<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
QUIXOTE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
[LOGO]
NOTICE AND AGENDA OF THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD WEDNESDAY, NOVEMBER 18, 1998
--------------------
TO THE STOCKHOLDERS OF QUIXOTE CORPORATION:
The Annual Meeting of Stockholders of Quixote Corporation (the "Company")
will be held on Wednesday, November 18, 1998, at 10:00 a.m., Central Standard
Time, in the Assembly Room at The Northern Trust Company, 50 South LaSalle
Street, Chicago, Illinois 60675 for the following purposes:
1. To elect two (2) directors to serve for a three-year term expiring at
the Annual Meeting of Stockholders to be held in 2001;
2. To approve an amendment to the Company's 1993 Long-Term Stock Ownership
Incentive Plan;
3. To approve an amendment to the Company's 1991 Director Stock Option
Plan;
4. To ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent auditors; and
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only stockholders of record at the close of business on September 21, 1998,
will be entitled to notice of, and to vote at, the meeting.
Stockholders are encouraged to attend the meeting in person. Whether or not
you attend the meeting, your vote is important. As a cost-savings measure and an
added convenience for the Company's stockholders, we are offering voting by
telephone and the Internet this year. Registered holders and most "street name"
holders will find instructions on the enclosed proxy card. We urge you to use
either of the electronic voting alternatives available, or sign, date and mail
the enclosed proxy card in the envelope provided at your earliest convenience.
No postage is required if mailed in the United States.
WE APPRECIATE YOUR COOPERATION AND WE THANK YOU.
By order of the Board of Directors,
/s/ Joan R. Riley
JOAN R. RILEY
SECRETARY
Chicago, Illinois
September 29, 1998
<PAGE>
I M P O R T A N T
A PROXY STATEMENT AND PROXY CARD ARE SUBMITTED WITH THIS NOTICE. ALL
STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT AND TO VOTE PROMPTLY.
STOCKHOLDERS ARE ENCOURAGED TO VOTE THEIR SHARES ELECTRONICALLY BY FOLLOWING
THE INSTRUCTIONS ON THE PROXY CARD, OR SIGN, DATE AND RETURN THE ENCLOSED
PROXY FORM IN THE ENVELOPE PROVIDED. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES. A LIST OF STOCKHOLDERS ENTITLED TO VOTE AT THE ANNUAL MEETING
WILL BE AVAILABLE FOR INSPECTION BY ANY STOCKHOLDER FOR ANY PURPOSE GERMANE
TO THE MEETING DURING ORDINARY BUSINESS HOURS FOR A PERIOD OF TEN DAYS PRIOR
TO THE MEETING AT THE PRINCIPAL OFFICES OF THE COMPANY, ONE EAST WACKER
DRIVE, 30TH FLOOR, CHICAGO, ILLINOIS.
<PAGE>
[LOGO]
SEPTEMBER 29, 1998
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD WEDNESDAY, NOVEMBER 18, 1998
--------------------
PROXY SOLICITATION
This Proxy Statement is furnished to stockholders of Quixote Corporation
(the "Company"), on or about September 29, 1998, in connection with the
solicitation of proxies on behalf of the Board of Directors to be voted at the
Annual Meeting of Stockholders on Wednesday, November 18, 1998, at 10:00 a.m.,
Central Standard Time, in the Assembly Room at The Northern Trust Company, 50
South LaSalle Street, Chicago, Illinois 60675, and at any adjournment thereof.
The person voting the enclosed proxy may revoke it at any time before it is
exercised by writing to the Secretary of the Company at its principal office,
One East Wacker Drive, Chicago, Illinois 60601, or by attending the Annual
Meeting and voting in person, in which case any prior proxy given will be
automatically revoked.
Properly executed proxies received prior to the meeting will be voted at the
meeting. If a stockholder designates how the proxy is to be voted on any
business to come before the meeting, the signed proxy will be voted in
accordance with such designation. If a stockholder fails to designate how his or
her proxy should be voted, the signed proxy will be voted: (1) FOR the election
of the nominees named below as Directors; (2) FOR the approval of the amendment
of the 1993 Long-Term Stock Ownership Incentive Plan (the "Long-Term Plan"); (3)
FOR the approval of the amendment of the 1991 Director Stock Option Plan (the
"Director Plan"); and (4) FOR the ratification of the appointment of
PricewaterhouseCoopers L.L.P. as the Company's independent auditors.
The costs of this solicitation will be paid by the Company. Such costs
include preparation, printing and mailing of the Notice of Annual Meeting, Proxy
Card and this Proxy Statement. The officers and employees of the Company and its
subsidiaries may solicit proxies personally or by telephone and facsimile.
Arrangements will be made with brokerage houses and other custodians, nominees
and fiduciaries for proxy material to be sent to the principals, and the Company
will reimburse such persons for their reasonable out-of-pocket expenses. The
Company has also retained the firm of Morrow & Co., Inc. to assist in the
solicitation of proxies at a cost of approximately $7,500 plus reasonable
out-of-pocket expenses.
1
<PAGE>
VOTING AT THE ANNUAL MEETING
Stockholders of record owning the Company's common stock, $.01 2/3 par value
("Common Stock"), at the close of business on September 21, 1998, will be
entitled to vote at the Annual Meeting. On that date, 7,937,442 shares of Common
Stock were outstanding. Each outstanding share of Common Stock entitles the
holder to one vote upon each matter presented at the Annual Meeting. The
affirmative vote of a majority of all of the shares of Common Stock of the
Company present in person or represented by proxy and entitled to vote at the
meeting is necessary to approve the amendment of the Director Plan, the
amendment of the Long-Term Plan, and to ratify the selection of
PricewaterhouseCoopers L.L.P., as independent auditors for the Company. The
nominees for Director will be elected if they receive the affirmative vote of at
least sixty percent of all votes entitled to be cast at this meeting.
Shares voted as abstentions on any matter (or a "withhold vote for" as to
Directors) will be counted as shares that are present and entitled to vote for
purposes of determining a quorum at the meeting and as unvoted, although present
and entitled to vote, for purposes of determining the approval of each matter as
to which the stockholder has abstained. Abstentions and withheld votes have the
effect of votes against a matter.
Pursuant to the New York Stock Exchange rules, brokers who hold shares of
Common Stock as nominees will have discretionary authority to vote those shares
on the proposals. However, if a broker submits a proxy that indicates the broker
does not have discretionary authority (known as "broker non-votes"), such
non-votes will be counted as shares that are present and entitled to vote for
purposes of determining a quorum at the meeting, but will not be considered as
present and entitled to vote with respect to such matters. Accordingly, broker
non-votes will have the effect of votes against a matter.
While the Notice of Annual Meeting calls for the transaction of such other
business as may properly come before the meeting, management has no knowledge of
any matters to be presented for action by the stockholders except as already set
forth. The enclosed proxy gives discretionary authority to the persons holding
those proxies to vote in accordance with their best judgment as to any other
business.
ELECTION OF DIRECTORS
At the Annual Meeting, two (2) Directors are to be elected to serve three
year terms until the Annual Meeting to be held in 2001 and until their
successors are elected and qualified. The Company is soliciting proxies to vote
for its nominees, William G. Fowler and Robert D. van Roijen, Jr., as Directors
of the Company.
All proxies will be voted in accordance with the stated instructions. If any
nominee ceases to be a candidate for election for any reason, the proxy will be
voted for a substitute nominee designated by the Board. The Board of Directors
currently has no reason to believe that any nominee will be either unwilling or
unable to serve as a Director if elected. Proxies given by stockholders cannot
be voted for more than two (2) persons. The nominees for Director will be
elected if they receive the affirmative vote of at least sixty percent (60%) of
all votes entitled to be cast at this meeting.
INFORMATION CONCERNING NOMINEES FOR DIRECTOR AND DIRECTORS CONTINUING IN OFFICE.
The information appearing in this section in regard to age and principal
occupation or employment has been furnished to the Company by the respective
nominees for Director and by the respective Directors continuing in office.
Information relating to the beneficial ownership of the Company's Common Stock
by Directors and nominees for Director is set forth in the table on page 21.
2
<PAGE>
NOMINEES FOR DIRECTOR FOR A THREE-YEAR TERM
EXPIRING IN 2001
WILLIAM G. FOWLER
Mr. Fowler, 70, is of counsel to the law firm of Van Cott, Bagley, Cornwall
& McCarthy of Salt Lake City, Utah. He joined the Board in January 1973. Mr.
Fowler is the Chairman of the Audit/Compensation Committee.
ROBERT D. VAN ROIJEN, JR.
Mr. van Roijen, 59, has been the President of Tox Financial Company, a
private investment firm, since 1988. He was formerly associated with Control
Laser Corporation, serving in various capacities from 1977 to 1987, including as
Chairman of the Board and as President and Chief Executive Officer. Mr. van
Roijen is also a director of Commonwealth Scientific; Applied Digital
Technology; St. Leonard's Corporation; and Security Storage Company, and is a
former director of Sonex Research, Inc. and AMBAR Corp. Mr. van Roijen has
served as a Director of the Company since May 1993 and is a member of the
Audit/Compensation Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE ELECTION OF MR.
FOWLER AND MR. VAN ROIJEN AS DIRECTORS OF THE COMPANY.
DIRECTORS CONTINUING IN OFFICE
PHILIP E. ROLLHAUS, JR.
Mr. Rollhaus, 64, is Chairman of the Board and the Chief Executive Officer
of the Company. Mr. Rollhaus has served in these capacities and as a Director of
the Company since the Company was founded in July 1969. Mr. Rollhaus also served
as President of the Company from July 1969 until Mr. Leslie J. Jezuit's
appointment to that office in January 1996. Mr. Rollhaus is Chairman and Chief
Executive Officer of Energy Absorption Systems, Inc., a wholly-owned subsidiary
of the Company. Mr. Rollhaus is a former member of the Board of Directors of the
Keller Graduate School of Management and of DeVry, Inc. His current term as
Director expires at the Annual Meeting to be held in 1999.
LESLIE J. JEZUIT
Leslie J. Jezuit, 52, has served as President and Chief Operating Officer of
the Company since January 1996 and is also Vice Chairman and a Director of
Energy Absorption Systems, Inc. Mr. Jezuit has served as a Director of the
Company since May 1997. Prior to joining the Company, Mr. Jezuit served from
1991 to 1995 as President and Chief Operating Officer of Robertshaw Controls
Company, a $500 million manufacturer of HVAC, appliance and pneumatic controls.
He also served as Vice President and General Manager of the Cutler-Hammer
division of Eaton Corporation (1985-1991); in various positions at Federal
Signal Corporation, including Group President and Vice President of Corporate
Development (1980-1985); as Vice President of Marketing at Mead Digital Systems
(1975-1980); and in various management positions at the Graphic Systems Division
of Rockwell International (1968-1975). Mr. Jezuit is a former member of the
Board of Directors of Prospectus Plus, Inc. His current term as Director expires
at the Annual Meeting to be held in 1999.
JAMES H. DEVRIES
Mr. DeVries, 66, has served as a Director of the Company since July 1969.
Prior to his retirement from the Company in June 1997, Mr. DeVries served as
Executive Vice President, General Counsel and Secretary of the Company, and as
Secretary of Energy Absorption Systems, Inc. His current term as Director
expires at the Annual Meeting to be held in 2000.
3
<PAGE>
LAWRENCE C. MCQUADE
Mr. McQuade, 71, is Chairman of Qualitas International (since 1994). In
addition, he serves as a Director of Bunzl P.L.C. (since 1991), of Oxford
Analytica, Inc. (since 1988), of Eurotech, Ltd. (since 1998), and is a founding
partner of River Capital International L.L.C. Mr. McQuade served as Chairman of
the Czech & Slovak American Enterprise Fund from August 1995 to March 1996. Mr.
McQuade was Vice Chairman of Prudential Mutual Fund Management, Inc. from 1988
through April 1995. He was Executive Vice President and a Director of W.R. Grace
& Co. from 1975 to 1987. In 1967 to 1969 he served as Assistant Secretary, U.S.
Department of Commerce. He is a graduate of Yale University, Oxford University
(Rhodes Scholar), and Harvard Law School. Mr. McQuade has served as a Director
of the Company since February 1992 and is a member of the Audit/Compensation
Committee. His current term as Director expires at the Annual Meeting to be held
in 2000.
AUDIT/COMPENSATION COMMITTEE
The Audit/Compensation Committee recommends the accounting firm to be
employed as the Company's independent auditors to the Board; consults with the
auditors regarding the audit; reviews the auditors' report or proposed report
and resulting letter of comments to management; consults with the auditors and
management regarding the adequacy of internal controls; determines adjustments
to salaries, bonuses and other forms of compensation (including stock option
grants) afforded the principal officers of the Company and its subsidiaries; and
considers any other matter relating to the Company's affairs that the Committee,
in its discretion, deems appropriate. The Audit/Compensation Committee had three
meetings during fiscal 1998. The Board of Directors does not have a nominating
committee. The Board of Directors as a whole performs the functions normally
performed by a nominating committee.
REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
In fiscal 1998, Directors who were also employees of the Company were paid a
fee of $1,000 for each day of scheduled meetings of the Board, plus expenses.
Non-employee Directors were paid a fee of $2,000 for each day of scheduled
meetings of the Board and the Audit/Compensation Committee, plus traveling and
related expenses, and $500 for each telephone conference meeting. There were
four scheduled meetings (four meeting days) and five telephone conference
meetings of the Board in fiscal 1998. Of the three Audit/Compensation Committee
meetings in fiscal 1998, members of the Committee received compensation for only
one telephone meeting in addition to compensation received for their attendance
at scheduled Board meetings.
Present and future Directors are eligible to receive stock options as
granted from time to time by the Board of Directors pursuant to the Director
Plan, subject to certain limits on the number of shares any individual Director
may receive. Options are granted under the Director Plan at 100% of fair market
value on the grant date and require continued service as a Director for at least
one year from the grant date as a condition of exercise. On February 19, 1998,
the Company granted each of the Directors options to purchase 10,000 shares of
Common Stock at $8.34 per share.
The Company maintains accidental death and disability insurance coverage in
the amount of $500,000 on behalf of each of the non-employee Directors, payable
to the designated beneficiary of each Director. The Company paid premiums of
$600 for each Director to provide such insurance in fiscal 1998.
4
<PAGE>
SUMMARY COMPENSATION TABLE
The following table summarizes the total compensation earned or paid for
services rendered in all capacities during each of the years ended June 30,
1998, 1997 and 1996, by the named Executive Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------------------- ------------------------
OTHER RESTRICTED
ANNUAL STOCK OPTIONS/
SALARY BONUS COMPENSATION(1) AWARD(S)(2) SARS
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#)
- ------------------------------------------- --------- --------- --------- ----------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Philip E. Rollhaus, Jr .................... 1998 445,000 240,000 140,213 169,200 60,000
Chairman and Chief Executive Officer, 1997 425,000 100,000 280,072 196,875 32,000
Quixote Corporation and Energy Absorption 1996 425,000 130,000 101,706 0 42,000
Systems, Inc.
Leslie J. Jezuit .......................... 1998 290,000 210,000 152,515 644,972 54,445
President and Chief Operating Officer, 1997 275,000 100,000 177,501 157,500 25,000
Quixote Corporation; Vice Chairman, Energy 1996 137,500 70,000 35,411 0 55,000
Absorption Systems, Inc.
George D. Ebersole ........................ 1998 225,000 120,000 54,571 0 25,000
President and Chief Operating Officer, 1997 215,000 75,000 32,825 0 10,000
Energy Absorption Systems, Inc. 1996 215,000 100,000 26,506 0 15,000
Daniel P. Gorey ........................... 1998 165,000 80,000 89,772 42,300 30,000
Vice President, Chief Financial Officer 1997 155,000 40,000 137,727 500,323 15,000
and Treasurer(4)
Joan R. Riley ............................. 1998 125,000 45,000 46,117 356,996 18,000
General Counsel and Secretary(5)
<CAPTION>
ALL OTHER
COMPENSATION(3)
NAME AND PRINCIPAL POSITION ($)
- ------------------------------------------- -------------------
<S> <C>
Philip E. Rollhaus, Jr .................... 5,000
Chairman and Chief Executive Officer, 3,200
Quixote Corporation and Energy Absorption 3,000
Systems, Inc.
Leslie J. Jezuit .......................... 5,000
President and Chief Operating Officer, 3,200
Quixote Corporation; Vice Chairman, Energy 0
Absorption Systems, Inc.
George D. Ebersole ........................ 4,007
President and Chief Operating Officer, 3,050
Energy Absorption Systems, Inc. 3,000
Daniel P. Gorey ........................... 5,737
Vice President, Chief Financial Officer 1,674
and Treasurer(4)
Joan R. Riley ............................. 5,495
General Counsel and Secretary(5)
</TABLE>
- ------------------------------
(1) The amounts disclosed include (a) cash paid under the Quixote Corporation
Long-Term Stock Ownership Incentive Plan (the "Long-Term Plan") to cover the
federal, state and other taxes arising from the restricted stock issued in
the fiscal year to the named Executive Officers pursuant to the retirement
plan provisions of the Long-Term Plan and, (b) cash paid to cover the
federal, state and other taxes arising from a restricted stock award granted
on August 20, 1998 to Messrs. Rollhaus, Jezuit, Gorey and Ms. Riley for
their work related to the Company's discontinued operations. The amounts
disclosed for Messrs. Rollhaus and Jezuit also include compensation of
$4,000 paid to them for their services as Directors of the Company.
Perquisites and other personal benefits are disclosed for Mr. Gorey,
including an automobile allowance of $14,746 in 1998 and $13,438 in 1997.
The aggregate amount of perquisites and other personal benefits for Messrs.
Rollhaus, Jezuit, Ebersole and Ms. Riley did not exceed the lesser of
$50,000 or ten percent (10%) of the total annual salary and bonus reported
for each of them and, therefore, is not included.
(2) The amounts disclosed for Messrs. Rollhaus, Jezuit, Gorey and Ms. Riley
include the dollar value of the stock awards granted to them on August 20,
1998. The fair market value on the date of grant was $14.10. The total
number of shares awarded are as follows: Mr. Rollhaus - 12,000 shares; Mr.
Jezuit - 8,000 shares; Mr. Gorey - 3,000 shares; Ms. Riley - 2,000 shares.
The restricted shares are fully vested, but are subject to transfer
restrictions until February 20, 1999 at which time they shall become
unrestricted shares. Dividends will be paid on the restricted stock. The
1997 amount disclosed for Mr. Gorey also includes the dollar value of a
restricted stock award of 12,000 shares granted to him on June 25, 1997. The
fair market value of the shares on the date of grant was $7.88. These
restricted shares are fully vested but subject to transfer restrictions
until June 25, 1998 at which time 50% of the shares became unrestricted
shares. On June 25, 1999 all restrictions shall lapse. Dividends are paid on
the restricted stock.
The 1998 amounts disclosed for Mr. Jezuit and Ms. Riley include the dollar
value of restricted stock awards granted to them on February 19, 1998 under
the retirement plan provisions of the Long-Term Plan (calculated at the
Current Market Price of $8.396 per share of the Company's Common Stock on
that date). The number of shares covered by the award and the number vested
are as follows: Mr. Jezuit - 63,384/5,762 shares; Ms. Riley - 39,161/2,176
shares. The 1997 amount disclosed for Mr. Gorey includes the dollar value of
a restricted award of 51,409 shares granted to him on June 30, 1997 under
the retirement plan provisions of the Long-Term Plan (calculated at the
Current Market Price of $7.894 per share of the Company's Common Stock on
that date) of which 5,712 shares are vested. Restrictions on the issuance
and transferability of such restricted stock is described below. In addition
to the amounts disclosed, restricted stock awards also were granted to
Messrs. Rollhaus and Ebersole in 1993 pursuant to the retirement plan
provisions of the Long-Term Plan. The number of shares covered by these
restricted stock awards and the number of shares vested, respectively, are
as follows: Mr. Rollhaus - 91,530/91,530 shares; Mr. Ebersole -
37,037/31,746 shares. Pursuant to the terms of the Long-Term Plan, the
remaining restricted stock covered by the 1993 award to Mr. Ebersole will be
issued on June 30, 1999, subject to the continuation of employment and
transferability restrictions described below, and subject further to the
Company's right to terminate the agreement at any time after June 30, 1998.
The remaining restricted stock covered by the awards granted to Mr. Jezuit,
Mr. Gorey and Ms. Riley will be issued in equal annual installments on June
30 of the next ten, sixteen, and seventeen years, respectively, subject to
the continuation of
5
<PAGE>
employment and transferability restrictions described below, and subject to
the Company's right to terminate Mr. Jezuit's and Ms. Riley's agreement at
any time after July 1, 2003 and, in the case of Mr. Gorey, at any time after
July 1, 2002.
In order to receive an annual issuance of restricted stock, the executive
must be employed by the Company or its subsidiaries on the last day of the
fiscal year in which such stock is to be issued (except in the case of his
death, disability or termination of employment other than for cause). The
executive may not sell or transfer any restricted stock received under the
Long-Term Plan until the earlier of the date his employment is terminated or
the date he reaches retirement age (whether he actually retires at that time
or not). Pursuant to the terms of the Long-Term Plan, dividends are paid
only on shares of restricted stock issued and delivered to the named
Executive.
The number and value of each employee's aggregate restricted stock holdings,
as of June 30, 1998 were as follows: Mr. Rollhaus - 116,030/$1,421,367; Mr.
Jezuit - 23,762/$291,084; Mr. Gorey - 14,712/$180,222; Mr. Ebersole -
31,746/$388,888; Ms. Riley - 7,669/$93,945.
(3) Amounts shown for the named Executive Officers for fiscal 1998 are matching
contributions by the Company under the Company's 401(k) Plan.
(4) Mr. Gorey was appointed Chief Financial Officer of the Company in November,
1996.
(5) Ms. Riley was designated an Executive Officer of the Company in August,
1998.
STOCK OPTION GRANTS IN FISCAL YEAR 1998
The following table shows the options granted to the named Executive
Officers during fiscal 1998 and the potential realizable value of those grants
(on a pre-tax basis) determined in accordance with SEC rules. The information in
this table shows how much the named Executive Officers may eventually realize in
future dollars under three hypothetical situations: if the price of the
Company's Common Stock does not increase, and if the stock gains 5% or 10% in
value per year, compounded over the life of the options. These amounts represent
assumed rates of appreciation, and are not intended to forecast future
appreciation of the Company's Common Stock.
The options described in this table have exercise prices equal to the
current market value of a share of Common Stock on the date they were granted.
Unless the Company's stock price appreciates and the recipient continues to be
employed until the options vest, the options will have no value.
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF STOCK
------------------------------------------------------ PRICE APPRECIATION FOR
% OF TOTAL OPTION TERM(2)
OPTIONS OPTIONS GRANTED EXERCISE OR ----------------------
GRANTED TO EMPLOYEES IN BASE PRICE EXPIRATION 0%
NAME (#)(1) FISCAL YEAR ($/SH) DATE -- 5%($)
- ---------------------------------------------- ----------- --------------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Philip E. Rollhaus, Jr........................ 25,000 9.3% 8.00 08/28/02 0 55,256
10,000 3.7% 8.34 02/19/08 0 52,450
25,000 9.3% 8.34 02/19/03 0 57,605
Leslie J. Jezuit.............................. 20,000 7.5% 8.00 08/28/02 0 44,205
4,445 1.7% 8.00 08/28/07 0 22,363
20,000 7.5% 8.34 02/19/03 0 46,084
10,000 3.7% 8.34 02/19/08 0 52,450
George D. Ebersole............................ 10,000 3.7% 8.00 08/28/02 0 22,103
15,000 5.6% 8.34 02/19/03 0 34,563
Daniel P. Gorey............................... 15,000 5.6% 8.00 08/28/02 0 33,154
15,000 5.6% 8.34 02/19/03 0 34,563
Joan R. Riley................................. 8,000 3.0% 8.00 08/28/02 0 17,682
10,000 3.7% 8.34 02/19/03 0 23,042
<CAPTION>
NAME 10%($)
- ---------------------------------------------- ---------
<S> <C>
Philip E. Rollhaus, Jr........................ 122,102
132,918
127,291
Leslie J. Jezuit.............................. 97,682
56,673
101,833
132,918
George D. Ebersole............................ 48,841
76,375
Daniel P. Gorey............................... 73,261
76,375
Joan R. Riley................................. 39,073
50,917
</TABLE>
- ------------------------------
(1) The options which expire on August 28, 2002 and February 19, 2003 were
granted on August 28, 1997 and February 19, 1998 respectively, under the
Long-Term Plan and the options which expire August 28, 2007 and February 19,
2008 were granted on the same dates under the Director Plan. All options
were granted at the Current Market Price (as defined in the Plans) on such
dates. The options granted on August 28, 1997 become exercisable in
one-third installments, beginning one year after the grant and the options
granted on February 19, 1998 become exercisable in one-half installments
beginning one year after grant. All option rights under the Long-Term Plan
lapse upon termination of employment except for limited exercise periods. In
the event of a change in control of the Company (as defined in the Long-Term
Plan and Director Plan), the Plans give each optionee the right, within 30
days of such change in control, to exercise his options, notwithstanding the
other provisions of the Plans.
(2) The potential realizable value to all stockholders at the appreciation rates
of 0%, 5% and 10% would be $0, $26,657,681 and $58,906,504 (based on shares
outstanding at June 30, 1998 and assuming such shares were purchased for
$12.25 on June 30, 1998 and held until June 30, 2003).
AGGREGATED OPTION EXERCISES AND OPTION VALUES TABLE
The following table shows information concerning the exercise of stock
options by each of the named Executive Officers during fiscal 1998, and the
value of all remaining exercisable and unexercisable options at June 30, 1998,
on a pre-tax basis.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS/ SARS
OPTIONS/SARS AT 6/30/98(#) AT 6/30/98($)(1)
SHARES ACQUIRED VALUE REALIZED ---------------------------- --------------------------
NAME ON EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------- ----------------- --------------- ----------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Phillip E. Rollhaus, Jr.............. 6,000 14,220 188,500 60,000 649,625 243,100
Leslie J. Jezuit..................... 0 0 80,000 54,445 326,875 221,191
George D. Ebersole................... 5,000 13,125 20,000 25,000 86,250 101,150
Daniel P. Gorey...................... 10,000 56,250 16,925 30,000 52,119 122,400
Joan R. Riley........................ 0 0 16,925 18,000 73,369 73,100
</TABLE>
- ------------------------------
(1) Based on the closing price of the Company's Common Stock as reported on the
NASDAQ-NNMS on June 30, 1998 ($12.25).
7
<PAGE>
EMPLOYMENT AGREEMENTS AND TERMINATION BENEFITS
The Company has an employment agreement with Philip E. Rollhaus, Jr. that
was entered into in February 1989 (the "Employment Agreement"). The Company also
has a change of control agreement with each of Philip E. Rollhaus, Jr., Leslie
J. Jezuit, Daniel P. Gorey, Joan R. Riley and George D. Ebersole that were
entered into as of December 1, 1997 (the "Change of Control Agreements"). The
Employment Agreement and Change of Control Agreements are collectively referred
to as the "Agreements". The Board of Directors believes that the Agreements
assure fair treatment of the Executive Officers in relation to their careers
with the Company by assuring them of some financial security. The Agreements
also protect the stockholders by encouraging the Executive Officers to continue
their attention to their duties without distraction in a potentially disturbing
circumstance and neutralizing any bias they might have in evaluating proposals
for the acquisition of the Company.
Mr. Rollhaus' Employment Agreement, amended in June 1991, provides for an
initial three-year term with an automatic one-year extension of such term each
year on the Agreement's anniversary date unless the Board of Directors should
previously determine not to extend the term. The Employment Agreement was
automatically extended in June 1998 for one year. In addition to providing for
the payment of a base annual salary included in the above summary compensation
table and other employee fringe benefits, Mr. Rollhaus' Employment Agreement
provides for special separation pay and benefits in the event of termination of
his employment under certain circumstances. The Employment Agreement provides
that upon termination, Mr. Rollhaus will receive his base salary through the
termination date determined in accordance with such Agreement. If his employment
is terminated due to disability, his Employment Agreement provides for a
separation payment equal to two times the sum of the annual base salary and the
average of his yearly bonus payments over the preceding two years. If the
Company terminates Mr. Rollhaus' employment other than for cause or disability
prior to a change in control of the Company, the Employment Agreement provides
that the Company will pay Mr. Rollhaus a separation payment equal to twice his
base salary. Upon such termination, Mr. Rollhaus must be offered continued
participation in (or comparable replacement of) retirement and group insurance
benefits through the later of the expiration of the term of the Employment
Agreement or the date of termination. The Employment Agreement further provides
that if any excise tax is imposed pursuant to Section 4999 of the Internal
Revenue Code on any payments to be received by Mr. Rollhaus pursuant to the
Employment Agreement or otherwise (the "Total Payments"), any severance payments
will be reduced to the extent necessary so that no portion of the Total Payments
is subject to the excise tax.
The Change of Control Agreements provide if, within three (3) years after a
change of control of the Company, the employment of the executive is terminated
other than (i) by death or disability, (ii) by the Company or employing
subsidiary for cause, or (iii) by the executive's voluntary resignation not
constituting a constructive termination as defined in the Agreement, the Company
will pay the executive a separation payment equal to 300% of the sum of his base
salary and average yearly bonus payment for the last two years. The Agreements
define a "change of control" as a change in the stock ownership of a magnitude
which requires the filing of reports under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). For the purposes of the Agreements, a "change
of control" shall be deemed to have occurred if any of the following occur: (i)
any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act) is or becomes the beneficial owner of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities; (ii) if during any period of two consecutive years,
there is a change in the composition of the Board of Directors of the Company
such that 50% of the non-employee Board members have not been slated by the
Board; (iii) a consolidation or merger occurs and the Company is not the
surviving company or the Company sells all or substantially all of its assets;
or (iv) the Company is
8
<PAGE>
liquidated or dissolved. The term "constructive termination" is generally
defined by the Agreements to mean any unfavorable change in the executive's or
employee's position, duties, compensation or benefits and "cause" is generally
defined as willful conduct of an executive or employee demonstrably injurious to
the Company or employing subsidiary. The Agreements also contain provisions for
the payment of legal expenses incurred by the executives and the employees as a
result of any termination of employment after a change in control.
REPORT OF THE AUDIT/COMPENSATION
COMMITTEE ON EXECUTIVE COMPENSATION
The Audit/Compensation Committee (the "Compensation Committee" or
"Committee") of the Board of Directors of the Company, composed of three
independent, non-employee Directors (see page 12), is responsible for reviewing
the recommendations of the Chairman and Chief Executive Officer and the
President and Chief Operating Officer and determining the compensation and other
remuneration afforded the Officers of the Company, collectively referred to as
the "Executive Officers." Executive compensation determinations of the Committee
are reviewed and approved by the entire Board. Action regarding awards under the
1993 Long-Term Stock Ownership Incentive Plan (the "Plan") are made solely by
the Compensation Committee in compliance with Rule 16b-3 of the Securities
Exchange Act.
COMPENSATION PRINCIPLES AND POLICIES OF THE COMPANY
The Compensation Committee is charged with the responsibility to assure that
the Officers of the Company are compensated in accordance with the philosophy
and policies of the Company. This philosophy and its attributes historically are
calculated to grow the Company and enhance the value of its shares. Philip E.
Rollhaus, Jr., founder, Chairman of the Board and Chief Executive Officer, has
directed the management team through all 29 years of the Company's existence.
During fiscal 1998, the Board and management have implemented a restated
corporate goal consolidating and expanding the Company's highway and
transportation safety businesses.
The financial results for fiscal 1998, reflecting the first full fiscal year
of operations as a highway and transportation safety business, were impressive.
The Company achieved record sales and earnings from continuing operations for
the fiscal year, with sales increasing 24% and earnings more than doubling. The
Company's record performance reflected strong internal growth driven by the
demand for the Company's many products, including several new models. In
furtherance of the restated Company goal, the Company also completed two
strategic acquisitions which not only expanded its product lines, but also
provided the opportunity to enter new sectors of the highway safety market.
In addition to considering the Company's profitability for the year, the
Compensation Committee critically evaluates management's performance in dealing
with competition and economic issues, as well as performance in implementing the
Company's long-term strategies. Share value depends in large part upon such
performance. Accordingly, the attainment of strategic objectives and enhanced
long-term financial results are significant in the Committee's evaluation
process.
The Committee continues regularly to engage the services of an independent
compensation consultant to evaluate compensation levels and to advise it
regarding competitive influences and peer entities upon compensation policies.
The Company's compensation program includes base salary and the consideration of
annual bonus and stock option awards. All three components are material and
interrelated in determining the total compensation of executives. This program
provides incentives compatible with current and long-term management goals of
the Company and its competitiveness in the marketplace, while recognizing
individual performance. The ultimate objective of the program is the enhancement
of shareholder value. The Committee
9
<PAGE>
believes that an effective compensation policy requires that a significant
portion of each officer's compensation be at risk in the form of a bonus and
stock options. This has been accomplished. The Executive Officer group owns
approximately 477,692 shares of Company Common Stock, or an average of about
95,538 common shares per Executive Officer.
BASE SALARY AND ANNUAL BONUS
The annual review and adjustments, as appropriate, of each officer's base
salary takes into account the officer's performance as well as substantive
modifications affecting the officer's responsibilities. The review also
considers competitive opportunities for executives both within and without the
Company's current industry and its desire to retain and groom its executives for
greater duties and responsibilities.
All things considered, including the higher levels of revenue and earnings
through management's skill and dedication, as well as the introduction of new
products and acquisitions, the Committee recommended, and the Board approved,
reasonable cost-of-living adjustments to the executive salaries and cash bonuses
reflective of these enhancements. Fair executive bonuses place a significant
portion of total annual compensation at risk. Accordingly, Mr. Rollhaus' salary
was increased from $445,000 in fiscal 1998 to $465,000 in fiscal 1999 and he
received a cash bonus of $240,000.
For fiscal 1998, the Committee also recommended, and the Board approved, a
stock award at the market price of $14.10. The award recognized the work of four
executives relating to the Company's discontinued operations, including the
successful settlement of several legal issues, and the resulting benefits to the
Company. The Board felt a stock award, in lieu of a cash bonus, better aligned
our executives with the continuing task of improving earnings and, in turn,
shareholder value.
STOCK OPTIONS
As a corporate practice the Company utilizes stock options, granted pursuant
to the 1993 Long-Term Stock Ownership Incentive Plan, as one of the three
components of the Company's management compensation package. Stock options
universally are accepted as an incentive to increase the Company's value.
Options generally vest over a three-year period and are exercisable over a
specified period of time following the date of grant, which is typically five
years. Option recipients must be employed by the Company at the time of vesting
and at the time the options are exercised. The Company cannot attract and retain
highly talented and qualified management employees without granting stock
options. For the last three fiscal years, the Company has granted options to
employees to purchase an annual average of 186,000 shares at the market price on
the date of grant. In fiscal 1998, the Committee granted Mr. Rollhaus employee
options to purchase 50,000 shares of the Company's Common Stock at the fair
market value of such stock on the date of grant. This option award is a
discretionary assessment of his future role in contributing to the long-term
growth of the Company and as an incentive to insure his strong interest in
providing enhancement of stock value.
STOCK BASED RETIREMENT PLAN
The Company maintains a stock-based retirement plan (the "Retirement Plan"),
which is a component of its 1993 Long-Term Stock Ownership Incentive Plan, to
provide its executives with a competitive retirement program.
Under the Retirement Plan, which is in lieu of any supplemental executive
retirement program, the Compensation Committee makes annual awards of Company
stock to selected key executives. The share awards, together with a cash award
intended to cover the concomitant income tax burden, are calculated under
accepted actuarial principles as the number required to provide a targeted
competitive retirement benefit. The targeted benefit, however, will be
10
<PAGE>
achieved at retirement only if the value of the Company's stock grows at a
sustained compounded level established by the Board. Furthermore, in order to
receive each year's award, the executive must remain in the employ of the
Company through the end of the fiscal year in which it is awarded (except in the
case of the Officer's death, disability or termination of employment other than
for cause during that year), and he or she must have retained all shares
previously awarded under the Retirement Plan. The Compensation Committee
believes that the Retirement Plan mutually benefits the Company, its
stockholders and its most senior executives.
OTHER COMPENSATION
The Company has an Incentive Savings Plan (the "Plan") which offers all
employees (subject to certain eligibility requirements), including the named
Executive Officers, tax advantages pursuant to Section 401(k) of the Internal
Revenue Code. During fiscal year 1998, the Company made a matching contribution
to the Plan of $.50 on each dollar of the first 7% of compensation contributed
by the participant, subject to legal maximums imposed by the Internal Revenue
Code. Contributions are made by participants by means of a payroll deduction
program. The total aggregate amount of the Company's matching contribution for
the named Executive Officers is included in the Summary Compensation Table on
page 5.
The Company maintains an Exec-U-Care Medical Reimbursement Plan which
provides additional health and life insurance protection for certain Officers of
the Company and its subsidiaries, in addition to the group health and life
insurance policies provided to all employees. The participants in the
Exec-U-Care Plan include Messrs. Rollhaus, Jezuit, Ebersole, Gorey and Ms.
Riley. The total aggregate cost to the Company during fiscal year 1998 under the
Plan for those Executive Officers was less than $35,000.
LIMITATION ON DEDUCTIBILITY OF COMPENSATION
In 1993, the tax laws were amended by the addition of Section 162(m) of the
Internal Revenue Code. Effective for fiscal years beginning after 1993, that
Section limits the deductibility of compensation paid by a publicly-held company
to its chief executive officer and to the four other Officers who are most
highly compensated. Generally, amounts paid in excess of $1 million to a covered
executive, other than performance-based compensation, cannot be deducted. No
Executive Officer other than Mr. Rollhaus was affected by this limitation in
fiscal 1998.
AUDIT/COMPENSATION COMMITTEE
William G. Fowler, Chairman
Lawrence C. McQuade
Robert D. van Roijen, Jr.
11
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are William G. Fowler, who
serves as Chairman, Lawrence C. McQuade and Robert D. van Roijen, Jr.
COMMON STOCK PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG QUIXOTE CORPORATION, THE RUSSELL 2000 INDEX,
THE NASDAQ NON-FINANCIAL INDEX AND
THE S&P MANUFACTURING (DIVERSIFIED INDUSTRY) INDEX.
The following graph compares the five year cumulative total return of the
Company's Common Stock with the Russell 2000 Index, the Nasdaq Non-Financial
Index and the Standard & Poor's Manufacturing (Diversified Industry) Index
assuming the investment of $100 on June 30, 1993 and the reinvestment of
dividends. For fiscal 1998, The Company changed the industry index it uses for
comparison purposes from the S & P Manufacturing (Diversified Industry) Index to
the Nasdaq Non-Financial Index. This change reflects the Company's decision to
focus solely on the highway and transportation safety industry since the sale of
its disc manufacturing business in March 1997.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG QUIXOTE CORPORATION, THE RUSSELL 2000 INDEX
THE S&P MANUFACTURING (DIVERSIFIED) INDEX AND
THE NASDAQ NON-FINANCIAL INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
QUIXOTE CORPORATION RUSSELL 2000 S & P MANUFACTURING (DIVERSIFIED)
<S> <C> <C> <C>
6/93 $100.00 $100.00 $100.00
6/94 $153.58 $104.24 $111.70
6/95 $95.16 $125.23 $147.70
6/96 $52.93 $155.13 $188.45
6/97 $64.65 $180.61 $279.80
6/98 $101.49 $214.50 $301.66
<CAPTION>
NASDAQ NON-FINANCIAL
<S> <C>
6/93 $100.00
6/94 $97.54
6/95 $134.02
6/96 $170.17
6/97 $200.00
6/98 $262.27
</TABLE>
* $100 INVESTED ON 6/30/93 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JUNE 30.
12
<PAGE>
CERTAIN TRANSACTIONS AND BUSINESS RELATIONSHIPS
See "Employment Agreements and Termination Benefits" and the "Summary
Compensation Table" for a description of certain transactions and business
relationships involving management of the Company. In addition, James H.
DeVries, a Director of the Company and its former Executive Vice President and
General Counsel, has an arrangement to provide consulting services in connection
with certain litigation matters. Mr. DeVries received $90,680.00 in fiscal 1998
in connection with his services to the Company.
APPROVAL OF THE AMENDMENT
OF THE QUIXOTE CORPORATION
1993 LONG-TERM STOCK OWNERSHIP INCENTIVE PLAN
The Board of Directors has adopted, subject to approval of the stockholders,
certain amendments to the 1993 Long-Term Stock Ownership Incentive Plan (the
"Long-Term Plan"). The first amendment increases the aggregate number of shares
available for grant under the Long-Term Plan from 1,015,000 shares to 1,280,000
shares, an increase of 265,000 shares, in order to assure that an adequate
number of shares is available for grant during the remainder of the term of the
Long-Term Plan. There are currently 118,896 shares available for option grants
under the Long-Term Plan. The Long-Term Plan expires June 30, 2003, except that
options may not be granted after August 19, 2001. A second amendment to the
Long-Term Plan restricts the ability of the Audit/Compensation Committee to
reprice options for no more than ten percent (10%) of the outstanding options
granted under the Long-Term Plan. No other amendments are being made to the
Long-Term Plan.
The purpose of the Long-Term Plan is to advance the growth and prosperity of
the Company and its Subsidiaries by providing officers and key employees with
additional incentives. The Company's management believes that the Company's
future success and profitability will depend to a great extent on its ability to
continue to attract, retain and motivate highly qualified individuals and that
an effective compensation policy for these individuals includes not only a
competitive annual salary, but also long-term incentives linked to stockholder
return and Company performance. The Company believes an important role is played
by stock-based incentives in retaining the services of outstanding personnel and
in encouraging such employees to have greater personal financial investment and
stock ownership in the Company.
Because the granting of Options (as defined below) and other Awards (as
defined below) under the provisions of the amended Long-Term Plan will continue
to be entirely in the discretion of the Audit/Compensation Committee, it is not
possible to designate the employees to whom Awards will be granted under the
amended Long-Term Plan or the number of shares to be covered by such Awards. It
is expected that the aggregate number of persons eligible to participate under
the Long-Term Plan will not exceed 50. Grants of Awards under the Long-Term Plan
made during the year ended June 30, 1998 are shown in the table on page 7.
The following is a summary of the principal provisions of the Long-Term
Plan. Capitalized terms used in this summary which are not defined herein have
the meanings ascribed to them in the Long-Term Plan. A copy of the Long-Term
Plan will be available at the forthcoming Annual Meeting of Stockholders or in
advance of the meeting to any stockholder to whom this Proxy Statement is
furnished upon written or oral request directed to: Joan R. Riley, Secretary,
Quixote Corporation, One East Wacker Drive, Chicago, Illinois 60601; telephone
number (312) 467-6755.
GENERAL INFORMATION
The Long-Term Plan provides for the granting of stock options and retirement
awards (payable in cash and stock) (collectively, the "Awards"). Such Awards,
which will expire not more
13
<PAGE>
than 10 years after their respective Grant Dates, may be granted alone or in
conjunction with one or more other Awards.
Options may be granted to any employee (including officers) of the Company
or of any of its subsidiaries. Retirement Awards (as defined below) may be
granted only to key executives who have completed ten (10) years of continuous
service for the Company or its subsidiaries although the Audit/Compensation
Committee may, in its discretion, waive the ten (10) year service requirement
under appropriate circumstances.
SCOPE OF THE LONG-TERM PLAN
The Long-Term Plan provides that an aggregate of 1,015,000 shares of the
Company's Common Stock are available and reserved for delivery on account of
Awards and the exercise of Awards, with 665,000 shares of Common Stock available
and reserved for delivery on account of options and 350,000 shares of Common
Stock available and reserved for delivery on account of Retirement Stock Awards
(as defined below). If any Award expires or terminates without having been
exercised or distributed in full or is forfeited, the shares of Common Stock
associated with such expired or terminated Award shall become available for
other Awards. The amendment will add 265,000 shares of the Company's Common
Stock to the Long-Term Plan, with all of those shares of Common Stock reserved
and available for delivery on account of options.
Common Stock issued under the Long-Term Plan may be either newly issued
shares, shares purchased on the open market, treasury shares or any combination
thereof. In addition, certain benefits under the Long-Term Plan may be payable
in cash.
PLAN ADMINISTRATION
Except for certain duties and responsibilities expressly reserved by the
Board or delegated to another committee pursuant to the terms of the Long-Term
Plan, the Long-Term Plan will be administered by a committee of the Board
composed of not less than three directors who are not employees of the Company
(the "Committee"). The Committee under the Long-Term Plan is the
Audit/Compensation Committee, whose members are identified on page 12.
Among other things, the Committee has exclusive discretion (subject to the
provisions of the Long-Term Plan): to select the persons to whom, and the times
when, Awards are to be granted, as well as the type, size and terms of such
Awards; within certain limits, to modify the terms of any Award which has been
granted; to interpret the Long-Term Plan and prescribe rules and regulations
thereunder; to accelerate the exercisability of, and to waive the restrictions
and conditions applicable to, Awards; and, subject to certain restrictions, to
extend the time during which Awards may be exercised, but not beyond 10 years
after the Grant Date of an Award. The determinations of the Committee are
conclusive and final. No Committee member is liable for any action or
determination made in good faith.
The Long-Term Plan currently allows the Audit/Compensation Committee to
cancel, with the consent of a grantee, outstanding awards and to grant new
awards in substitution, thereby allowing the Audit/Compensation Committee to
reprice options. The amendment of the Long-Term Plan would restrict the ability
of the Audit/Compensation Committee to reprice options for no more than ten
percent (10%) of the outstanding options granted under the Long-Term Plan.
AWARDS UNDER THE LONG-TERM PLAN
STOCK OPTIONS. The Long-Term Plan provides both for incentive stock options
("ISOs") specifically tailored to the provisions of the Internal Revenue Code of
1986 (the "Code") and for options not qualifying as ISOs ("Non-Qualified
Options"), each of which may (but need not) be granted in conjunction with other
Awards.
14
<PAGE>
Pursuant to the Long-Term Plan, the Committee shall determine the exercise
price to be paid by an optionee (the "Option Price") for each share issued in
connection with an ISO or a Non-Qualified Option (collectively referred to as
"Options"). The Option Price cannot be less than 100% of the Current Market
Value of the Common Stock on the Grant Date. Payment of the Option Price may be
made in cash or through the exchange of Common Stock held by the optionee for at
least six months. The Committee may allow a grantee to use a Company loan to
fund the amounts needed for the Option Price.
The fair market value of ISOs granted under the Long-Term Plan and
exercisable for the first time by a grantee during a particular calendar year
shall not exceed, in the aggregate, $100,000. Such fair market value shall be
determined as of the date on which the ISOs are granted. Non-Qualified Options
are not subject to this restriction.
If an optionee ceases to be employed by the Company or any Subsidiary for
any reason other than his death, total disability or retirement, the optionee
may, at the discretion of the Committee, be granted the right to exercise any
Option at any time within thirty (30) days after such termination, to the extent
the right to exercise such option has accrued, such Option has not previously
been exercised and such Option has not expired; PROVIDED, HOWEVER, that if the
optionee's employment is terminated by the Company or any Subsidiary for cause,
fraud, breach of fiduciary duty, or other dishonesty, the optionee's rights to
exercise any option shall expire on the last day of his employment. If an
optionee retires and such optionee has been in the employ of the Company or a
Subsidiary continuously from the date such Option was granted until retirement,
the optionee may, within the three (3) month period after such retirement,
exercise such Option to the extent that such three month period is included in
the remainder of the applicable Option's term. If an optionee dies or becomes
totally disabled while employed by the Company or a Subsidiary and previously
has not fully exercised his or her Options, his or her Options may be exercised
to the extent that those Options had not previously been exercised, at any time
within one year after his death or disability (absent earlier expiration of the
Option) by the optionee or his legally appointed guardian, in the case of
disability, or in the case of an optionee's death, by the executors or
administrators of his or her estate or the person who acquires the Option
directly from the optionee by bequest or inheritance.
RETIREMENT AWARDS. Under the Long-Term Plan, the Committee may make awards
of Company Common Stock ("Retirement Stock Awards") and cash sufficient to pay
the federal, state and other taxes arising from such awards ("Retirement Cash
Awards") to provide a retirement benefit for senior executives of the Company
and its Subsidiaries. The Retirement Stock Awards and Retirement Cash Awards are
collectively referred to as "Retirement Awards".
Each Retirement Award is made pursuant to a written agreement between the
Company and the executive which provides for the award of a set aggregate amount
of Retirement Stock to be issued in at least five equal annual installments,
together with a Retirement Cash Award in an amount to be calculated annually in
accordance with a formula determined by the Committee and set forth in the
agreement. Dividends are paid only on Retirement Stock which has been issued and
delivered to an executive. In order to receive an annual issuance of a
Retirement Award, the executive must be employed by the Company or its
Subsidiaries on the last day of the Company's fiscal year in which such stock is
issued except in case of death, disability or termination of employment other
than for cause. The executive may not sell or transfer any Retirement Stock he
receives while he is employed by the Company or its Subsidiaries. The transfer
restrictions lapse on the earlier of the date (i) when the executive's
employment is terminated or (ii) when the executive reaches his normal
retirement age, regardless of whether he actually retires at that time.
15
<PAGE>
AMENDMENT AND TERMINATION
The Long-Term Plan terminates on the tenth anniversary of its effective
date, but Options may not be granted under the Long-Term Plan after August 19,
2001. The Board of Directors may from time to time, insofar as permitted by law,
suspend, revise or amend the Long-Term Plan in any respect whatsoever except
that, without the approval of the stockholders, no such revision or amendment
shall: (1) change the number of shares subject to the Long-Term Plan; (2) change
the designation of the class of employees eligible to receive Awards; (3)
decrease the price at which Options may be granted; (4) remove the
administration of the Long-Term Plan from the Committee; (5) render any
Committee member eligible to receive an Award under the Long-Term Plan while
serving on the Committee; (6) extend the period during which Awards may be
granted; or (7) amend the Long-Term Plan in any manner that will cause the
Options issued under it to fail to qualify as ISOs. The Board of Directors is
specifically directed to revise, modify or amend the Long-Term Plan, without the
approval of the stockholders, as may be necessary to satisfy the requirements of
the Internal Revenue Code, as amended, to assure that the Options granted
thereunder may be treated as ISOs. Termination of the Long-Term Plan will not
affect any Awards then outstanding.
OTHER TERMS AND CONDITIONS
For purposes of the Long-Term Plan, the "Current Market Price" of the
Company's Common Stock is the average of the daily closing prices for such
Common Stock for the thirty (30) business days preceding the referenced date.
Awards granted under the Long-Term Plan will be evidenced by written
agreements consistent with the Long-Term Plan in such form as the Committee may
prescribe. Neither the Long-Term Plan nor such agreements confer any right to
continued employment upon any grantee.
Awards (other than shares of Retirement Stock) are generally
non-transferable other than by will or the laws of descent and may be exercised,
during a grantee's lifetime, only by the grantee. Restrictions with respect to
Retirement Stock are described above.
Adjustments in the amount of Awards issuable under the Long-Term Plan and in
any Awards outstanding may be made in order to preserve the benefits or
potential benefits intended to be made available to participants, in the event
of merger, consolidation, reorganization, the sale of all or substantially all
of the assets of the Company, recapitalization, reclassification, stock splits,
stock dividends or similar events.
The holder of an Award will have no rights as a stockholder with respect to
any shares of Common Stock covered by such Award until the date the Common Stock
relating to such Award is issued and delivered to such holder.
VOTING INFORMATION FOR THE PROPOSAL
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present in person or represented by proxy and entitled to
vote at the Annual Meeting is required to approve the amendment to the Long-Term
Plan.
RECOMMENDATION
The Board believes that adoption of the amendment of the Long-Term Plan is
advisable both to increase the share authorization for stock-based plans and to
limit the ability of the Committee to reprice options for no more than ten
percent of the outstanding options granted under the Long-Term Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE LONG-TERM
PLAN.
16
<PAGE>
APPROVAL OF THE AMENDMENT
OF THE QUIXOTE CORPORATION
1991 DIRECTOR STOCK OPTION PLAN
The Board of Directors has adopted, subject to approval of the stockholders,
an amendment to the 1991 Director Stock Option Plan (the "Director Plan"). The
amendment increases the aggregate number of shares available for grant under the
Director Plan from 419,445 shares to 539,445 shares, an increase of 120,000
shares, to assure that an adequate number of shares is available for grant
during the remaining term of the Director Plan. There are currently 60,000
shares available for grant under the Director Plan. The Director Plan expires
August 19, 2001.
The purpose of the Director Plan is to provide the Company's Directors with
an opportunity to increase their equity ownership in the Company and thereby tie
their economic interests to other stockholders' interests. The Company's Board
of Directors and management believe that properly designed options for the
Company's Common Stock also provides a valuable inducement to qualified persons
to become and remain affiliated with the Company as Directors. The Company's
management believes that the Company's future success and profitability will
depend to a great extent on its ability to continue to attract and retain highly
qualified individuals as Directors.
Because the granting of options under the provisions of the amended Director
Plan will be entirely within the discretion of the Board of Directors or a
committee designated by it, it is not possible to designate the number of
options to be granted to individual Directors under the amended Director Plan.
It is expected that the number of optionees under the amended Director Plan will
not exceed six persons. In fiscal 1998, there was one grant to each Director of
options to purchase 10,000 shares of Common Stock at $8.34 per share.
The following is a summary of the principal provisions of the Director Plan.
Capitalized terms used in this summary which are not defined herein have the
meanings ascribed to them in the Director Plan. A copy of the Director Plan will
be available at the forthcoming Annual Meeting of Stockholders or in advance of
the meeting to any stockholder to whom this Proxy Statement is furnished upon
written or oral request directed to: Joan R. Riley, Secretary, Quixote
Corporation, One East Wacker Drive, Chicago, Illinois 60601; telephone number
(312) 467-6755.
GENERAL INFORMATION
Under the Director Plan, the Board of Directors is authorized to grant
options to Directors subject to limitations of the Plan, including the
limitation that no Director may be granted options for more than 90,000 shares.
The Director Plan provides that any option requires continued service as a
Director for at least one year from the date of grant as a condition of
exercise, and such options may thereafter be exercised as the Board of Directors
determines; provided, however, that Directors may exercise options in the event
of a change-in-control of the Company, notwithstanding the fact that he or she
has failed to serve as a Director for one year from the date of grant.
The purchase price of the shares covered by an option granted under the
Director Plan cannot be less than 100% of the current market price of the shares
at the date of grant. Current market price is deemed to be the average of the
daily closing prices of the Common Stock for the 30 consecutive business days
before the date of grant.
The Director Plan gives the Board the discretion to determine when options
may be exercised. Options granted under the Director Plan cannot have a term of
more than ten years. Only Directors who are also employees of the Company are
eligible to receive incentive stock options (ISOs) within the meaning of the
Internal Revenue Code under the Director Plan. See the discussion regarding ISOs
at page 14, "Awards Under the Long-Term Plan".
17
<PAGE>
There are currently six Directors eligible to participate in the Director
Plan. An optionee electing to exercise an option must, at the time of exercise,
pay the full price of the shares being purchased. Payment of the purchase price
may be made in cash or in the Company's Common Stock valued at fair market value
on the date of exercise. In the event of a change in control of the Company (as
defined in the Plan), the Director Plan currently gives each optionee the right,
within 30 days of such change in control, to exercise his options whether or not
the option is otherwise exercisable.
SCOPE OF THE DIRECTOR PLAN
The Director Plan provided that an aggregate of 419,445 shares of the
Company's Common Stock were available and reserved for delivery on account of
options granted pursuant to the Plan. If an option expires or terminates without
having been exercised, the shares of Common Stock associated with that option
shall become available for other option grants. The proposed amendment will add
120,000 shares of the Company's Common Stock to the Director Plan to be reserved
and available for delivery on the account of options.
PLAN ADMINISTRATION
The Plan shall be administered by a Committee appointed by the Board of
Directors of the Company which shall consist of all members of the Board of
Directors unless the Board names other individuals to serve on the Committee.
The Committee shall from time to time, at its discretion, recommend to the Board
of Directors with respect to option grants and proposed optionees.
Interpretation and construction of the provisions of the Plan or of any option
granted pursuant to it by the Committee are final unless otherwise determined by
the Board of Directors. No member of the Board of Directors or the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any option granted thereunder.
AMENDMENT AND TERMINATION OF THE PLAN
Options may not be granted under the Director Plan after August 19, 2001.
The Board of Directors may from time to time, insofar as permitted by law,
suspend, discontinue, revise or amend the Director Plan in any respect
whatsoever except that, without the approval of the stockholders, no such
revision or amendment shall; (1) change the number of shares subject to the
Director Plan; (2) change the designation of the individuals eligible to receive
options; (3) decrease the price at which options may be granted; (4) remove the
administration of the Director Plan from the Committee; or (5) extend the period
during which options may be granted. The Board of Directors is specifically
directed to revise, modify or amend the Director Plan, without the approval of
the stockholders, as may be necessary to satisfy the requirements of the
Internal Revenue Code, as amended, to assure that the Options granted thereunder
may be treated as ISOs. Termination of the Director Plan will not affect any
options then outstanding.
VOTING INFORMATION FOR THE PROPOSAL
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present in person or represented by proxy and entitled to
vote at the Annual Meeting is required to approve the amendment to the Director
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE DIRECTOR
PLAN.
18
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS
GRANTED UNDER THE LONG-TERM AND DIRECTOR PLANS
The following discussion is intended as a brief summary of the federal
income tax treatment of the Options granted under the Long-Term Plan and the
Director Plan (together, the "Plans"), under the laws and regulations in effect
as of the date of this proxy statement. Because this discussion does not
consider all income tax aspects of the Plans, optionees should consult their own
tax advisors as to the federal, state and local income tax consequences relating
to their particular situations.
The granting of a Non-Qualified Option authorized under the Plans will not
be a taxable event. Non-Qualified Options include options which do not qualify
as ISOs. When a Non-Qualified Option is exercised, the optionee generally will
be taxed on an amount of compensation income equal to the excess of the market
value of the option shares at the time of exercise over the amount paid for such
shares. However, under certain circumstances, the income of an optionee who
exercises a Non-Qualified Option and is subject to Section 16(b) of the
Securities Exchange Act of 1934 (the "1934 Act") may be measured on the basis of
the market value of the Option shares as of the date the sale of the option
shares at a profit is no longer subject to suit under Section 16(b) of the 1934
Act, unless the optionee makes an election under Section 83(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), within thirty (30) days of the
exercise of the Non-Qualified Option. Upon the sale or other disposition of
Non-Qualified Option shares, the difference between the proceeds received and
the sum of the option price plus the compensation income recognized as described
above will be capital gain or loss. While compensation income is subject to
federal income tax at a maximum rate of 39.6%, capital gains recognized by
individuals are now taxed at various rates following the recent enactment of the
Taxpayer Relief Act of 1997 (the "1997 Tax Act"); the taxation of capital gains
is discussed below. Capital losses will be deductible against capital gains, if
any, plus up to $3,000 of an individual's other income; individuals may carry
forward any unused capital losses indefinitely.
The Plans authorize the granting of ISOs to key employees of the Company.
ISOs are intended to qualify as "incentive stock options" as defined in Section
422 of the Code. Generally, the optionee recognizes no income on the grant or
the exercise of an ISO. If the shares acquired by the exercise of an ISO are
disposed more than two years from the Grant Date and more than one year from the
date of exercise, the optionee will recognize a capital gain or loss measured by
the difference between the sale proceeds and the option price. If the ISO shares
are sold before the end of the above described holding periods, however, the
optionee will recognize compensation income in an amount equal to the difference
between the lesser of the market value of the shares on the date of exercise or
the sale price of such shares and the Option Price, with the balance of any
remaining gain taxed as capital gain.
In the year of exercise of an ISO, an individual optionee must increase his
or her alternative minimum taxable income by an amount equal to the difference
between the market price of the Company Common Stock subject to the ISO on the
date of exercise and the option price for purposes of computing liability for
the alternative minimum tax. A taxpayer's alternative minimum taxable income is
subject to the alternative minimum tax, which can now be as high as 28% but is
payable only to the extent it exceeds the taxpayer's regular income tax.
Recently enacted federal tax legislation has revised the holding periods and
tax rates for capital gains. The date on which an asset is sold or otherwise
disposed will determine the applicable holding period and tax rate. While
"short-term" capital gains (which arise from the sale of capital assets held for
12 months or less) are taxed at regular income tax rates (which can be as high
as 39.6%), more favorable tax treatment is accorded to "long-term" capital
gains. Assets generally must be held for more than 12 months for long-term
capital gain rates to apply; for sales or exchanges after July 28, 1997, and
prior to January 1, 1998, the most favorable long-term capital gain rates will
apply only if the asset was held for more than 18 months. The 18 month holding
period has been eliminated for tax years ending after December 31, 1997.
19
<PAGE>
The maximum tax rate applicable to long-term capital gains from the sale or
exchange of capital assets, such as option shares acquired under the Plans is
20%. However, individuals in the 15% income tax bracket (e.g., for the 1998 tax
year, single filers with $25,350 or less of taxable income or married persons
filing jointly with taxable income of $42,350 or less) will pay tax at a maximum
rate of 10% on their long-term capital gains recognized after May 6, 1997. (If
an asset is sold after July 28, 1997, and prior to January 1, 1998, and was held
for more than 12 months but not more than 18 months, any capital gain from the
sale will be taxed at a maximum rate of 28%). The maximum rate on long-term
capital gains will be reduced to 18% (8% for individuals in the 15% income tax
bracket) for assets sold or exchanged after December 31, 2000, and held for more
than five years; however, the 18% rate will only apply to the disposition of
assets acquired after December 31, 2000, and for purposes of determining
eligibility for this lower rate, the holding period of option shares will begin
on the date that the option is granted. The lower tax rates provided by the 1997
Tax Act will also apply for purposes of the alternative minimum tax.
Optionees may, at the discretion of the Committee in the case of the
Long-Term Plan, or the Board in the case of the Director Plan, pay all or part
of the exercise price for their Options by delivering Company Common Stock
already owned by them. Based on a Revenue Ruling published by the Internal
Revenue Service in 1980, if shares of Company Common Stock already owned by an
optionee are used to pay the exercise price of a Non-Qualified Option, no gain
or loss will be recognized with respect to the disposition of the previously
owned shares. However, the tax basis of the shares delivered as payment will
carry over to the shares received upon the exercise of the Option, share for
share, to the extent the number of shares received equals the number of shares
delivered as payment. The optionee will recognize ordinary income equal to the
fair market value on the exchange date of the balance of shares received in the
exchange (the number of shares received in excess of the number of shares
delivered). The tax basis of these shares will be equal to the taxable income
recognized by the optionee in the exchange.
Under proposed Treasury Department Regulations, an optionee who exercises an
ISO by surrendering previously acquired Company Common Stock generally will not
recognize taxable gain or loss upon the exchange. The optionee's tax basis of
the shares delivered as payment will carry over to the equivalent number of
shares received and the tax basis in the remaining shares will be zero. All
shares received will be subject to the holding period restrictions applicable to
ISOs; upon the disposition of any such shares prior to the expiration of these
holding periods, the shares with the lowest tax basis will be deemed to be
disposed of first. If payment of the exercise price of an ISO is made with
Company Common Stock acquired by an earlier exercise of an ISO that has not been
held by the optionee for the applicable holding periods, the optionee will
recognize ordinary income to the same extent as if the surrendered stock had
been sold in a premature disposition of shares subject to an ISO, but will
realize no capital gain or loss in the exchange. However, the stock acquired by
this exercise of an ISO will qualify for favorable tax treatment.
The Company will be entitled to claim a tax deduction for the amount of
compensation income recognized by an optionee upon the exercise of a
Non-Qualified Option. No such deduction will be available to Company as the
result of the exercise of an ISO unless the ISO shares are sold or disposed
before the relevant holding periods expire, in which case the Company would be
allowed a tax deduction equal to the compensation income recognized by the
optionee.
Neither the Long-Term Plan nor the Director Plan is qualified under Section
401(a) of the Code or is subject to any provisions of the Employee Retirement
Income Security Act of 1974.
THE PRECEDING DISCUSSION DOES NOT COVER ALL POSSIBLE FEDERAL INCOME TAX
CONSEQUENCES, AND IS INTENDED ONLY AS A SUMMARY THEREOF. GRANTEES SHOULD CONSULT
THEIR OWN TAX ADVISORS WITH RESPECT TO FEDERAL AND STATE TAX CONSEQUENCES.
20
<PAGE>
APPROVAL OF AUDITORS
The Directors have recommended that the stockholders approve
PricewaterhouseCoopers L.L.P., a certified public accounting firm, as
independent auditors for the Company. A representative of PricewaterhouseCoopers
L.L.P. is expected to be present at the Annual Meeting and will have an
opportunity to make an independent statement if he or she desires to do so. The
representative is expected to be available to respond to appropriate questions.
The affirmative vote of the holders of a majority of the outstanding shares
of the Company's Common Stock represented at the meeting and entitled to vote is
necessary to approve PricewaterhouseCoopers L.L.P. as the Company's auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE APPROVING PRICEWATERHOUSECOOPERS
L.L.P. AS THE COMPANY'S AUDITORS.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The chart below sets forth, as of September 3, 1998, information to the best
of the Company's knowledge with respect to the persons who beneficially owned in
excess of five percent of the Company's Common Stock; the total number of shares
of the Company's Common Stock beneficially owned by each Director and named
Executive Officer; and the total number of shares of the Company's Common Stock
beneficially owned by the Directors and Executive Officers of the Company, as a
group.
<TABLE>
<CAPTION>
AMOUNT APPROXIMATE
BENEFICIALLY PERCENTAGE(%)
NAME OF BENEFICIAL OWNER OWNED (1) OF CLASS (1)
- ------------------------------------------------------------------------------------- ----------- ---------------
<S> <C> <C>
Ryback Management Corp.(2)........................................................... 822,000 10.4
FMR Corp.(3)......................................................................... 636,700 8.1
Brinson Partners, Inc.(4)............................................................ 611,600 7.7
Wisconsin State Investment Board(5).................................................. 506,100 6.4
Dimensional Fund Advisors(6)......................................................... 499,200 6.3
Philip E. Rollhaus, Jr.(7)........................................................... 511,234 6.3
Leslie J. Jezuit..................................................................... 125,911 1.6
Daniel P. Gorey...................................................................... 44,989 *
George D. Ebersole................................................................... 88,697 1.1
Joan R. Riley........................................................................ 31,767 *
James H. DeVries(7).................................................................. 203,213 2.6
William G. Fowler(8)................................................................. 148,632 1.9
Lawrence C. McQuade.................................................................. 43,500 *
Robert D. van Roijen, Jr............................................................. 32,500 *
Directors and Executive Officers as a group (9 persons including those individuals
named above)(7)(8)................................................................. 1,230,443 15.6
</TABLE>
- ------------------------
* Less than one percent (1%).
(1) The shares reported in the above table include shares of Common Stock which
can be acquired within 60 days of September 3, 1998, through the exercise of
options ("Option Shares") as follows: Mr. Rollhaus - 196,833 shares; Mr.
Jezuit - 88,149 shares; Mr. DeVries - 56,500 shares; Mr. Gorey - 17,000
shares; Mr. Ebersole - 3,333 shares; Ms. Riley - 19,591 shares; Mr. Fowler -
61,500 shares; Mr. McQuade - 41,500 shares; Mr. van Roijen - 26,500 shares;
and Directors and Executive Officers as a group - 510,906 shares. Each
individual's Option Shares are also included in the number of shares of the
Company issued and outstanding for purposes of calculating the percentage
ownership of each individual in accordance with the rules and regulations of
the Exchange Act. Certain of these persons also have options not exercisable
within 60 days of September 3, 1998, by which they can acquire
21
<PAGE>
the following additional shares of Common Stock: Mr. Rollhaus - 51,667
shares; Mr. Jezuit - 46,296 shares; Mr. Gorey - 25,000 shares; Mr. Ebersole
- 21,667 shares; Ms. Riley - 15,334 shares; Mr. DeVries - 10,000 shares; Mr.
Fowler - 10,000 shares; Mr. McQuade - 10,000 shares; Mr. van Roijen - 10,000
shares; and Directors and Executive Officers as a group - 199,964 shares.
These shares are not included in the above table or in the percentage
ownership calculations.
(2) Based upon information set forth in a Schedule 13F filing for the period
ending June 30, 1998. The listed shares were held in a fiduciary capacity by
Ryback Management Corporation and/or Lindner Investment Series Trust. The
address for Ryback Management Corporation is 7711 Carondelet Avenue, Box
16900, St. Louis, Missouri 63105.
(3) Based upon information set forth in a Schedule 13F dated June 30, 1998.
Fidelity Management & Research Company, a wholly-owned subsidiary of FMR
Corp., is the beneficial owner of the listed shares as a result of acting as
investment adviser to various investment companies. The address for FMR
Corp. is 82 Devonshire Street, Boston, Massachusetts 02109.
(4) Based upon information set forth in a Schedule 13F filing for the period
ending June 30, 1998. Shares owned by Brinson Trust Company, Brinson
Holdings, Inc., SBC Holding (USA), Inc. and Swiss Bank Corporation are
included in the figures set forth for Brinson Partners, Inc. The address for
Brinson Partners, Inc. is 209 South LaSalle, Chicago, Illinois 60604-1295.
(5) Based on information set forth in a Schedule 13G filing for the period
ending December 31, 1997. The address for the Wisconsin State Investment
Board is P.O. Box 7842, Madison, Wisconsin 53707.
(6) Based upon information set forth in a Schedule 13F filing for the period
ending June 30, 1998. Dimensional Fund Advisors Inc. ("Dimensional"), a
registered investment advisor, is deemed to have beneficial ownership of
499,200 shares of Quixote Corporation stock as of June 30, 1998, all of
which shares are held in portfolios of DFA Investment Dimensions Group Inc.,
a registered open-end investment company, or in series of the DFA Investment
Trust Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional Fund Advisors Inc. serves as
investment manager. Dimensional disclaims beneficial ownership of all such
shares. The address for Dimensional is 1299 Ocean Avenue, Santa Monica,
California 90401.
(7) Messrs. Rollhaus and DeVries may be deemed to be the beneficial owner of
1,000 and 5,492 shares of Common Stock, respectively, owned by their family
members. These shares are not included in the above table. Messrs. Rollhaus
and DeVries disclaim beneficial ownership of these shares.
(8) Mr. Fowler has a beneficial interest in 890 shares of Common Stock held by
his retirement plan. These shares are not included in the above table.
22
<PAGE>
MISCELLANEOUS
STOCKHOLDER PROPOSALS FOR THE ANNUAL MEETING TO BE HELD IN 1999
Under the rules and regulations of the Securities and Exchange Commission,
proposals of stockholders intended to be presented at the Annual Meeting to be
held in 1999 must be received by the Company on or before May 29, 1999, to be
considered for inclusion in the Company's proxy statement relative to that
meeting. The persons named in the Board's proxy for the 1998 Annual Meeting will
be entitled to exercise the discretionary voting authority conferred by such
proxy on any shareholder proposal which is not included in the Company's Proxy
Statement if the shareholder making such proposal does not give the Company
notice before August 17, 1999. Such proposals should be in writing and sent to
Ms. Joan R. Riley, Secretary - Quixote Corporation, One East Wacker Drive,
Chicago, IL 60601.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and Executive Officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Executive
Officers, Directors and greater than ten percent shareholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on review of the copies of such reports furnished to the
Company and written representations that no other reports were required during
fiscal year 1998, the Company believes that all Section 16(a) filing
requirements applicable to the Company's Officers and Directors and ten percent
shareholders were complied with by such persons.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
The Company will be pleased to make its Annual Report on Form 10-K, as filed
with the Securities and Exchange Commission, available without charge to
interested parties. Written requests for the report should be directed to Ms.
Joan R. Riley, Secretary - Quixote Corporation, One East Wacker Drive, Chicago,
IL 60601.
23
<PAGE>
SKU#0524-PS-98
<PAGE>
VOTE VIA TELEPHONE OR THE INTERNET - IT'S QUICK, EASY AND IMMEDIATE
Your telephone or Internet vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed, and returned your proxy
card. Please note all votes cast via the telephone or the Internet must be
cast prior to 5 p.m., November 17, 1998. If you wish to change your address
or notify the company that you plan to attend the meeting, please mark the
boxes below and return your proxy by mail.
TELEPHONE VOTING:
- - There is NO CHARGE for this call.
- - On a Touch Tone Telephone call TOLL FREE 1-888-807-7699 24 hours per day -
7 days a week.
- - You will be asked to enter the Control Number which is located above your
name and address below.
- -------------------------------------------------------------------------------
OPTION #1: To vote AS THE BOARD OF DIRECTORS RECOMMENDS, press 1.
- -------------------------------------------------------------------------------
Your vote will be confirmed and cast as you directed. END OF CALL.
- -------------------------------------------------------------------------------
OPTION #2: If you choose to vote ON EACH PROPOSAL SEPARATELY, press 2. You
will hear these instructions:
- -------------------------------------------------------------------------------
PROPOSAL 1: To vote FOR ALL nominees, press 1; to WITHHOLD YOUR VOTE FROM
ALL nominees, press 2,
To vote FOR EACH NOMINEE SEPARATELY, press 3; Please listen to
the instructions to cast your votes.
PROPOSAL 2-4: To vote FOR, press 1; to vote AGAINST, press 2; to ABSTAIN,
press 3.
Your vote will be confirmed and cast as you directed. END OF CALL.
INTERNET VOTING;
- - As with all Internet access, usage or server fees must be paid by the user.
Visit our internet voting site at http://www.equlserve.com/proxy/ and follow
the instructions on your screen. These instructions are similar to those
above for telephone voting.
- -------------------------------------------------------------------------------
If you vote via telephone or the Internet, it is not necessary to return your
proxy by mail. THANK YOU FOR VOTING.
- -------------------------------------------------------------------------------
DETACH HERE
- -------------------------------------------------------------------------------
/X/ Please mark votes as in this example.
1. Election of Directors.
NOMINEES: William G. Fowler and Robert D. van Roijen, Jr.
FOR WITHHELD
/ / / /
/ / _______________________________________
For both nominees except as noted above
2. Approving the Amendment of the 1993 FOR AGAINST ABSTAIN
Long-Term Stock Ownership Incentive / / / / / /
Plan.
3. Approving the amendment of the 1991 / / / / / /
Director Stock Option Plan.
4. Approving the selection of / / / / / /
PricewaterhouseCoopers LLP as
Independent auditors of the
Company.
5. Transaction of such other business as may properly come before the meeting
and any adjournments thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
MARK HERE IF YOU PLAN TO ATTEND THE MEETING / /
Please date and sign as name is imprinted hereon, including designation as
executor, trustee, etc. if applicable. A corporation must sign in its name
by the president or other authorized officers. All co-owners must sign.
Signature: ______________________________ Date:________________
Signature: ______________________________ Date:________________
<PAGE>
DETACH HERE
- -------------------------------------------------------------------------------
PROXY
QUIXOTE CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Philip E. Rollhaus, Jr. and Joan R. Riley
as proxies with full power of substitution and hereby directs them to vote
the stock of the undersigned at the Annual Meeting of Stockholders of Quixote
Corporation to be held in the Assembly Room at the Northern Trust Company,
50 South LaSalle Street, Chicago, Illinois, Wednesday, November 18, 1998, at
10:00 a.m. Central Standard Time, and at any adjournments thereof, as
indicated on the proposals set forth on the reverse side of this Proxy.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED, OR IF NO
DIRECTION IS INDICATED, IT WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS AND
"FOR" PROPOSALS 2,3, AND 4. Discretionary authority is conferred by the Proxy
to vote on all matters, other than those specified on the reverse side, which
may properly come before the meeting or any adjournment thereof.
PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
- ------------- -------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ------------- -------------
<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
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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
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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
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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.
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(h) RIGHTS AS A STOCKHOLDER
An optionee or a transferee of an option shall have no rights as a
stockholder with respect to any shares covered by his option until the date
of the issuance of a stock certificate to him for such shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for which the
record date is prior to the date such stock certificate is issued, except as
provided in Section 5(g) hereof.
(i) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS
Subject to the terms and conditions and within the limitations of
the Plan, the Committee, with the approval of the Board of Directors, may
modify, extend or renew outstanding options granted under the Plan, or accept
the surrender of outstanding options (to the extent not theretofore
exercised) and authorize the granting of new options in substitution therefor
(to the extent not theretofore exercised). The Board of Directors shall not,
however, modify any outstanding options so as to specify a lower price or
accept the surrender of outstanding options and authorize the granting of new
options in substitution therefor specifying a lower price. Notwithstanding
the foregoing however no modification of an option shall, without the consent
of the optionee, alter or impair any rights or obligations under any option
theretofore granted under the Plan.
(j) INVESTMENT PURPOSE
Each option under the Plan shall be granted on the condition that
the stock purchased shall be held for investment purposes, and not with a
view to resale or distribution except that in the event the stock subject to
such option is registered under the Securities Act of 1933, as amended, or in
the event a resale of such stock without such registration would otherwise be
permissible, such condition shall be inoperative if in the opinion of counsel
for the Corporation such condition is not required under the Securities Act
of 1933 or any other applicable law, regulation, or rule of any governmental
agency.
(k) OTHER PROVISIONS
The option agreements authorized under the Plan shall contain such
other provisions, including, without limitation, restrictions upon the
exercise of the option, as the Committee and the Board of Directors of the
Corporation shall deem advisable.
6. TERM OF PLAN
Options may be granted under the Plan from time to time within a period
of ten years from the date the Plan is adopted, or the date the Plan is
approved by the Stockholders, whichever is earlier.
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7. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
Directors or as members of the Committee, the members of the Committee shall
be indemnified by the Corporation against the reasonable expenses, including
attorneys' fees actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any option
granted thereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Corporation) or paid by them in satisfaction of a judgment
except in relation to matters as to which it shall be adjudged in such
action, suit or proceeding that such Committee member is liable for
negligence or misconduct in the performance of his duties; provided that
within sixty (60) days after institution of any such action, suit or
proceeding a Committee member shall in writing offer the Corporation the
opportunity at its own expense, to handle and defend the same.
8. AMENDMENT OF THE PLAN
Upon recommendation of the Committee, the Board of Directors of the
Corporation may, insofar as permitted by law, from time to time, with respect
to any shares at the time not subject to options, suspend or discontinue the
Plan or revise or amend it in any respect whatsoever except that without
approval of the stockholders, no such revision or amendment shall change the
number of shares subject to the Plan, change the designation of the
individuals eligible to receive options, decrease the price at which options
may be granted, remove the administration of the Plan from the Committee, or
extend the period during which options may be granted.
The Board of Directors of the Corporation shall, from time to time,
revise, modify, or amend the Plan, in part or in total, without approval of
the stockholders, as may be necessary to satisfy the requirements of the Code
such that certain stock options which are granted under the Plan may qualify
as "incentive stock options" as defined in Code Section 422A and any
amendments or revisions thereof.
9. APPLICATION OF FUNDS
The proceeds received by the Corporation from the sale of Common Stock
pursuant to options will be used for general corporate purposes.
10. NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation upon the optionee
to exercise such option.
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Date Plan was adopted by Board of Directors: August 19, 1991
Date Plan was approved by Stockholders: November 19, 1991
Date Plan was amended by Board of Directors: June 25, 1997
Date Plan was amended by Board of Directors: August 28, 1997
Date amended Plan was approved by Stockholders: November 19, 1997
Date Plan was amended by the Board of Directors: August 21, 1998
Date amended Plan was approved by Stockholders: _________, 1998
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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.
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(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.
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(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.
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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.
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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
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<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
