competes on the basis of price, quality
and service in all of its products lines.
Government Policies
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The market for crash cushions is directly affected by federal, state and
local governmental policies. A large portion of the Company'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. Legislation called the Transportation Equity Act for the 21st
Century (TEA 21) was passed in May of 1998 and provides federal funding of
approximately $218 billion over a six-year period, an increase of more than
40% over previous spending levels. This legislation also includes a
guaranteed amount of funding for highway programs. The states must set aside
10% of the federal funds received each year under TEA 21 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 FHWA. Energy Absorption is obligated to seek such approval for
improvements or upgrades to such devices and for any new devices.
Backlog
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As of June 30, 1998, 1997 and 1996, the Company had a backlog of unfilled
orders for highway safety devices of $12,204,000, $8,999,000, and $8,591,000
respectively. The Company can usually fill an order anywhere from two days
to 8 weeks of receipt depending on the type of product.
Research and Development; Patents
- ---------------------------------
The Company conducts its own research, development and testing of new
products before introducing them to the marketplace. The expenditures for
research and development activities were $1,570,000, $2,209,000, and
$1,536,000, in the years 1998, 1997 and 1996, respectively.
The Company 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. The Company 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, the Company is seeking to develop or to acquire new products which can
be sold through its existing distribution networks to its existing customers.
The Company 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. The Company believes that adequate
supplies of these materials will continue to be available.
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Major Customers
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No single customer of the Company represents a significant portion of total
revenues.
Other
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Investment in FIP Joint Venture:
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During fiscal 1996, the Company entered into a joint venture with FIP
Industriale S.p.A. of Italy to market their seismic bridge bearings in the
United States. The Company, accounting for this investment under the equity
method of accounting, took charges of $1,402,000 and $300,000 for 1997 and
1996 respectively. In June 1997, the Company decided to wind down the
activities of the joint venture due to the lack of revenues and progress to
date. The 1997 charge includes $502,000 in accrued costs to exit this
venture. During 1998, the joint venture was dissolved.
DISCONTINUED OPERATIONS
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In March 1997, the Company sold substantially all of the assets and
transferred significant operating liabilities of Disc Manufacturing, Inc.
(DMI) to Cinram Ltd. for $80,283,000 in cash. The transaction excluded DMI's
Huntsville, Alabama land and building as well as certain DMI litigation. DMI
was one of the largest independent manufacturers of compact discs and CD-Roms
in the United States.
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. Liabilities retained by the Company at June 30, 1998 include
repetitive stress injury litigation and liabilities under certain lease
obligations.
During 1998, the Company recorded additional losses from discontinued
operations of $6,138,000, or $0.76 per share, which was net of income tax
benefits of $3,162,000. The losses were recorded to provide for current and
anticipated costs associated principally with the Company's legal
contingencies related to DMI.
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Item 2. Properties
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<TABLE>
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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 and
other plastic products
739 College Drive 28,000 sq. ft. Storage facility for Owned
South Bend, Indiana highway safety devices
23785 Cabot Boulevard 2,300 sq. ft. Sales office Leased
Hayward, California
1050 North Rand Road 1,000 sq. ft. Sales office Leased
Wauconda, Illinois
4900 Prospectus Drive 4,600 sq. ft. Sale and manufacture of Leased
Durham, North Carolina highway advisory radio
equipment
1725 Carpenter Fletcher Road 850 sq. ft. Warehouse Leased
Durham, North Carolina
4905 Moores Mill Road 332,000 sq. ft. Sublet Owned
Huntsville, Alabama
200 Corporate Pointe 19,800 sq. ft. Sublet Leased
Culver City, California
225 West Washington 5,300 sq. ft. Sublet Leased
Chicago, Illinois
</TABLE>
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. 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 Disc Manufacturing, Inc. ("DMI"), a discontinued operation, 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 alleged that the individual defendants, each a DMI director
until April 30, 1990, had in concert with Disctronics Limited and its
affiliated companies (the "Disctronics Group"), during the time that the
Disctronics Group owned DMI, misappropriated DMI's corporate opportunity to
acquire Memory-Tech, a competing compact disc manufacturer located in Plano,
Texas. The lawsuit also alleged that the defendants had violated DMI's
federal trademark rights in the name "Disctronics".
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 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' (including defendants') federal trademark/Lanham Act claims, which
were stayed, pending resolution of the state court action, described in B
below.
B. 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 (described in A above), along
with a claim under the Alabama trademark law, in the Circuit Court for
Madison County, Alabama (Huntsville), the jurisdiction in which DMI was
located. Following a 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. (In March 1996, the Court approved DMI's substitution
of a $6 million surety bond backed by a $2 million letter of credit to
replace the certificate of deposit). The defendants appealed the entry of
the preliminary injunction and on May 15, 1992 the Alabama Supreme Court
reversed the Circuit Court's issuance of the injunction, remanding the case
for further proceedings. Quixote sought a rehearing which 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 sought damages
of $73.8 million, to invalidate a 1989 Work-Out Agreement among the parties,
punitive damages and other relief.
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 Circuit
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. 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 in connection with the
Disctronics' Memory-Tech Inc. transaction.
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Both parties appealed the Court's May 1995 ruling. In September 1996, the
Alabama Supreme Court ruled on the appeal, reinstating all of DMI's claims
which had been dismissed by the Circuit Court except the corporate
opportunity to acquire Memory-Tech Inc. and unjust enrichment claims and
upholding the dismissal of all of the defendants' claims except a "palming
off" claim related to use of the name "Disctronics". Consequently, the
Company and DMI had pending claims for breach of fiduciary duty, tortious
interference and fraud. The defendants' pending claims were for wrongful
injunction, "palming off", fraud, breach of contract and alleged interference
cclaims.
Defendants subsequently filed an amended counterclaim without seeking leave
of court which sought to assert in slightly different form generically some
of the same claims as previously asserted and against which judgment had
already been granted and become final. Quixote and DMI moved to dismiss those
claims.
On June 1, 1998, all litigation between the parties described herein was
settled on terms mutually satisfactory to the parties.
C. 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 thirty-two 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.
Of the 32 cases, six were dismissed in April 1997 after a jury verdict in
favor of Stenograph and that decision is now final. In additions, eleven
cases have been dismissed with prejudice and eight cases have been dismissed
without prejudice to refile the complaints. 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.
D. 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. On May 18, 1998, this litigation was
settled on terms mutually satisfactory to the parties.
E. 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 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 moved for judgment
as a matter of law or, in the alternative, for a new trial, which was denied.
In July 1997, Thomson filed an appeal which is pending.
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F. 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 relating to optical storage discs by the manufacture and
sale of compact discs 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. Plaintiffs subsequently dropped four patents from the
case leaving six patents in issue. In April 1997, the District Court denied
a motion by DiscoVision to dismiss portions of the DMI antitrust case. In
August 1997, the District Court granted a motion by DMI to limit the time
period for which damages could be asserted against DMI and denied DMI's
motion to assert the doctrine of laches. The District Court, in September
1997, deconsolidated DMI's antitrust claims for purposes of trial and issued
its determination on claims interpretation. A trial on the issue of patent
infringement was held in October 1997 and a decision is pending.
G. 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 F. above).
H. 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 arose 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 sought unspecified damages
from Energy Absorption and numerous defendants, including the State of New
Jersey, the U.S. Federal Highway Administration and various other
governmental entities. This case was settled in April 1998 on terms mutually
satisfactory to the parties.
I. ERNEST CHICO v. ENERGY ABSORPTION SYSTEMS, INC. On April 12, 1996 Energy
Absorption Systems, Inc. was served in an action entitled ERNEST CHICO V. THE
STATE OF INDIANA, ENERGY ABSORPTION SYSTEMS, INC. AND HOOSIER COMPANY IN LAKE
SUPERIOR COURT FOR THE STATE OF INDIANA, CAUSE NO. 45DO2-9605-CT-391 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. Discovery is proceeding and a trial is not expected
until the year 2000.
J. FEATHER V. ENERGY ABSORPTION SYSTEMS, INC., In July 1997, plaintiff filed
this action in Superior Court of the State of California, Case No. SCV-6077
in an action entitled SUSAN FEATHER V. ENERGY ABSORPTION SYSTEMS, INC. ET AL.
Plaintiff claimed special, general and punitive damages because of sexual
discrimination/harassment, retaliation, intentional infliction of emotional
distress, negligent infliction of emotional distress, and constructive
discharge while an employee of Energy Absorption. After a trial in August
1998, the jury arrived at a defense verdict for Energy Absorption.
K. DISC MANUFACTURING, INC. V. CD TITLES, INC.; DISC MANUFACTURING, INC. V.
PALOMAR MEDICAL TECHNOLOGIES, INC., CONSOLIDATED Action No. 9705328-B,
Superior Court of the Commonwealth of Massachusetts. This is an action
brought by Disc Manufacturing, Inc. to recover approximately $680,000 for
goods and services sold to CD Titles, of which $400,000 was guaranteed by
Palomar Medical Technologies. CD Titles has answered the complaint,
asserting a counterclaim for conversion of certain inventory valued by CD
Titles at $1.3 million. Discovery has proceeded, but is presently stayed in
accordance with an automatic stay that was entered upon an involuntary
petition in bankruptcy filed against CD Titles in July 1998 by DMI and other
creditors. CD Title's motion to dismiss the involuntary petition has been
denied and a trustee has been appointed to proceed with the bankruptcy.
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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 1998.
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PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
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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
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<S> <C> <C> <C> <C>
FISCAL 1998
High $ 9-1/2 $ 9-3/8 $ 10 $ 13
Low 7-5/8 7-5/8 8 10-1/4
FISCAL 1997
High $ 8 $10-3/4 $ 9-7/8 $ 9-1/8
Low 5-3/4 7-5/8 8-1/4 6-3/4
</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 4, 1998,
there were approximately 1,775 shareholders of record.
Dividend Policy
- ---------------
During 1998, the Company declared semiannual cash dividends of thirteen cents
per share. During 1997, the Company declared semiannual cash dividends of
twelve cents and thirteen cents per share.
-12-
<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, 1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Results:
Net sales $ 55,988 $ 45,037 $ 46,750 $ 46,522 $ 43,433
Gross profit 25,543 22,249 24,291 23,382 23,453
Selling and administrative expenses 15,420 14,264 15,059 13,662 13,825
Research and development expenses 1,570 2,209 1,536 1,545 1,978
Other income (expense) 199 (2,112) (488) (1,887) (928)
Earnings from continuing operations 6,147 2,907 4,390 4,470 4,989
Net earnings (loss) 9 (3,831) (9,892) 5,950 11,644
Cash dividends per common share .26 .25 .24 .22 .21
Per share data:
Basic EPS:
Earnings from continuing operations $ .77 $ .36 $ .56 $ .57 $ .65
Net earnings (loss) .00 (.48) (1.26) .76 1.52
Weighted average common and common
equivalent shares outstanding 7,943,653 7,966,700 7,875,585 7,819,537 7,680,192
Diluted EPS:
Earnings from continuing operations $ .76 $ .36 $ .52 $ .54 $ .60
Net earnings (loss) .00 (.48) (1.26) .76 1.38
Weighted average common and common
equivalent shares outstanding 8,088,354 8,008,893 8,951,562 9,151,701 9,117,508
Financial position:
Total assets $ 59,065 $ 55,220 $ 118,888 $ 135,662 $ 98,999
Working capital 15,146 20,639 4,055 5,541 8,204
Property, plant and equipment, net 13,482 12,903 13,113 10,645 8,532
Long-term debt, net 7,677 0 58,000 68,000 38,975
Shareholders' equity 38,886 41,655 47,619 58,915 54,069
Book value per common share 4.94 5.24 5.99 7.49 6.94
</TABLE>
NOTE: OPERATING RESULTS AND FINANCIAL POSITION FOR ALL PERIODS PRESENTED
REFLECT THE LEGAL TECHNOLOGIES, INC. AND DISC MANUFACTURING, INC. SEGMENTS AS
DISCONTINUED OPERATIONS.
-13-
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------------------
1998 COMPARED TO 1997
- ---------------------
The Company's sales for 1998 increased 24% to $55,988,000 from $45,037,000 in
1997 due to both internal sales growth as well as sales growth resulting from
two acquisitions the Company completed during 1998. Internal sales, without
the effect from acquisitions, increased 13% resulting from demand for Energy
Absorption's newer products, introduced in later 1997. Energy Absorption's
permanent crash cushion line of products increased due to strong unit sales
of the newer QuadGuard-Registered Trademark- family of crash cushions. The
QuadGuard family of products replaces the Company's GREAT-Registered
Trademark-and GREAT CZ-Registered Trademark- crash cushion products. Sales
dollars of the QuadGuard products increased at a lesser rate than its unit
sales due to the lower selling price of these products. The Company also
experienced sales increases in its TMA (truck-mounted attenuator) product
line, including the newer Alpha 100k-Registered Trademark- TMA. Triton
Barrier-Registered Trademark-sales along with sales of Safe-Hit's highway
delineators and Spin-Cast's custom molded products also increased during the
year. Roadway Safety Service, Inc., acquired in October 1997, contributed
sales of $4,554,000 for the nine month period as part of the Company. Roadway
Safety Service is a supplier of crash attenuators and vehicle arresting
systems for the highways. Highway Information Systems, Inc. (HIS), acquired
effective April 1, 1998, contributed sales of $641,000 for the period. HIS is
a leading provider of computerized highway advisory radio transmitting
systems. Somewhat offsetting these sales increases, sales of the
Energite-Registered Trademark- barrel product line and parts sales declined
slightly during 1998.
The gross profit margin in 1998 decreased to 45.6% from 49.4% in 1997. This
was due principally to a change in sales mix from the GREAT crash cushion to
the lower margin QuadGuard crash cushion product line. The QuadGuard family
of products is priced lower than the GREAT crash cushions as mentioned
earlier. Roadway Safety Service also contributed to the decline in gross
margin as its gross margins are lower than Energy Absorption's historical
gross margins. HIS gross margins, although higher than the Company's average
gross margin, had no material effect on gross margins due to its late
acquisition date and therefore smaller sales contribution.
Selling and administrative expenses in 1998 increased 8% to $15,420,000 from
$14,264,000 in 1997. Selling and administrative expenses at Energy Absorption
and its subsidiaries increased consistent with the increased level of sales.
Roadway Safety Service and HIS added a combined $1,032,000 in selling and
administrative costs during 1998. These increases in selling and
administrative expenses were offset somewhat by corporate level expenses
which decreased $713,000 in 1998 from 1997 as a result of a decrease in
personnel, consulting and insurance expenses.
Research and development expenses in 1998 decreased 29% to $1,570,000 from
$2,209,000 in 1997. This was due to a reduction in the number of tests
performed in the current year related to last year's upgrade of the Company's
product line to a higher set of safety guidelines known as NCHRP 350. These
guidelines increase safety standards to accommodate heavier and higher center
of gravity vehicles such as sport utility vehicles and pick-up trucks.
During the current year, the Company incurred development costs in connection
with its testing of a wider version of the Company's QuadGuard and REACT 350
crash cushions and in the testing of a snowplowable road marker and other
developmental projects.
Interest income in 1998 was $540,000 compared to $339,000 in 1997 and relates
to amounts earned on the Company's invested cash, $3,927,000 as of June 30,
1998. Interest expense in 1998 was $357,000 compared to $497,000 in 1997.
Current period interest expense relates both to seller financing in
connection with the acquisition of Roadway Safety Service as well as bank
debt incurred in connection with the acquisition of HIS. Other income was
$16,000 in 1998 compared to other expenses of $552,000 in 1997.
-14-
<PAGE>
The Company's effective income tax rate for 1998 was 30% due to the
realization of certain tax benefits during the current year along with the
settlement of certain tax contingencies. The Company believes its effective
income tax rate for 1999 will be approximately 35%.
During 1998, the Company recorded additional losses from its discontinued
operations of $6,138,000, or $0.76 per share, which was net of income tax
benefits of $3,162,000. The losses were recorded to provide for current and
anticipated costs associated principally with the Company's legal
contingencies related to DMI.
On October 10, 1997, the Company and its wholly-owned subsidiary, TranSafe
Corporation, acquired certain assets and assumed certain contracts from
Roadway Safety Service, Inc. The purchase price was $10,258,000, of which
$4,822,000 was paid in cash at closing, and other payments, the present value
of which is $5,436,000, will be paid over the next 10 years using a discount
rate of 8.5%. The acquisition was accounted for as a purchase and was
effective as of October 1, 1997. Goodwill of approximately $9,300,000 will
be amortized over a twenty year life.
On April 14, 1998, the Company and its wholly-owned subsidiary, TranSafe
Corporation, acquired certain assets and assumed certain liabilities of
Highway Information Systems, a division of Digital Recorders, Inc. for
$2,800,000 in cash. The acquisition was accounted for as a purchase and was
effective as of April 1, 1998. Goodwill of approximately $1,700,000 will be
amortized over a twenty year life.
1997 COMPARED TO 1996
- ---------------------
The Company's sales for 1997 decreased 4% to $45,037,000 from $46,750,000 in
1996. Sales declined in Energy Absorption's permanent system product lines
which include the GREAT as well as the newly introduced QuadGuard crash
cushion products. This was due to, among other things, increased competition
which resulted in a decline in selling prices and to a lesser extent, a
decrease in unit volume. In addition, the Company believes that some
customers may have postponed their purchases earlier in 1997 in anticipation
of several new products introduced later in the year that qualify under NCHRP
350, coupled with a delay in certifying one of these new products. Sales of
the Triton Barrier and Safe-Hit delineator also declined. Somewhat
offsetting these product line decreases were increases in the Energite and
TMA product lines.
The gross profit margin in 1997 decreased to 49.4% from 52.0% in 1996. This
was due to a decrease in the average selling prices of its permanent systems
products and to a lesser extent, lower sales volume. In addition, the gross
margin also declined due to increased overhead from the expansion of Energy
Absorption's Pell City, Alabama facility which was doubled in size to 160,000
square feet.
Selling and administrative expenses in 1997 decreased 5% to $14,264,000 from
$15,059,000 in 1996. This decrease was due principally to the 1996 write-off
of $800,000 to discontinue the Company's sewer rehabilitation business.
Corporate level administrative expenses remained at a level consistent with
last year.
Research and development expenses in 1997 increased 44% to $2,209,000 from
$1,536,000 in 1996. This increase was due to expenditures for the
development of new products as well as for the upgrade of the Company's
existing product lines in order to meet the revised NCHRP 350 standards.
-15-
<PAGE>
Interest income in 1997 was $339,000 compared to $358,000 in 1996. Interest
income in 1997 was earned on the Company's cash of approximately $18 million
which was being invested in short-term money market instruments. 1996
interest income was the result of the interest earned on a $6 million
certificate of deposit posted as injunction security for certain litigation.
This certificate of deposit was redeemed in the third quarter of 1996 and
replaced with a surety bond backed by a letter of credit. Interest expense
in 1997 decreased 71% to $497,000 from $1,726,000 in 1996. This was due to a
decrease in the average long-term debt outstanding in 1997 compared to 1996.
The Company paid off all long-term debt upon the sale of DMI in March 1997.
In addition, as a result of the sale of DMI, total interest expense was
allocated between continuing and discontinued operations based upon the
relative net asset values of each. The Company recorded a loss of $1,402,000
in 1997 related to the Company's investment in a seismic bridge bearing joint
venture with FIP Industriale S.p.A. This compares to a $300,000 loss from
this venture in 1996. Other expenses were $552,000 in 1997 compared to
income of $1,180,000 in 1996.
The Company's effective tax rate decreased in 1997 to 20.7% from 39.1% in
1996 due to the realization of certain tax benefits in the current year along
with the settlement of certain tax contingencies.
As discussed in Note 3 to the Consolidated Financial Statements, on March 27,
1997, the Company sold substantially all of the assets and transferred
significant operating liabilities of Disc Manufacturing, Inc. to Cinram LTD.
for $80.3 million in cash. The transaction excluded the Huntsville, Alabama
land and building as well as certain DMI litigation. The sale, approved by
the Company's shareholders, resulted in a loss of $4,507,000 which was net of
income tax benefits of $3,004,000. DMI incurred a loss on operations for
1997 and 1996 of $2,231,000 and $1,816,000 which are net of income tax
benefits of $957,000 and $1,888,000 respectively. These results are
presented as discontinued operations in the Company's Consolidated Statements
of Operations.
The Company used the proceeds of the sale to repay all of its $37.2 million
in bank debt and to redeem all of its $18 million of 8% Convertible
Subordinated Debentures and pay the related accrued interest. After paying
transaction costs of approximately $2.6 million, the balance of the proceeds
was invested in the highway safety and equipment business and in other
opportunities deemed beneficial to stockholders, including the repurchase of
a portion of the Company's common stock outstanding.
LIQUIDITY AND CAPITAL RESOURCES
- ---------------------------------
The Company had cash and cash equivalents of $3,927,000 and access to
additional funds of $36,500,000 under its bank arrangements as of June 30,
1998. Continuing operating activities were a source of cash for the Company
during 1998 providing $2,354,000. Discontinued operations however, used cash
of $6,849,000 primarily for legal fees and settlements related to the
Company's ongoing litigation and for other expenses including lease
commitments. This resulted in a net cash use from operating activities of
$4,495,000.
Cash of $9,560,000 was used for investing activities during 1998 of which
$7,622,000 in cash was used for the purchase of the assets of Roadway Safety
Service, Inc., acquired in October 1997, and for the purchase of the assets
of Highway Information Systems, acquired in April 1998. In addition, the
Company also used cash for the purchase of equipment during 1998 totalling
$1,436,000.
-16-
<PAGE>
Financing activities used cash of $481,000 during 1998. The payment of the
Company's semi-annual cash dividends used cash of $2,071,000. Cash of
$1,854,000 was used to purchase 224,985 shares of the Company's own stock for
the treasury. Additional shares may be purchased from time to time. In
addition, the Company used cash of $962,000 for payment of notes due in
connection with the acquisition of Roadway Safety Service. Offsetting these
cash payments somewhat, the Company received net cash of $3,500,000 through
borrowings under its line of credit. Cash of $906,000 was also received from
the exercise of common stock options.
For fiscal 1999, the Company anticipates needing less than $2,500,000 in cash
for capital expenditures. The Company may also need additional cash as it
considers acquiring businesses that complement its existing operations.
Also, the Company will require additional investments in working capital to
maintain growth. In addition, the Company may also need funds to repurchase
its own stock from time to time. These expenditures will be financed either
through the Company's invested cash, cash generated from its operations, or
from borrowings available under the Company's revolving credit facility. The
Company believes its existing cash, cash generated from operations and funds
available under its existing credit facility are sufficient for all planned
operating and capital requirements.
YEAR 2000 ISSUE
- ---------------
The "Year 2000 Issue" exists because many computer programs use only the last
two digits of a number to refer to a year. Therefore, these computer
programs may recognize a year such as 2002 as 1902. If not corrected, many
computer applications could fail or create erroneous results. The Year 2000
problem may impact the Company as a result of its own computer deficiencies
as well as those of its vendors, customers, or other third parties that
interface with the Company if not addressed and corrected.
The Company is in the process of making an assessment of its Year 2000 Issue
relative to its own information technology and non-information technology as
well as assessing the state of Year 2000 readiness of its vendors and
customers. A task force consisting of certain members of senior management
has been established by the Company to assess the Company's state of
readiness and to implement an action plan to correct any deficiencies. The
Company has determined that its principal software program for financial,
order entry and manufacturing planning is not Year 2000 compliant and will
need to be upgraded to a more advanced and recent version. The Company has
ordered and received this software upgrade and has added additional computer
hardware to accommodate this upgrade. The Company plans to complete
implementation of this upgrade by December 1998.
In addition, the Company is continuing to evaluate the impact of the Year
2000 Issue on its non-information technology systems, such as manufacturing
machinery, equipment, computer-aided design and test equipment as well as its
products with date sensitive software and embedded microprocessors. The
Company expects to complete the assessment phase of its non-information
technology systems during its second fiscal quarter with remedial action
planned for the Company's third fiscal quarter.
The Company has plans to initiate communications with significant suppliers,
customers and other relevant third parties to identify and minimize
disruptions to the Company's operations related to Year 2000 issues. However,
there can be no certainty that the systems and products of other companies on
which the Company relies will not have an adverse effect on the Company's
operations. The Company expects to complete this assessment phase during its
third fiscal quarter.
The Company anticipates completing substantially all of its Year 2000
projects during fiscal 1999. In the event the Company falls short of these
milestones, additional internal resources will be focused on completing these
projects or developing contingency plans. The estimated cost to correct the
Company's Year 2000 deficiencies is approximately $300,000. This estimate
includes $200,000 in cost to upgrade its information technology systems with
the balance of the estimate for any changes or modifications needed for
non-information technology systems. While the Company believes that its
non-information
-17-
<PAGE>
technology and vendor and customer issues are of a lower risk, until the
Company's assessment of these risks is complete, there can be no assurance
that these issues will not have a material effect on the Company's
operations. All estimates of Year 2000 related costs are based on numerous
assumptions and there is no certainty that estimates will be achieved and
actual costs could be materially greater than anticipated.
In the event the Company is unable to take timely corrective measures related
to its Year 2000 issues, the Company's ultimate contingency plan is to
outsource critical computer applications where feasible and in addition
create manual systems until such corrective measures are taken.
FORWARD LOOKING STATEMENTS
- --------------------------
Various statements made within the Management's Discussion and Analysis of
Financial Condition and Results of Operations constitute "forward looking
statements" for purposes of the Securities and Exchange Commission's "safe
harbor" provisions under the Private Securities Litigation Reform Act of 1995
and Rule 3b-6 under the Securities Exchange Act of 1934, as amended.
Investors are cautioned that all forward looking statements involve risks and
uncertainties, including those detailed in the Company's filings with the
Securities and Exchange Commission. There can be no assurance that actual
results will not differ from the Company's expectations. Factors which could
cause materially different results include, among others, uncertainties
related to the introduction of the Company's products and services; the
successful completion and integration of acquisitions; and competitive and
general economic conditions.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF QUIXOTE CORPORATION:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and retained earnings and of cash flows
present fairly, in all material respects, the financial position of Quixote
Corporation and its subsidiaries at June 30, 1998 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended June 30, 1998, in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule
listed in Part IV of Form 10-K, Item 14(a)2, 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. 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 of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
August 7, 1998
-18-
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
For each of the three years ended June 30,
<TABLE>
<CAPTION>
Dollar amounts in thousands, except per share data 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net sales $ 55,988 $ 45,037 $ 46,750
Cost of sales 30,445 22,788 22,459
--------- --------- ---------
Gross profit 25,543 22,249 24,291
Operating expenses:
Selling and administrative 15,420 14,264 15,059
Research and development 1,570 2,209 1,536
--------- --------- ---------
16,990 16,473 16,595
--------- --------- ---------
Operating profit 8,553 5,776 7,696
Other income (expense):
Interest income 540 339 358
Interest expense (357) (497) (1,726)
Loss on investment in FIP joint venture (1,402) (300)
Other 16 (552) 1,180
--------- --------- ---------
199 (2,112) (488)
--------- --------- ---------
Earnings from continuing operations
before provision for income taxes 8,752 3,664 7,208
Provision for income taxes 2,605 757 2,818
--------- --------- ---------
Earnings from continuing operations 6,147 2,907 4,390
Discontinued operations:
Loss from operations, net of income taxes (2,231) (3,369)
Loss on disposal, net of income taxes (6,138) (4,507) (10,913)
--------- --------- ---------
Loss from discontinued operations, net
of income taxes (6,138) (6,738) (14,282)
--------- --------- ---------
Net earnings (loss) $ 9 $ (3,831) $ (9,892)
--------- --------- ---------
Basic earnings per share:
Earnings from continuing operations $ .77 $ .36 $ .56
--------- --------- ---------
Net earnings (loss) $ .00 $ (.48) $ (1.26)
--------- --------- ---------
Weighted average common and common
equivalent shares outstanding 7,943,653 7,966,700 7,875,585
--------- --------- ---------
Diluted earnings per share:
Earnings from continuing operations $ .76 $ .36 $ .52
--------- --------- ---------
Net earnings (loss) $ .00 $ (.48) $ (1.26)
--------- --------- ---------
Weighted average common and common
equivalent shares outstanding 8,088,354 8,008,893 8,951,562
--------- --------- ---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
-19-
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of June 30,
Dollar amounts in thousands, except per share data 1998 1997
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,927 $ 18,463
Accounts receivable, net of allowance for doubtful
accounts of $565 in 1998 and $165 in 1997 13,976 8,494
Refundable income taxes 1,132 1,329
Inventories 5,826 4,224
Deferred income tax assets 1,642 887
Other current assets 350 241
-------- --------
Total current assets 26,853 33,638
Property, plant and equipment at cost:
Land 1,215 1,215
Buildings and improvements 9,132 8,691
Machinery and equipment 9,290 8,118
Furniture and fixtures 3,066 2,812
Leasehold improvements 533 519
-------- --------
23,236 21,355
Less: accumulated depreciation and amortization (9,754) (8,452)
-------- --------
13,482 12,903
Intangible assets 12,553 2,045
Other assets 987 720
Assets of discontinued operations 5,190 5,914
-------- --------
$ 59,065 $ 55,220
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 497
Accounts payable 1,681 $ 1,743
Dividends payable 1,021 1,039
Accrued expenses:
Payroll and commissions 1,679 1,366
Other 2,215 2,802
Liabilities of discontinued operations 4,614 6,049
-------- --------
Total current liabilities 11,707 12,999
Long-term debt, net of current portion 7,677
Deferred income tax liabilities 795 566
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 8,908,940 shares - 1998
and 8,753,333 shares - 1997 148 146
Capital in excess of par value of stock 31,396 30,269
Retained earnings 15,324 17,368
Treasury stock, at cost, 1,032,420 shares - 1998
and 807,435 shares - 1997 (7,982) (6,128)
-------- --------
Total shareholders' equity 38,886 41,655
-------- --------
$ 59,065 $ 55,220
-------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
-20-
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the three years ended June 30, 1998
Capital in
Excess of
Common Par Value Retained Treasury
Stock of Stock Earnings Stock
------- ---------- -------- --------
<S> <C> <C> <C> <C>
Dollar amount in thousands
BALANCES, JUNE 30, 1995 $ 143 $ 29,268 $ 34,977 $ (5,473)
Exercise of options for 55,006 shares 1 250
Net loss - 1996 (9,892)
Declaration of semi-annual cash
dividends ($.12 per share) (1,889)
Issuance of 34,679 shares pursuant
to the stock retirement plan 1 233
------- ---------- -------- --------
BALANCES, JUNE 30, 1996 145 29,751 23,196 (5,473)
Exercise of options for 39,847 shares 188
Net loss - 1997 (3,831)
Declaration of semi-annual cash
dividends($.12 per share and
$.13 per share) (1,997)
Issuance of 42,385 shares pursuant
to the stock retirement plan 1 330
Purchase of 88,514 shares at
$7.25 to $8.00 per share (655)
------- ---------- -------- --------
BALANCES, JUNE 30, 1997 146 30,269 17,368 (6,128)
Exercise of options and grant of
awards for 137,783 shares 2 904
Net earnings - 1998 9
Declaration of semi-annual
cash dividends ($.13 per share) (2,053)
Issuance of 17,824 shares pursuant
to the stock retirement plan 223
Purchase of 224,985 shares at
$7.75 to $9.25 per share (1,854)
------- ---------- -------- --------
BALANCES, JUNE 30, 1998
8,908,940 common shares and
1,032,420 treasury shares $ 148 $ 31,396 $ 15,324 $(7,982)
------- ---------- -------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
-21-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For each of the three years
ended June 30,
Dollar amounts in thousands 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Operating Activities:
Earnings from continuing operations $ 6,147 $ 2,907 $ 4,390
Discontinued operations
Loss from operations, net of income taxes (2,231) (3,369)
Loss on disposal, net of income taxes (6,138) (4,507) (10,913)
-------- -------- --------
Net earnings (loss) 9 (3,831) (9,892)
ADJUSTMENTS TO RECONCILE NET EARNINGS
(LOSS) TO NET CASH PROVIDED BY CONTINUING
OPERATIONS:
Discontinued operations 6,138 6,738 14,282
Depreciation 1,302 1,531 13,899
Amortization 1,034 351 552
Provision for losses on accounts receivable (71)
Deferred income taxes 429 (404) (1,909)
Changes in operating assets and liabilities:
Accounts receivable (4,737) 548 2,202
Inventories (1,216) (868) 1,448
Refundable income taxes 197 1,687 (3,016)
Other current assets (84) 249 (1,505)
Accounts payable and accrued expenses (718) 744 (1,769)
Income taxes payable (4,110)
Loss on investment in FIP joint venture 1,402 300
Gain on sale of Quantic Industries, Inc. (1,287)
Gain on sale of patent (347)
Loss on sewer rehabilitation investment 601
-------- -------- --------
Net cash provided by operating activities
of continuing operations 2,354 8,147 9,378
Net cash provided by (used in)
discontinued operations (6,849) (8,754) 4,066
-------- -------- --------
Net cash provided by (used in)
operating activities (4,495) (607) 13,444
-------- -------- --------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (1,436) (1,321) (24,419)
Cash paid for acquired businesses (7,622)
Proceeds from sales of discontinued operations 80,283 5,981
Investment in FIP joint venture (900) (300)
Proceeds from sale of investment in
Quantic Industries, Inc. 8,050
Proceeds from sale of patent 1,960
Decrease in funds deposited with IDB trustee 2,719
Other (502) 41 (731)
-------- -------- --------
Net cash provided by (used in) investing
activities (9,560) 78,103 (6,740)
-------- -------- --------
FINANCING ACTIVITIES:
Cash payments on notes payable (962)
Payments on revolving credit agreement (2,300) (52,050) (32,000)
Proceeds from revolving credit agreement 5,800 12,050 23,000
Payment of semi-annual cash dividend (2,071) (1,903) (1,805)
Proceeds from exercise of common stock options 906 188 251
Repurchase of common stock for treasury (1,854) (655)
Payments on convertible debentures (18,000) (1,975)
Proceeds from redemption of certificate
of deposit 6,000
-------- -------- --------
Net cash used in financing activities (481) (60,370) (6,529)
-------- -------- --------
Net change in cash and cash equivalents (14,536) 17,126 175
Cash and cash equivalents at beginning of year 18,463 1,337 2,075
-------- -------- --------
Cash and cash equivalents at end of year $ 3,927 $ 18,463 $ 2,250
-------- -------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
-22-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
Quixote Corporation and its subsidiaries develop,
manufacture and market, to both domestic and international markets,
energy-absorbing highway crash cushions and other highway safety products for
the protection of motorists and highway workers.
2. ACCOUNTING POLICIES
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 is
invested in income-producing investments generally having initial maturities
of three months or less. These investments are stated at 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
1996 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 earnings 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 10 to 40 years
Machinery and equipment 3 to 12 years
Furniture and fixtures 3 to 10 years
Leasehold improvements 5 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 with the gain or loss credited
or charged to earnings.
GOODWILL AND PATENTS
Goodwill and patents are amortized on a straight-line basis over lives of 7 to
20 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 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 assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities 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.
-23-
<PAGE>
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 the disclosure of
contingent assets and liabilities at the date of the financial statements.
Management's estimates also affect the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
During the second quarter of 1998, the Company adopted Statement of Financial
Accounting Standards (FAS) No. 128, Earnings Per Share. This accounting
pronouncement requires the presentation of basic earnings per share (EPS) and,
for companies with potential dilutive securities, such as stock options and
warrants, diluted EPS. It also requires restatement of EPS for prior periods.
During 1998, the Company adopted FAS No. 129, Disclosure of Information about
Capital Structure. This accounting pronouncement provides additional
guidance on the disclosure of certain information about an entity's capital
structure.
In June 1997 FAS No. 131, Disclosures about Segments of an Enterprise and
Related Information, was issued. This statement, effective for financial
statements for periods beginning after December 15, 1997, requires that a
public business enterprise report financial and descriptive information about
its reportable operating segments. Generally, financial information is
required to be reported on the basis that it is used internally for
evaluating segment performance and deciding how to allocate resources to
segments. The Company is evaluating the effects of this pronouncement.
On June 15, 1998, the Financial Accounting Standards Board issued FAS No.
133, Accounting for Derivative Instruments and Hedging Activities. FAS 133
is effective for all quarters beginning after June 15, 1999 (July 1, 1999 for
the Company). FAS 133 requires that all derivative instruments be recorded
on the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part
of a hedge transaction and, if it is, the type of hedge transaction.
Management of the Company anticipates that due to its limited use of
derivative instruments the adoption of FAS 133 will not have a significant
effect on the Company's results of operations or its financial position.
RECLASSIFICATIONS
Certain amounts for the years ended June 30, 1997 and June 30, 1996 were
reclassified to conform to the current year presentation. These
reclassifications did not affect net earnings.
3. ACQUISITIONS, DISPOSITIONS AND DISCONTINUED OPERATIONS
On October 10, 1997, the Company and its wholly-owned subsidiary, TranSafe
Corporation, acquired certain assets and assumed certain contracts from Roadway
Safety Service, Inc. This transaction was accounted for as a purchase and was
effective as of October 1, 1997. The purchase price was $10,258,000, of which
$4,822,000 was paid in cash at closing and other payments, the present value of
which is $5,436,000, will be paid over the next 10 years using a discount rate
of 8.5%. Goodwill of approximately $9,300,000 will be amortized over a 20 year
life.
On April 14,1998, the Company and its wholly-owned subsidiary, TranSafe
Corporation, acquired the assets and assumed certain liabilities of Highway
Information Systems, a division of Digital Recorders, Inc. for $2,800,000 in
cash. The acquisition was accounted for as a purchase and was effective as
of April 1, 1998. Goodwill of approximately $1,700,000 will be amortized
over a 20 year life.
The following unaudited pro forma summary presents the consolidated results
of operations as if the acquisitions had occurred at the beginning of the
period presented below:
-24-
<PAGE>
<TABLE>
<CAPTION>
Dollar amounts in thousands 1998 1997
---- ----
<S> <C> <C>
Net sales $ 59,074 $ 53,667
-------- --------
Net loss $ (447) $ (4,404)
-------- --------
Net loss per diluted share $ (.06) $ (.55)
-------- --------
</TABLE>
In March 1997, the Company sold substantially all of the assets and
transferred significant operating liabilities of Disc Manufacturing, Inc.
(DMI) to Cinram LTD. for $80,283,000 in cash. The transaction excluded DMI's
Huntsville, Alabama land and building as well as certain litigation related
to DMI. The sale, approved by the Company's shareholders, resulted in a loss
of $4,507,000 which was net of income tax benefits of $3,004,000.
During 1998, the Company recorded additional losses from discontinued
operations of $6,138,000, or $0.76 per share, which was net of income tax
benefits of $3,162,000. The losses were recorded to provide for current and
anticipated costs associated principally with the Company's legal
contingencies related to DMI.
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. The loss on disposal of $10,913,000 is
net of income tax benefits of $7,275,000.
The accompanying consolidated balance sheets and consolidated statements of
operations have been restated in order to present the compact disc and legal
technologies segments as discontinued operations for accounting purposes. As
part of this restatement, interest expense was for 1997 and 1996 allocated
between continuing and discontinued operations based upon the relative net
assets of each.
The income tax benefits for the results of discontinued operations for the
years ended 1998, 1997 and 1996 are $3,162,000, $957,000 and $2,613,000,
respectively. Net sales for the discontinued businesses were $0 in 1998,
$66,206,000 in 1997 and $109,919,000 in 1996.
The following assets and (liabilities) relate to discontinued operations:
<TABLE>
<CAPTION>
Dollar amounts in thousands 1998 1997
---- ----
<S> <C> <C>
Land and building, net $ 7,501 $ 7,501
Deferred income taxes 3,867 4,073
Accrued legal and accounting (6,539) (5,320)
Lease obligations (1,974) (2,590)
Severance (130) (280)
Other accruals (2,149) (3,519)
------- -------
Net assets (liabilities) of discontinued
operations $ 576 $ (135)
------- -------
</TABLE>
These assets and liabilities are valued based upon management's estimates,
utilizing currently available information as of the balance sheet date. It
is reasonably possible, however, that these estimates could change materially.
During 1996 Energy Absorption entered into a joint venture with FIP
Industriale S.p.A. of Italy to market their seismic bridge bearings in the
United States. In June 1997 the Company decided to wind down the activities
of the joint venture due to the lack of revenues and progress to date. The
Company, accounting for this investment under the equity method, took charges
of $1,402,000 for 1997 which included $502,000 in accrued costs to exit this
venture.
In January 1996, the Company 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.
-25-
<PAGE>
4. INVENTORIES Inventories consist of the following at June 30:
<TABLE>
<CAPTION>
Dollar amounts in thousands 1998 1997
---- ----
<S> <C> <C>
Finished goods $ 2,084 $ 832
Work-in-process 696 978
Raw materials 3,046 2,414
-------- --------
$ 5,826 $ 4,224
-------- --------
</TABLE>
5. LONG-TERM DEBT
Long-term debt consists of the following at June 30:
<TABLE>
<CAPTION>
Dollar amounts in thousands 1998 1997
---- ----
<S> <C> <C>
Revolving credit note due October 31,
2000, interest at variable rates $3,500 $ 0
Notes payable, interest imputed at
8.5%, payable quarterly through 2007 4,674 0
------ -------
Total long-term debt 8,174 0
less current portion 497 0
------ -------
Long-term debt, net $7,677 $ 0
------ -------
</TABLE>
The Company has a three-year unsecured revolving credit agreement with three
banks. The agreement provides for a $40 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.
The Notes payable were entered into in connection with the acquisition of
Roadway Safety Service, Inc. and are payable to several former owners and
employees. The Notes are payable quarterly over a five or ten year period.
The aggregate amount of maturities of long-term debt for the four years
subsequent to 1999 assuming renewal of the revolving credit note is as
follows: $541,000 in 2000, $588,000 in 2001, $640,000 in 2002 and $420,000 in
2003.
-26-
<PAGE>
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 (Incentive Plan) and the Director Stock Option Plan (Director
Plan) are to be granted at no less than 100% of the current market price at
the date of the grant. Options vest equally over not less than a two year
period and have a term of five years under the Incentive Plan and ten years
under the Director Plan. No charges are made to earnings in connection with
the options.
Information with respect to options under the Company's plans is as follows:
<TABLE>
<CAPTION>
Number of Option Price
Common Shares per Share
------------- ---------
<S> <C> <C>
Shares under option:
July 1, 1996 897,949 $ 4.25 to $ 21.00
Granted 137,000 9.00
Exercised (54,500) 4.25 to 6.88
Cancelled or expired (108,175) 4.25 to 12.63
--------
June 30, 1997 872,274 $ 5.38 to $ 21.00
Granted 308,445 8.00 to 12.15
Exercised (78,000) 5.88 to 6.88
Cancelled or expired (115,424) 10.50 to 12.88
--------
June 30, 1998 987,295 $ 5.38 to $ 21.00
--------
</TABLE>
Options outstanding at June 30, 1998 are exercisable as follows: 833,484 in
1999, 128,811 in 2000 and 25,000 thereafter. As of June 30, 1998, the
Company has 1,257,266 common shares reserved for various conversion
privileges and options.
The following is the composition of the June 30, 1998 stock option balance:
<TABLE>
<CAPTION>
Options Having A Weighted Average
Per Share Exercise Weighted Average Exercise Price Per Number of
Price of: Remaining Life Share Shares
- ------------------ ---------------- ------------------ ---------
<S> <C> <C> <C>
$ 5.38 to $ 8.00 2.60 years $ 7.45 319,445
8.13 to 12.15 4.20 years 8.93 429,850
12.38 to 13.38 3.76 years 12.78 178,000
21.00 6.15 years 21.00 60,000
-------
987,295
-------
</TABLE>
During 1997, the Company adopted FAS No. 123, Accounting for Stock-Based
Compensation, which encourages entities to adopt a fair value based method of
accounting for stock-based compensation plans in place of the provisions of
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25), for all arrangements under which employees receive shares
of stock or other equity instruments of the employer.
As allowed by FAS 123, the Company will continue to apply the provisions of
APB 25 in accounting for its stock-based employee compensation arrangements,
and will disclose the pro forma net earnings and earnings per share
information in its footnotes as if the fair value method had been applied.
The Company recognizes compensation cost for stock-based compensation
arrangements equal to the difference between the quoted market price of the
stock option at the date of grant and the price to be paid by the employee
upon exercise in accordance with the provisions of APB 25. Based upon the
terms of the Company's current stock option plans, the stock price on the
date of grant and price paid upon exercise are the same, thus no compensation
charge is required to be recognized.
-27-
<PAGE>
Had compensation cost for the Company's stock option plans been determined
based on the fair value method for awards in 1998, 1997 and 1996 consistent
with the provisions of FAS 123, the Company's net earnings(loss) and
earnings(loss) per share would have been changed to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
Dollar amounts in thousands,
except per share data 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net earnings (loss),
as reported $ 9 $ (3,831) $ (9,892)
------- -------- --------
Net loss pro forma $ (598) $ (4,872) $ (9,951)
------- -------- --------
Net loss per diluted share,
as reported $ .00 $ (.48) $ (1.26)
------- -------- --------
Net loss per diluted share,
pro forma $ (.08) $ (.61) $ (1.26)
------- -------- --------
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1998: dividend yield of 3.04%; expected
volatility of 48%; risk-free interest rate of 5.5% to 6.5%; and expected life
of 5.3 years.
The weighted average fair value of options granted in 1998 is $3.28 per
share. The weighted average exercise price of the options outstanding is
$9.88 and the weighted average remaining contractual life of those options is
3.7 years.
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 acquiror 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 14, 1998 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 $40 per unit. In
addition, if an acquiring person becomes the beneficial owner of more than 15
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 $40.
If after an acquiring person becomes the beneficial holder of more than 15
percent of the Company's outstanding common stock and then 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 $40. The Company may redeem the
rights, for $.01 per right, under certain circumstances.
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 $403,000 in 1998, $561,000 in 1997 and
$463,000 in 1996.
-28-
<PAGE>
9. INCOME TAXES
The income tax provisions (benefits) are comprised of the following for the
three years ended June 30:
<TABLE>
<CAPTION>
Dollar amounts in thousands 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 1,786 $ 496 $ 2,660
State 390 665 850
------- ------- -------
2,176 1,161 3,510
------- ------- -------
Deferred:
Federal 360 ( 26) (536)
State 69 (378) (156)
------- ------- -------
429 (404) (692)
------- ------- -------
Income tax provision for continuing
operations 2,605 757 2,818
Income tax benefit from
discontinued operations (3,162) (3,961) (9,888)
------- ------- -------
Total income tax benefit $ (557) $(3,204) $(7,070)
------- ------- -------
</TABLE>
The components of the net deferred tax asset are as follows at June 30:
<TABLE>
<CAPTION>
Dollar amounts in thousands 1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Accounts receivable allowance $ 226 $ 66
Inventory valuation 198 170
Compensated absences and medical claims 90 130
Tax over book basis in affiliates 1,854 1,612
Other liabilities and reserves 763 879
Net operating loss carryforwards 1,818 2,527
Various tax credit carryforwards 12 12
Contribution carryforwards 9 9
Provision for discontinued operations 3,928 4,064
Valuation allowance (2,742) (3,480)
-------- -------
Total 6,156 5,989
-------- -------
Deferred tax liabilities:
Book over tax basis of capital assets 1,442 1,595
-------- -------
Net deferred tax asset $ 4,714 $ 4,394
-------- -------
</TABLE>
The valuation allowance relates principally to deferred tax assets that the
Company estimates may not be realizable, including portions of tax over book
basis in affiliates, net operating loss carryforwards, and tax credit
carryforwards. The decrease in the valuation allowance is due principally to
the expiration of unutilized net operating loss carryforwards.
At June 30, 1998, certain subsidiaries of the Company have approximately
$3,935,000 of federal and $3,973,000 of state net operating loss
carryforwards for tax purposes. Certain limitations on utilization are
present and realization of a significant portion of the carryforwards is
uncertain. These carryforwards expire in years from 1999 through 2005.
-29-
<PAGE>
The net deferred tax asset is presented on the balance sheet as follows at
June 30:
<TABLE>
<CAPTION>
Dollar amounts in thousands 1998 1997
---- ----
<S> <C> <C>
Current deferred tax asset $ 1,642 $ 887
Noncurrent deferred tax liability (795) (566)
------- -------
Net deferred tax asset of continuing
operations 847 321
------- -------
Current deferred tax asset of
discontinued operations 3,520 2,458
Noncurrent deferred tax asset of
discontinued operations 347 1,615
------- -------
Net deferred tax asset of discontinued
operations 3,867 4,073
------- -------
Net deferred tax asset $ 4,714 $ 4,394
------- -------
</TABLE>
Income tax provisions differed from the taxes calculated at the statutory
federal tax rate as follows for the three years ended June 30:
<TABLE>
<CAPTION>
Dollar amounts in thousands 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Taxes at statutory rate $ 2,975 $ 1,246 $ 2,451
State income taxes 303 189 458
Utilization of capital loss
carryforwards (822) (561)
Other (673) 144 470
------- ------ -------
Income tax provision for
continuing operations: $ 2,605 $ 757 $ 2,818
------- ------- -------
</TABLE>
10. EARNINGS PER SHARE
The Company adopted FAS No. 128, Earnings Per Share, in 1998. This
pronouncement eliminates the measure of performance called "primary" earnings
per share (EPS) and replaces it with "basic" EPS. The essential difference
between the two calculations is that the dilutive effects of stock options
outstanding are not considered in the basic EPS computation. As a result,
basic EPS tends to be slightly higher than primary EPS. The pronouncement
also changed the measure previously reported as "fully diluted" EPS to
"diluted" EPS. The computational differences between them are not material to
the Company. All prior periods have been restated in conformity with FAS 128.
Basic earnings per share is computed by dividing net earnings available to
holders of common stock by the weighted average number of shares of common
stock outstanding. Diluted EPS is computed assuming the exercise of all
stock options that are profitable to the recipients under the treasury stock
method and, for the 1996 year only, conversion of the convertible debentures
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.
-30-
<PAGE>
The computation of basic and diluted earnings per share, as prescribed by FAS
128, is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Dollar Amounts in Thousands
Net earnings (loss) per share
of common stock:
Basic $ .00 $ (.48) $ (1.26)
----- ------ -------
Diluted $ .00 $ (.48) $ (1.01)
----- ------ -------
Numerator:
- ----------
Net earnings (loss) available to
common shareholders-basic $ 9 $ (3,831) $ (9,892)
----- -------- --------
Adjustment for interest expense
and amortization related to
convertible debentures 886
----- -------- --------
Adjusted earnings for diluted
calculation $ 9 $ (3,831) $ (9,006)
------ -------- --------
Denominator:
- ------------
Weighted average shares
outstanding-basic 7,943,653 7,966,700 7,875,585
Effect of dilutive securities
Options 144,701 42,193 128,339
Convertible debt 947,638
-------- -------- --------
Weighted average shares
outstanding-diluted 8,088,354 8,008,893 8,951,562
--------- --------- ---------
</TABLE>
There were outstanding options to purchase common stock at prices that
exceeded the average market price for the income statement period as follows:
<TABLE>
<S> <C> <C> <C>
Average exercise price per share $ 14.04 $ 9.63 $ 9.83
Number of shares 288,850 572,274 500,615
</TABLE>
These options have been excluded from the computation of diluted earnings per
share.
11. COMMITMENTS AND CONTINGENT LIABILITIES
Aggregate rental expense under operating leases, principally for office and
manufacturing facilities used in continuing operations was $477,000 in 1998,
$450,000 in 1997 and $504,000 in 1996. These operating leases include options
for renewal. Annual minimum future rentals for lease commitments related to
continuing operations range from approximately $450,000 in 1999 to $317,000 in
2003, an aggregate of $1,482,000 through 2003.
The Company has 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.
The Company has retained liability for two patent infringement lawsuits filed
in Delaware federal court against Disc Manufacturing, Inc. (DMI), a
discontinued operation sold by the Company in March 1997. In one of the
cases, a federal jury ruled that the plaintiff's patents were invalid and the
plaintiffs have appealed. 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. A trial of the patent
infringement and invalidity issues was conducted in October 1997 and a
decision is pending. Royalties requested by the patent holders could result
in a significant cost to the Company.
-31-
<PAGE>
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 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. Of the 32 cases filed to date, six were
dismissed in April 1997 after a jury verdict in favor of Stenograph. In
addition, eleven cases have been dismissed with prejudice and eight cases
have been dismissed without prejudice to refile the complaints. All cases
have been referred to the Company's insurance carriers and the Company
believes that any liability (excluding punitive damages and deductibles in
certain years) 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.
In 1998, the Company settled three claims involving DMI. They include a
lawsuit with the Disctronics Group, former owners of DMI, and a lawsuit by a
customer that claimed DMI failed to produce certain video discs on schedule,
thereby injuring its business. A third settlement resolved a trademark,
copyright and related intellectual property rights infringement claim
initiated by the Recording Industry Association of America. The settlements,
in total, resulted in a fiscal 1998 fourth quarter after-tax charge of $4.2
million, or $0.51 per diluted share, to discontinued operations.
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 FAS 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,additional liabilities, if any, arising from
these legal actions should not have a material effect on the Company's
results of operations or financial condition.
12. SUPPLEMENTAL CASH FLOW STATEMENT DISCLOSURES
Cash paid for interest was $300,000 in 1998, $3,825,000 in 1997 and $6,105,000
in 1996. The Company received net refunds from income taxes of $1,388,000 in
1998 and $3,954,000 in 1997. Net cash paid for income taxes was $1,495,000 in
1996. In connection with the Company's acquisitions during 1998, liabilities of
$114,000 were assumed. In addition, seller financed debt of $5,436,000 was
incurred.
The Company declared dividends that were payable at year end of $1,021,000 in
1998, $1,039,000 in 1997 and $946,000 in 1996.
13. INDUSTRY SEGMENT INFORMATION
The Company's operations consist of one industry segment engaged in the
manufacture and sale of highway safety products. Substantially all the sales of
highway safety devices are to distributors and contractors providing product and
services to federal, state and local governmental units.
-32-
<PAGE>
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for years 1998 and 1997 follows:
Dollar amounts in thousands, except per share data
<TABLE>
<CAPTION>
Three months ended
9/30 12/31 3/31 6/30
---- ----- ---- ----
<S> <C> <C> <C> <C>
1998
Net sales $ 12,334 $ 12,118 $ 12,821 $ 18,715
Gross profit 5,796 4,957 5,385 9,405
Earnings from continuing operations 1,588 642 820 3,097
Loss from discontinued operations (1,980) (4,158)
--------- -------- -------- --------
Net earnings (loss) $ 1,588 $ (1,338) $ 820 $ (1,061)
--------- -------- -------- --------
Basic earnings (loss) per share:
Continuing operations $ .20 $ .08 $ .10 $ .39
--------- -------- -------- --------
Net earnings (loss) $ .20 $ (.17) $ .10 $ (.13)
--------- -------- -------- --------
Diluted earnings (loss) per share:
Continuing operations $ .20 $ .08 $ .10 $ .38
--------- -------- -------- --------
Net earnings (loss) $ .20 $ (.17) $ .10 $ (.13)
--------- -------- -------- --------
</TABLE>
Dollar amounts in thousands, except per share data
<TABLE>
<CAPTION>
Three Months Ended
9/30 12/31 3/31 6/30
---- ----- ---- ----
<S> <C> <C> <C> <C>
1997
Net sales $ 11,096 $ 9,195 $ 10,268 $ 14,478
Gross profit 5,594 4,311 4,797 7,547
Earnings (loss) from continuing operations 691 (301) 189 2,328
Earnings (loss) from discontinued operations 105 1,340 (8,183)
--------- -------- -------- --------
Net earnings (loss) $ 796 $ 1,039 $ (7,994) $ 2,328
--------- -------- -------- --------
Basic earnings (loss) per share:
Continuing operations $ .09 $ (.04) $ .02 $ .29
--------- -------- -------- --------
Net earnings (loss) $ .10 $ .13 $ (1.00) $ .29
--------- -------- -------- --------
Diluted earnings (loss) per share:
Continuing operations $ .08 $ (.04) $ .02 $ .29
--------- -------- -------- --------
Net earnings (loss) $ .10 $ .13 $ (1.00) $ .29
--------- -------- -------- --------
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
- ------------------------------------------------------------------------
None.
-33-
<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 18, 1998 to be filed with the Commission
on or about September 28, 1998 and is incorporated herein by reference.
The executive officers of the Company, their ages and offices held by each
during fiscal 1998 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Philip E. Rollhaus, Jr. 63 Chairman, Chief Executive Officer & Director -
Quixote Corporation
Chairman, Energy Absorption Systems, Inc.
Leslie J. Jezuit 52 President, Chief Operating Officer & Director -
Quixote Corporation, Vice Chairman - Energy Absorption
Systems, Inc.
Daniel P. Gorey 47 Chief Financial Officer, Vice President & Treasurer
- Quixote Corporation
Joan R. Riley 45 General Counsel & Secretary - Quixote Corporation
George D. Ebersole 62 President, Energy Absorption Systems, Inc.
</TABLE>
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. Gorey joined the Company as Manager of Corporate Accounting in July 1985.
He was made Controller of the Company in 1987, elected Vice President in
1994, and was elected Chief Financial Officer and Treasurer in November 1996.
Ms. Riley joined the Company as Assistant General Counsel and Assistant
Secretary in 1991 and was elected General Counsel and Secretary in 1997.
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 "Remuneration of Directors and Executive Officers" of the
Registrant's Definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on November 18, 1998 to be filed with the Commission
on or about September 28, 1998 and is incorporated herein by reference.
-34-
<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 18, 1998 to be filed with the Commission on or about September
28, 1998 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 18, 1998 to be filed with the Commission on or about September
28, 1998 and is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
----------------------------------------------------------------
<TABLE>
<CAPTION>
Item Page Number in
Number This Report
- ------ --------------
<S> <C> <C>
(a).1. Financial Statements
--------------------
Report of Independent Accountants 18
Consolidated Statements of Operations for the
years ended June 30, 1998, 1997 and 1996 19
Consolidated Balance Sheets as of June 30,
1998 and 1997 20
Consolidated Statements of Shareholders'
Equity for the years ended June 30, 1998,
1997 and 1996 21
Consolidated Statements of Cash Flows for the
years ended June 30, 1998, 1997 and 1996 22
Notes to Consolidated Financial Statements 23-33
</TABLE>
(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.
-35-
<PAGE>
(b). Reports on Form 8-K
-------------------
In June 1998, the Company filed a report on Form 8-K dated May 18, 1998,
reporting under "Item 5 Other Events" the settlement of three claims against
its formerly owned subsidiary, Disc Manufacturing, Inc., which included
settlement of litigation described in Part 1, Item 3(A)(B) and (D) of this
Report on Form 10K, as well as trademark, copyright and related intellectual
property claims asserted by the Recording Industry Association of America.
In July 1998 the Company filed a report on Form 8-K dated June 30, 1998,
reporting the Company's adoption of a new Shareholder Rights Plan and, in
connection therewith, the declaration of a dividend distribution of one Right
(as described in the new Plan) to all stockholders of record on July 14, 1998.
(c). Exhibits
--------
*Management contract or compensatory plan or agreement
3.(a) Restated Certificate of Incorporation dated February 4, 1998
filed as Exhibit 3(a) to the Company's Form 10-Q Report for the
quarter ended December 31, 1997, File No. 0-7903, and
incorporated herein by reference; Certificate of Designation,
Preferences and Rights of Series B Junior Participating
Preferred Stock dated July 24, 1998, filed as Exhibit 1 to the
Company's Form 8-A Registration Statement dated July 23, 1998,
File No. 001-08123, and incorporated herein by reference.
(b) Amended and Restated By-Laws of the Company as amended through July
13, 1998, filed herewith.
4. (a) Rights Agreement dated as of July 24, 1998, between the Company
and BankBoston, N.A, as Rights Agent, filed as Exhibit 1 to the
Company's Form 8-A Registration Statement dated July 23, 1998,
File No. 001-08123, and incorporated herein by reference.
10.(a) Amended and Restated Loan Agreement ("Loan Agreement") dated as
of June 30, 1997 among Quixote Corporation and certain
subsidiaries ("Quixote"), The Northern Trust Company
("Northern"), LaSalle National Bank ("LaSalle"), and American
National Bank and Trust Company ("American")and Amended and
Restated Revolving Credit Notes dated June 30, 1997 from the
Company and certain of its subsidiaries to the Northern, LaSalle
and American, filed as Exhibit 10(a) to the Company's Form 10-Q
Report for the quarter ended September 30, 1997, File No.
0-7903, and incorporated herein by reference; First Amendment to
the Loan Agreement dated May 31, 1998, filed herewith.
(b)* Restated 1972 Director Stock Option Plan, as amended through
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.
(c)* 1991 Director Stock Option Plan, as amended through August 21,
1998, filed herewith.
(d)* 1993 Long-Term Stock Ownership Incentive Plan, as amended
through August 21, 1998, filed herewith; Retirement Award
Agreements for Philip E. Rollhaus, Jr. and George D. Ebersole,
dated June 30, 1993 and as amended on August 23, 1996, filed as
Exhibit 12(f) to the Company's Form 10-K Report for the fiscal
year ended June 30, 1996, File No. 0-7903, and incorporated
herein by reference; Retirement Award Agreement dated as of June
30, 1997 between the Company and Daniel P. Gorey, filed as
Exhibit 10(d) to the Company's Form 10-K Report for the fiscal
year ended June 30, 1997, File No. 0-7903, and incorporated
herein by reference; Retirement Award Agreement dated as of
February 19, 1998 between the Company and Leslie J. Jezuit filed
as Exhibit 10(a) to the Company's Form
-36-
<PAGE>
10-Q Report for the quarter ended March 31, 1998 and
incorporated herein by reference; Retirement Award Agreement
dated as of February 19, 1998 between the Company and Joan R.
Riley, filed herewith.
(e) 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; Fourth Amendment to Company Lease dated as
of September 18, 1996 filed as Exhibit 10(b) to the Company's
Form 10-Q Report for the quarter ended December 31, 1996 and
incorporated herein by reference; Office Lease between
Amberjack, Ltd. and Litigation Sciences, Inc. dated July 2,
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; Promissory Note
dated December 31, 1996 from Quixote Steno Corporation and
Quixote Corporation to Coventry Fund III, Ltd., filed as
Exhibit 10(e) to the Company's Form 10-K Report for the year
ended June 30, 1997, File No. 0-7903, and incorporated herein
by reference.
(f)* Employment agreement ("Employment Agreement") dated as of June
24, 1991 between the Company and Philip E. Rollhaus, Jr., 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; Amended Executive Employment
Agreement dated November 14, 1996 to Employment Agreement and
Second Amendment to Employment Agreement dated January 12, 1997,
filed as Exhibit 10(a) to the Company's form 10-Q Report for the
quarter ended December 31, 1996, 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, and
incorporated herein by reference; Letter Agreement dated August
12, 1997 between the Company and James H. DeVries, filed as
Exhibit 10(f) to the Company's Form 10-K Report for the year
ended June 30, 1997, File No. 0-7903, and incorporated herein by
reference; Change of Control Agreements dated December 1,1997 by
and between the Company and each of Philip E. Rollhaus, Jr.,
Leslie J. Jezuit, George D. Ebersole and Daniel P. Gorey, filed
as Exhibit 10(f) to the Company's Form 10-Q Report for the
quarter ended December 31, 1997, File No. 0-7903, and
incorporated herein by reference; Change of Control Agreement
dated December 1, 1997 between the Company and Joan R. Riley,
filed herewith.
(g) Summary Plan Description for the Incentive Savings Plan of the
Company Amended o Reflect Provisions Effective July 1, 1997,
filed herewith.
(h) 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.
(i) 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
-37-
<PAGE>
incorporated herein by reference.
(j) 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.
(k) 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 as Exhibit 10(k) to the Company's Form 10-K for the year
ended June 30, 1996, File No. 0-0793, and incorporated herein by
reference.
(l) Asset Purchase Agreement dated as of December 8, 1996 among the
Company, Disc Manufacturing, Inc., Cinram Ltd. and Cinram Inc.,
filed as Exhibit 10 (c) to the Company's Form 10-Q for the
quarter ended December 31, 1996, File No. 0-7903, and
incorporated herein by reference.
(m) Asset Purchase Agreement made October 10, 1997, and effective
October 1, 1997, by and between Quixote Corporation, TranSafe
Corporation, Roadway Safety Service, Inc., Momentum Management,
Inc., and Fitch Barrier Corporation; Exclusive License Agreement
made October 10, 1997, and effective October 1, 1997, by and
between Robert A. Mileti, Roadway Safety Systems, Inc., Quixote
Corporation and TranSafe Corporation; Consulting Agreement made
October 10, 1997, and effective October 1, 1997, by and between
TranSafe Corporation and E. Scott Walter; Consulting Agreement
made October 10, 1997, and effective October 1, 1997, by and
between Quixote Corporation, Energy Absorption Systems, Inc.,
Roadway Safety Systems, Inc. and Robert A. Mileti, all filed as
Exhibits 2.1, 2.2, 2.3 and 2.4 to the Company's Form 8-K Report
dated October 10, 1997, File No. 0-7903, and incorporated herein
by reference.
(n) Asset Purchase Agreement dated as of April 14, 1998 by and
between TranSafe Corporation and Digital Recorders, Inc., filed
as Exhibit 10(b) to the Company's Form 10-Q Report for the
quarter ended March 31, 1998 and incorporated herein by
reference.
21. Subsidiaries of the Company
23. Consent of PricewaterhouseCoopers, LLP as Independent
Certified Public Accountants
27. Financial Data Schedule
(d) Schedules:
----------
II - Valuation and Qualifying Accounts and Reserves
-38-
<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: September 28, 1998 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 September 28, 1998
Philip E. Rollhaus, Jr. (Chief Executive Officer)
/s/ Leslie J. Jezuit
- --------------------------- President and Chief Operating September 28, 1998
Leslie J. Jezuit Officer
/s/ Daniel P. Gorey
- --------------------------- Chief Financial Officer, Vice September 28, 1998
Daniel P. Gorey President and Treasurer (Chief
Accounting and Financial Officer)
/s/ Joan R. Riley Secretary and General Counsel September 28, 1998
- ---------------------------
Joan R. Riley
/s/ James H. DeVries
- --------------------------- Director September 28, 1998
James H. DeVries
/s/ William G. Fowler
- --------------------------- Director September 28, 1998
William G. Fowler
/s/ Lawrence C. McQuade
- --------------------------- Director September 28, 1998
Lawrence C. McQuade
/s/ Robert D. van Roijen, Jr.
- --------------------------- Director September 28, 1998
Robert D. van Roijen, Jr.
</TABLE>
-39-
<PAGE>
QUIXOTE CORPORATION & SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the years ended June 30, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Column A Column B Column C Column D(a) Column E
- -------- -------- ----------- ----------- ---------
Additions
Balance at Charged to Balance at
Beginning of Costs and End of
Description Period Expenses Deductions Period
- ----------- ------------ ---------- ----------- ---------
<S> <C> <C> <C> <C>
Deducted from
Receivables:
Allowance for
Doubtful Accounts:
Year ended
June 30, 1998 $ 165,000 $ 405,000 $ 5,000 $ 565,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Year ended
June 30, 1997 $ 165,000 $ 2,000 $ 2,000 $ 165,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Year ended
June 30, 1996 $ 160,000 $ 21,000 $ 16,000 $ 165,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
NOTES:
(a) Column D represents accounts written off as uncollectable, net of
collections on accounts previously written off.
(b) Column C additions for 1998 include $400,000 related to the acquisition
of Highway Information Systems.
-40-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBITS
---------------------- -----------------------------------------------
<S> <C>
3(b) AMENDED AND RESTATED BY-LAWS OF QUIXOTE CORPORATION
10(a) FIRST AMENDMENT TO THE REVOLVING CREDIT AGREEMENT
DATED MAY 31, 1998
10(c) QUIXOTE CORPORATION 1991 DIRECTOR STOCK OPTION PLAN
AMENDED AUGUST 21, 1998
10(d)1 QUIXOTE CORPORATION 1993 LONG-TERM STOCK OWNERSHIP
INCENTIVE PLAN AS AMENDED AUGUST 21, 1998
10(d)2 RETIREMENT AWARD AGREEMENT DATED AS OF FEBRUARY 19,
1998 BETWEEN QUIXOTE CORPORATION AND JOAN R. RILEY
10(f) CHANGE OF CONTROL AGREEMENT DATED DECEMBER 1, 1997
BETWEEN QUIXOTE CORPORATION AND JOAN R. RILEY
10(g) SUMMARY PLAN DESCRIPTION FOR QUIXOTE CORPORATION'S
INCENTIVE SAVINGS PLAN
21 SUBSIDIARIES OF THE COMPANY.
23 CONSENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.
27 FINANCIAL DATA SCHEDULE
</TABLE>
-41-
<PAGE>
EXHIBIT 3(b)
AMENDED AND
RESTATED
BY-LAWS
OF
QUIXOTE CORPORATION
(A Delaware Corporation)
as adopted on March 16, 1991,
and as amended through July 13, 1998
(the Corporation was named Energy Absorption Systems, Inc. from July 14, 1969
to June 30, 1980)
ARTICLE I
OFFICES AND RECORDS
SECTION 1.1. DELAWARE OFFICE. The principal office of the Corporation
in the State of Delaware shall be located in the City of Wilmington, County
of New Castle, and the name and address of its registered agent is The
Corporation Trust Company, No. 100 West Tenth Street, Wilmington, Delaware.
SECTION 1.2. OTHER OFFICES. The Corporation may have such other
offices, either within or without the State of Delaware, as the Board of
Directors may designate or as the business of the Corporation may from time
to time require.
SECTION 1.3. BOOKS AND RECORDS. The books and records of the
Corporation may be kept outside the State of Delaware at such place or places
as may from time to time be designated by the Board of Directors.
ARTICLE II
STOCKHOLDERS
SECTION 2.1. ANNUAL MEETING. The annual meeting of the stockholders of
the Corporation shall be held on such date and at such place and time during
the period commencing at 12:01 A.M. (Chicago Time) on October 1 and ending
11:59 P.M. (Chicago Time) on December 10 in each year as may be fixed by
resolution of the Board of Directors adopted at least ten days prior to the
date so fixed, for the purpose of electing directors and for the transaction
of such other business as may properly come before the meeting. If, in any
year the Board of Directors shall not fix an annual meeting date, place
<PAGE>
and time by the end of the 10th day next preceding the third Friday of
October in that year, then the date, place and time of the annual meeting in
such year shall be on the third Friday of October at the principal office of
the Corporation in Chicago, Illinois at the hour of 10:30 A.M. (Chicago
Time). If the date of the annual meeting shall be a legal holiday in the
State where such meeting is to be held, such meeting shall be held on the
next succeeding business day.
SECTION 2.2. SPECIAL MEETINGS. Special meetings of the stockholders
shall be called at any time by the Chairman, President or a majority of the
Board of Directors.
SECTION 2.3. PLACE OF MEETING. The Board of Directors may designate
the place of meeting for any annual meeting or for any special meeting called
by the Board of Directors. If no designation is made by the Board of
Directors or if a special meeting be otherwise called, the place of meeting
shall be the principal office of the Corporation in Chicago, Illinois.
SECTION 2.4. NOTICE OF MEETING. Written or printed notice stating the
date, place and time of the meeting, and, in the case of a special meeting,
the purpose and purposes for which the meeting is called, shall be given as
required by the General Corporation Law of the State of Delaware.
SECTION 2.5. FIXING OF RECORD DATE. For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or stockholders entitled to receive payment of
any dividend, or in order to make a determination of stockholders for any
other proper purpose, the Board of Directors may fix in advance a date as the
record date for any such determination of stockholders, such date to be not
less than ten (10) days nor more than sixty (60) days prior to the date of
the meeting or of the payment of a dividend or such other event. If no
record date is fixed, the record date for such determination of stockholders
shall be (a) the close of business on the day next preceding the date on
which notice of the meeting is mailed, (b) the date on which the resolution
of the Board of Directors declaring such dividend is adopted, or (c) the date
on which notice is given to stockholders involving an event requiring a
record date, as the case may be. When a determination of stockholders
entitled to vote at any meeting of stockholders has been made as provided in
this Section, such determination shall apply to any adjournment thereof.
SECTION 2.6. QUORUM. A majority of the outstanding shares entitled to
vote shall constitute a quorum at meetings of stockholders, except that when
specified business is to be voted on by a class or series, voting as a class,
the holders of a majority of the shares of such class or series shall
constitute a quorum for the transaction of such business. At all meetings of
stockholders all questions shall be determined by a majority vote of the
stockholders entitled to vote present in person or by proxy, except as
otherwise provided by law or the Certificate of Incorporation or these
By-Laws.
<PAGE>
SECTION 2.7. PROXIES. At all meetings of stockholders, a stockholder
may vote by proxy. Without limiting the manner in which a stockholder may
authorize another person or persons to act for him as proxy, the following
are valid means of granting such authority. A stockholder may execute a
writing authorizing another person or persons to act for him as proxy.
Execution may be accomplished by the stockholder or his authorized officer,
director, employee or agent signing such writing or causing his or her
signature to be affixed to such writing by any reasonable means including,
but not limited to, by facsimile signature. A stockholder may also authorize
another person or persons to act for him as proxy by transmitting or
authorizing the transmission of a telegram, cablegram or other means of
electronic transmission to the person who will be the holder of the proxy or
to a proxy solicitation firm, proxy support service organization or like
agent duly authorized by the person who will be the holder of the proxy to
receive such transmission, provided that any such telegram, cablegram or
other means of electronic transmission must either set forth or be submitted
with information from which it can be determined that the telegram, cablegram
or other electronic transmission was authorized by the stockholder. If it is
determined that such telegrams, cablegrams or other electronic transmissions
are valid, the inspectors or, if there are no inspectors, such other persons
making that determination shall specify the information upon which they
relied. Any copy, facsimile telecommunication or other reliable reproduction
of the writing or transmission created pursuant to this section may be
substituted or used in lieu of the original writing or transmission for any
and all purposes for which the writing or transmission could be used,
provided that such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original writing or
transmission. No proxy shall be valid after eleven (11) months from the date
of its execution, unless the proxy shall otherwise provide.
SECTION 2.8. JUDGES OF ELECTION. The Secretary of the Corporation, or
any Assistant Secretary of the Corporation in the absence of the Secretary,
shall serve as the Judge of each meeting of stockholders, provided, however,
that the Chairman of the Board of the Corporation at his discretion may
appoint, in place of the Secretary or any Assistant Secretary of the
Corporation, three (3) judges of election to serve with respect to such
meeting of stockholders, and if any judge so appointed shall refuse to serve
or shall not be present at such stockholders' meeting, he shall be replaced
by the Chairman of the Board of Directors in advance of such meeting or in
advance of any voting at such meeting. All voting at stockholders' meetings
shall be conducted solely under the direction of the judge(s), and the
decision of the judge, or a majority of the judges if more than one, as to
the outcome of all voting at such meetings shall be binding upon the
Corporation and its stockholders in the absence of actual fraud in the
decision of the judge(s). Any competent person over the age of 21 may be
appointed as a judge of election.
<PAGE>
(a) In fulfilling the obligations hereunder, the judge(s) shall have
the following responsibilities: (1) to determine whether the meeting itself
is legally constituted for the purpose of the stockholders' action; (2) to
determine the validity and effect of proxies and the authority of the person
or persons designated in such proxies to vote pursuant thereto; (3) to
determine the validity and effect of ballots cast for the matters to be voted
on by the stockholders; and (4) to do all other acts and make all other
determinations necessary or appropriate in connection with conducting the
voting and deciding the results thereof.
(b) In discharging any or all of the aforementioned responsibilities,
the judge(s) (1) shall not have the duty of determining the names or
addresses of the registered stockholders of the Corporation entitled to vote
at such meeting, but may rely on a dated list of such stockholders if
certified by either the transfer agent or the Secretary of the Corporation
and if the date of such list coincides with the record date as fixed pursuant
to these By-Laws, and (2) shall not have the duty of determining the date of
mailing of the notices of the meeting or the persons to whom notices were
sent, but may rely on a certificate of the transfer agent or the Secretary of
the Corporation containing such information.
(c) To aid them in carrying out any of the aforementioned duties, the
judge(s) shall have the authority, but not the obligation, to appoint agents,
including, but not necessarily limited to, accountants, attorneys and
custodians. Any such agents so appointed shall be responsible only to the
judge(s).
(d) The judge(s) shall be entitled to possession of all ballots,
together with any accompanying proxies, cast by the stockholders. The
judge(s) shall retain possession, but not necessarily the physical custody,
of such ballots and proxies until they have determined the results of the
election, at which time they shall deliver such ballots and proxies, and
certify the results of the election, to the secretary of the meeting.
(e) Judge(s) shall be entitled to reimbursement from the Corporation
for all expenses reasonably incurred by them in connection with the discharge
of their responsibilities as judges, including fees and expenses of any
agents appointed pursuant to the provisions of these By-Laws, and, in
addition, the Corporation shall pay the judge(s) a fee commensurate with the
services rendered and the responsibilities undertaken by them.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed by its Board of Directors. In addition to the powers and
authority expressly
<PAGE>
conferred upon them by these By-Laws, the Board of Directors may exercise
all such powers of the Corporation and do all such lawful acts and things as
are not by statute or by the Certificate of Incorporation or by these By-Laws
required to be exercised or done by the stockholders.
SECTION 3.2. NUMBER, TENURE AND QUALIFICATIONS. The number of
directors of the Corporation shall be six. Each director shall hold office
until the third succeeding annual meeting of stockholders or until his
successor shall have been elected and qualified. Directors need not be
residents of the State of Delaware or stockholders of the Corporation.
Directors may be nominated for office in advance of the annual meeting of
stockholders.
SECTION 3.3. CLASSES OF DIRECTORS. As provided in the Certificate of
Incorporation, the directors shall be divided into three classes, as nearly
equal in number as possible. At each annual meeting, directors to replace
those whose term expires at such annual meeting shall be elected to hold
office until the third succeeding annual meeting or until his successor shall
have been elected and qualified. If the number of directors is changed, any
newly created directorships or decrease in directorships shall be so
apportioned among the classes as to make all classes as nearly equal in
number as possible. No decrease in the Board shall shorten the term of any
incumbent director.
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As used in these By-Laws, "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no
vacancies. Except as otherwise provided in the Certificate of Incorporation
or the By-Laws, vacancies occurring in the Board of Directors may be filled
for the unexpired term by a majority vote of the remaining directors.
SECTION 3.4. CONDUCT OF MEETINGS. The Board of Directors shall adopt
such rules and regulations for the conduct of the meetings and management of
the affairs of the Corporation as it may deem proper, not inconsistent with
the laws of the State of Delaware or these By-Laws. As soon as practicable
after the annual meeting of stockholders, the Board of Directors shall meet
for the purpose of organization and the transaction of business.
SECTION 3.5. REGULAR MEETINGS. The Board of Directors may, by
resolution, provide the time and place for the holding of regular meetings
without other notice than such resolution.
SECTION 3.6. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be called at the request of the Chairman of the Board, the
President or any two directors. The person or persons authorized to call
special meetings of the Board of Directors may fix the place and time for
such meetings.
SECTION 3.7. NOTICE. Notice of any special meeting shall be given to
each director at his business address in writing or by telegram or by
telephone communication. If mailed, such notice shall be deemed adequately
delivered when deposited in the United States mail so addressed, with postage
thereon prepaid at least five (5) days before such meeting. If by telegram,
such notice shall be deemed adequately delivered when the telegram is
delivered to the telegraph company at least twenty-four (24) hours before
such meeting. If by telephone, the notice shall be given at least twelve
(12) hours prior to the time set for the meeting. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice of such meeting, except
for amendments to these By-Laws as provided under Article VII. Notice of any
special or regular meeting shall be waived if the director is present at any
special or regular meeting.
SECTION 3.8. QUORUM. A majority of the number of directors fixed by
Section 3.2 of this Article III shall constitute a quorum for the transaction
of business at any meeting of the Board of Directors, but if less than such
majority is present at the meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice. The act of a
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. The directors present at a duly
organized meeting may continue to transact business until adjournment
notwithstanding the withdrawal of enough directors to leave less than a
quorum.
<PAGE>
SECTION 3.9 VACANCIES. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be
filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum of the Board of Directors. If the vacancy occurs
less than sixty days before the annual meeting of stockholders, the director
shall serve until the annual meeting succeeding the next annual meeting of
stockholders, at which such meeting the stockholders shall appoint the
director to fill the term of director If the vacancy occurs greater than
sixty days before the annual meeting of stockholders, the director shall
serve until the next annual meeting of stockholders at which such meeting the
stockholders shall appoint the director to fill the term. If the size of the
Board of Directors is enlarged or increased and a director is appointed to
fill the new directorship, the Board of Directors may designate the term of
the director appointed to fill the new directorship. No decrease in the size
of the Board of Directors shall shorten the term of any incumbent director.
SECTION 3.10 COMMITTEES. The Board of Directors, by resolution or
resolutions passed by three-fourths of the entire Board of Directors, may
designate from among its members an executive committee and other committees,
each consisting of three or more directors, and each of which, to the extent
provided in the Certificate of Incorporation, the By-Laws and in such
resolution or resolutions, shall have the authority of the Board of
Directors, except as may be provided otherwise by law. The Chairman of the
Board and the President shall be members EX OFFICIO of any executive
committee or finance committee. An executive committee or any other
committee shall act only at such times as the Board of Directors is not in
session and in no case to the exclusion of the right of the Board of
Directors at any time to act as a Board upon any business of the Corporation.
Each such committee shall cease to exist and function in any capacity upon
the termination of its authority by resolution or resolutions passed by a
majority of the entire Board of Directors.
All action by any committee of the Board of Directors shall be referred
to the Board of Directors at its meeting next succeeding such action, and
shall be subject to revision or alteration by the Board of Directors,
provided that no rights or acts of third parties shall be affected by any
such revision or alteration. Subject to such applicable resolutions as may
be adopted by the Board, each committee shall fix its own rules of procedure
and shall meet where and as provided in such rules, but in any case the
presence of a majority shall be necessary to constitute a quorum.
ARTICLE IV
OFFICERS
SECTION 4.1. ELECTED OFFICERS. The elected officers of the Corporation
shall be a Chairman of the Board, President, one or more Vice Presidents (the
number thereof to be determined by the Board of Directors and one or more of
whom may be designated as Executive Vice President), a Secretary, a Corporate
Record Keeper, a Treasurer, and one
<PAGE>
or more Assistant Secretaries and one or more Assistant Treasurers (the
number thereof to be determined by the Board of Directors). Any two or more
offices may be held by the same person, except the offices of President and
Secretary or Assistant Secretary. The Board of Directors may create such
other office or offices from time to time as shall in its judgment be
necessary or convenient and shall have power to prescribe the duties and
authority of the officers elected thereto by the Board of Directors.
SECTION 4.2. ELECTION AND TERM OF OFFICE. The elected officers of the
Corporation shall be elected annually by the Board of Directors at the
regular meeting of the Board of Directors held after each annual meeting of
the stockholders. If the election of officers shall not be held at such
meeting, such election shall be held as soon thereafter as conveniently may
be. Each officer shall hold office until his successor shall have been duly
elected and shall have qualified or until his death or until he shall resign
or shall have been removed.
SECTION 4.3. CHAIRMAN OF THE BOARD. The Chairman of the Board shall be
the chief executive officer of the Corporation and shall preside at all
meetings of the Board of Directors and of the stockholders. He shall
exercise the powers and perform the duties usual to the chief executive
officer and have general responsibility for the business and affairs of the
Corporation. Subject to the control and direction of the Board of Directors,
the Chairman of the Board shall define the Corporation's long-term
objectives, and consider and evaluate particular markets for the
Corporation's future activities, as well as be generally responsible for the
business and affairs of the Corporation. He shall see that all orders and
resolutions of the Board of Directors are carried into effect and shall do
and perform such other duties as from time to time may be assigned to him by
the Board of Directors or these By-laws, and as are incident to the office of
the chief executive officer. The Chairman of the Board shall have the power
to execute bonds, mortgages and other contracts, agreements and instruments
of the Corporation.
SECTION 4.4. PRESIDENT. The President shall be the chief operating and
administrative officer of the Corporation, and subject to the control and
direction of the Board of Directors and the Chairman of the Board, shall
direct, supervise and administer the affairs and daily operation of the
business of the Corporation, including but not limited to supervision of the
operations, performance and direction of the Corporation's subsidiaries and
their activities. In the absence or disability of the Chairman of the Board,
the President shall preside at all meetings of the Board of Directors and of
the stockholders, and otherwise shall exercise all of the duties of the
Chairman of the Board. The President shall have the power to execute bonds,
mortgages and other contracts, agreements and instruments of the Corporation
and to perform such other duties as from time to time may be assigned to him
by the Board of Directors, the Chairman of the Board, or these By-Laws and as
are incident to the office of President.
SECTION 4.5. VICE PRESIDENTS. The Vice Presidents, one or more of whom
may be designated Executive or Administrative Vice Presidents, shall perform
such duties in such capacities or as heads of their respective operating
divisions as may be assigned by
<PAGE>
the Board of Directors, the Chairman of the Board or the President and shall
report to such person or persons with respect to the performance of such
duties as the Board of Directors, the Chairman of the Board or the President
may from time to time specify. In the absence or incapacity of the Chairman
of the Board and the President, the duties of the offices of the Chairman of
the Board and President shall be performed by the Vice Presidents in the
order of priority established by the Board, and unless and until the Board of
Directors shall otherwise direct.
SECTION 4.6. SECRETARY TO THE BOARD OF DIRECTORS. The Secretary to the
Board of Directors shall have the duty to record the proceedings of the
meetings of the stockholders and directors in a book to be kept for that
purpose, and such other duties as the Board of Directors may delegate to
implement their activities.
SECTION 4.7. CORPORATE RECORD KEEPER. The Corporate Record Keeper
shall (a) see that all notices are duly given in accordance with the
provisions by these By-Laws or as required by law; (b) be custodian of the
corporate records and of the seal of the Corporation and see that the seal of
the Corporation is affixed to all documents, the execution of which on behalf
of the Corporation under its seal is duly authorized; (c) keep a register of
the post office address of each stockholder which shall be furnished to the
Corporate Record Keeper by such stockholder; (d) sign with the President or
Vice President, certificates for shares of the Corporation, the issuance of
which shall have been authorized by resolution of the Board of Directors;
(e) have general charge of the stock transfer books of the Corporation; and
(f) in general perform all duties incident to the office of Corporate Record
Keeper and such other duties as from time to time may be assigned to him by
the President or the Board of Directors.
SECTION 4.8. TREASURER. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his duties in such
sum and with such surety or sureties as the Board of Directors shall
determine. He shall (a) have charge and custody of and be responsible for
all funds and securities of the Corporation, (b) receive and give receipts
for moneys due and payable to the Corporation from any source whatsover, and
deposit all such moneys in the name of the Corporation in such banks, trust
companies or other depositories as shall be selected by the Board of
Directors, and (c) in general perform all of the duties incident to the
office of Treasurer and such other duties as from time to time may be
assigned to him by the President or the Board of Directors.
SECTION 4.9. CONTROLLER. The Board of Directors may elect a Controller
who shall be responsible for all accounting and auditing functions of the
Corporation and who shall perform such other duties as may from time to time
be required of him by the Board of Directors.
SECTION 4.10. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
Assistant Secretary, or any of them if there be more than one, may sign with
the Chairman or Vice-Chairman of the Board of Directors, President or a Vice
President certificates for shares of the Corporation, the issuance of which
shall have been authorized by resolution of the
<PAGE>
Board of Directors, and may attest the execution of contracts and other
documents on behalf of the Corporation by duly authorized officers of the
Corporation by affixing the corporate seal to such contracts and other
documents. The Assistant Treasurer, or any of them if there be more than
one, shall, if required by the Board of Directors, give bond for the faithful
discharge of his duties with such sums and with such sureties as the Board of
Directors shall determine. In general, the Assistant Secretaries and
Assistant Treasurers shall perform such duties as shall be assigned to them
by the Secretary or the Treasurer, respectively, or by the President or the
Board of Directors. The Assistant Secretaries in the order of their
election, shall, in the absence or disability of the Secretary, perform the
duties and exercise the powers of the Secretary. The Assistant Treasurers,
in order of their election, shall in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer.
SECTION 4.11. APPOINTIVE OFFICERS. Subject to the approval of the
Chairman of the Board, the President may appoint other officers and agents on
a division basis or otherwise, as such divisions or other operating units are
created by the Board of Directors, and such other officers and agents shall
receive such compensation, have such tenure and exercise such authority as
the President shall specify. All appointments made by the President
hereunder and all terms and conditions thereof must be reported to the Board
of Directors. No appointive officer shall have any contractual rights
against the corporation for compensation by virtue of such appointment beyond
the date of the appointment of his successor, his death, his resignation, or
his removal, whichever event shall first occur, except as otherwise provided
in an employment contract or under an employee deferred compensation plan.
SECTION 4.12. SALARIES. The salaries of the elected officers shall be
fixed from time to time by the Board of Directors and no officer shall be
prevented from receiving such salary by reason of the fact that he is also a
director of the Corporation.
SECTION 4.13. REMOVAL. Any officer elected by the Board of Directors
may be removed by the vote of three-fourths of the entire Board of Directors.
No elected officer shall have any contractual rights against the Corporation
for the compensation by virtue of such election beyond the date of the
election of his successor, his death, his resignation or his removal,
whichever event shall first occur, except as otherwise provided in an
employment contract or under an employee deferred compensation plan.
SECTION 4.14. VACANCIES. A newly created office or a vacancy in any
office because of death, resignation, or removal may be filled by the Board
of Directors for the unexpired portion of the term at any meeting of the
Board of Directors.
<PAGE>
ARTICLE V
STOCK CERTIFICATES AND TRANSFERS
SECTION 5.1. CERTIFICATES FOR SHARES. Certificates representing shares
of the Corporation shall be in such form as shall be determined by the Board
of Directors. Such certificates shall be signed by the Chairman or
Vice-Chairman of the Board of Directors, or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary and sealed with the corporate seal. All
certificates for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares are issued
and dates of issue, shall be entered on the stock transfer books of the
Corporation. All certificates surrendered to the Corporation for transfer
shall be canceled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
canceled, except that in case of a lost, destroyed or mutilated certificate a
new one may be issued therefor upon such terms and indemnity to the
Corporation as the Board of Directors may prescribe.
SECTION 5.2. TRANSFER OF SHARES. Transfer of shares of the Corporation
shall be made only on the stock transfer books of the Corporation by the
holder or record thereof or by his legal representative, who shall furnish
proper evidence of authority to transfer, or by his attorney thereunto
authorized by a power of attorney duly executed, and on surrender for
cancellation of the certificate for such shares. The person in whose name
shares stand on the books of the Corporation shall be deemed by the
Corporation to be the owner thereof for all purposes.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1. FISCAL YEAR. The fiscal year of the Corporation shall
begin on the first day of July and end on the thirtieth day of June of each
year.
SECTION 6.2. DIVIDENDS. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in
the manner and upon the terms and conditions provided by law and its
Certificate of Incorporation.
SECTION 6.3. SEAL. The corporate seal may bear the emblem of some
object, and shall have inscribed thereunder the words "Corporation Seal" and
around the margin thereof the words "QUIXOTE CORPORATION, Delaware".
SECTION 6.4. WAIVER OF NOTICE. Whenever any notice is required to be
given to any stockholders or any director of the Corporation under the
provisions of the General
<PAGE>
Corporation Law of the State of Delaware, a waiver thereof in writing, signed
by the person or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such notice.
Neither the business to be transacted at, nor the purpose of, any annual or
special meeting of the stockholders or the Board of Directors need be
specified in any waiver of notice of such meeting.
SECTION 6.5. AUDITS. In the discretion of the Board of Directors the
accounts, books and records of the Corporation may be audited upon the
conclusion of each fiscal year by an independent certified public accountant
selected by the Board of Directors.
SECTION 6.6. RESIGNATIONS. Any director or any officer, whether
elected or appointed, may resign at any time by serving written notice of
such resignation on the President or the Secretary, and such resignation
shall be deemed to be effective as of the close of business on the date said
notice is received by the President or Secretary. No formal action shall be
required of the Board of Directors or the stockholders to make any such
resignation effective.
SECTION 6.7. PUBLIC CONTRACTS. The following officers of the
Corporation, or any of them, or any other person from time to time designated
in writing by any one of said officers, are authorized to offer, make, sign,
execute, submit, deliver and perform for and on behalf of the Corporation, or
any operating divisions thereof, any bid or proposal or agreement or contract
of this Corporation in connection with the offer for sale or sale of products
or property to the United States, any state, any municipality, or any
political subdivision, department, division, authority, commission or agency
of any thereof, and to include in such bid, proposal, agreement or contract,
or in any or all of them, any certificate as to non-collusion required by
applicable law, as the act and deed of the Corporation, and for any
inaccuracies or misstatements in such certificate the Corporation shall be
liable under the penalties of perjury:
The Chairman of the Board, the President, any Vice
President, the Secretary, the Treasurer, any Assistant
Secretary, any Assistant Treasurer, or any appointed
divisional President or Vice President.
ARTICLE VII
AMENDMENTS
SECTION 7.1. AMENDMENTS. The Board of Directors may make, alter, amend
or repeal any of the By-Laws by the affirmative vote of at last a majority of
the members of the entire Board of Directors as fixed by Section 3.2 of
Article III of these By-Laws.
ARTICLE VIII
<PAGE>
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
SECTION 8.1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Except as
prohibited by law, each person who was or is a party or threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative including an
internal corporation investigation or appeal ("Proceeding"), by reason of the
fact that he is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer, fiduciary
or trustee of another corporation, partnership, joint venture, trust,
employee benefit plan, or any other enterprise, shall be indemnified against
expenses, attorneys' fees and disbursements, judgments, fines, excise taxes,
other penalties, and amounts paid in settlement actually and reasonably
incurred by him in connection with such Proceeding to the full extent
permitted by law. Such indemnification shall extend to the payment of
judgments against the directors and officers and to reimbursement of amounts
paid in settlement of such claims or actions, and may apply to judgments in
favor of the Corporation or amounts paid in settlement to the Corporation.
The foregoing right of indemnification shall inure to each such director
and officer, whether or not he is a director or officer at the time such cost
or expenses are imposed or incurred, and whether or not the claim asserted
against him is based on acts or omissions which occurred prior to or after
the adoption of this By-law if the Proceeding is commenced after the adoption
hereof, and in the event of his death, shall extend to his heirs, executors,
and administrators. If the director or officer is determined to be not
entitled to full indemnification, he shall have the right to partial
indemnification to the full extend permitted by law. The right of
indemnification provided in this Article shall not be exclusive of any other
rights to which such director or officer may be entitled. The foregoing
provisions of this Section 8.1 shall be deemed to be a contract between the
Corporation and each director and officer who serves in such capacity at any
time while this Article VIII and the relevant provisions of the General
Corporation Law and other applicable law, if any, are in effect, and any
repeal or modification thereof shall not affect any rights or obligations
then existing, with respect to any state of facts then or theretofore
existing, or any Proceeding theretofore, or thereafter brought or threatened
based in whole or in part upon any such state of facts.
SECTION 8.2. INDEMNIFICATION OF OTHER PERSONS. Except as prohibited by
law, each person who was or is a party or threatened to be made a party to
any Proceeding by reason of the fact that he is or was an employee or agent
of the Corporation or is or was serving at the request of the Corporation as
an employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan, or other enterprise, may be entitled to
indemnification against expenses, attorneys' fees and disbursements,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with the expense or settlement of such
Proceeding to the fullest extent permitted by law; provided that such
employee or agent acted in good faith and in a manner he reasonably believed
to be in or not opposed to the interests of the Corporation
<PAGE>
or such other entity and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful.
SECTION 8.3. ADVANCEMENT OF EXPENSES. Expenses incurred with respect to
any Proceeding shall be paid by the Corporation to any person entitled to
indemnification pursuant to Sections 8.1 or 8.2 in advance of the final
disposition of such Proceeding, upon receipt of an undertaking by or on behalf
of the recipient to repay such amount if it is ultimately determined that he is
not entitled to be indemnified by the Corporation.
SECTION 8.4. INSURANCE AND FUNDING. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
trustee, employee, or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, trustee, employee, or agent
of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such, whether or not
the Corporation would have the power to indemnify him against such liability.
The Corporation may create a trust fund, grant a security interest or use
other means (including, without limitation, a letter of credit) to assure the
payment of such sums as may become necessary to effect the indemnification
provided herein.
<PAGE>
FIRST AMENDMENT TO
REVOLVING CREDIT AGREEMENT
THIS FIRST AMENDMENT (this "FIRST AMENDMENT"), dated as of May 31, 1998,
is among QUIXOTE CORPORATION, a Delaware corporation ("QUIXOTE"), ENERGY
ABSORPTION SYSTEMS, INC., a Delaware corporation ("EAS"), QUIXOTE LASER
CORPORATION (f/k/a Disc Manufacturing, Inc.), a Delaware corporation ("DMI"),
QUIXOTE STENO CORPORATION (f/k/a Stenograph Corporation), a Delaware
corporation ("STENOGRAPH"), LEGAL TECHNOLOGIES, INC., a Delaware corporation
("LTI"), TRANSAFE CORPORATION, a Delaware corporation ("TRANSAFE"),
LITIGATION COMMUNICATIONS, INC., a Delaware corporation ("LCI") SPIN-CAST
PLASTICS, INC., an Indiana corporation ("SPIN-CAST"), QUIXOTE LSI CORPORATION
(f/k/a Litigation Services, Inc.), a Delaware corporation ("LSI"), E-TECH
TESTING SERVICES, INC., a Delaware corporation ("E-TECH"), ROADWAY SAFETY
SERVICE, INC., a Delaware corporation ("ROADWAY"), and SAFE-HIT CORPORATION,
a Nevada corporation ("SAFE-HIT"), certain lenders signatory hereto
("LENDERS"), and THE NORTHERN TRUST COMPANY, an Illinois banking corporation,
as agent for the Lenders hereunder ("AGENT"). Quixote, EAS, DMI, LTI,
Stenograph, Transafe, LCI, Spin-Cast, LSI, E-Tech, Roadway and Safe-Hit are
individually and collectively referred to herein as "BORROWER." This First
Amendment shall amend that certain Amended and Restated Loan Agreement dated
as of June 30, 1997 among the Borrower, the Lenders and the Agent (the "LOAN
AGREEMENT").
WITNESSETH:
WHEREAS, the Borrower, the Lenders and the Agent are parties to the Loan
Agreement; and
WHEREAS, the Borrower, the Lenders and the Agent desire to amend the Loan
Agreement in certain respects as set forth herein;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. AMENDMENTS TO THE 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. Section 1 of the Loan Agreement is hereby amended as of
the date hereof by deleting the definition of "Base Rate" in its entirety and
the following is hereby inserted in lieu thereof:
<PAGE>
"Base Rate" shall mean that rate of interest per year announced
from time to time by Agent called its prime rate, which rate may not at any
time be the lowest rate charged by Agent. Changes in the rate of interest on
the Revolving Credit Loan or the Term Loan resulting from a change in the
Base Rate shall take effect on the date set forth in each announcement for a
change in the Base Rate.
2. REPRESENTATIONS AND WARRANTIES.
The Borrower hereby remakes, as at the date of execution hereof, all of
the representations and warranties set forth in Section 4 of the Loan
Agreement as amended hereby and additionally represents and warrants that:
(a) the borrowings under the Loan Agreement as amended hereby, the execution
and delivery by the Borrower of this First Amendment and the performance by
the Borrower of its obligations under this First Amendment and the Loan
Agreement as amended hereby are within the Borrower's corporate powers, have
been authorized by all necessary corporate action, have received all
necessary governmental approval (if any shall be required) and do not and
will not contravene or conflict with any provision of law or of the charter
or by-laws of the Borrower or any subsidiary or of any agreement binding upon
the Borrower or any subsidiary; and (b) no Default or Event of Default under
the Loan Agreement as amended hereby has occurred and is continuing on the
date of execution hereof.
3. CONDITIONS OF EFFECTIVENESS.
The effectiveness of this First Amendment is subject to the
conditions precedent that the Agent shall have received all of the following,
each duly executed and dated the date hereof, in form and substance
satisfactory to the Agent and its counsel, at the expense of the Borrower,
and in such number of signed counterparts as the Agent may request:
(a) FIRST AMENDMENT. This First Amendment;
(b) RESOLUTIONS/INCUMBENCY. A certificate from the Secretary or
Assistant Secretary of each Borrower certifying the name(s) of the officer
or officers of the Borrower authorized to sign this First Amendment and the
other documents provided for in this First Amendment, together with a
sample of the true signature of each such officer (the Agent may
conclusively rely on each such certificate until formally advised by a like
certificate of any changes therein) and true copies of a resolutions of the
Board of Directors of each Borrower authorizing or ratifying the execution,
delivery and performance, of this First Amendment, the Loan Agreement as
amended hereby, and the other documents provided for in this First
Amendment;
(c) NO DEFAULT - REPRESENTATIONS ACCURATE. A certificate of each
Borrower, dated the date hereof, that (i) no Default or Event of Default
has occurred and is
<PAGE>
continuing and (ii) all representations and warranties contained in the
Loan Agreement as further amended hereby are true and complete as of the
date hereof; and
(d) MISCELLANEOUS. Such other documents as the Agent may request.
4. MISCELLANEOUS.
4.1 COUNTERPARTS. This First Amendment may be executed by the parties on
any number of separate counterparts and by each party on separate
counterparts; each counterpart shall be deemed an original instrument; and
all of the counterparts taken together shall be deemed to constitute one and
the same instrument.
4.2 SUCCESSORS AND ASSIGNS. This First Amendment and the Loan Agreement as
amended hereby shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Agent and their respective successors and assigns.
4.3 CAPTIONS. Captions in this First Amendment are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.
4.4 FEES. The Borrower agrees to pay or reimburse the Agent for all
reasonable costs and expenses of preparing and seeking advice in regard to
this First Amendment and any document or instrument executed in connection
herewith and therewith (including legal fees and reasonable time charges of
attorneys who may be employees of the Agent, whether in or out of court, in
original or appellate proceedings or in bankruptcy).
4.5 CONSTRUCTION. THIS FIRST AMENDMENT, THE LOAN AGREEMENT AS AMENDED
HEREBY AND ANY DOCUMENT OR INSTRUMENT EXECUTED IN CONNECTION HEREWITH OR
THEREWITH SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE INTERNAL 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, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA. AGENT, EACH LENDER AND BORROWER AGREE TO SUBMIT TO PERSONAL
JURISDICTION AND TO WAIVE ANY OBJECTION AS TO VENUE IN THE COUNTY OF COOK,
STATE OF ILLINOIS. BORROWER AGREES NOTHING HEREIN SHALL PRECLUDE AGENT, ANY
LENDER OR BORROWER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY
OTHER JURISDICTION.
4.6 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND
<PAGE>
EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY
(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION,
THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTON, SUIT OR
PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS
FIRST AMENDMENT, ANY OF THE OTHER LOAN DOCUMENTS OR ANY OF THE OTHER
AGREEMENTS.
4.7 AMENDMENT TO LOAN AGREEMENT. This First Amendment shall be deemed to be
an amendment to the Loan Agreement. All references to the Loan Agreement in
any other document or instrument shall be deemed to refer to the Loan
Agreement as amended hereby. As hereby amended, the Loan Agreement is hereby
ratified and confirmed in each and every respect.
[signature page to follow]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be executed by their duly authorized officers as of the day and
year first written above.
THE NORTHERN TRUST COMPANY,
as Agent and as Lender
By: /s/ Robert T. Jank
Name: Robert T. Jank
Title: Senior Vice President
LASALLE NATIONAL BANK,
as Lender
By: /s/ Joseph D. Stewart
Name: Joseph D. Stewart
Title: Assistant Vice President
AMERICAN NATIONAL BANK AND
TRUST COMPANY,
as Lender
By:/s/ Kyle Freimuth
Name: Kyle Freimuth
Title: Assistant Vice President
<PAGE>
QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC.
By: /s/ Leslie J. Jezuit By: /s/ Leslie J. Jezuit
Name: Leslie J. Jezuit Name: Leslie J. Jezuit
Title(s): President and COO Title(s): Vice Chairman
QUIXOTE LASER CORPORATION QUIXOTE STENO CORPORATION
(f/k/a Disc Manufacturing, Inc.) (f/k/a Stenograph Corporation)
By: /s/ Leslie J. Jezuit By: /s/ Leslie J. Jezuit
Name: Leslie J. Jezuit Name: Leslie J. Jezuit
Title(s): President Title(s): President
LEGAL TECHNOLOGIES, INC. TRANSAFE CORPORATION
By: /s/ Leslie J. Jezuit By: /s/ Leslie J. Jezuit
Name: Leslie J. Jezuit Name: Leslie J. Jezuit
Title(s): President Title(s): Present & COO
LITIGATION COMMUNICATIONS, INC. SPIN-CAST PLASTICS, INC.
By: /s/ Leslie J. Jezuit By: /s/ George D. Ebersole
Name: Leslie J. Jezuit Name: George D. Ebersole
Title(s): President Title(s): President & COO
QUIXOTE LSI CORPORATION SAFE-HIT CORPORATION
(f/k/a Litigation Sciences, Inc.)
By: /s/ Leslie J. Jezuit By: /s/ George D. Ebersole
Name: Leslie J. Jezuit Name: George D. Ebersole
Title(s): President Title(s): Chairman & President
<PAGE>
E-TECH TESTING SERVICES, INC. ROADWAY SAFETY SERVICE, INC.
By: /s/ George D. Ebersole By: /s/ Leslie J. Jezuit
Name: George D. Ebersole Name: Leslie J. Jezuit
Title(s): Chairman of the Board Title(s): President & COO
<PAGE>
QUIXOTE CORPORATION
1991 DIRECTOR STOCK OPTION PLAN
AMENDED AUGUST 21, 1998
1. PURPOSE
This Stock Option Plan (the "Plan") is intended as an incentive to
encourage stock ownership by certain Directors of QUIXOTE CORPORATION (the
"Corporation") so that they may acquire or increase their proprietary
interest in the success of the Corporation and to encourage them to continue
to render their services to the Corporation as Directors. It is further
intended that options granted pursuant to this Plan may constitute "incentive
stock options" within the meaning of Section 422A of the Internal Revenue
Code, as amended (the "Code"), if they satisfy the various requirements
specified under Code Sec. 422A. Otherwise, options granted pursuant to this
Plan shall be "nonqualified stock options".
2. ADMINISTRATION
The Plan shall be administered by a committee appointed by the Board of
Directors of the Corporation (the "Committee"). The Committee shall consist
of all members of the Corporation's Board of Directors unless the Board
adopts a resolution naming other individuals to serve on the Committee. The
Board of Directors may from time to time remove members from, or add members
to, the Committee. Vacancies on the Committee, howsoever caused, shall be
filled by the Board of Directors. The Committee shall select one of its
members as Chairman and shall hold meetings at such times and places as it
may determine. A majority of the Committee at which a quorum is present, or
acts reduced to or approved in writing by a majority of the members of the
Committee, shall be the valid acts of the Committee. The Committee shall from
time to time at its discretion recommend to the Board of Directors with
respect to the Directors who shall be granted options and the amount of stock
to be optioned to each.
The interpretation and construction by the Committee of any provisions
of the Plan or of any option granted under it shall be final unless otherwise
determined by the Board of Directors. No member of the Board of Directors or
the Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any option granted under it.
3. ELIGIBILITY
The persons who shall be eligible to receive options shall be Directors
of the Corporation as the Board of Directors shall select from time to time
from among those nominated by the Committee, provided however, that only
Directors who are also employees of the Corporation shall be eligible to
receive "incentive stock options" under this Plan. An optionee may hold more
than one option, but only on the terms and subject to the restrictions
hereafter set forth. No person shall be eligible to receive an option for a
larger number of shares of stock than is recommended for him by the
Committee, and in no event shall any optionee in any calendar year receive
options under this Plan for stock with an aggregate fair market value
(determined at the time of the grant of the option) in excess of the
limitations set forth in Section 5(b) of the Plan. The number of shares of
stock with respect to which
<PAGE>
option rights under the Plan may be granted to any individual during the term
of the Plan shall not exceed 90,000 shares, subject to adjustment as provided
in Section 5(g) of the Plan.
4. STOCK
The stock subject to options under the Plan shall be shares of the
Corporation's authorized but unissued or reacquired $.01-2/3 par value common
stock, hereafter sometimes called Common Stock. The aggregate number of
shares that may be issued under options shall not exceed 539,445 shares of
Common Stock. The limitations established by each of the preceding sentences
shall be subject to adjustment as provided in Section 5(g) of the Plan.
In the event that any outstanding option under the Plan for any reason
expires or is terminated, the shares of Common Stock allocable to the
unexercised portion of such option may again be subjected to an option under
the Plan.
5. TERMS AND CONDITIONS OF OPTIONS
Stock options granted under the Plan shall be authorized by the Board of
Directors and shall be evidenced by agreements in such form as the Committee
shall from time to time recommend and the Board of Directors shall from time
to time approve, which agreements shall comply with and be subject to the
following terms and conditions:
(a) OPTIONEE'S AGREEMENT
Each optionee shall agree to render to the Corporation his services
as a Director (1) for a period of one year from the date of the option, or
(2) until his death, whichever first occurs, but such agreement shall not
impose upon the Corporation any obligation to retain the optionee in any
capacity for any period; provided, however, the agreement shall permit an
optionee to exercise the option after a "change of control" (as defined at
Section 5(g)) notwithstanding the optionee's failure to have served as a
Director for one year from the date of grant.
(b) NUMBER OF SHARES
Each option shall state the number of shares to which it pertains.
Options granted under this Plan may be considered "incentive stock options"
as defined in Code Sec. 422A to the extent that the aggregate fair market
value of stock (determined at the time the option is granted) with respect to
which any such option is exercisable for the first time in a calendar year is
not more than $100,000.
(c) OPTION PRICE
Each option shall state the option price, which shall be not less
than 100% of the current market price of the shares of Common Stock of the
Corporation on the date of the granting of the option; provided, that in the
event an optionee owns stock representing more than ten percent of the voting
power or value of the stock of the Corporation on the date of grant, the
option price of an option which is intended to qualify as an "incentive stock
2
<PAGE>
option" shall not be less than 110% of the current market price of the shares
on the date of grant. The current market price of the Common Stock at any
date shall be deemed to be the average of the daily closing prices for the
thirty (30) consecutive business days before the date in question. The
closing price for each day shall be the last reported sale price determined
in the regular way or, in case no such reported sale takes place on such day,
the average of the last reported bid and asked prices determined in the
regular way, in either case on the principal national securities exchange on
which the Common Stock is admitted to trading or listed, or if not listed or
admitted to trading on any national securities exchange, the average of
highest reported bid and lowest reported asked prices as reported by NASDAQ
or other similar organization if NASDAQ is no longer reporting such
information, or if not so available, the fair market price as determined by
the Board of Directors. Subject to the foregoing, the Board of Directors and
the Committee shall have full authority and discretion in fixing the option
price and be fully protected in doing so.
(d) MEDIUM AND TIME OF PAYMENT
The option price is to be paid in full in United States dollars
upon the exercise of the option and may be paid in cash or by check, or with
the approval of the Committee, by the optionee tendering to the Corporation
shares of common stock of the Corporation owned by him and having a fair
market value (determined at the time the Corporation receives written notice
of the optionee's election to exercise the option) equal to the aggregate
exercise price of the options being exercised. With the approval of the Board
of Directors, the optionee may borrow from the Corporation all or any portion
of the funds needed to pay the option price on such terms and conditions as
the Committee deems appropriate, provided that: (1) the interest rate for any
such loan by the Corporation shall not be less than the "applicable federal
rate" (as defined by Code Section 1274(d)(1)(A) in effect on the date of such
loan or any other rate as necessary to avoid the imputation of interest under
the Code or other applicable law, (2) proceeds of the loan are used solely to
pay the exercise price of an option granted pursuant to this Plan, and (3)
the optionee executes a promissory note and such other documents as the
Committee deems appropriate to evidence the optionee's indebtedness to the
Corporation.
(e) TERM AND EXERCISE OF OPTIONS
Subject to this Section 5(e) and Sections 5(f) and 5(g) of this
Plan, no option shall be exercised either in whole or in part prior to twelve
months from the date it is granted. Subject to the right of cumulation
provided in this Section 5(e), each option granted pursuant to the Plan shall
be exercisable to the extent provided for in the agreement between the
Corporation and each optionee as determined by the Committee in its
discretion. The Committee may provide, however, for the exercise of options
after the initial twelve month period, either as to an increased percentage
of shares per year or as to all remaining shares, if the optionee shall, with
the approval of the Corporation, retire as a Director of the Corporation. To
the extent not exercised, installments shall accumulate and be exercisable,
in whole or in part, in any subsequent period, prior to the expiration of the
term described in the next sentence of this Section 5(e). No option shall be
exercisable after the expiration of ten years from the date it is granted,
provided that in the event the optionee owned stock representing more than
ten
3
<PAGE>
percent (10%) of the voting power or value of the stock of the Corporation on
the date the option was granted, any option which is intended to qualify as
an "incentive stock option" must be exercised within five (5) years from the
date of grant. During the optionee's lifetime, the options granted under this
Plan may be exercised only by him.
(f) DEATH OF OPTIONEE AND TRANSFER OF OPTION
If the optionee shall die and shall not have fully exercised the
option, the entire unexercised portion of the option may be exercised within
one year from the date of the optionee's death by the executors or
administrators of the optionee or by any person or persons who shall have
acquired the option directly from the optionee by bequest or inheritance,
subject to the condition that no option shall be exercisable after the
expiration of ten years (five years for an option which is intended to
qualify as an "incentive stock option" to an optionee who owned more than ten
percent of the value or voting power of the stock of the Corporation on the
date of grant) from the date it is granted.
No option shall be assignable or transferable by the optionee
otherwise than by will or the laws of descent and distribution.
(g) RECAPITALIZATION
Subject to any required action by the stockholders, the number of
shares of Common Stock covered by each outstanding option, and the price per
share thereof in each such option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock of the
Corporation resulting from a subdivision or consolidation of shares or the
payment of a stock dividend (but only on the Common Stock) or any other
increase or decrease in the number of such shares effected without receipt of
consideration by the Corporation.
Subject to any required action by the stockholders, if the
Corporation shall be the surviving corporation in any merger or
consolidation, each outstanding option shall pertain to and apply to the
securities to which a holder of the number of shares of Common Stock subject
to the option would have been entitled. A dissolution or liquidation of the
Corporation, or a merger or consolidation in which the Corporation is not the
surviving corporation, or a change in control of the Corporation, as defined,
shall cause each optionee to have the right to exercise his option in whole
or in part, notwithstanding the provisions of Section 5(e) above: (i)
immediately prior to such dissolution or liquidation or merger or
consolidation in which the Corporation is not the surviving corporation, and
thereafter; or (ii) after such change of control.
"Change of control" of the Corporation shall mean a change in
control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended ("Exchange Act"); provided that, without
limitation, such a change in control shall be deemed to have occurred if (i)
any "person" (as such term is used in Section 13(d) and 14(d) of the Exchange
Act) is, or becomes, the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Corporation
4
<PAGE>
representing twenty percent (20%) or more of the combined voting power of the
Corporation's then outstanding securities; or, (2) during any period of two
consecutive years, individuals who at the beginning of such period constitute
all members of the Board of Directors of the Corporation who are not employed
by the Corporation (the "Outside Directors") shall cease for any reason to
constitute at least a majority of the Outside Directors unless the election
of each Outside Director, who was not an Outside Director at the beginning of
the period, was approved by a vote of at least two-thirds (2/3) of the
Directors then still in office who were Directors at the beginning of the
period; or, (3) there shall be consummated (A) any consolidation or merger of
the Corporation in which the Corporation is not the continuing or surviving
corporation or pursuant to which shares of the Corporation's Common Stock
would be converted into cash, securities or other property, other than a
merger of the Corporation in which the holders of the Corporation's Common
Stock immediately prior to the merger have the same proportionate ownership
of common stock of the surviving corporation immediately after the merger, or
(B) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all, or substantially all, of the assets
of the Corporation or, (4) the stockholders of the Corporation approve a plan
or proposal for the liquidation or dissolution of the Corporation.
To the extent that the foregoing adjustments relate to stock or
securities of the Corporation, such adjustments shall be made by the
Committee, whose determination in that respect shall be final and binding and
conclusive; provided that each option granted pursuant to this Plan which
could qualify as an "incentive stock option" shall not be adjusted in a
manner that causes the option to fail to continue as an "incentive stock
option" within the meaning of Code Section 422A.
Except as hereinbefore expressly provided in this Section 5(g), the
optionee shall have no rights by reason of any subdivision or consolidation
of shares of stock of any class or the payment of any stock dividend or any
other increase or decrease in the number of shares of stock of any class or
by reason of any change of control, dissolution, liquidation, merger, or
consolidation or spin-off of assets or stock of another corporation, and any
issue of the Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to the option.
The grant of an option pursuant to the Plan shall not affect in any
way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve, liquidate, sell, or transfer
all or any part of its business or assets.
5
<PAGE>
(h) RIGHTS AS A STOCKHOLDER
An optionee or a transferee of an option shall have no rights as a
stockholder with respect to any shares covered by his option until the date
of the issuance of a stock certificate to him for such shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for which the
record date is prior to the date such stock certificate is issued, except as
provided in Section 5(g) hereof.
(i) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS
Subject to the terms and conditions and within the limitations of
the Plan, the Committee, with the approval of the Board of Directors, may
modify, extend or renew outstanding options granted under the Plan, or accept
the surrender of outstanding options (to the extent not theretofore
exercised) and authorize the granting of new options in substitution therefor
(to the extent not theretofore exercised). The Board of Directors shall not,
however, modify any outstanding options so as to specify a lower price or
accept the surrender of outstanding options and authorize the granting of new
options in substitution therefor specifying a lower price. Notwithstanding
the foregoing however no modification of an option shall, without the consent
of the optionee, alter or impair any rights or obligations under any option
theretofore granted under the Plan.
(j) INVESTMENT PURPOSE
Each option under the Plan shall be granted on the condition that
the stock purchased shall be held for investment purposes, and not with a
view to resale or distribution except that in the event the stock subject to
such option is registered under the Securities Act of 1933, as amended, or in
the event a resale of such stock without such registration would otherwise be
permissible, such condition shall be inoperative if in the opinion of counsel
for the Corporation such condition is not required under the Securities Act
of 1933 or any other applicable law, regulation, or rule of any governmental
agency.
(k) OTHER PROVISIONS
The option agreements authorized under the Plan shall contain such
other provisions, including, without limitation, restrictions upon the
exercise of the option, as the Committee and the Board of Directors of the
Corporation shall deem advisable.
6. TERM OF PLAN
Options may be granted under the Plan from time to time within a period
of ten years from the date the Plan is adopted, or the date the Plan is
approved by the Stockholders, whichever is earlier.
6
<PAGE>
7. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
Directors or as members of the Committee, the members of the Committee shall
be indemnified by the Corporation against the reasonable expenses, including
attorneys' fees actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any option
granted thereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Corporation) or paid by them in satisfaction of a judgment
except in relation to matters as to which it shall be adjudged in such
action, suit or proceeding that such Committee member is liable for
negligence or misconduct in the performance of his duties; provided that
within sixty (60) days after institution of any such action, suit or
proceeding a Committee member shall in writing offer the Corporation the
opportunity at its own expense, to handle and defend the same.
8. AMENDMENT OF THE PLAN
Upon recommendation of the Committee, the Board of Directors of the
Corporation may, insofar as permitted by law, from time to time, with respect
to any shares at the time not subject to options, suspend or discontinue the
Plan or revise or amend it in any respect whatsoever except that without
approval of the stockholders, no such revision or amendment shall change the
number of shares subject to the Plan, change the designation of the
individuals eligible to receive options, decrease the price at which options
may be granted, remove the administration of the Plan from the Committee, or
extend the period during which options may be granted.
The Board of Directors of the Corporation shall, from time to time,
revise, modify, or amend the Plan, in part or in total, without approval of
the stockholders, as may be necessary to satisfy the requirements of the Code
such that certain stock options which are granted under the Plan may qualify
as "incentive stock options" as defined in Code Section 422A and any
amendments or revisions thereof.
9. APPLICATION OF FUNDS
The proceeds received by the Corporation from the sale of Common Stock
pursuant to options will be used for general corporate purposes.
10. NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation upon the optionee
to exercise such option.
7
<PAGE>
Date Plan was adopted by Board of Directors: August 19, 1991
Date Plan was approved by Stockholders: November 19, 1991
Date Plan was amended by Board of Directors: June 25, 1997
Date Plan was amended by Board of Directors: August 28, 1997
Date amended Plan was approved by Stockholders: November 19, 1997
Date Plan was amended by the Board of Directors: August 21, 1998
Date amended Plan was approved by Stockholders: _________, 1998
8
<PAGE>
QUIXOTE CORPORATION
1993 LONG-TERM STOCK OWNERSHIP INCENTIVE PLAN
As Amended August 21, 1998
THE PLAN. Quixote Corporation, a Delaware corporation (the
"Company"), hereby amends and restates the substantive provisions of the
Quixote Corporation 1991 Incentive Stock Option Plan (the "1991 Plan"), to
establish the Quixote Corporation 1993 Long-Term Stock Ownership Incentive
Plan as set forth herein and as may from time to time be amended (the
"Plan"), in order to add provisions which will provide the Company with the
ability to provide its senior executives with stock-based retirement benefits
linked to increases in the value of the Company's Stock. The Plan is
effective as of June 30, 1993 subject to the approval by a majority of the
stockholders at the first annual meeting of stockholders held after the
Effective Date. Until such time as stockholder approval of the Plan is
obtained, the 1991 Plan will continue to exist and operate independently of
the Plan. Options granted and outstanding under the 1991 Plan following
stockholder approval of the Plan shall be governed by the provisions of the
Plan. Nothing in this Plan is intended to, or shall be deemed to, modify,
amend or alter any of the rights and benefits of holders of options granted
under the 1991 Plan or provide any additional benefits to such holders.
1. PURPOSE
The purposes of the Plan are to encourage selected employees of the
Company and its Subsidiaries who are capable of having an impact on the
performance of the Company to acquire a long-term proprietary interest in the
growth and performance of the Company, to generate an increased incentive to
contribute to the Company's future success and prosperity (thus enhancing the
value of the Company for the benefit of its stockholders), and to enhance the
ability of the Company and its Subsidiaries to attract and retain qualified
individuals upon whom the sustained progress, growth, and profitability of
the Company depend. It is further intended that options issued pursuant to
this Plan shall constitute "incentive stock options" within the meaning of
Sec. 422A of the Internal Revenue Code (such options are referred to herein
as "Incentive Stock Options"). In the event that stock options granted
pursuant to this Plan do not satisfy the requirements specified under
Internal Revenue Code Sec. 422A, such options shall be "nonqualified stock
options."
2. DEFINITIONS
As used in the Plan, terms defined immediately after their use shall
have the respective meanings provided by such definitions and the terms set
forth below shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "Affiliate" is a person that directly or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common
control with the Company.
(b) "Award" means options, Retirement Stock Awards or Retirement Cash
Awards granted under the Plan.
<PAGE>
(c) "Award Agreement" has the meaning specified in Section 4(b)(v).
(d) "Board" means the Board of Directors of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
References to a particular section of the Code shall include references to
successor provisions.
(f) "Committee" means the committee of the Board appointed pursuant to
Section 4.
(g) "Company" has the meaning set forth in the introductory paragraph.
(h) "Current Market Price" of the Stock means at any date the average of
the daily closing prices for thirty (30) consecutive business days commencing
no more than forty-five (45) business days before the day in question. The
closing price for each day shall be the last reported sales price determined
in the regular way or, in case no such reported sales takes place on such
day, the average of the last reported bid and asked prices determined in the
regular way, in either case on the principal national securities exchange on
which the Stock is admitted to trading or listed, or if not listed or
admitted to trading on any national securities exchange, the average of the
closing bid and asked prices as reported by NASDAQ or other similar
organization if NASDAQ is no longer reporting such information, or if not so
available, the fair market price as determined by the Board.
(i) "Disability" means, as relates to the exercise of an Incentive Stock
Option after termination of employment, a disability within the meaning of
Section 22(e)(3) of the Code, and for all other purposes, a mental or
physical condition which, in the opinion of the Committee, renders a Grantee
unable or incompetent to carry out the job responsibilities which such
Grantee held or the tasks to which such Grantee was assigned at the time the
disability was incurred, and which is expected to be permanent or for an
indefinite duration exceeding one year.
(j) "Effective Date" means June 30, 1993; provided that the Plan and any
Retirement Awards granted prior to the 1993 annual meeting of the Company's
stockholders are subject to approval of the Plan by the stockholders at such
annual meeting.
(k) "Grant Date" means the date on which the Committee grants the Award or
such later date as specified in advance by the Committee; provided however,
that references to the Grant Date of an option under this Plan shall, with
respect to options granted under the 1991 Plan prior to stockholder approval
of the Plan, refer to the date of grant of such option under the 1991 Plan.
(l) "Grantee" means an individual who has been granted an Award.
(m) "Including" or "includes" means "including, without limitation," or
"includes, without limitation."
(n) "1934 Act" means the Securities Exchange Act of 1934, as amended.
References to a particular section of, or rule under, the 1934 Act shall
include references to successor provisions.
2
<PAGE>
(o) "Option Price" means the per share purchase price of Stock subject to
an option.
(p) "Plan" has the meaning set forth in the introductory paragraph.
(q) "Retirement" means a termination of employment with the Company and
its Subsidiaries any time after attaining age 60.
(r) "SEC" means the Securities and Exchange Commission.
(s) "Section 16 Grantee" means a person subject to potential liability
under Section 16(b) of the 1934 Act with respect to transactions involving
equity securities of the Company.
(t) "Stock" means the common stock of the Company, $0.01-2/3 par value.
(u) "Subsidiary" means (i) with respect to Incentive Stock Options, a
corporation as defined in Section 424(f) of the Code with the Company being
treated as the employer corporation for purposes of this definition, and (ii)
for all other purposes any entity in which the Company directly or through
intervening subsidiaries owns at least a majority interest of the total
combined voting power or value of all classes of stock or, in the case of an
unincorporated entity, at least a majority in the capital and profits.
(v) "10% Owner" means a person who owns stock (including stock treated as
owned under Section 424(d) of the Code) possessing more than 10% of the total
combined voting power of all classes of stock of the Company.
3. SCOPE OF THE PLAN
(a) An aggregate of One Million Two Hundred and Eighty Thousand
(1,280,000) shares of Stock are hereby made available and reserved for
delivery on account of Awards and the exercise of Awards, with Nine Hundred
and Thirty Thousand (930,000) shares of Stock being made available and
reserved for delivery on account of options and Three Hundred Fifty Thousand
(350,000) shares of stock being made available and reserved for delivery on
account of Retirement Stock Awards. The limitations established by the
preceding sentences shall be subject to adjustment as provided in Section 18
of the Plan.
Such shares may be treasury shares, newly issued shares, or shares
purchased on the open market (including private purchases) in accordance with
applicable securities laws, or any combination of the foregoing, as may be
determined from time to time by the Board or the Committee.
(b) To the extent an Award shall expire or terminate for any reason
without having been exercised in full (including a cancellation and re-grant
of an option), or shall be forfeited, without, in either case, the Grantee
having enjoyed any of the benefits of Stock ownership (other than voting
rights or dividends that are also forfeited), the shares of Stock (including
Retirement Stock) associated with such Award shall become available for other
Awards.
(c) For purposes of this Section 3,
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(i) The aggregate number of shares covered by a Retirement Award Agreement
shall be counted on the Grant Date of such Award (without respect to the
timing of the Company's obligation to issue and deliver such shares) against
the aggregate number of shares of Stock available for granting Retirement
Stock Awards under the Plan; and
(ii) the shares of Stock underlying outstanding options (without respect to
any vesting schedule) shall be counted while the Award is outstanding against
the aggregate number of shares of Stock available for granting Awards under
the Plan; and
(iii) in the event of a stock-for-stock exercise of an option, the gross
number of shares of Stock subject to the option exercised, not the net number
of shares actually issued upon exercise shall be counted against the
aggregate number of shares of Stock available for granting Awards under the
Plan.
4. ADMINISTRATION
(a) Subject to Section 4(b), the Plan shall be administered
by a committee ("Committee") which shall consist of not less than three
persons who are Directors of the Company and who are not employees of the
Company. Membership on the Committee shall be subject to such other
limitations as the Board deems appropriate to permit transactions in Stock
pursuant to the Plan to be exempt from liability under Section 16(b) of the
1934 Act pursuant to Rule 16b-3 thereunder. Unless the Board adopts a
resolution naming other individuals to serve on the Committee, the Committee
shall consist of all Directors of the Company who are not employees of the
Company. The Board may from time to time remove members from, or add members
to the Committee. Vacancies on the Committee, however caused, shall be
filled by the Board. The Committee shall select one of its members as
Chairman, and shall hold meetings at such times and places as it may
determine. A majority of the Committee at which a quorum is present, or acts
approved in writing by all of the members of the Committee, shall be the
valid acts of the Committee. No member of the Committee shall be eligible to
receive any grant of any Awards under this Plan.
(b) The Committee, unless otherwise determined by the Board,
shall have full and final authority, in its discretion, but subject to the
express provisions of the Plan, as follows:
(i) to grant Awards;
(ii) to determine (A) when Awards may be granted, and
(B) whether or not specific Awards shall be identified with other specific
Awards, and if so, whether they shall be exercisable cumulatively with or
alternatively to such other specific Awards;
(iii) to interpret the Plan and to make all
determinations necessary or advisable for the administration of the Plan;
(iv) to prescribe, amend, and rescind rules and
regulations relating to the Plan, including rules with respect to the
exercisability and non-forfeitability of Awards upon the termination of
employment of a Grantee;
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(v) to determine the terms and provisions and any
restrictions or conditions (including specifying such performance criteria as
the Committee deems appropriate, and imposing restrictions with respect to
Stock acquired upon exercise of an option or Retirement Award, which
restrictions may continue beyond the Grantee's termination of employment) of
the written agreements by which all Awards shall be evidenced ("Award
Agreements") which need not be identical and, with the consent of the Grantee
where required by contract law, to modify any such Award Agreement at any
time;
(vi) to impose, incidental to an Award, conditions
with respect to competitive employment or other activities, to the extent
such conditions do not conflict with the Plan;
(vii) to cancel, with the consent of the Grantee,
outstanding Awards and to grant new Awards in substitution therefor;
provided, however, that any cancellation of outstanding options and grant of
new option awards so as to specify a lower price shall be made to no more
than ten percent (10%) of the options outstanding at such time;
(viii) to accelerate the exercisability of, and to
accelerate or waive any or all of the restrictions and conditions applicable
to any Award or any group of Awards;
(ix) subject to Section 6(c), to extend the time
during which any Award or group of Awards may be exercised;
(x) to make such adjustments or modifications to
Awards to Grantees working outside the United States as are necessary and
advisable to fulfill the purposes of the Plan which are not in conflict with
the Plan; and
(xi) to impose such additional conditions,
restrictions, and limitations upon the grant, exercise or retention of Awards
as the Committee may, before or concurrently with the grant thereof, deem
appropriate, including requiring simultaneous exercise of related identified
Awards, and limiting the percentage of Awards which may from time to time be
exercised by a Grantee.
The determination of the Committee on all matters relating to the Plan
or any Award Agreement shall be conclusive and final. No member of the
Committee or the Board shall be liable for any action or determination made
in good faith with respect to the Plan or any Award.
(c) The Board may, in its discretion, reserve to itself or
delegate to another committee of the Board, any or all of the authority and
responsibility of the Committee with respect to Awards to Grantees who are
not Section 16 Grantees at the time any such delegated authority or
responsibility is exercised. Such other committee may consist of two or more
Directors who may, but need not be, officers or employees of the Company or
of any of its Subsidiaries. To the extent that the Board has reserved to
itself or delegated to such other committee the authority and responsibility
of the Committee, all references to the Committee in the Plan shall be to the
Board or such other committee.
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5. ELIGIBILITY
Awards may be granted to any key employee (including any officer) of
the Company or any of its Subsidiaries; provided, however, that Retirement
Awards may be granted only to executive officers of the Company or its
Subsidiaries who have completed 10 years of continuous service for the
Company or its Subsidiaries; provided further that the Committee may, under
appropriate circumstances and in its discretion, waive the requirement of ten
years continuous service for a particular executive officer. In selecting
the individuals to whom Awards may be granted, as well as in determining the
number of shares of Stock subject to, and the other terms and conditions
applicable to, each Award, the Committee shall take into consideration such
factors as it deems relevant in promoting the purposes of the Plan.
6. TERMS AND CONDITIONS OF OPTION GRANTS
Stock options granted by the Committee pursuant to the Plan shall be
evidenced by Award Agreements in such form as the Committee shall from time
to time approve, which agreements shall comply with and be subject to the
following terms and conditions:
(a) Each option shall state the number of shares to which it
pertains.
(b) The Option Price of any option shall not be less than
100% of the Current Market Price of the Stock on the Grant Date.
(c) Any option granted under this Plan may be considered a
Incentive Stock Option to the extent that it:
(i) shall only be granted to individuals who are
employed by the Company or any of its Subsidiaries on the Grant Date;
(ii) shall not be granted to a 10% Owner unless the
Option Price is at least 110% of the Current Market Price of the Stock
subject to such option on the Grant Date and shall be exercisable for a
period of not more than five (5) years from the Grant Date;
(iii) except as provided in (ii) above, shall be
exercisable for a period of not more than 10 years from the Grant Date, and
shall be subject to earlier termination as provided herein or in the
applicable Award Agreement;
(iv) shall not have an aggregate fair market value
(determined for each Incentive Stock Option at its Grant Date) of Stock with
respect to which Incentive Stock Options are exercisable for the first time
by such Grantee during any calendar year (under the Plan and any other
employee stock option plan of the Grantee's employer or any parent or
Subsidiary thereof determined in accordance with the provisions of Section
422 of the Code), which exceeds $100,000; and
(v) shall require the Grantee to notify the Company
of any disposition of any Stock issued pursuant to the exercise of the
Incentive
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Stock Option under the circumstances described in Section 421(b) of the Code
(relating to certain disqualifying dispositions), within 10 days of such
disposition.
Subject to the foregoing, the Committee shall have full authority and
discretion in fixing the Option Price and the terms and conditions of the
option Awards and shall be fully protected in doing so.
(d) All options shall be granted on or before August 19,
2001.
(e) Options shall not be assignable or transferable other
than by will or the laws of descent and distribution and may be exercised
during the Grantee's lifetime only by the Grantee; provided, however, that
the Grantee may, to the extent provided in the Plan in any manner specified
by the Committee, designate in writing a beneficiary to exercise his/her
option after the Grantee's death.
(f) Subject to Section 4(b)(viii) and such terms and
conditions as the Committee may impose, each option shall be exercisable in
one or more installments. Each option shall be exercised by delivery to the
Company of written notice of intent to purchase a specific number of shares
of Stock subject to the option. The Option Price of any shares of Stock as
to which an option shall be exercised shall be paid in full at the time of
the exercise. Payment may, at the election of the Grantee, be made in any one
or any combination of the following:
(i) United States dollars in cash or by check;
(ii) Stock held by the Grantee for at least 6 months
prior to exercise of the option, valued at its Current Market Price on the
date of written notice of optionee's election to exercise the option; or
(iii) with the approval of the Committee, shares of
Retirement Stock held by the Grantee for at least 6 months prior to exercise
of the option, valued at the Current Market Price of a share of Stock on the
date of exercise.
(g) Except as expressly provided in this Plan or the Award
Agreement, no option may be exercised prior to twelve months from its Grant
Date. Subject to the right of cumulation provided in the next sentence of
this Section 6(g), each option shall be exercisable to the extent provided
for in the Award Agreement as determined by the Committee in its discretion.
To the extent not exercised, installments shall accumulate and be
exercisable, in whole or in part, in any subsequent period, prior to the
expiration of the term described in the Award Agreement, provided that no
option may be exercised more than ten years from its Grant Date.
Notwithstanding the preceding sentence, in the event that the optionee is a
10% Owner (determined on the Grant Date) of the Company, no option intended
to qualify as an Incentive Stock Option may be exercised more than five years
from the date it is granted. During the lifetime of the optionee, the option
shall be exercisable only by him and shall not be assignable or transferable
by him and no other person shall acquire any rights therein.
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(h) In the event that an optionee shall cease to be employed
by the Company for any reason other than his death, Disability, or
Retirement, subject to the condition that no option shall be exercisable
after the expiration of ten years from its Grant Date (five years for an
option which is intended to qualify as an Incentive Stock Option that is
granted to a 10% Owner on the Grant Date), such optionee may, at the
discretion of the Committee, be granted the right to exercise the option at
any time within thirty (30) days after such termination of employment to the
extent his right to exercise such option had not expired pursuant to Section
6(g) of this Plan, had vested and had not previously been exercised;
provided, however, that if the employment of the optionee is terminated by
the Company or any of its Subsidiaries for cause, fraud, breach of fiduciary
duty, or other dishonesty, the optionee's rights to exercise the option
otherwise provided herein shall expire on the last day of his employment.
Whether authorized leave of absence or absence for military or governmental
service, or any other reason, shall constitute termination of employment, for
the purposes of the Plan, shall be determined by the Committee, which
determination shall be final and conclusive.
(i) (i) In the event an optionee terminates his
employment with the Company or any Subsidiary because of a Disability, the
Disabled optionee or a lawfully appointed custodian thereof may exercise an
option granted pursuant to this Plan for a period of twelve months from the
date of termination of employment to the extent his right to exercise such
option had not expired pursuant to Section 6(g) of this Plan and had not
previously been exercised at the date of such termination.
(ii) If the employment of an optionee with the Company
or any Subsidiary is terminated by reason of the optionee's Retirement and
the optionee has been in the employ of either the Company or a Subsidiary
continuously from the date such option was granted until such Retirement
(except for leaves of absence approved in writing by the President of the
Company or the President of the Subsidiary for which the optionee works), the
entire unexercised portion of such option may be exercised by the optionee at
any time or times in whole or in part during the three-month period after
such retirement to the extent that such three-month period is included in the
remainder of such option's term.
(j) If the optionee shall die while in the employ of the
Company or any Subsidiary and shall not have fully exercised the option, the
unexercised portion of an option may be exercised at any time within one year
after the optionee's death by the executors or administrators of the optionee
or by any person or persons who shall have acquired the option directly from
the optionee by bequest or inheritance, subject to the condition that no
option shall be exercisable after the expiration of ten years from its Grant
Date (five years for an optionee under an Incentive Stock Option who is a 10%
Owner on the Grant Date).
No option shall be transferable by the optionee otherwise than
by will or the laws of descent and distribution.
7. TERMS AND CONDITIONS OF RETIREMENT AWARDS
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Grants of Stock and cash Awards intended to fund retirement benefits
for senior executives (the "Retirement Stock Awards" and "Retirement Cash
Awards" (each more fully described below), respectively, and collectively the
"Retirement Awards") pursuant to the Plan shall be authorized by the
Committee and shall be evidenced by agreements in such form as the Committee
shall from time to time approve (each a "Retirement Award Agreement"), which
agreements shall comply with and be subject to the following terms and
conditions:
(a) The Committee may grant Retirement Awards to any
individual eligible under Section 5 to receive such Retirement Awards.
(b) The Committee shall, in its discretion, determine the
amount, if any, that a Grantee shall pay for shares of Retirement Stock.
Awards shall be granted for no cash consideration or for such minimal cash
consideration as may be required by applicable law. If any such cash
consideration is required, payment shall be made in full by the Grantee
before the delivery of the shares and in any event no later than 10 days
after the Grant Date for such shares. In the discretion of the Committee and
to the extent permitted by law, payment may also be made in accordance with
Section 11.
(c) Each Retirement Award Agreement shall state the number
of shares of Stock and the amount of cash to which it pertains.
(d) The Retirement Award Agreement shall provide for an
aggregate Award of Retirement Stock which the Company will agree to issue and
deliver to the Grantee. Such Retirement Stock Award will be issued and
delivered to the Grantee in equal annual installments commencing with the
Grant Date and continuing over a period of years to be determined by the
Committee and set forth in the Retirement Award Agreement, subject to the
requirement that the Grantee be employed by the Company or any Subsidiary on
the last day of the fiscal year in which Retirement Stock is issued and
delivered; provided however, the Retirement Award Agreement may include a
provision which excepts from this requirement the Grantee's death, disability
or other involuntary termination of employment (excluding for cause) which
occurs during the same fiscal year. Unless otherwise provided in the
Agreement, the Retirement Award Agreement will have an initial term of five
(5) years. In its discretion, the Committee may provide that the term of a
Retirement Award Agreement be automatically extended for additional one-year
periods until the Company gives the Grantee notice of its intention not to
extend the Agreement at the end of its then-current term.
(e) The Grantee may not sell, transfer, pledge, hypothecate,
or otherwise transfer any shares of Retirement Stock he or she receives under
the Plan during any period in which he or she is employed by the Company or
any Subsidiary; provided, however, that following the earlier of (i)
termination of the employment of the Grantee with the Company or any
Subsidiary or (ii) the Grantee's attainment of normal retirement age (whether
or not Grantee actually retires), all such restrictions with respect to
Retirement Stock which has been issued and delivered to such Grantee prior to
such time shall terminate. Notwithstanding the above, no Grantee may sell,
transfer, pledge, hypothecate any shares of Retirement Stock he or she
receives during the six months immediately following the later of Grant Date
or the date the Plan is approved by the Company's stockholders unless the
Grantee dies before the
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expiration of the six month period. Each share of Retirement Stock subject
to such restrictions shall bear an appropriate legend specifying that such
share is non-transferable and subject to the restrictions set forth in the
Plan and the Retirement Award Agreement. When all applicable restrictions
have ended, the Company shall cause certificates for such shares to be issued
or reissued without such legend.
(f) In connection with any Retirement Stock Award, the
Committee may grant cash bonus awards ("Retirement Cash Awards") to Grantees
solely in order to, and in an amount it determines will, cover the federal
and state income tax liability, and any other tax liability, to the Grantee,
created by, or arising in connection with, the receipt of the Retirement
Award by the Grantee. The Retirement Award Agreement shall provide that
Retirement Cash Awards will be calculated annually at the time of the
issuance of an annual installment of Retirement Stock to which the Retirement
Cash Award relates by using the same maximum marginal federal and state
income tax percentage which was used in the prior year and the Current Market
Price of the Retirement Stock being issued in such year on the date of such
issuance (unless the Committee approves an adjustment to that formula).
(g) The Retirement Award shall be issued and delivered to
the Grantee in accordance with the terms set forth in the Retirement Award
Agreement; provided, however, that the Company shall have no obligation to
issue or deliver any Retirement Award under a Retirement Award Agreement to
any Grantee following (i) the termination of his employment with the Company
or its Subsidiaries or (ii) any breach of the Grantee's obligations under the
Retirement Award Agreement.
(h) Any other provision of the Plan or the Retirement Award
Agreement to the contrary notwithstanding, the Committee may at any time
remove or limit any restrictions, if it determines that conditions, including
but not limited to, changes in the economy, changes in competitive
conditions, changes in laws or government regulations, changes in generally
accepted accounting principles, changes in the Company's accounting policies,
acquisitions or dispositions, or the occurrence of other unusual, unforseen,
or extraordinary events, so warrant.
(i) Notwithstanding the fact that the Company delivers
notice of its intention not to extend the term of a Retirement Award
Agreement at the end of its then current term (if such Agreement provides for
such a notice), the Company shall remain obligated to issue and deliver all
scheduled annual Retirement Awards in accordance with the Retirement Award
Agreement.
8. NOTIFICATION UNDER CODE SECTION 83(b)
The Committee may, on the Grant Date or any later date, prohibit a
Grantee from making the election described in this Section 8. If the
Committee has not prohibited such Grantee from making such election, and the
Grantee, in connection with the exercise of any option or the grant of
Retirement Stock, makes the election permitted under Section 83(b) of the
Code (i.e., an election to include in such Grantee's gross income in the year
of transfer the amounts specified in Section 83(b) of the Code), such Grantee
shall notify the Company of such election within 10 days of filing notice of
the election with the Internal Revenue Service, in addition to any filing and
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notification required pursuant to regulations issued under the authority of
Section 83(b) of the Code.
9. MANDATORY WITHHOLDING OF TAXES
(a) Whenever under the Plan, cash or shares of Stock are to
be delivered upon exercise or payment of an Award or any other event occurs
which subjects the Grantee to income taxes with respect to rights and
benefits hereunder, the Company shall be entitled to require as a condition
of delivery of the Award (i) that the Grantee remit an amount sufficient to
satisfy all federal, state, and local withholding tax requirements related
thereto, (ii) the withholding of such sums from compensation otherwise due to
the Grantee or from any shares of Stock due to the Grantee under the Plan, or
(iii) any combination of the foregoing.
(b) If any disqualifying disposition described in Section
6(c)(v) is made with respect to shares of Stock acquired by exercising an
Incentive Stock Option granted pursuant to the Plan or any election described
in Section 8 is made, then the person making such disqualifying disposition
or election shall remit to the Company an amount sufficient to satisfy all
federal, state, and local withholding taxes thereby incurred; provided that,
in lieu of or in addition to the foregoing, the Company shall have the right
to withhold such sums from compensation otherwise due to the Grantee or from
any shares of Stock due to the Grantee under the Plan.
10. LOANS
With the approval of the Committee, the Grantee may borrow from the
Company all or any portion of the funds needed to pay the Option Price or to
pay for Retirement Stock on such terms and conditions as the Committee deems
appropriate, provided that (i) the interest rate for any such loan by the
Company shall not be less than the "applicable federal rate" (as defined by
Code Section 1274(d)(1)(A)) in effect on the date of such loan or any other
rate as necessary to avoid the imputation of interest under the Code or other
applicable law, (ii) proceeds of the loan are used solely to pay either the
exercise price of an option or to pay for Retirement Stock granted pursuant
to this Plan, and (iii) the Grantee executes a promissory note and such other
documents as the Committee deems appropriate to evidence the Grantee's
indebtedness to the Company, and pledges the Stock received in exchange for
such borrowed funds as Collateral for such loan.
11. SECURITIES LAW MATTERS
(a) If the Committee deems it necessary to comply with the
Securities Act of 1933, Committee may require a written investment intent
representation by the Grantee and may require that a restrictive legend be
affixed to certificates for shares of Stock.
(b) If, based upon the opinion of counsel for the Company,
the Committee determines that the exercise or non-forfeitability of, or
delivery of benefits pursuant to, any Award would violate any applicable
provision of (i) federal or state securities laws or (ii) the listing
requirements of any national securities exchange on which are listed any of
the Company's equity securities, then the Committee may postpone any such
exercise, non-
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forfeitability or delivery, as the case may be, but the Company shall use its
best efforts to cause such exercise, non-forfeitability or delivery to comply
with all such provisions at the earliest practicable date.
(c) With respect to Section 16 Grantees, transactions under
this Plan are intended to comply with all applicable conditions of Rule 16b-3
or its successors under the 1934 Act. To the extent that any provision of
the Plan or action by the Committee fails to so comply, it shall be deemed
null and void, to the extent permitted by law and deemed advisable by the
Committee.
12. FUNDING; RESERVES
Cash benefits payable under the Plan to any person shall be paid
directly by the Company. The Company shall not be required to fund, or
otherwise segregate assets to be used for payment of, cash benefits under the
Plan. Neither the Plan nor any Award shall create or be construed to create a
trust or separate fund of any kind or a fiduciary relationship between the
Company or any Subsidiary and a Grantee or any other person. To the extent
that any person acquires a right to receive payments from the Company or any
Subsidiary pursuant to an Award, such right shall be no greater than the
right of an unsecured general creditor of the Company or any Subsidiary. The
Board shall cause the Company to reserve shares of Stock from its authorized
but unissued shares for the purpose of making available shares of Stock to
fund the Awards.
13. NO EMPLOYMENT RIGHTS
Neither the establishment of the Plan, nor the granting of any Award
nor the execution of an Award Agreement shall be construed to (a) give any
Grantee the right to remain employed by the Company or any of its
Subsidiaries or to any benefits not specifically provided by the Plan or an
Award Agreement, or (b) in any manner modify the right of the Company or any
of its Subsidiaries to modify, amend, or terminate any of its employee
benefit plans. Further, the Company or Subsidiary may at any time dismiss a
Grantee from employment, free from any liability, or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement.
14. RIGHTS AS A STOCKHOLDER
A Grantee shall not, by reason of any Award have any right as a
stockholder of the Company with respect to the shares of Stock which may be
deliverable in the future upon exercise of such Award, or otherwise as
provided in an Award Agreement, until Stock has been actually issued and
delivered to the Grantee. Shares of Retirement Stock issued and delivered to
a Grantee in accordance with the Retirement Award Agreement shall confer on
the Grantee all rights of a stockholder of the Company, except as otherwise
provided in the Plan or the specific Retirement Award Agreement.
15. NATURE OF PAYMENTS
Any and all grants, payments of cash, or deliveries of shares of Stock
hereunder shall constitute special incentive payments to the Grantee and
shall not be taken into account in computing the amount of salary or
compensation of
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the Grantee for the purposes of determining any pension, retirement, death or
other benefits under (a) any pension, retirement, profit-sharing, bonus, life
insurance or other employee benefit plan of the Company or any of its
Subsidiaries or (b) any agreement between the Company or any Subsidiary, on
the one hand, and the Grantee, on the other hand, except as such plan or
agreement shall otherwise expressly provide.
16. NON-UNIFORM DETERMINATIONS
Determinations made by the Committee or the Board under the Plan do
not need to be uniform and may be made by the Committee or the Board
selectively among persons who receive, or are eligible to receive, Awards
(whether or not such persons are similarly situated). Without limiting the
generality of the foregoing, the Committee shall be entitled, among other
things, to make non-uniform and selective determinations and to enter into
non-uniform and selective Award Agreements, as to (a) the identity of the
Grantees, (b) the terms and provisions of Awards, and (c) the treatment under
Section 13 of terminations of employment. Notwithstanding the foregoing, the
Committee's interpretation of Plan provisions shall be uniform as to
similarly situated Grantees.
17. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION
(a) Subject to any required action by the Stockholders, the
Committee shall make such adjustment, as it shall deem equitable, to any or
all of:
(i) the aggregate numbers of shares of Stock
available under Sections 3(a) and 3(b);
(ii) the number of shares of Stock subject to an
option or shares of Retirement Stock covered by an Award;
(iii) the Option Price;
(iv) the Retirement Cash Award;
(v) any other terms or provisions of any outstanding
grants of options or Retirement Awards:
to reflect a stock dividend, stock split, reverse stock split, share
combination, recapitalization, merger, consolidation, acquisition of property
or shares, separation, asset spin-off, reorganization, stock rights offering,
liquidation or similar event, of or by the Company, or, if deemed
appropriate, the Committee may make provisions for a cash payment to the
holder of an outstanding Award; provided, however, if the Company shall be
the surviving corporation in any merger or consolidation, each outstanding
option or Award Agreement shall pertain to and apply to the securities to
which a holder of the number of shares of Stock subject to the option or
Award Agreement would have been entitled; and provided further, upon a
dissolution or liquidation of the Company, or a merger or consolidation in
which the Company is not the surviving corporation, or a change in control of
the Company, as defined in subsection (b) below, each optionee shall have the
right to exercise his option in whole or in part notwithstanding the
provisions of Section 6(g)
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above: (i) immediately prior to such dissolution or liquidation or merger or
consolidation in which the Company is not the surviving corporation, and
thereafter; or (ii) after such change of control. However, with respect to
Awards of Incentive Stock Options no such adjustment shall be authorized to
the extent that the authority to make such adjustments would cause the Plan
to violate Section 422(b)(1) of the Code or any successor provision thereto
and the number of shares subject to any Award denominated in shares of Stock
shall always be a whole number.
(b) "Change of control" of the Company shall mean a change
in control of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934 ("Exchange Act"); provided that, without limitation,
such a change in control shall be deemed to have occurred if: (i) any person
(as that term is defined in Section 13(d) and Section 14(d) of the Exchange
Act) is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 20 percent, or more of the combined
voting power of the Company's then outstanding securities; or (ii) during any
period of two consecutive years, individuals who at the beginning of such
period constitute all members of the Board who are not employed by the
Company (the "Outside Directors") shall cease for any reason to constitute at
least a majority of the Outside Directors, unless the election of each
Outside Director, who was not an Outside Director at the beginning of such
period, was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of such period; or, (iii)
there shall be consummated (A) any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant
to which shares of the Company's Common Stock would be converted into cash,
securities or other property, other than a merger of the Company in which the
holders of the Company's Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (B) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company, or, (iv) the stockholders
of the Company approve a plan or proposal for the liquidation or dissolution
of the Company.
(c) In the event of a change in the Stock of the Company as
presently constituted, which is limited to a change of all of its authorized
shares with par value into the same number of shares with a different par
value or without par value, the shares resulting from any such change shall
be deemed to be the Stock within the meaning of the Plan.
(d) Except as hereinbefore expressly provided in this
Section 18, the Grantee shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class or the payment of any stock
dividend or any other increase or decrease in the number of shares of stock
of any class or by reason of any change of control, dissolution, liquidation,
merger, or consolidation or spin-off of assets or stock of another
corporation, and any issue of the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number
or price of shares of Stock subject to Awards.
14
<PAGE>
The grant of an Award pursuant to the Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge,
consolidate, dissolve, liquidate, sell, or transfer all or any part of its
business or assets.
18. AMENDMENT OF THE PLAN
Upon recommendation of the Committee, the Board of Directors of the
Company may insofar as permitted by law, from time to time, with respect to
any shares at the time not subject to options or Award Agreements, suspend or
discontinue the Plan or revise or amend it in any respect whatsoever except
that, without approval of the stockholders, no such revision or amendment
shall: change the number of shares subject to the Plan; change the
designation of the class of employees eligible to receive Awards; decrease
the price at which Options may be granted; remove the administration of the
Plan from the Committee other than as expressly provided by the Plan; extend
the period during which Awards may be granted; or render any member of the
Committee eligible to receive an Awards under the Plan while serving thereon.
Furthermore, the Plan may not without the approval of the stockholders be
amended in any manner that will cause Options issued under it to fail to
qualify as Incentive Stock Options.
Except as provided in this Section 19, the Board shall, from time to
time, revise, modify, or amend the Plan, in part or in total, without
approval of the stockholders, as may be necessary to satisfy the requirements
of the Code and any amendments or revisions thereof, such that certain stock
options which are granted under the Plan may qualify as Incentive Stock
Options, and to satisfy all other applicable laws and regulations.
19. TERMINATION OF THE PLAN
The Plan shall terminate on the tenth (10th) anniversary of the
Effective Date or at such earlier time as the Board may determine. Any
termination, whether in whole or in part, shall not affect any Award then
outstanding under the Plan.
20. OTHER COMPENSATION PLANS
Nothing contained in the Plan shall prevent the Company or any
Affiliate from adopting or continuing in effect other or additional
compensation arrangements, and such arrangements may be either generally
applicable or applicable only in specific cases.
21. NO ILLEGAL TRANSACTIONS
The Plan and all Awards granted pursuant to it are subject to all laws
and regulations of any governmental authority which may be applicable
thereto; and notwithstanding any provision of the Plan or any Award, Grantees
shall not be entitled to exercise Awards or receive the benefits thereof and
the Company shall not be obligated to deliver any Stock or pay any benefits
to a Grantee if such exercise, delivery, receipt or payment of benefits would
constitute a violation by the Grantee or the Company of any provision of any
such law or regulation.
15
<PAGE>
22. CONTROLLING LAW
The law of the State of Illinois, except its law with respect to
choice of law and except as to matters relating to corporate law (in which
case the corporate law of the State of Delaware shall control), shall be
controlling in all matters relating to the Plan.
23. TAX LITIGATION
The Company shall have the right, but not the obligation, to contest,
at its expense, any tax ruling or decision, administrative or judicial, on
any issue that is related to the Plan and that the Company believes to be
important to Grantees and to conduct any such contest or any litigation
arising therefrom to a final decision.
24. SEVERABILITY
If all or any part of the Plan is declared by any court or
governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not serve to invalidate any portion of the Plan not declared
to be unlawful or invalid. Any Section or part of a Section so declared to
be unlawful or invalid shall, if possible, be construed in a manner in which
will give effect to the terms of such Section or part of a Section to the
fullest extent possible while remaining lawful and valid.
25. INDEMNIFICATION
Each person who is or at any time serves as a member of the Board or
the Committee shall be indemnified and held harmless by the Company against
and from: (i) any loss, cost, liability or expense, including attorneys' fees
actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, that
may be imposed upon or reasonably incurred by such person in connection with
or resulting from any claim, action, suit, or proceeding to which such person
may be a party or in which such person may be involved by reason of any
action or failure to act under the Plan; and (ii) any and all amounts paid by
such person in satisfaction of judgment in any such action, suit or
proceeding relating to the Plan. Each person covered by this indemnification
provision shall give the Company an opportunity, at its own expense, to
handle and defend the same before such person undertakes to handle and defend
it on such person's own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the By-Laws of the Company, as a matter of law, or
otherwise, or any power that the Company may have to indemnify such person or
hold such person harmless.
26. RELIANCE ON REPORTS
Each member of the Board and the Committee shall be fully justified in
relying or acting in good faith upon any report made by the independent
public accountants of, or counsel for, the Company and upon any other
information furnished in connection with the Plan. In no event shall any
person who is or shall have been a member of the Board or the Committee be
liable for any
16
<PAGE>
determination made or other action taken or any failure to act in reliance
upon any such report or information or for any action taken, including the
furnishing of information, or failure to act, if done in good faith.
27. EXPENSES
The Company shall bear all expenses of administering the Plan.
28. TITLES AND HEADINGS
The titles and headings of the sections in the Plan are for
convenience of reference only, and in the event of any conflict, the text of
the Plan, rather than such titles or headings, shall control.
29. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Stock pursuant
to any Awards will be used for general corporate purposes.
Date Plan was adopted by Board of Directors: June 30, 1993
Date Plan was approved by Stockholders: November 16, 1993
Date Plan was amended by Board of Directors: June 25, 1997
Date Plan was amended by Board of Directors: August 28, 1997
Date amended Plan was approved by Stockholders: November 19, 1997
Date Plan was amended by Board of Directors: August 21, 1998
Date amended Plan was approved by stockholders: _______, 1998
17
<PAGE>
RETIREMENT AWARD AGREEMENT
This Retirement Award Agreement ("Agreement") is entered into as of this 19th
day of February, 1998 between QUIXOTE CORPORATION ("the Company"), a Delaware
corporation whose principal place of business is Chicago, Illinois, and JOAN R.
RILEY 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 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.
(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 39,161 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:
<PAGE>
<TABLE>
<CAPTION>
Number of
Issuance Date Shares
------------- -------------
<S> <C>
June 30, 1998 2,176 shares
June 30, 1999 2,176 shares
June 30, 2000 2,176 shares
June 30, 2001 2,176 shares
June 30, 2002 2,176 shares
June 30, 2003 2,176 shares
June 30, 2004 2,176 shares
June 30, 2005 2,176 shares
June 30, 2006 2,176 shares
June 30, 2007 2,176 shares
June 30, 2008 2,176 shares
June 30, 2009 2,176 shares
June 30, 2010 2,176 shares
June 30, 2011 2,176 shares
June 30, 2012 2,176 shares
June 30, 2013 2,176 shares
June 30, 2014 2,176 shares
June 30, 2015 2,169 shares
</TABLE>
(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
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<PAGE>
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 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 she will not sell,
transfer, pledge, hypothecate, or otherwise transfer any Retirement Stock she
receives pursuant to this Agreement during the period she 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 without a legend when the
applicable restrictions have terminated as provided herein:
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<PAGE>
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 February 19, 1998 by and between Quixote
Corporation and Joan R. Riley. The Retirement Award Agreement provides that the
restrictions shall automatically expire upon the earlier of (i) the termination
of Ms. Riley's employment by Quixote Corporation or its subsidiaries, or (ii)
Ms. Riley's attaining 65 years of age.
(b) 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 she is acquiring
the Stock for her 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.
(c) 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
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<PAGE>
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.
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, 2003 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, 1999, 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, 2015.
-5-
<PAGE>
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 by 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, IL 60601
Attn: Philip E. Rollhaus, Jr.
With a copy to: Joan R. Riley, Esq.
Quixote Corporation
One East Wacker Drive
Suite 3000
Chicago, IL 60601
To the Employee: Joan R. Riley
400 East Randolph
Chicago, IL 60601
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<PAGE>
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: Chairman and Chief Executive Officer
ATTEST:
/s/ Wendy H. Cary
- -----------------
/s/ Joan R. Riley
------------------
Joan R. Riley
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<PAGE>
CHANGE OF CONTROL AGREEMENT BETWEEN
JOAN R. RILEY AND
QUIXOTE CORPORATION
THIS CHANGE OF CONTROL AGREEMENT, dated as of December 1, 1997 (the
"Agreement"), is by and between Quixote Corporation, a Delaware corporation
having its principal offices at One East Wacker Drive, Chicago, IL, 60601 ("the
Company"), and Joan R. Riley, an employee of the Company (the "Employee").
WHEREAS, the Employee is presently serving as an employee and elected
officer of the Company; and
WHEREAS, the Board of Directors of the Company ("the Board") has
recognized and continues to recognize that the Employee's contribution to the
growth and success of the Company has been, and is expected to continue to be,
substantial and desires to assure the Company of the Employee's continued
employment by assuring her of fair treatment if that relationship is terminated;
and
WHEREAS, the Company and the Employee agree that, as a result of
various factors, it is desirable to enter into this Change of Control Agreement;
and
WHEREAS, the Company desires to retain the Employee's services and the
Employee is willing to continue her employment as an employee and elected
officer of the Company on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and conditions contained herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. CERTAIN DEFINED TERMS.
<PAGE>
(a) "Change of Control", as used herein, shall mean a
change in control of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934 ("Exchange Act"); provided that, without limitation, such a
change in control shall be deemed to have occurred if : (i) any person (as that
term is defined in Section 13(d) and Section 14(d) of the Exchange Act) is or
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing twenty percent (20%) or more of the combined voting power
of the Company's then outstanding securities; or (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
all members of the Board who are not employed by the Company (the "Outside
Directors") shall cease for any reason to constitute at least a majority of the
Outside Directors, unless the election of each Outside Director, who was not an
Outside Director at the beginning of such period, was approved by a vote of at
least two-thirds of the directors then still in office who were directors at the
beginning of such period; or, (iii) there shall be consummated (A) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the Company's
common stock would be converted into cash, securities or other property, other
than a merger of the Company in which the holders of the Company's common stock
immediately prior to the merger have the same proportionate ownership of common
stock of the surviving corporation immediately after the merger, or (B) any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the
Company, or, (iv) the stockholders of the Company approve a plan or proposal for
the liquidation or dissolution of the Company.
(b) "Constructive Termination", as used herein, shall mean any
one or more of the following occurrences within three (3) years following the
Effective Date of a
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<PAGE>
Change of Control: (i) the Employee is assigned any duties inconsistent in
any material adverse respect with the Employee's position, authority, duties
or responsibilities immediately prior to the Effective Date of the Change of
Control referred to above, or any other action by the Company which results
in a diminution in any material adverse respect of the Employee's position,
authority, duties or responsibilities as the same existed immediately prior
to the Effective Date of the Change of Control referred to above, (ii) the
Employee's total compensation (when taken as a whole including fringe
benefits and the manner of determining incentive compensation) is changed in
a material adverse way or the Company fails to obtain the assumption of the
obligation to perform this Agreement by any successor as contemplated in
Section 8 hereof, or (iii) the Company requires the Employee to be based
outside of a radius of thirty (30) miles from the location of the Company's
present corporate offices (except for required travel on Company business to
an extent substantially consistent with the Employee's business travel
obligations immediately prior to such change in control); PROVIDED, HOWEVER,
that none of the foregoing shall be a Constructive Termination if any of the
foregoing actions are taken by the Company for Cause (as defined in
subsection 1(d) hereof).
(c) "Effective Date", as used herein, shall mean the first date
on which a Change of Control (as defined in Section 1(a)) occurs.
(d) "Cause" For purposes of this Agreement, the Company shall
have "Cause" to terminate the Employee's employment upon (i) the willful failure
by the Employee to substantially perform her duties, other than such failure
resulting from the Employee's incapacity due to physical or mental illness, (ii)
the willful engaging by the Employee in gross misconduct materially and
demonstrably injurious to the Company or its subsidiaries or (iii) the
commission by the Employee of a crime which is a felony. For the purpose of
this subsection (d), no act, or the failure to act, on the Employee's part shall
be considered "willful" unless done, or omitted to
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<PAGE>
be done, by him not in good faith and without reasonable belief that her
action or omission was in the best interest of the Company or subsidiaries.
Notwithstanding the foregoing, the Employee shall not be deemed to have been
terminated for Cause under subsections (i), (ii) or (iii) of the first
sentence of this subsection (d), unless and until there shall have been
delivered to the Employee a copy of a resolution, duly adopted by the
affirmative vote of not less than two-thirds (2/3) of the entire membership
of the Company's Board of Directors at a meeting of the Board called and held
for that purpose (after reasonable notice to the Employee and an opportunity
for him, together with her counsel, to be heard before the Board), finding
that in the good faith opinion of the Board, the Employee was guilty of
conduct set forth above in clause (i), (ii) or (iii) of the first sentence of
this subsection (d) and specifying the particulars thereto in detail.
(e) "Disability" For purposes of this Agreement, an Employee's
"Disability" shall occur if the Employee is absent from her duties as an
employee of the Company on a full-time basis for six (6) consecutive months
following a Change of Control of the Company and if she qualifies for long-term
disability under the Company's long-term disability insurance plan.
2. TERMINATION. If the Employee is terminated for a reason other
than death, Disability, Cause or voluntary resignation not constituting a
Constructive Termination, or is subject to a Constructive Termination (a
Constructive Termination or termination for a reason other than death,
Disability, Cause or voluntary resignation not constituting a Constructive
Termination referred to herein as a "Termination"), within three (3) years
following the Effective Date of a Change of Control, the Employee will be
entitled to receive the benefits set forth below:
(a) ACCELERATED VESTING. If a Termination of the Employee
occurs
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<PAGE>
within three (3) years following the Effective Date of a Change of Control,
the vesting of all rights listed on EXHIBIT A ("Rights") shall be accelerated
to the date on which the Employee is terminated or is subject to a
Constructive Termination.
(b) SALARY CONTINUATION. If a Termination of the Employee
occurs within three (3) years following the Effective Date of a Change of
Control:
(i) The Employee shall have a right to receive her
full base salary through the date of Termination at the rate in effect
at the time Termination occurs, and in lieu of any further salary
payment to the Employee for periods subsequent to the date of
Termination, the Company shall pay to the Employee in cash an amount
equal to three (3) times the sum of (A) the higher of the Employee's
base salary at the date of Termination or on the date when a Change of
Control of the Company occurs plus (B) the average of the bonus
payment plus other incentive compensation made to the Employee for the
two (2) full fiscal years preceding the fiscal year in which a Change
of Control of the Company occurs. At the option of the Employee, such
payment shall be made in a lump sum not later than 5 days after the
date of Termination or in substantially equal semimonthly
installments, commencing no later than the fifth day following the
date of Termination and continuing for a period of thirty-six (36)
months following the date of Termination. In the event (A) the
Company shall fail to make any payment to the Employee which is
required under this subsection within ten (10) days of the date that
such payment is due and (B) such failure to pay continues, following
written notification by the Employee to the Company of such failure to
make payment, for more than seven (7) additional days thereafter, all
remaining installments or payments payable to the Employee shall be
accelerated
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<PAGE>
and shall become immediately due and payable by the Company, without
any discounting to present value, with interest accruing on any unpaid
portion thereof at the rate of twelve percent (12%) per annum.
(ii) The Company shall provide to Employee all benefits she
was entitled to immediately prior to the date of Termination during
the Salary Continuation Period, as defined below, including but not
limited to all group insurance plans in which the Employee was
entitled to participate immediately prior to the date of the
Termination, provided that the Employee's continued participation is
possible under the terms of such plans (as, for example, it may not
possible if the Employee elects the lump sum payment option described
in subsection 2(b)(i) above), failing which the Company shall arrange
to provide the Employee with alternative benefits and/or insurance
substantially similar to those provided under the then current benefit
and insurance plans unless it is not commercially feasible to do so.
If the cost of providing such benefits is more than 150% of the cost
of providing such benefits for the Employee prior to the date of
Termination, then the parties agree that it shall be deemed not
commercially feasible to do so.
(iii) The Salary Continuation Period as used in
this Section 2(b) shall mean three (3) years from the date of a
Termination of the Employee.
(c) MITIGATION. The Employee shall not be required to
mitigate the amount of any payment provided for in subsection 2(b) by seeking
other employment or otherwise, nor shall the amount of any payment provided for
in subsection 2(b) be reduced by any compensation earned by the Employee as a
result of employment by another employer after
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<PAGE>
the date of Termination, or otherwise.
3. RIGHTS APPLY ONLY ON CHANGE OF CONTROL. The rights granted
under this Change of Control Agreement only apply upon a Change of Control and
subsequent Termination and supersede the severance or other similar rights
accruing upon a Change of Control and subsequent Termination under any other
agreement, including without limitation the Key Employee Severance Agreement,
dated as of January 10, 1997 by and between the Company and the Employee (the
"Key Employee Severance Agreement").
4. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois applicable to
agreements made and to be performed in Illinois, without giving effect to
conflicts of law principles.
5. HEADINGS. The section headings of this Agreement are for
reference only and are to be given no effect in the construction or
interpretation of this Agreement.
6. SEVERABILITY. If any part or provision of this Agreement shall
be declared invalid or unenforceable by a court of competent jurisdiction, said
provision or part shall be ineffective to the extent of such invalidity or
unenforceability only, without in any way affecting the remaining parts or
provisions of this Agreement.
7. WAIVER. Any party may waive compliance by another party with any
of the provisions of this Agreement. No waiver of any provision shall be
construed as a waiver of any other provision. Any waiver must be in writing.
8. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding on
and inure to the benefit of the parties and their respective successors and
permitted assigns. Nothing in this Agreement shall create or be deemed to
create any third party beneficiary rights in any person or entity (including any
employee or person engaged by the Company in any capacity) not a party to this
Agreement. The Company will require any successor (whether direct or indirect,
-7-
<PAGE>
by merger, purchase, consolidation or otherwise) of the Company to make an
express assumption of the obligations hereunder and cause any successor (whether
direct or indirect, by merger, purchase, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to agree to
perform all parts and provisions under this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle Employee to compensation from the Company in the
same amount and on the same terms as he would be entitled to hereunder if he is
subject to a Construction Termination, except for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the date of Termination. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to the business and/or
assets of the Company which executes and delivers the agreement provided for in
this section 8, or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.
This Agreement and all rights of the Employee hereunder shall inure to the
benefit of, and be enforceable by the Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Employee should die after any amounts shall become
payable to him hereunder, all such amounts, unless otherwise provided for
herein, shall be paid in accordance with the terms of this Agreement to the
Employee's devisee, legatee or other designee or, if there be no such devisee or
other designee, to the Employee's estate.
9. LEGAL FEES. The Company shall pay, or reimburse the Employee
for, all legal fees and expenses incurred by the Employee as a result of any
Termination of her employment hereunder after a Change of Control of the
Company, including all such fees and
-8-
<PAGE>
expenses, if any, incurred contesting or disputing in good faith any such
Termination or in seeking to obtain or enforce any right or benefit provided
by this Agreement.
10. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Chicago, Illinois in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award
in any court having jurisdiction; PROVIDED, HOWEVER, that the Employee shall be
entitled to seek specific performance of her right to be paid until the date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement.
11. COUNTERPARTS. This Agreement may be signed in any number of
counterparts and all such counterparts shall be read together and construed as
but one and the same document.
12. NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be deemed given when delivered
personally, or sent by facsimile transmission, receipt confirmed, one day after
sent by recognized overnight courier, or five (5) days after deposit in the
United States mail, postage prepaid, registered or certified mail, return
receipt requested, to the parties at the following addresses (or to such other
address as a party may have specified by notice duly given to the other party in
accordance with this provision):
If to the Employee:
At the Employee's then current business or residence address as shown
on the records of the Company, with a copy to such other person as the
Employee may have specified by notice duly given to the Company in
accordance with this provision.
-9-
<PAGE>
If to the Company:
Quixote Corporation
One East Wacker Drive
Chicago, IL 60601
Attention: President
IN WITNESS WHEREOF the parties have executed this Agreement, in
triplicate, on the date first written above.
Quixote Corporation Employee
/s/ Philip E. Rollhaus, Jr. /s/ Joan R. Riley
________________________________ ________________________________
By: Chief Executive Officer Joan R. Riley
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<PAGE>
EXHIBIT A
All rights granted to Employee under the Company's plans including, but not
limited to the following:
1993 Long-Term Stock Ownership Incentive Plan
Incentive Savings Plan
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<PAGE>
EXHIBIT 10(g)
THE QUIXOTE CORPORATION INCENTIVE SAVINGS PLAN
HIGHLIGHTS AND GENERAL INFORMATION
PLAN NAME: The Quixote Corporation Incentive Savings Plan.
EFFECTIVE DATE: The Quixote Corporation Incentive Savings Plan was
originally effective on July 1, 1984. This booklet
describes it in operation on July 1, 1997.
TYPE OF PLAN: 401(k) PLAN
PLAN YEAR: The PLAN YEAR is the 12-month period beginning on
January 1 each year and ending on December 31. Records
for the PLAN are kept on a PLAN YEAR basis.
YOUR EMPLOYER: Quixote Corporation
One East Wacker Drive
Chicago, IL 60601
Employer Identification Number: 36-2675371
Plan Number: 001
PLAN ADMINISTRATOR:
Quixote Corporation will serve as PLAN ADMINISTRATOR.
You may contact your PLAN ADMINISTRATOR at:
Quixote Corporation
One East Wacker Drive
Chicago, IL 60601
(312) 467-6755
ELIGIBILITY REQUIREMENTS:
- Hourly or salaried employee
- Labor Union members are NOT allowed to participate
in this PLAN
- 21 years of age
- Not classified as a leased employee
YOUR CONTRIBUTIONS:
- PRE-TAX CONTRIBUTIONS -- 2% to 18% of your
ELIGIBLE EARNINGS
- ROLLOVER CONTRIBUTIONS -- funds transferred to
your ACCOUNT directly from a QUALIFIED retirement
savings PLAN
EMPLOYER CONTRIBUTIONS:
- MATCHING CONTRIBUTIONS -- $.50 for every $1 of
PRE-TAX CONTRIBUTIONS up to a maximum of 7% of
your ELIGIBLE EARNINGS
- DISCRETIONARY CONTRIBUTIONS
VESTING: - 100% immediate VESTING in all contributions made
to your ACCOUNT
<PAGE>
TO MAKE CHANGES - Call AnswerLine at 1-800-253-2287
TO YOUR ACCOUNT: - Contact your PLAN ADMINISTRATOR
TAKING MONEY OUT OF YOUR ACCOUNT:
- LOANS permitted quarterly from your PRE-TAX
CONTRIBUTIONS and ROLLOVER CONTRIBUTIONS
- DISTRIBUTIONS:
-- Termination
-- Retirement
-- DISABILITY
-- Death (payment made to your beneficiary(ies))
Note: There may be limits and tax liabilities on
PLAN payments; please see your PLAN
ADMINISTRATOR for details.
PAYMENT OPTION: One-time lump sum cash payment
TRUSTEE: CG Trust Company, an Illinois Company
525 West Monroe Street, Suite 1800
Chicago, IL 60661-3629
AGENT FOR LEGAL PROCESS:
Your PLAN ADMINISTRATOR is designated to receive any
summons or legal notice informing the PLAN of a legal
action in which it may be involved.
PLAN FIDUCIARY: The PLAN'S fiduciary is the PLAN ADMINISTRATOR.
<PAGE>
USING THIS "SUMMARY PLAN DESCRIPTION"
If you make this PLAN your primary method of retirement saving, you may be able
to reach your goals more quickly. Whether you've already begun to save for your
future or are just thinking about it, the information contained in this booklet
is very important to you. Please read it very carefully.
We recognize that some aspects of the PLAN are difficult to understand. For
this reason, we have included examples throughout this booklet, which will
always appear in shaded boxes like the following example.
EXAMPLE:
All of the examples in this booklet will be based
on the following fictional employees:
1. BOB SMITH, Age 21
Years of service: 2
Annual Salary: $15,000
2. SALLY KEE, Age 45
Years of service: 10
Annual Salary: $20,000
Definitions of words or phrases that appear bolded and italicized (e.g.,
PLAN) can be found in the Glossary at the end of the booklet. Following
the Glossary, you will find an Index containing IRS terms and acronyms that
you may have encountered. These terms are also bolded and italicized
throughout the text.
Remember that the information in this booklet is only an overview of the
important provisions of your PLAN. Every effort has been made to
accurately describe the PLAN provisions which are contained in the PLAN
document. If there is a difference between this booklet and the PLAN
document, the PLAN document will govern. You can review the PLAN in the
PLAN ADMINISTRATOR'S office during regular business hours if you have any
questions this booklet doesn't answer. If you want your own copy of the
PLAN, please write your PLAN ADMINISTRATOR. There may be a small charge.
<PAGE>
TABLE OF CONTENTS
1. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Why You Should Be a Part of the Plan. . . . . . . . . . . . . .1
How the Quixote Corporation Incentive Savings Plan Works. . . .1
2. ELIGIBILITY AND ENROLLMENT. . . . . . . . . . . . . . . . . . . . . . . .1
3. PLAN CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Pre-Tax Contributions . . . . . . . . . . . . . . . . . . . . .2
Matching Contributions. . . . . . . . . . . . . . . . . . . . .2
Discretionary Contributions . . . . . . . . . . . . . . . . . .2
Qualified Contributions . . . . . . . . . . . . . . . . . . . .3
Rollover Contributions. . . . . . . . . . . . . . . . . . . . .3
The Limit on Total Contributions. . . . . . . . . . . . . . . .3
4. VESTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
5. OBTAINING INFORMATION ABOUT YOUR ACCOUNT. . . . . . . . . . . . . . . . .3
Your Participant Financial Statement. . . . . . . . . . . . . .3
6. YOUR INVESTMENT OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . .3
7. MAKING CHANGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Changing the Amount of Your Future Contributions. . . . . . . .4
Suspending or Resuming Your Contributions . . . . . . . . . . .4
Transferring Funds and/or Changing Your Investment Choices. . .4
8. TAKING MONEY OUT OF THE PLAN. . . . . . . . . . . . . . . . . . . . . . .4
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Distributions . . . . . . . . . . . . . . . . . . . . . . . . .6
Rollover Distributions. . . . . . . . . . . . . . . . . . . . .7
Choosing Your Payment Options . . . . . . . . . . . . . . . . .7
9. TERMINATION OF EMPLOYMENT . . . . . . . . . . . . . . . . . . . . . . . .8
10. TAX RULES AFFECTING PLAN PAYMENTS . . . . . . . . . . . . . . . . . . . .8
Mandatory 20% Withholding . . . . . . . . . . . . . . . . . . .8
10% Additional Penalty Tax. . . . . . . . . . . . . . . . . . .8
11. SURVIVOR BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Choosing a Beneficiary. . . . . . . . . . . . . . . . . . . . .9
Payment of Survivor Benefits to Your Spouse . . . . . . . . . .9
Payment of Survivor Benefits to a Nonspouse Beneficiary . . . .10
12. EVENTS THAT MAY AFFECT YOUR ACCOUNT . . . . . . . . . . . . . . . . . . .10
If the Plan Is Terminated . . . . . . . . . . . . . . . . . . .10
If Circumstances Require the Delay of a Withdrawal. . . . . . .10
Transfers from the Guaranteed Income Fund May Be Limited. . . .10
If a Court Issues a Domestic Relations Order. . . . . . . . . .10
If You Are a Highly Compensated Employee. . . . . . . . . . . .11
If the Plan Is Determined to be Top Heavy . . . . . . . . . . .11
13. YOUR ERISA RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
If Your Request for Retirement Income is Denied . . . . . . . .12
Requesting a Review of the Denial . . . . . . . . . . . . . . .12
Time Extensions . . . . . . . . . . . . . . . . . . . . . . . .13
Other Rights You May Have . . . . . . . . . . . . . . . . . . .13
14. ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . .13
Approval by the IRS . . . . . . . . . . . . . . . . . . . . . .13
Description of Entity That Maintains the Plan . . . . . . . . .14
Pension Benefit Guaranty Corporation . . . . . . . . . . . . .14
15. GLOSSARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
16. INDEX OF ACRONYMS AND IRS TERMS . . . . . . . . . . . . . . . . . . . . .19
<PAGE>
1. INTRODUCTION
WHY YOU SHOULD BE A PART OF THE PLAN
In the following pages, you will read about one of your most important
company benefits, the Quixote Corporation Incentive Savings Plan. If you
become a PARTICIPANT, you can:
- Reduce the amount of taxes you owe now;
- Postpone paying taxes on money you save and the investment income
it earns;
- Take advantage of EMPLOYER contributions and postpone paying
taxes on the investment income they earn; and
- Build retirement equity for your future.
HOW THE QUIXOTE CORPORATION INCENTIVE SAVINGS PLAN WORKS
When you enroll in the PLAN, you decide what percentage of your pay you
want to save through the PLAN and how you would like your savings
invested. You may contribute from your gross (pre-tax) salary. The
money you put into the PLAN is automatically deducted from your
paycheck, deposited into your individual ACCOUNT, and invested according
to your instructions.
We may also contribute money to your ACCOUNT. This money will be invested
according to our instructions.
There are some limits to these contributions which you will find explained
in detail in Chapter 3, Plan Contributions, on page 2.
You control the amount of contributions to your ACCOUNT. You may change
the amount you choose to contribute or stop contributing altogether.
2. ELIGIBILITY AND ENROLLMENT
You can enroll in the Quixote Corporation Incentive Savings Plan if you meet the
following requirements:
- You are 21 years old
- You are an hourly or salaried employee
- You are not a member of a Labor Union, UNLESS your COLLECTIVE
BARGAINING AGREEMENT (or contract) provides for coverage under this
PLAN
- You are not classified as a leased employee
Once you are eligible to participate, your PLAN ADMINISTRATOR will provide you
with enrollment information. Your participation will be effective on the next
January 1 or July 1 following the date you enroll.
1
<PAGE>
If you are a FORMER EMPLOYEE who has been rehired, please consult your PLAN
ADMINISTRATOR for details about your participation in the Quixote Corporation
Incentive Savings Plan.
3. PLAN CONTRIBUTIONS
PRE-TAX CONTRIBUTIONS
PRE-TAX CONTRIBUTIONS are subtracted from the amount you report to the IRS
as taxable income. You will pay no income taxes on PRE-TAX CONTRIBUTIONS
or investment earnings on these contributions until you take them out of
the PLAN.
You may contribute an amount from 2% to 18% of your ELIGIBLE EARNINGS.
PRE-TAX CONTRIBUTIONS will automatically be deducted from your paycheck
each pay period.
ANNUAL % PRE-TAX TOTAL ANNUAL
EMPLOYEE PAY CONTRIBUTION CONTRIBUTION
Bob Smith $15,000.00 3% $450.00
Sally Kee $20,000.00 6% $1,200.00
LIMITS ON PRE-TAX CONTRIBUTIONS
The IRS limits the total amount of your PRE-TAX CONTRIBUTIONS each year.
This amount is adjusted for inflation every year. For 1998, the limit is
$10,000. This limit applies to amounts you contribute to 401(k) PLANS and
may affect the amounts you contribute to SECTION 403(b) PLANS and
SIMPLIFIED EMPLOYEE PENSION PLANS. Any amount that you contribute in
excess of this limit will be returned to you and treated as taxable income.
MATCHING CONTRIBUTIONS
For every PRE-TAX dollar you contribute, the company will contribute $.50.
The pre-tax dollars upon which the MATCHING CONTRIBUTIONS are based shall
not exceed 7% of your ELIGIBLE EARNINGS.
PRE-TAX MATCHING TOTAL
EMPLOYEE CONTRIBUTIONS CONTRIBUTIONS CONTRIBUTIONS
Bob Smith $450.00 $225.00 $675.00
Sally Kee $1,200.00 $600.00 $1,800.00
DISCRETIONARY CONTRIBUTIONS
We may choose to make a DISCRETIONARY CONTRIBUTION. The amount of this
contribution may vary from year to year. It will be allocated to you in
the same proportion that your ELIGIBLE EARNINGS bear to the total ELIGIBLE
EARNINGS paid to all PLAN PARTICIPANTS.
2
<PAGE>
QUALIFIED CONTRIBUTIONS
At times, to maintain a QUALIFIED PLAN, we may need to make a "qualified"
contribution. Qualified contributions will not be made to HIGHLY
COMPENSATED EMPLOYEES. The qualified contributions may be made as
QUALIFIED MATCHING or QUALIFIED NONELECTIVE CONTRIBUTIONS.
ROLLOVER CONTRIBUTIONS
Money from your former EMPLOYER'S qualified retirement PLAN may be "rolled
over" to your PLAN. There are special rules for ROLLOVER CONTRIBUTIONS.
Please contact your PLAN ADMINISTRATOR for more details.
THE LIMIT ON TOTAL CONTRIBUTIONS
In addition to the annual limit on PRE-TAX CONTRIBUTIONS, there is also a
limit on the TOTAL amount of ALL types of contributions (excluding ROLLOVER
CONTRIBUTIONS) you receive each year. This limit is the SMALLER of two
amounts:
- $30,000 (to be adjusted for inflation each year); or
- 25% of your salary.
The IRS also places special limitations on the contributions of HIGHLY
COMPENSATED EMPLOYEES. If you need more information on these limits,
please see your PLAN ADMINISTRATOR.
4. VESTING
Vesting means that you have a right to all or a portion of the money in your
ACCOUNT -- rights that cannot be FORFEITED or otherwise taken away. This PLAN
provides for 100% immediate vesting of all contributions made to your ACCOUNT.
5. OBTAINING INFORMATION ABOUT YOUR ACCOUNT
YOUR PARTICIPANT FINANCIAL STATEMENT
Periodically you will receive a statement which summarizes all the activity
in your ACCOUNT, including new contributions or LOANS, as well as
earnings/losses on your investments.
6. YOUR INVESTMENT OPTIONS
You can choose to invest your PRE-TAX CONTRIBUTIONS and ROLLOVER CONTRIBUTIONS
in the wide variety of funds offered under your PLAN. Each of these funds is
designed with a specific investment objective. You should become familiar with
each fund's investment goals and level of risk before making your investment
decision.
3
<PAGE>
Information on the funds was included with your enrollment materials and is
available through AnswerLine. Please contact your PLAN ADMINISTRATOR if you
would like further information on the funds your PLAN offers.
Our PLAN is intended to meet the requirements of ERISA section 404(c) and its
regulations. Under these rules, the PLAN'S fiduciaries may be relieved of
liability for losses that are a direct and necessary result of your investment
instructions. Please contact your PLAN ADMINISTRATOR for details.
7. MAKING CHANGES
As your personal situation changes, you may decide to change the amount you
elect to contribute and/or your investment choices. Your PLAN allows you to
make the changes you need by following these simple guidelines:
CHANGING THE AMOUNT OF YOUR FUTURE CONTRIBUTIONS
You can change the amount of your PRE-TAX CONTRIBUTIONS on January 1, April
1, July 1 and October 1.
SUSPENDING OR RESUMING YOUR CONTRIBUTIONS
You may suspend your contributions by notifying your PLAN ADMINISTRATOR.
Once you suspend your contributions, you may resume at either July 1 or
January 1.
TRANSFERRING FUNDS AND/OR CHANGING YOUR INVESTMENT CHOICES
You may change the way your FUTURE PRE-TAX CONTRIBUTIONS are invested among
your PLAN'S various investment funds. You may also transfer PRE-TAX
CONTRIBUTIONS already in your ACCOUNT between the funds. To perform these
transactions you may call AnswerLine or contact your PLAN ADMINISTRATOR.
Transfers do not change the way your FUTURE PRE-TAX CONTRIBUTIONS are
allocated; if you want to change the way your future PRE-TAX CONTRIBUTIONS
will be invested, you must specifically request such a change.
You will receive written confirmation of your transaction by mail.
8. TAKING MONEY OUT OF THE PLAN
Please read this section very carefully before deciding to take money out of
your ACCOUNT. You should also review Chapter 10, Tax Rules Affecting Plan
Payments, on page 8.
You may receive money from your ACCOUNT in two ways:
- LOANS
- DISTRIBUTIONS
4
<PAGE>
LOANS
Your PLAN lets you borrow from your PRE-TAX CONTRIBUTIONS AND ROLLOVER
CONTRIBUTIONS. To apply for a LOAN, you must be an ACTIVE EMPLOYEE and you
may not already have a LOAN outstanding. LOANS are only available on a
quarterly basis.
TYPES OF LOANS:
- General purpose LOAN
- LOAN used to purchase your primary residence
LIMITS ON THE AMOUNT YOU MAY BORROW
The minimum amount you can borrow is $1,000. The maximum is 50% of your
entire ACCOUNT BALANCE. You may never borrow more than $50,000 minus the
highest outstanding balance on any individual PLAN LOAN during the last 12
months.
APPLYING FOR A LOAN
To request a LOAN:
- Call AnswerLine;
- Experiment with different loan amounts and repayment terms;
- Confirm your loan request. (IF YOU CHANGE YOUR MIND ABOUT TAKING
A LOAN, DO NOT CONFIRM YOUR REQUEST.) ONCE A LOAN HAS BEEN
APPROVED, IT CANNOT BE CANCELED.
Since LOANS are only available on a quarterly basis, you will need to call
AnswerLine to apply for your LOAN during December, March, June or September
to receive your LOAN packet for processing on the respective quarter-end.
You will be required to sign a note promising to repay the amount of the
LOAN, plus interest. This promissory note verifies that your ACCOUNT
BALANCE will be used as security, guaranteeing that your LOAN will be paid
back to your ACCOUNT.
Your PLAN ADMINISTRATOR has the authority to set interest rates based on
regulatory guidelines. Since interest rates are constantly changing, you
should check with your PLAN ADMINISTRATOR or AnswerLine for the current
rate at the time of your LOAN application. Once your LOAN is approved, the
rate will remain in effect until you repay the LOAN.
LOAN REPAYMENT
Generally, you may take up to five years to repay a general purpose
LOAN, in equal installments. If you are using the LOAN to purchase your
primary residence, your PLAN ADMINISTRATOR may allow you a longer
repayment period. You must repay the LOAN through payroll deductions.
Your PLAN may allow you to prepay your LOAN, at any time, without
penalty. When you repay the LOAN, both the principal and the interest
will be reinvested in your ACCOUNT.
5
<PAGE>
DEFAULTING ON A LOAN
If you do not make any payment due within any 90-day period, your PLAN
ADMINISTRATOR may determine that your LOAN is in default. If this happens:
- The full amount will be due and payable immediately.
- The outstanding balance of the LOAN will be reported to the IRS
as ordinary income and you will have to pay federal and state
income tax on this amount.
- Future applications you make for a LOAN may be denied.
If you think you are in danger of defaulting on a LOAN, contact your PLAN
ADMINISTRATOR immediately.
DISTRIBUTIONS
You are automatically eligible to receive a DISTRIBUTION of your ACCOUNT
BALANCE when you:
- Retire
- Terminate
- Become DISABLED
- Die (in which case payment will be made to your BENEFICIARY(IES))
NORMAL RETIREMENT
NORMAL RETIREMENT under this PLAN occurs when you reach age 65 or older.
AFTER AGE 70-1/2
If you're still employed on or after age 70-1/2, and you are considered a
5% owner, you must begin to receive a DISTRIBUTION of your ACCOUNT not
later than April 1 following the calendar year in which you reach the age
of 70-1/2. If you are not a 5% owner, the rules vary depending on when you
turn age 70-1/2. See your Plan Administrator for detail on how these rules
apply to you.
TERMINATION
If you leave employment before you retire, you will be entitled to a lump
sum payment equal to your ACCOUNT BALANCE which you may take as a personal
cash payment or roll over into either your own INDIVIDUAL RETIREMENT
ACCOUNT (IRA) or another QUALIFIED PLAN.
For information on your potential tax liabilities, see Chapter 10, Tax
Rules Affecting Plan Payments, on page 8, and the section on Rollover
Distributions on page 7 of this chapter.
PERMANENT DISABILITY
If you terminate your employment because of disability, you will receive a
full cash DISTRIBUTION.
6
<PAGE>
DEATH
If you die while employed, your BENEFICIARY(IES) will receive the full
value of your ACCOUNT. If you are married, your spouse will be the
BENEFICIARY unless he or she has willingly given up that right. This is
discussed in more detail in Chapter 11, Survivor Benefits, on page 9.
ROLLOVER DISTRIBUTIONS
You may defer paying tax on some taxable payments by electing a rollover
DISTRIBUTION, for payments of $200 or more, instead of a personal payment.
There are two different types of rollover DISTRIBUTIONS:
DIRECT ROLLOVER
In a direct rollover, all funds due to you are sent to either an INDIVIDUAL
RETIREMENT ACCOUNT (IRA) or another QUALIFIED PLAN. No funds are paid to
you. By directly rolling over the taxable portion of your funds, you avoid
the mandatory 20% withholding. See Chapter 10, Tax Rules Affecting Plan
Payments, on page 8. If you have an outstanding LOAN and you want to roll
over your entire ACCOUNT balance, you must repay your LOAN before taking a
DISTRIBUTION.
Your payment will not be taxed until you take it out of the IRA or
QUALIFIED PLAN. Therefore, you will pay no tax on it in the current year
and no income tax will be withheld from the payment.
INDIRECT ROLLOVER
In an indirect rollover, all funds are first paid to you. Your PLAN
ADMINISTRATOR is required by law to withhold 20% of the taxable portion of
your funds for income taxes. The 20% withheld is credited to your taxes
due when you file your income tax return. You may roll over the remaining
80% of the funds to an INDIVIDUAL RETIREMENT ACCOUNT (IRA) or another
QUALIFIED PLAN within 60 days of the time you receive the DISTRIBUTION.
You will not be taxed on the amount rolled over until you take the money
out of the IRA or QUALIFIED PLAN.
If you wish to roll over the full 100% of the taxable portion of your
payment, you will have to make up 20% of the payment from another source.
If you only roll over the 80% that you actually received, you will be taxed
on the 20% that was withheld but not rolled over. See Chapter 10, Tax
Rules Affecting Plan Payments, on page 8.
CHOOSING YOUR PAYMENT OPTIONS
There are several choices you may need to make. You may choose to:
- Consent to a single lump sum payment; or
- Postpone payment to a later date. If you do not elect to take
full payment, or roll over your account when you terminate
employment, you may defer your ACCOUNT.
You must pay all fees and expenses to maintain your interest in
the PLAN. These expenses will be withdrawn directly from your
account.
7
<PAGE>
During the time that your interest remains in the PLAN, you may
continue to make investment transfers subject to the requirements
of the PLAN. You may, at any time, take a full distribution of
your account by writing the PLAN ADMINISTRATOR.
Notwithstanding the above, if your interest never exceeded $3,500, the
DISTRIBUTION will be made as soon as possible and will be made in the form
of a single lump sum cash payment.
9. TERMINATION OF EMPLOYMENT
If you leave the company, you are entitled to the value of your entire ACCOUNT
balance.
10. TAX RULES AFFECTING PLAN PAYMENTS
MANDATORY 20% WITHHOLDING
Whenever you receive a DISTRIBUTION from the PLAN, and there is no direct
rollover to an IRA or another QUALIFIED PLAN, the IRS requires your PLAN
ADMINISTRATOR to withhold 20% of the DISTRIBUTION. This 20% withholding is
not a tax; it is credited to any future federal income tax that you may
owe. This amount will automatically be deducted from the amount paid to
you.
Example:
Sally Kee, age 45, decides to leave the company.
She initially elects a personal payment of her
account balance. A month later, she starts a new
job and wishes to roll over her distribution into
her new employer's qualified plan.
Her account balance is: $10,000
Less 20% withholding: - 2,000
-------
Total cash received $8 ,000
-------
-------
10% ADDITIONAL PENALTY TAX
Any payment of TAXABLE money from your ACCOUNT is generally subject to an
additional 10% federal tax penalty if you take it out "early," which is
defined as:
- Before you reach the age of 59-1/2.
- For reasons other than permanent DISABILITY or death.
This penalty tax does NOT APPLY to the following types of payments:
- Any full DISTRIBUTION made when you terminate employment at or
after age 55.
8
<PAGE>
- Any DISTRIBUTION made under the terms of a QUALIFIED DOMESTIC
RELATIONS ORDER, which is a court order creating or recognizing
an alternate payee's (e.g., spouse, former spouse, child) right
to part or all of your PLAN benefits. See Chapter 12, Events
That May Impact Your Account, on page 10 for more information
about DOMESTIC RELATIONS ORDERS.
- Any corrective DISTRIBUTIONS necessary to comply with IRS
contribution limits.
If you have questions about tax rules affecting PLAN payments, please
contact your tax advisor.
11. SURVIVOR BENEFITS
Survivor benefits are an important part of the financial security and peace of
mind this PLAN provides. In this section, we discuss these benefits in more
detail as well as the decisions you'll need to make about them before you
retire.
CHOOSING A BENEFICIARY
When you enroll in the PLAN, you'll receive a BENEFICIARY designation form
that you can use to name your BENEFICIARY.
Generally, this PLAN requires that 100% of your ACCOUNT BALANCE be used to
provide benefits for your spouse. You may name someone other than your
spouse as BENEFICIARY at any time, provided that your spouse consents to
this change in writing and the consent is notarized.
If your spouse consents to waive his or her right to a survivor benefit,
you may cancel this waiver at any time before your death. If you do so,
your spouse again becomes your BENEFICIARY. If you wish, you may also make
a new choice, subject to the same consent provisions discussed above.
You and your spouse need to understand your respective rights and
obligations concerning the benefits payable at your death, particularly the
financial impact a waiver will have on your spouse. Your PLAN
ADMINISTRATOR will provide you with information on this.
If you are married and you die without complying with these BENEFICIARY
requirements, 100% of your ACCOUNT BALANCE will be payable to your spouse.
Of course, it is very important that you keep the PLAN ADMINISTRATOR
informed of any changes in your marital status and of the proper name and
address of your BENEFICIARY.
PAYMENT OF SURVIVOR BENEFITS TO YOUR SPOUSE
If you die BEFORE you receive the DISTRIBUTION of your ACCOUNT BALANCE,
your spouse is entitled to a lump sum payment of your ACCOUNT.
Your spouse's choice of payment options may be limited by certain IRS tax
rules, in which case your PLAN ADMINISTRATOR will provide your spouse with
any necessary information.
9
<PAGE>
The DISTRIBUTION must be made no later than five years after your death.
PAYMENT OF SURVIVOR BENEFITS TO A NONSPOUSE BENEFICIARY
If you die BEFORE you've started to receive payment of your ACCOUNT:
Your BENEFICIARY will receive payment of your ACCOUNT BALANCE within a
reasonable period after the PLAN ADMINISTRATOR has been notified of your
death. Your BENEFICIARY may also specifically choose to postpone a cash
payment for up to five years after your death.
12. EVENTS THAT MAY AFFECT YOUR ACCOUNT
Here are some of the events that could have an impact on your ACCOUNT. Please
note how your contributions and/or benefits would be affected in each case.
IF THE PLAN IS TERMINATED
You may expect the PLAN to continue indefinitely; however, unforeseen
circumstances may occur. If this PLAN is terminated and a successor
qualified salary deferral retirement PLAN is not established, you will be
entitled to receive payment of your ACCOUNT BALANCE.
IF CIRCUMSTANCES REQUIRE THE DELAY OF A WITHDRAWAL
There will be no delay in payment in cases of death, retirement,
termination of employment, or total and permanent DISABILITY.
TRANSFERS FROM THE GUARANTEED INCOME FUND MAY BE LIMITED
Under certain circumstances the amount transferred from the guaranteed
income fund to other investment funds may be limited by Connecticut General
Life Insurance Company. Please see your PLAN ADMINISTRATOR for further
information on transferring funds from the guaranteed income fund.
IF A COURT ISSUES A DOMESTIC RELATIONS ORDER
If you become divorced or separated, the court may assign part or all of
your benefit to an alternate payee (such as your spouse, former spouse,
child or other dependent) through a DOMESTIC RELATIONS ORDER. This is a
court order that recognizes the alternate payee's right to part or all of
your benefit. While ERISA (the EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974) generally protects PLAN benefits against creditors, DOMESTIC
RELATIONS ORDERS that are deemed qualified by the PLAN ADMINISTRATOR are an
exception.
A QUALIFIED DOMESTIC RELATIONS ORDER (QDRO) can force payment of benefits
to an alternate payee even though the PLAN prohibits DISTRIBUTIONS earlier
than retirement, termination, death, or DISABILITY. The law requires that
your PLAN ADMINISTRATOR determine, within a reasonable amount of time,
whether the DOMESTIC RELATIONS ORDER is qualified. Your PLAN ADMINISTRATOR
must follow specific procedures to ensure that your benefits are properly
distributed. This can sometimes be a time-consuming process. You and each
alternate payee will be notified of the PLAN ADMINISTRATOR'S decision.
10
<PAGE>
IF YOU ARE A HIGHLY COMPENSATED EMPLOYEE
To ensure that the PLAN does not offer unfair advantages to some employees
over others, the Internal Revenue Code places some restrictions on the
participation in the PLAN by HIGHLY COMPENSATED EMPLOYEES. To make sure
these restrictions are followed, certain tests are performed each year and
any necessary corrective actions must be taken.
Most employees are permitted to save up to 25% of their ELIGIBLE EARNINGS
on a tax-deferred basis. However, HIGHLY COMPENSATED EMPLOYEES may be
limited in the amounts they may contribute to the PLAN.
The Internal Revenue Code has also placed limits on the amounts of EMPLOYER
contributions made to the ACCOUNTS of HIGHLY COMPENSATED EMPLOYEES.
If you are a HIGHLY COMPENSATED EMPLOYEE, you should contact your PLAN
ADMINISTRATOR to see how your ACCOUNT may be affected by these
restrictions.
IF THE PLAN IS DETERMINED TO BE TOP HEAVY
A PLAN is termed TOP HEAVY if the value of the ACCOUNTS held by KEY
EMPLOYEES is 60% or more of the total current value of all ACCOUNTS under
the PLAN. KEY EMPLOYEES are generally defined as certain officers and
shareholders of the company.
Should this PLAN become TOP HEAVY, you will be notified. In such a case,
certain provisions will change in order to compensate NON-KEY EMPLOYEES.
If the PLAN is TOP HEAVY, we may be required to make a minimum contribution
on behalf of all NON-KEY EMPLOYEES who:
- Were employed on the last day of the PLAN YEAR during which the
PLAN was TOP HEAVY; and
- Were eligible to participate in the PLAN during that PLAN YEAR.
13. YOUR ERISA RIGHTS
PARTICIPANTS in the PLAN have certain rights and protection under the
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, commonly known as ERISA.
ERISA states that, as a PLAN PARTICIPANT, you are entitled to:
- Examine, without charge, all PLAN documents at the PLAN
ADMINISTRATOR'S office and other specified locations. These
documents include insurance contracts and copies of all
documents, such as annual reports and PLAN descriptions, filed by
the PLAN with the U.S. Department of Labor;
- Obtain copies of all PLAN documents and other PLAN information
upon a written request directed to the PLAN ADMINISTRATOR. The
PLAN ADMINISTRATOR may charge a reasonable amount for the copies;
11
<PAGE>
- Receive a summary of the PLAN'S annual financial report. The
PLAN ADMINISTRATOR is legally required to give PARTICIPANTS a
copy of this summary annual report.
Further, you may not be fired or discriminated against in any way as a
means of preventing you from obtaining your RETIREMENT BENEFITS or
exercising your rights under ERISA.
IF YOUR REQUEST FOR RETIREMENT INCOME IS DENIED
ERISA regulations describe steps that must be taken in the rare cases when
a claim for payment is denied, either in whole or in part. A claim might
be denied if:
- The PLAN ADMINISTRATOR does not believe that you are entitled to
payment; or
- The PLAN ADMINISTRATOR disagrees with the payment amount to which
you believe you are entitled.
If your claim is denied, the PLAN ADMINISTRATOR has to notify you in
writing within 90 days after receiving your claim. The notice must contain
the following information:
- The specific reason(s) your claim was denied.
- The PLAN provisions that support the denial.
- If your application was incomplete, the additional information
needed to complete your claim request and an explanation of why
it is needed.
- Information on what you need to do in order to have the claim
denial reviewed.
If you do not receive notice on the status of your claim from the PLAN
ADMINISTRATOR within 90 days, or within 180 days if it is a special case
(see Time Extensions on page 13 in this chapter), you can assume your claim
has been denied and you may request a review of your denial.
REQUESTING A REVIEW OF THE DENIAL
Once the PLAN ADMINISTRATOR has reviewed your claim and notified you in
writing of the denial within the required 90-day period, you may contest
the denial. You must submit a written request for a review of that denial
within 60 days of the date of the PLAN ADMINISTRATOR'S written
notification. In case the PLAN ADMINISTRATOR does not notify you of the
denial within the required 90-day period, your request for review should be
submitted immediately after the 90-day period expires.
If you wish, you (or your representative) may review the appropriate PLAN
documents and submit written information supporting your claim to the
appropriate FIDUCIARY. Within 60 days of your request, the PLAN
FIDUCIARIES should notify you in writing of the final decision. This
notification must:
- Be written in clear, easily understood language; and
12
<PAGE>
- Inform you of the decision, the reasons why that decision was
made, and the specific PLAN provisions that support it.
If you do not receive a decision on your request for review within 60 days,
you can assume your request has been denied.
If you disagree with the results of the review, you may file suit in
federal or state court. If your suit is successful, the court may award
you legal costs, including attorneys' fees.
TIME EXTENSIONS
Under special circumstances, the 90-day and 60-day notification periods
just discussed may be extended by up to 90 days. You will be informed in
writing of any extensions before the end of these notification periods.
The extension notice will state the special circumstances necessitating the
delay and the revised date by which you may expect a decision.
OTHER RIGHTS YOU MAY HAVE
Under ERISA, there are steps you can take to enforce your rights. For
instance, if you request materials from the PLAN and do not receive them
within 30 days, you may file suit in a federal court. In such a case, the
court may require the PLAN ADMINISTRATOR to provide the documents and pay
you up to $110 a day until you receive them -- unless you did not receive
the materials for reasons beyond the PLAN ADMINISTRATOR'S control. In
addition to defining the rights of PLAN PARTICIPANTS, ERISA imposes
obligations on the people responsible for operating the PLAN. These
persons are legally referred to as FIDUCIARIES and must act prudently and
in the sole interest of the PLAN'S PARTICIPANTS and BENEFICIARIES. If the
FIDUCIARIES misuse the PLAN'S money or if you are discriminated against for
asserting your rights, you may seek assistance from the U.S. Department of
Labor or you may file suit in a federal court. The court will decide who
should pay court costs and legal fees. If you are successful, the court
may order the person you have sued to pay these costs and fees. If you
lose, however, or if the court finds your claim to be frivolous, the court
may order you to pay these costs and fees.
If you have any questions about your PLAN, you should contact the PLAN
ADMINISTRATOR. If you have any questions about this statement or about
your rights under ERISA, you should contact the nearest Area Office of the
U.S. Labor-Management Services Administration, Department of Labor.
14. ADDITIONAL INFORMATION
APPROVAL BY THE IRS
This PLAN is intended to be a "qualified" PLAN under Internal Revenue Code
section 401(a). Therefore, certain contributions made to the PLAN are not
taxable to you until distributed. In the unlikely event that the IRS
determines that the PLAN does not meet its qualification requirements, all
contributions will cease. At such time, some or all of your contributions
may be returned. Any contributions that are returned to you are taxable to
you in the year that the DISTRIBUTION is made from the disqualified PLAN.
13
<PAGE>
DESCRIPTION OF ENTITY THAT MAINTAINS THE PLAN
Connecticut General Life Insurance Company, a CIGNA Company, has been
retained to assist us with the operation of our PLAN. This PLAN operates
under a contract administration. This means that PLAN contributions
accumulate and benefit payments are payable under a group annuity
contract. Our contract is with Connecticut General Life Insurance
Company.
PENSION BENEFIT GUARANTY CORPORATION
The Pension Benefit Guaranty Corporation (PBGC) is operated under the
Department of Labor to insure plan benefits. Because our PLAN maintains
individual participant accounts, it is not covered by PBGC insurance.
14
<PAGE>
15. GLOSSARY
ACCOUNT
An individual account is maintained for you under the plan. An account contains
all contributions made on your behalf and includes earnings or losses on those
contributions.
ACTIVE EMPLOYEE
An active employee is someone who is currently employed by the employer.
BENEFICIARY
The person to whom the funds in your account will be distributed in the event of
your death.
CONTRIBUTION PERIOD
For employee contributions, the regular period (monthly) for which participants
make these contributions. For employer contributions, the regular period
(monthly for matching contributions and annually for discretionary
contributions) in which the employer intends to make contributions.
DISABLED
If you should become unable to engage in any substantial gainful activity
because of a medically determinable physical or mental impairment which can be
expected to continue indefinitely, your Plan Administrator may deem you to be
disabled.
DISCRETIONARY CONTRIBUTION
Your employer may make a discretionary contribution on your behalf. This
contribution will not be based on the amount of your pre-tax contributions.
DISTRIBUTION
Any payments made from your account.
DOMESTIC RELATIONS ORDER (SEE QUALIFIED DOMESTIC RELATIONS ORDER)
ELIGIBLE EARNINGS
Eligible earnings are your wages for the plan year. Eligible earnings may also
include amounts your employer contributes on your behalf to any salary deferral
arrangements, even though these amounts are excluded from your gross income for
tax purposes.
The plan does NOT recognize compensation amounts that exceed an
inflation-adjusted annual limit, which is $160,000 for 1998. In some cases,
this limit may apply to an entire family working for the same employer. In
addition, if you join the plan within the plan year, your limit will be adjusted
accordingly.
EMPLOYER
The entity (usually a company or partnership) whose employees are covered under
the retirement plan. In the case of a group of employers which constitutes a
controlled group of corporations or an affiliated service group, all such
employers shall be considered as a single employer for purposes of the plan.
15
<PAGE>
FIDUCIARY
A person who has discretionary control over or responsibility for a plan's
administration and/or its assets.
FOREIGN NATIONAL
Someone who is a non-United States citizen. Plan sponsors usually allow foreign
nationals working and residing in the United States to participate.
FORMER EMPLOYEE
A former employee is an employee who is no longer employed by the employer.
HIGHLY COMPENSATED EMPLOYEES
Under the Internal Revenue Code, an employee is regarded as "highly compensated"
if he or she meets any of the criteria listed below. The dollar amounts shown
below are 1997 figures and are adjusted annually based on cost-of-living factors
determined by the government.
- Owns at least 5% of the company for the current or preceding year; or
- Earns more than $80,000 in the preceding year and, if elected for the
plan year, was in the top 20% of the employees for the preceding year.
HOUR OF SERVICE
You will be credited with one hour of service for every hour that you work for
the employer.
INDIVIDUAL RETIREMENT ACCOUNT (IRA)
An IRA is an individual retirement account established to save money for
retirement. With an IRA, taxes are deferred on the interest your investment
earns, and, if you meet certain criteria, taxes on the contributions are also
deferred.
KEY AND NON-KEY EMPLOYEES
Key employees are generally certain officers, managers and shareholders of the
employer. If a plan becomes top-heavy in any plan year, the benefits earned by
that year's non-key employees may be increased.
LOAN
A portion of your account balance which you borrow and agree to repay with
interest.
MATCHING CONTRIBUTIONS
A contribution your employer may make on your behalf that is based upon the
amount of your pre-tax or post-tax contributions.
NORMAL RETIREMENT DATE
The first day of the month following the date you attain the normal retirement
age specified in the Plan.
PARTICIPANT
For pre-tax contributions, a participant is an employee who is eligible to
participate under the terms of a qualified plan or who has a right to a benefit
from the plan.
16
<PAGE>
PLAN
The plan that your employer is maintaining to help you save for your retirement
years.
PLAN ADMINISTRATOR
Your Plan Administrator is Quixote Corporation which is responsible for the
operation of your plan.
PLAN YEAR
The period of 12 consecutive months for which records are kept and assets are
valued.
PRE-TAX CONTRIBUTIONS
An arrangement between you and your employer in which you consent to "defer" a
certain amount of salary each pay period. Your employer then deposits this
money into your account.
QUALIFIED CONTRIBUTIONS
- - Qualified Matching Contributions
A matching contribution made to nonhighly compensated employees in order to
ensure that highly compensated employees are not receiving an unfair
proportion of the plan's contributions.
- - Qualified Nonelective Contributions
A discretionary contribution made to nonhighly compensated employees in
order to ensure that highly compensated employees are not receiving an
unfair proportion of the plan's contributions.
QUALIFIED DOMESTIC RELATIONS ORDER (QDRO)
A domestic relations order deemed qualified by a Plan Administrator. A
qualified domestic relations order can force payment of plan benefits to an
alternate payee (e.g., spouse, former spouse, child), even though the plan
normally prohibits distributions earlier than retirement, termination, death, or
disability.
RETIREMENT BENEFIT
The funds paid to you or your designated beneficiary once you separate from
service after reaching the earliest retirement date described under the terms of
the plan.
ROLLOVER CONTRIBUTIONS
Contributions from a retirement plan established by a former employer which are
"rolled over" to the current plan either directly or through an Individual
Retirement Account (IRA). If the money is rolled directly from one qualified
plan to another, the money is not actually distributed to you and is not subject
to income tax withholding.
SALARY DEFERRAL ARRANGEMENT (See PRE-TAX CONTRIBUTIONS)
TOP HEAVY
A plan is regarded as top heavy when the current value of accounts attributable
to key employees is 60% or more of the total current value of all accounts in
the plan.
17
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TRUSTEE
An individual or entity appointed by the employer's board of directors who holds
title to plan assets and may be responsible for managing the assets.
18
<PAGE>
16. INDEX OF ACRONYMS AND IRS TERMS
401(k) PLAN
A plan which allows participants to defer taxable income by making pre-tax
contributions to the plan. Federal income tax is deferred until a distribution
is made.
ACTUAL CONTRIBUTION PERCENTAGE (ACP) TEST
A test that is performed each plan year for all plans that allow employee
post-tax and/or employer matching contributions. The test ensures that such
contributions do not discriminate in favor of highly compensated employees.
ACTUAL DEFERRAL PERCENTAGE (ADP) TEST
A test that is performed each plan year for all 401(k) plans to ensure that
employee pre-tax contributions do not discriminate in favor of highly
compensated employees.
ANNUAL ADDITIONS/415 LIMITATIONS
A limit on all employer and employee contributions (pre-tax and post-tax) and
forfeitures allocated to a participant's account. The annual additions
limitation is the lesser of $30,000 (as indexed) or 25% of eligible earnings for
each year.
DEPARTMENT OF LABOR (DOL)
A U.S. Government agency that, among other responsibilities, administers the
labor, regulatory, and administrative provisions of ERISA.
EMPLOYEE RETIREMENT INCOME SECURITY ACT (ERISA) OF 1974
ERISA is the law designed to protect the rights of participants and
beneficiaries of employee benefit plans. ERISA imposes various plan
qualification standards and fiduciary responsibilities.
INTERNAL REVENUE CODE (IRC)
The Internal Revenue Code of 1986 is the body of law governing the federal
taxation of individuals and business entities.
INTERNAL REVENUE SERVICE (IRS)
The agency of the Federal Treasury Department charged with administering,
interpreting, and enforcing the tax code. The IRS also determines whether a
plan complies with federal tax regulations for qualified plans.
QUALIFIED PLAN
A pension or profit sharing plan that meets the requirements of Internal Revenue
Code section 401(a) and qualifies for special tax considerations.
19
<PAGE>
EXHIBIT 21
QUIXOTE CORPORATION & SUBSIDIARIES
SUBSIDIARIES OF THE COMPANY
as of June 30, 1998
<TABLE>
<CAPTION>
Jurisdiction
Under Which
QUIXOTE CORPORATION (PARENT) Organized
- ---------------------------- -------------
<S> <C>
Energy Absorption Systems, Inc. Delaware
Composite Components, Inc. Delaware
E-Tech Testing Services, Inc. Delaware
Safe-Hit Corporation Nevada
Spin-Cast Plastics, Inc. Indiana
TranSafe Corporation Delaware
Roadway Safety Service, Inc. Delaware
Highway Information Systems, Inc. Delaware
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
QualAir Corporation Delaware
Quixote Foreign Sales Corporation U.S. Virgin Islands
Quixote Laser Corporation Delaware
Quixote Research Corporation Delaware
</TABLE>
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.
TranSafe Corporation is the sole shareholder of Roadway Safety Service, Inc.
and Highway Information Systems, 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.
<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, 33-74488 and
333-62933) and the registration statements on Form S-3 (Files Nos. 2-96502
and 33-14873 Amendment No. 1) of our reports, dated August 7, 1998,
accompanying the consolidated financial statements and financial statement
schedules of Quixote Corporation and Subsidiaries as of June 30, 1998 and
1997, and for each of the years ended June 30, 1998, 1997 and 1996, which
report is included in this Annual Report on Form 10-K of Quixote Corporation.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
September 28, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 3,927,000
<SECURITIES> 0
<RECEIVABLES> 14,541,000
<ALLOWANCES> 565,000
<INVENTORY> 5,826,000
<CURRENT-ASSETS> 26,853,000
<PP&E> 23,236,000
<DEPRECIATION> 9,754,000
<TOTAL-ASSETS> 59,065,000
<CURRENT-LIABILITIES> 11,707,000
<BONDS> 7,677,000
0
0
<COMMON> 148,000
<OTHER-SE> 38,738,000
<TOTAL-LIABILITY-AND-EQUITY> 59,065,000
<SALES> 55,988,000
<TOTAL-REVENUES> 55,988,000
<CGS> 30,445,000
<TOTAL-COSTS> 30,445,000
<OTHER-EXPENSES> 16,990,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 357,000
<INCOME-PRETAX> 8,752,000
<INCOME-TAX> 2,605,000
<INCOME-CONTINUING> 6,147,000
<DISCONTINUED> (6,138,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,000
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
