<PAGE>
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
-------------------------------------------------------
[x] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the period ended March 31, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
for the transition period from
------------ To ------------
-----------------------------------------
Commission file number 0-7903
I.R.S. Employer Identification Number 36-2675371
QUIXOTE CORPORATION
(a Delaware Corporation)
One East Wacker Drive
Chicago, Illinois 60601
Telephone: (312) 467-6755
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES XX NO
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 8,039,501 shares of the
Company's Common Stock ($.01-2/3 par value) were outstanding as of March 31,
1999.
1
<PAGE>
PART I
FINANCIAL INFORMATION
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended March 31,
----------------------------
1999 1998
---- ----
<S> <C> <C>
Net sales .................................. $ 49,212,000 $ 37,273,000
Cost of sales .............................. 27,400,000 21,135,000
------------ ------------
Gross profit ............................... 21,812,000 16,138,000
Operating expenses:
Selling & administrative ................. 14,327,000 10,959,000
Research & development ................... 1,186,000 1,119,000
------------ ------------
15,513,000 12,078,000
Operating profit ........................... 6,299,000 4,060,000
Other income (expense):
Interest income .......................... 76,000 484,000
Interest expense ......................... (723,000) (203,000)
Other .................................... 29,000 16,000
------------ ------------
(618,000) 297,000
------------ ------------
Earnings from continuing operations before
income taxes ............................. 5,681,000 4,357,000
Provision for income taxes ................. 1,988,000 1,307,000
------------ ------------
Earnings from continuing operations ........ 3,693,000 3,050,000
------------ ------------
Earnings (loss) from discontinued operations
(net of income taxes)..................... 240,000 (1,980,000)
------------ ------------
Net earnings ............................... $ 3,933,000 $ 1,070,000
------------ ------------
Per share data - basic:
Earnings from continuing operations ...... $ .46 $ .38
Earnings (loss) from discontinued
operations.............................. .03 (.25)
------------ ------------
Net earnings ............................. $ .49 $ .13
------------ ------------
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
2
<PAGE>
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Operations-Continued
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended March 31,
----------------------------
1999 1998
---- ----
<S> <C> <C>
Per share data - diluted:
Earnings from continuing operations ........... $ .45 $ .38
Earnings (loss) from discontinued operations .. .03 (.25)
---------- ----------
Net earnings .................................. $ .48 $ .13
---------- ----------
Shares used to compute earnings per share:
Basic ........................................ 7,962,584 7,971,514
---------- ---------
Diluted ...................................... 8,216,341 8,065,789
---------- ---------
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
3
<PAGE>
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------
1999 1998
---- ----
<S> <C> <C>
Net sales .................................. $18,347,000 $12,821,000
Cost of sales .............................. 10,098,000 7,436,000
------------ -----------
Gross profit ............................... 8,249,000 5,385,000
Operating expenses:
Selling & administrative ................. 5,746,000 3,824,000
Research & development ................... 456,000 389,000
------------ -----------
6,202,000 4,213,000
Operating profit ........................... 2,047,000 1,172,000
Other income (expense):
Interest income .......................... 10,000 84,000
Interest expense ......................... (343,000) (100,000)
Other .................................... 29,000 15,000
------------ -----------
(304,000) (1,000)
------------ -----------
Earnings from continuing operations
before income taxes ..................... 1,743,000 1,171,000
Provision for income taxes ................ 610,000 351,000
------------ -----------
Earnings from continuing operations ....... 1,133,000 820,000
------------ -----------
Earnings from discontinued operations
(net of income taxes).................... 240,000
------------ -----------
Net earnings .............................. $ 1,373,000 $ 820,000
------------ -----------
Per share data - basic:
Earnings from continuing operations $ .14 $ .10
Earnings from discontinued operations .03
------------ -----------
Net earnings............................. $ .17 $ .10
------------ -----------
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
4
<PAGE>
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Operations-Continued
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------
1999 1998
---- ----
<S> <C> <C>
Per share data - diluted:
Earnings from continuing operations .......... $ .14 $ .10
Earnings from discontinued operations ........ .03
----------- ------------
Net earnings ...... .......................... $ .17 $ .10
----------- ------------
Shares used to compute earnings per share:
Basic ........................................ 8,018,193 7,904,556
----------- -----------
Diluted ...................................... 8,238,973 7,998,831
----------- -----------
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
5
<PAGE>
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>
March 31, June 30,
----------------------------
ASSETS 1999 1998
- --------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ...................... $ 1,340,000 $ 3,927,000
Accounts receivable, net of allowances for
doubtful accounts of $475,000 at
March 31 and $565,000 at June 30 ............. 15,593,000 13,976,000
Refundable income taxes ........................ 1,132,000
Inventories:
Raw materials ................................ 4,726,000 3,046,000
Work in process .............................. 1,220,000 696,000
Finished goods ............................... 3,186,000 2,084,000
---------- ----------
9,132,000 5,826,000
---------- ----------
Deferred income tax assets ..................... 2,077,000 1,642,000
Assets of discontinued operations............... 1,181,000
Other current assets ........................... 481,000 350,000
---------- ----------
Total current assets ........................... 29,804,000 26,853,000
---------- ----------
Property, plant and equipment, at cost ........... 26,375,000 23,236,000
Less accumulated depreciation .................... (10,777,000) (9,754,000)
---------- ----------
15,598,000 13,482,000
---------- ----------
Intangible assets................................. 24,231,000 12,553,000
Other assets ..................................... 1,229,000 987,000
Assets of discontinued operations ................ 5,190,000
---------- ----------
$ 70,862,000 $ 59,065,000
========== ==========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
6
<PAGE>
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>
March 31, June 30,
---------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998
- ----------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Current portion of long-term debt ................ $ 550,000 $ 497,000
Accounts payable ................................. 1,872,000 1,681,000
Dividends payable ................................ 1,021,000
Accrued expenses ................................. 6,103,000 3,894,000
Income taxes payable.............................. 2,410,000
Liabilities of discontinued operations ........... 4,614,000
---------- ----------
Total current liabilities ........................ 10,935,000 11,707,000
---------- ----------
Deferred income tax liabilities .................... 795,000 795,000
Long-term debt, net of current portion.............. 14,908,000 7,677,000
Liabilities of discontinued operations.............. 1,247,000
Shareholders' equity:
Common stock ..................................... 151,000 148,000
Capital in excess of par value of stock .......... 32,665,000 31,396,000
Retained earnings ................................ 18,143,000 15,324,000
Treasury stock, at cost .......................... (7,982,000) (7,982,000)
---------- ----------
Total shareholders' equity ....................... 42,977,000 38,886,000
---------- ----------
$70,862,000 $59,065,000
=========== ===========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
7
<PAGE>
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended March 31,
-----------------------------
1999 1998
---- ----
<S> <C> <C>
Cash from operating activities:
Earnings from continuing operations............... $ 3,693,000 $ 3,050,000
Adjustments to reconcile earnings from continuing
operations to net cash provided by operating
activities:
Depreciation .................................... 1,320,000 1,140,000
Amortization..................................... 1,210,000 595,000
Provision for losses on accounts receivable...... (94,000) 4,000
Changes in operating assets and liabilities
(net of the effect of acquisitions):
Accounts receivable .......................... (865,000) (279,000)
Refundable income taxes ...................... 1,132,000 1,329,000
Inventories and other current assets.......... (2,635,000) (914,000)
Accounts payable and accrued expenses ......... 1,051,000 (1,409,000)
Income taxes payable ........................ 2,410,000 196,000
---------- ----------
Net cash provided by operating activities of
continuing operations........................... 7,222,000 3,712,000
Net cash provided by (used in) discontinued
operations ..................................... 1,542,000 (6,712,000)
---------- ----------
Net cash provided by (used in) operating
activities....................................... 8,764,000 (3,000,000)
---------- ----------
Investing activities:
Cash paid for acquired business (net of cash on
books)........................................ (13,701,000) (4,822,000)
Purchase of property, plant and equipment ...... (1,881,000) (1,114,000)
Investment in Transportation Management
Technologies, LLC............................. (500,000)
Other .......................................... (49,000) (457,000)
---------- ----------
Net cash used in investing activities............. (16,131,000) (6,393,000)
----------- ----------
Financing activities:
Borrowing on revolving line of credit............ 7,100,000
Payments on notes payable ...................... (797,000) (729,000)
Payment of semi-annual cash dividend ........... (2,135,000) (2,070,000)
Proceeds from exercise of common stock options . 612,000 245,000
Repurchase of common stock for the treasury .... (1,855,000)
---------- ----------
Net cash provided by (used in) financing
activities ..................................... 4,780,000 (4,409,000)
---------- ----------
Decrease in cash and cash equivalents............. (2,587,000) (13,802,000)
Cash and cash equivalents at beginning of period.. 3,927,000 18,463,000
--------- ----------
Cash and cash equivalents at end of period ....... $ 1,340,000 $ 4,661,000
--------- ----------
</TABLE>
Note: During the nine months ended March 31, 1999, the Company had net cash
refunds of $1,554,000 for income taxes and paid $742,000 for interest. During
the same period in the prior year, the Company had net cash refunds of
$217,000 for income taxes and paid $203,000 for interest.
See Notes to Consolidated Condensed Financial Statements.
8
<PAGE>
QUIXOTE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
1. The accompanying unaudited consolidated condensed financial statements
present information in accordance with generally accepted accounting
principles for interim financial information and applicable rules of
Regulation S-X. Accordingly, they do not include all information or footnotes
required by generally accepted accounting principles for complete financial
statements. Management believes the financial statements include all normal
recurring adjustments necessary for a fair presentation. Operating results
for the three and nine months ended March 31, 1999 do not necessarily reflect
the results that may be expected for the full year. For further information,
refer to the consolidated financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the year ended June 30, 1998.
2. The computation of basic and diluted earnings per share, as prescribed by
FASB 128, is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings per share of common stock:
Basic ...................... $ .17 $ .10 $ .49 $ .13
Diluted .................... $ .17 $ .10 $ .48 $ .13
Numerator:
- ----------
Net earnings available to
common shareholders-basic
and diluted: ................. $ 1,373,000 $ 820,000 $3,933,000 $1,070,000
========== ========== ========= =========
Denominator:
- ------------
Weighted average shares
outstanding-basic: ........... 8,018,193 7,904,556 7,962,584 7,971,514
Effect of dilutive securities
options ...................... 220,780 94,275 253,757 94,275
---------- ---------- --------- ---------
Weighted average shares
outstanding-diluted .......... 8,238,973 7,998,831 8,216,341 8,065,789
========== ========== ========= =========
</TABLE>
9
<PAGE>
QUIXOTE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited), continued
3. During the second quarter, the Company settled certain litigation
involving its formerly owned subsidiary, Disc Manufacturing, Inc. (DMI),
which it sold in April 1997. The litigation, initiated in 1995, includes a
lawsuit brought by Discovision Associates against DMI for infringement of
certain patents related to optical disc technology as well as a lawsuit
brought by DMI against Discovision Associates, Pioneer Electronic
Corporation, Pioneer Electronics (USA) Inc. and Pioneer Electronics Capital
Inc. for violations of the antitrust laws and acts of unfair competition. The
settlement involves a payment previously accrued in the financial statements
and, therefore, there will be no additional charge to the Company's earnings
related to this matter. In a separate patent infringement lawsuit brought
against DMI by Thomson S.A., the U.S. Court of Appeals, on January 25, 1999,
affirmed the District Court's decision to sustain the jury verdict in favor
of DMI.
4. On December 9, 1998, the Company and its wholly-owned subsidiary, TranSafe
Corporation, acquired Nu-Metrics, Inc., a Uniontown, Pennsylvania based
developer and manufacturer of traffic sensing and distance measuring devices.
This transaction was accounted for as a purchase and was effective as of
December 1, 1998. The purchase price was $13,701,000 which was paid in cash.
When acquired, Nu-Metrics had long-term debt of approximately $981,000.
Goodwill recorded in the transaction of approximately $12,500,000 will be
amortized over a 20 year life.
The following unaudited proforma summary presents the consolidated results of
operations as if the acquisition of Nu-Metrics had occurred at the beginning
of the period presented below:
<TABLE>
<CAPTION>
Nine Months Ended March 31,
-------------------------------
1999 1998
---- ----
<S> <C> <C>
Net sales ...................................... $ 51,509,000 $ 41,550,000
------------ ----------
Net earnings.................................... $ 3,666,000 $ 1,126,000
------------ ----------
Net earnings per diluted share.................. $ .45 $ .14
------------ ----------
</TABLE>
5. During the second quarter the Company and its wholly-owned subsidiary,
TranSafe Corporation, entered into a joint venture agreement to market
pavement inspection and management systems and other high technology products
and services in the United States. The joint venture is with G.I.E.
Technologies, Inc., based in Montreal, Canada, and eight independent
distributors of the Company's highway products. TranSafe is required to
invest up to $1,000,000 in $250,000 quarterly installments for an 18%
interest in Transportation Management Technologies, L.L.C., the company
formed to market the products and services. This investment is being
accounted for under the equity method of accounting.
6. On March 26, 1999, DMI assigned all of its rights to certain real property
and a building, located in Huntsville, Alabama to Cinram, Inc. upon Cinram's
exercise of its option to purchase for the pre-agreed purchase price of
$6,947,000, less approximately $238,000 for roof repairs agreed to by both
parties.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CURRENT YEAR-TO-DATE VERSUS PRIOR YEAR-TO-DATE
- ----------------------------------------------
The Company's sales for the first nine months of fiscal 1999 increased 32% to
$49,212,000 from $37,273,000 for the first nine months of fiscal 1998 due to
both internal sales growth as well as growth from three acquisitions the
Company completed during fiscal 1998 and 1999. Internal sales increased 18%
resulting from demand for Energy Absorption System, Inc.'s newer crash
cushion products. Energy Absorption's permanent line of crash cushion
products increased 36% due to strong sales of the QuadGuard -Registered
Trademark- family of crash cushions including the newer wide and low
maintenance versions of this product line. The Company also experienced sales
increases in its truck-mounted attenuator (TMA) product line, including the
Alpha 100k TMA -TM-. Parts sales and sales of Safe-Hit Corporation's highway
delineators also increased during the period. Roadway Safety Service, Inc.,
acquired in October 1997, increased sales $2,317,000 to $4,917,000 for the
nine month period. Highway Information Systems, Inc., acquired April 1, 1998,
contributed sales of $1,696,000 for the period. Nu-Metrics, Inc., acquired
December 1, 1998, contributed sales of $1,801,000 for the four month period
as part of the Company. Nu-Metrics is a leading manufacturer of electronic
measuring and sensing devices for highway safety and traffic monitoring.
Somewhat offsetting these sales increases, sales of the Energite-Registered
Trademark- barrel product line and Triton Barrier-Registered Trademark-
declined during the period. Spin-Cast Plastics, Inc.'s custom molded products
also declined during the period.
The gross profit margin in the first nine months of the current year
increased to 44.3% from 43.3% in the same period last year. Energy Absorption
and its subsidiaries had an increase in gross profit margin due principally
to efficiencies related to the increase in sales. Roadway Safety Service also
had an increase in its gross margin for the nine month period due to both
lower vendor costs as well as the increase in sales volume. Highway
Information Systems and Nu-Metrics, acquisitions not part of the Company in
last year's nine month period, contributed to the increase in gross margin as
their gross margins are higher than the Company's historical gross profit
margin.
Selling and administrative expenses in the first nine months of the current
year increased 31% to $14,327,000 from $10,959,000 in the first nine months
last year. This was due principally to the fiscal 1998 and 1999 acquisitions
of Roadway Safety Service, Highway Information Systems and Nu-Metrics which
added a combined $1,756,000 in selling and administrative expenses for the
nine month period. Corporate level administrative expenses increased $867,000
due principally to increased salaries and benefits, investor relations and
professional services expenses. Energy Absorption and its subsidiaries had a
$745,000 increase in selling and administrative expenses which was due to their
increased level of sales.
Research and development expenses in the first nine months of the current
year increased slightly to $1,186,000 compared to $1,119,000 in the same
period last year. During the current year, the Company continued with its
testing of a wider version of the Company's REACT 350-Registered Trademark-
crash cushion as well as a snowplowable reflective road marker and other
developmental crash cushion products.
Interest income in the first nine months of the current year was $76,000
compared to $484,000 in the same period last year. Interest income declined
as a result of a decline in the Company's cash as it has been deployed for
the acquisition of several business's during the past year. Interest expense
in the first nine months of the current year was $723,000 compared to
$203,000 in the same period last year. Current period interest expense
relates to seller financing in connection with the acquisition of Roadway
Safety Service and bank debt incurred in connection with the acquisitions of
Highway Information Systems and Nu-Metrics.
The Company's effective income tax rate for the first nine months of the
current year was 35% compared to an effective income tax rate of 30% in the
same period last year due to last year's realization of certain tax benefits
along with the settlement of certain tax contingencies. The Company believes
its effective income tax rate for the current year will be approximately 35%.
11
<PAGE>
CURRENT YEAR QUARTER VERSUS PRIOR YEAR QUARTER
- ----------------------------------------------
The Company's sales for the third quarter of fiscal 1999 increased 43% to
$18,347,000 from $12,821,000 in the third quarter of fiscal 1998 due to both
internal sales growth as well as growth from acquisitions the Company
completed during fiscal 1998 and 1999. Internal sales increased 29% resulting
from demand for Energy Absorption's newer crash cushion products. Energy
Absorption's permanent line of crash cushion products increased principally
due to strong unit sales of the QuadGuard family of crash cushions including
the newer wide and low maintenance versions of this product line. The Company
also experienced sales increases in its TMA and Energite barrel product line.
Parts sales and sales of Safe-Hit's highway delineators also increased during
the quarter. Highway Information Systems contributed sales of $440,000 for
the quarter. Nu-Metrics contributed sales of $1,314,000 for the quarter.
Roadway Safety Service's sales for the current quarter increased 39% to
$1,753,000 from $1,261,000 in the same quarter last year. Somewhat offsetting
these sales increases, sales of the Triton Barrier-Registered Trademark-
declined during the quarter. Spin-Cast Plastics' custom molded products also
declined during the quarter.
The gross profit margin in the third quarter of fiscal 1999 increased to
45.0% from 42.0% in the third quarter last year. Energy Absorption Systems
and its subsidiaries had an increase in its gross profit margin due
principally to efficiencies related to the increase in sales. Roadway Safety
Service also had an increase in its gross margin for the quarter due to both
lower vendor costs as well as the increase in sales volume. Highway
Information Systems and Nu-Metrics, acquisitions not part of the Company
in last year's third quarter, contributed to the increase in gross margin as
their gross margins are higher than the Company's historical gross profit
margin.
Selling and administrative expenses in the third quarter of the current year
increased 50% to $5,746,000 from $3,824,000 in the third quarter last year.
This was due principally to the acquisitions of Highway Information Systems
and Nu-Metrics which added a combined increase of $786,000 in selling and
administrative expenses. Energy Absorption and its subsidiaries had a
$468,000 increase in selling and administrative expenses which was due
principally to the increased level of sales. Roadway Safety Service had
increased selling and administrative expenses of $66,000 also due to
increased sales. Corporate level administrative expenses increased $602,000
due principally to increased salaries and benefits, investor relations and
professional services expenses.
Research and development expenses in the third quarter of the current year
increased 17% to $456,000 from $389,000 in the same quarter last year. During
the current quarter, the Company continued with the development and testing of
advanced new crash cushion products as well as a snowplowable road marker and
other developmental projects.
Interest income in the third quarter of the current year was $10,000 compared
to $84,000 in the third quarter last year. Interest income declined as a
result of a decline in the Company's cash as it has been deployed through the
Company's acquisitions. Interest expense in the third quarter of the current
year was $343,000 compared to $100,000 in the third quarter last year
resulting from additional bank debt incurred in connection with the
acquisitions of Highway Information Systems and Nu-Metrics.
LIQUIDITY AND CAPITAL RESOURCES
- ---------------------------------------------------------
The Company had cash and cash equivalents of $1,340,000 and access to
additional funds of $29,400,000 under its bank arrangements as of March 31,
1999. Continuing operating activities were a source of cash for the Company
for the first nine months of fiscal 1999 providing $7,222,000. Discontinued
operations were also a source of cash generating $1,542,000 as a result of
the sale of a building for $6,709,000 related to a business previously sold.
Cash was used by discontinued operations for payments for a legal settlement
related to the Company's dispute with the Recording Industry Association of
America and for legal expenses and lease commitments. This resulted in net
cash provided by all operating activities of $8,764,000.
Investing activities used cash of $16,131,000 during the current nine month
period of which $13,701,000 was used for the purchase of Nu-Metrics. In
addition, the Company used cash of $1,881,000 for the purchase of equipment
and used additional
12
<PAGE>
cash of $500,000 for an equity investment in Transportation Management
Technologies, L.L.C. as discussed in the notes to the financial statements.
Financing activities provided cash of $4,780,000 during the current nine
month period. The Company received cash of $7,100,000 from borrowings under
its revolving credit facility to fund, in part, the purchase of Nu-Metrics.
The payment of the Company's semi-annual cash dividend used cash of
$2,135,000. The Company also used cash of $797,000 for the payment of notes
due in connection with the acquisition of Roadway Safety Service and for
payments on long-term debt at Nu-Metrics. Offsetting these cash payments
somewhat, the Company received cash of $612,000 for the exercise of common
stock options.
For fiscal 1999, the Company anticipates needing less than $2,500,000 in cash
for capital expenditures. The Company may also need additional cash as it
considers acquiring businesses that complement its existing operations. Also,
the Company will require additional investments in working capital to
maintain growth. In addition, the Company may also need funds to repurchase
its own stock from time to time. These expenditures will be financed either
through the Company's invested cash, cash generated from its operations, or
from borrowings available under the Company's revolving credit facility. The
Company believes its existing cash, cash generated from operations and funds
available under its existing credit facility, are sufficient for all planned
operating and capital requirements.
YEAR 2000 ISSUE
- ---------------------
During the current year, the Company continued making an assessment of its
Year 2000 (Y2K) issues relative to its own information technology and
non-information technology as well as assessing the state of Y2K readiness of
its vendors and customers. The Company's Y2K task force, consisting of senior
management, continued to assess the Company's state of readiness and to
implement an action plan to correct Y2K deficiencies. The Company determined
that its principal software programs for financial, order entry and
manufacturing planning were not Y2K compliant and has upgraded these programs
to more advanced versions that are Y2K compliant. The Company has begun
assessing the state of Y2K readiness for Nu-Metrics, Inc., its recent
acquisition, during the Company's third fiscal quarter.
In addition, the Company continued to evaluate the impact of the Y2K issue on
its non-information technology systems, such as manufacturing machinery,
equipment, computer-aided design and test equipment as well as products with
date sensitive software and embedded microprocessors. The Company completed
the assessment phase of its non-information technology systems during its
second fiscal quarter and has begun taking remedial action in the Company's
third fiscal quarter.
The Company has initiated communications with significant suppliers,
customers and other relevant third parties to identify and minimize
disruptions to the Company's operations related to Y2K issues. However, there
can be no certainty that the systems and products of other companies on which
the Company relies will not have a material adverse effect on the Company's
operations. In addition, much of the Company's revenues are derived from
various federal and state agencies which may not be Y2K compliant. The
Company expects to complete this assessment phase during fiscal 1999.
The Company anticipates completing substantially all of its Y2K projects
during fiscal 1999. In the event the Company falls short of these milestones,
additional internal resources will be focused on completing these projects or
developing contingency plans. The estimated cost to correct the Company's Y2K
deficiencies is approximately $300,000. This estimate includes $200,000 in
costs to upgrade its information technology systems with the balance of the
estimate for any changes or modifications needed for non-information
technology systems. The Company estimates it has spent approximately $250,000
to date. While the Company believes that its non-information technology and
vendor and customer issues are of a lower risk, until the Company's
assessment of these risks is complete there can be no assurance that these
issues will not have a material effect on the Company's operations. All
estimates of Y2K related costs are based on numerous assumptions and there is
no certainty that estimates will be achieved and actual costs could be
materially greater than anticipated.
In the event the Company is unable to take corrective measures related to its
Y2K issues, the Company's ultimate contingency plan is to outsource critical
computer applications where feasible, and in addition, create manual systems
until such
13
<PAGE>
corrective measures are taken. Please refer to the Company's disclosure in
its Form 10-K for the period ended June 30, 1998 for additional information.
FORWARD LOOKING STATEMENTS
- --------------------------
Various statements made within the Management's Discussion and Analysis of
Financial Condition and Results of Operations and elsewhere in this Quarterly
Report on Form 10-Q constitute "forward looking statements" for purposes of
the Securities and Exchange Commission's "safe harbor" provisions under the
Private Securities Litigation Reform Act of 1995 and Rule 3b-6 under the
Securities Exchange Act of 1934, as amended. Investors are cautioned that all
forward looking statements involve risks and uncertainties, including those
detailed in the Company's filings with the Securities and Exchange
Commission. There can be no assurance that actual results will not differ
from the Company's expectations. Factors which could cause materially
different results include, among others, uncertainties related to the
introduction of the Company's products and services; the successful
completion and integration of acquisitions; any adverse effects due to the
Y2K issue; and competitive and general economic conditions.
14
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. Legal Proceedings
- --------------------------
1. Thomson S.A. v. Time Warner et al., Case No. 94-83, U.S. District Court for
the District of Delaware. On April 26, 1999, Thomson S.A. filed with the U.S.
Supreme Court a petition for a Writ of Certiorari. No decision to hear this
case has been made by the Supreme Court as of this time. See the Company's
Form 10-K for the period ended June 30, 1998, Item 3, for additional
information about this litigation.
2. Repetitive Stress Injury Litigation. The Company has agreed to settle for a
nominal amount ten of the remaining eleven repetitive stress injury cases and
has been advised that the remaining case will be dismissed. See the Company's
Form 10-K for the period ended June 30, 1998, Item 3, for additional
information.
ITEM 2. Changes in Securities
------------------------------
None.
ITEM 3. Default upon Senior securities
---------------------------------------
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
None.
ITEM 5. Other Information
--------------------------
None.
ITEM 6. Exhibits and reports on Form 8-K
-----------------------------------------
(a) None
(b) Exhibits
10 (a) Second Amendment and Waiver to Amended and Restated Loan
Agreement dated as of March 15, 1999 among Quixote Corporation and
certain subsidiaries, the Northern Trust Company, LaSalle National
Bank and American National Bank and Trust Company, and Amended and
Restated Revolving Credit Notes, filed herewith.
10 (b) Partial Assignment of Lease and Equity in Project dated
March 26, 1999 by and between Disc Manufacturing Inc. (n/k/a Quixote
Laser Corporation), Cinram, Inc. and the Industrial Development Board
of the City of Huntsville, and Termination of Sublease dated March 26,
1999 by and between Disc Manufacturing, Inc. (n/k/a Quixote Laser
Corporation) and Cinram, Inc., filed herewith.
15
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999 to be signed on its behalf by the undersigned thereunto
duly authorized.
QUIXOTE CORPORATION
DATED: May 12, 1999 /s/ Daniel P. Gorey
------------ -------------------
DANIEL P. GOREY
Chief Financial Officer
Vice President and Treasurer
(Chief Financial & Accounting
Officer)
16
<PAGE>
SECOND AMENDMENT AND WAIVER TO
AMENDED AND RESTATED LOAN AGREEMENT
THIS SECOND AMENDMENT AND WAIVER TO AMENDED AND RESTATED LOAN AGREEMENT
(this "Second Amendment"), dated as of March 15, 1999, is among QUIXOTE
CORPORATION, a Delaware corporation ("Quixote"), ENERGY ABSORPTION SYSTEMS,
INC., a Delaware corporation (f/k/a Quixote Steno Corporation and successor
by merger to Energy Absorption Systems, Inc., a Delaware corporation and
Litigation Communications, Inc. a Delaware corporation) ("EAS"), QUIXOTE
LASER CORPORATION (f/k/a Disc Manufacturing, Inc.), a Delaware corporation
("DMI"), TRANSAFE CORPORATION, a Delaware corporation ("TranSafe"),
SPIN-CAST PLASTICS, INC., an Indiana corporation ("Spin-Cast"), E-TECH
TESTING SERVICES, INC., a Delaware corporation ("E-Tech"), ROADWAY SAFETY
SERVICE, INC., a Delaware corporation ("Roadway"), SAFE-HIT CORPORATION, a
Nevada corporation ("Safe-Hit"), HIGHWAY INFORMATION SYSTEMS, INC., a
Delaware corporation ("HIS"), NU-METRICS, INC., a Pennsylvania corporation
("Nu-Metrics"), certain lenders signatory hereto ("Lenders"), and THE
NORTHERN TRUST COMPANY, an Illinois banking corporation, as agent for the
Lenders hereunder ("Agent"). Quixote, EAS, DMI, TranSafe, Spin-Cast, E-Tech,
Roadway, Safe-Hit, HIS and Nu-Metrics are individually and collectively
referred to herein as "Borrower." This Second Amendment shall amend that
certain Amended and Restated Loan Agreement dated as of June 30, 1997 among
the Borrower, the Lenders and the Agent, as previously amended by that
certain First Amendment to Revolving Credit Agreement dated as of May 31,
1998 (as amended, restated, modified or supplemented, the "Loan Agreement").
WITNESSETH:
WHEREAS, the Borrower, the Lenders and the Agent are parties or,
pursuant to the terms of this Second Amendment, will become parties to the
Loan Agreement;
WHEREAS, on or about April 1, 1998, Quixote acquired 100% of the assets
of HIS, and on or about December 10, 1998, Quixote acquired 100% of the
outstanding capital stock of Nu-Metrics;
WHEREAS, HIS and Nu-Metrics are wholly-owned Subsidiaries of Quixote and
Quixote desires to make each a Borrower under the Loan Agreement;
WHEREAS, Litigation Communications, Inc., a Delaware corporation and a
Borrower under the Loan Agreement ("LCI"), merged into Quixote Steno
Corporation, a Delaware corporation and also a Borrower under the Loan
Agreement, on September 28, 1998 pursuant to the terms of that certain
Agreement and Plan of Merger dated September 28, 1998 between Quixote Steno
Corporation, LCI and other subsidiaries of Quixote Steno Corporation;
<PAGE>
WHEREAS, Energy Absorption Systems, Inc., a Delaware corporation and
Borrower under the Loan Agreement merged into Quixote Steno Corporation on
September 30, 1998 pursuant to the terms of that certain Agreement and Plan
of Merger dated September 28, 1998 between such parties;
WHEREAS, pursuant to such Agreement and Plan of Merger between Energy
Absorption Systems, Inc. and Quixote Steno Corporation, Quixote Steno
Corporation remained as the surviving corporation, changed its name to Energy
Absorption Systems, Inc. and assumed all debts and obligations of the former
Energy Absorption Systems, Inc. under such name, including all of its
obligations as a Borrower under the Loan Agreement;
WHEREAS, Legal Technologies, Inc., a Delaware corporation ("LTI") was a
Borrower under the Loan Agreement but dissolved and ceased its corporate
existence on October 5, 1998;
WHEREAS, Quixote LSI Corporation (f/k/a Litigation Services, Inc.), a
Delaware corporation ("LSI") was a Borrower under the Loan Agreement but
dissolved and ceased its corporate existence on December 9, 1998;
WHEREAS, the Borrower has requested that the Agent and the Lenders waive
certain conditions set forth in Section 7.2 of the Loan Agreement, as more
specifically described herein, related to TranSafe's agreement to invest an
aggregate amount of $1,000,000 and acquire an 18.56% interest in
Transportation Management Technologies, L.L.C., a Delaware limited liability
company ("TMT") pursuant to the terms of that certain Limited Liability
Company Operating Agreement of TMT dated as of October 1, 1998; and
WHEREAS, the Borrower has, among other amendments, requested an
extension of one year on the maturity dates for the Revolving Credit Loans,
the Conversion Date, and the Term Loans, and the Lenders and the Agent have
agreed to amend the Loan Agreement in this and other respects as set forth
herein;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. AMENDMENTS TO THE LOAN AGREEMENT.
1.1 Terms Used. Terms used but not otherwise defined herein are used with
the same meanings as provided therefor in the Loan Agreement.
1.2 Section 1. Section 1 of the Loan Agreement is hereby amended as of the
date hereof by:
(a) deleting the definition of "Applicable Margin" in its entirety and
replacing it with the following:
"Applicable Margin" shall mean the percentage as set forth below then applicable
to, respectively, the Revolving Credit Loan, the Term Loan and the
<PAGE>
Unused Revolving Credit Loan Charge as determined by using the following
performance based grid after determining which of the pricing levels (being
Pricing Level I through Pricing Level IV) specified thereon is then in effect:
<TABLE>
<CAPTION>
Net Consolidated Pricing Level Pricing Level Pricing Level Pricing Level
<S> <C> <C> <C> <C>
Funded Debt to I II III IV
EBITDA < 1.50 x > /=1.50 > /=2.25 > /=3.0
Revolving Credit
Loan 1.0 1.25 1.50 1.625
Term Loan 1.125 1.375 1.625 1.750
Unused Revolving
Credit Loan Charge .15 .15 .25 .25
</TABLE>
For the purposes of the foregoing, (a) prior to September 30, 1998, the
Applicable Margin shall be determined in accordance with Pricing Level I, and
(b) from and after such date, the Applicable Margin shall be determined at
any time by reference to the Net Consolidated Funded Debt to EBITDA Ratio and
any change in the Applicable Margin based on a change in such ratio during
any Fiscal Quarter shall be effective for all purposes on the first day of
the Fiscal Quarter following the last day of the Fiscal Quarter in which such
change occurred as shown in a Compliance Certificate delivered to the Agent
and the Lenders pursuant to Section 5.1(c), which Compliance Certificate
shall set forth the information and make the certifications required in the
form of Exhibit E, including without limitation the detailed computations of
the compliance by the Borrower with the covenants contained in Section 6.3.
Notwithstanding the foregoing, no reduction in the Applicable Margin shall be
effective if a Default or Event of Default shall have occurred and be
continuing. If the Borrower shall at any time fail to timely provide the
Agent and the Lenders with a Compliance Certificate as required pursuant to
Section 5.1, the next higher Pricing Level from that then in effect (but not
higher than Pricing Level IV) shall apply until such Compliance Certificate
is delivered.";
(b) deleting the references to the dates "October 31, 2000" and "October
31, 2004" in the definition of "Commitment Termination Date" and replacing
them with the dates "October 31, 2001" and "October 31, 2005" respectively;
(c) deleting the reference to the date "November 1, 2000" in the
definition of "Conversion Date" and replacing it with the date "November 1,
2001";
(d) deleting the definition of "EBITDA" in its entirety and replacing it
with the following in place thereof:
<PAGE>
""EBITDA" shall mean for any fiscal period (i) Consolidated Net Income plus
(ii) to the extent deducted in determining Consolidated Net Income, Interest
Expense and taxes (as stated in the consolidated statement of income for
Quixote and its Subsidiaries) plus (iii) to the extent deducted in
determining Consolidated Net Income, depreciation, amortization and other
similar non-cash charges; provided, that in the event that Borrower has,
directly or indirectly, by operation of law or otherwise, merged or
consolidated with or into, or acquired all or substantially all of the assets
or capital stock of, or otherwise combined with, any Person that is not an
Affiliate of Borrower, EBITDA shall be adjusted to reflect such Person's pro
forma historical or actual EBITDA, as the case may be, in a form acceptable
to Agent; provided, that such Person's historical EBITDA may be adjusted
solely to reflect owner's compensation."; and
(e) deleting the definition of "Net Consolidated Funded Debt to EBITDA
Ratio" in its entirety and replacing it with the following:
""Net Consolidated Funded Debt to EBITDA Ratio" shall mean, at any date of
determination thereof, the ratio of (a) Consolidated Funded Debt less the
aggregate amount of cash and cash equivalents described in Section 7.2(i),
(ii), (iii), (iv) and (v) of the Borrower and its Subsidiaries in excess of
$1,000,000 to (b) EBITDA."
1.3 Section 6.3. Section 6.3 of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:
"6.3 Financial Covenants. Quixote and its Subsidiaries shall have, on a
consolidated basis:
(a) at all times a Consolidated Net Worth (which shall be certified by
Quixote at the end of each Fiscal Year) equal to or greater than (i)
$38,000,000, plus, (ii) 50% of Quixote's positive Consolidated Net Income for
the 1998 Fiscal Year and each Fiscal Year thereafter;
(b) at the end of each Fiscal Quarter, a Minimum Interest Coverage Ratio
(which shall be certified by Quixote at the end of each Fiscal Quarter) of
not less than 2.0 to 1.0;
(c) at the end of each Fiscal Quarter, a Consolidated Funded Debt to
Adjusted Capitalization Percentage (which shall be certified by Quixote at
the end of each Fiscal Quarter) equal to or less than 50%; and
(d) at the end of each of the following periods, a Net Consolidated
Funded Debt to EBITDA Ratio (which shall be certified by Quixote at the end
of such period):
Maximum Funded
Period Debt to EBITDA
- ---------------------------------- --------------------------------
<PAGE>
June 30, 1997 to December 31, 1997 less than or equal to 4.0 to 1.0
January 1, 1998 to December 31, 1998 less than or equal to 3.75 to 1.0
January 1, 1999 and thereafter less than or equal to 3.5 to 1.0."
1.4 Section 7.3. Section 7.3 of the Loan Agreement is hereby amended by (a)
deleting the word "and" immediately preceding clause (xiii) thereof, and (b)
deleting the "." at the end of Section 7.3 and replacing it with the
following:
"; (xiv) Indebtedness under (A) that certain Participating First Note in the
principal amount of $366,000 dated June 16, 1995 by Nu-Metrics in favor of
the Pennsylvania Industrial Development Authority ("PIDA"), (B) that certain
Second Note in the principal amount of $94,000 dated June 16, 1995 by
Nu-Metrics in favor of PIDA, (C) that certain promissory note in the
principal amount of $75,000 dated August 21, 1995 by Nu-Metrics in favor of
Fay-Penn Economic Development Council ("Fay-Penn") and (D) that certain loan
agreement in the principal amount of $175,000 dated August 31, 1998 by
Nu-Metrics in favor of Fay-Penn."
1.5 Definition of "Borrower". The parties hereto hereby agree that HIS and
Nu-Metrics will henceforth each individually be a "Borrower" under the Loan
Agreement and, together with Quixote, EAS, TranSafe, Spin-Cast, DMI, E-Tech,
Roadway and Safe-Hit, shall collectively henceforth be the "Borrower" under
the terms of the Loan Agreement. The definition of "Borrower" set forth in
the preamble to the Loan Agreement is hereby amended to mean the entities,
individually and collectively, set forth in this Section 1.5.
1.6 Exhibits. Exhibits A, B, C and E to the Loan Agreement are deleted in
their entirety and Exhibits A, B, C and E attached hereto are substituted in
lieu thereof.
1.7 Schedule 1. Schedule 1 is attached hereto and made a part hereof and a
part of the Loan Agreement. The Borrower has included the information set
forth in Schedule 1 in order to amend and supplement the information provided
by the Borrower on the Closing Date in the various schedules to the Loan
Agreement and in order to make the information contained therein accurate and
complete as of the date hereof.
2. WAIVER.
The Agent and the Required Lenders hereby waive any Default or Event of
Default under Section 7.2 of the Loan Agreement arising out of the Borrower's
failure to comply with the restrictions on investments imposed by such section
and caused by that certain agreement by TranSafe to make an investment not to
exceed $1,000,000 in the aggregate to acquire 18.56% of the limited liability
company interests in TMT pursuant to the terms of that certain Limited Liability
Company Operating Agreement of TMT dated as of October 1, 1998. The waiver by
the Agent and the Required Lenders as
<PAGE>
described above shall not operate as a consent or waiver of (i) any other
right, power or remedy of the Agent or the Lenders under the Loan Documents,
or (ii) any other Default or Event of Default under the Loan Agreement. Such
waiver is only applicable and shall only be effective in the specific
instance and for the specific purpose for which made or given.
3. REPRESENTATIONS AND WARRANTIES.
The Borrower hereby remakes, as at the date of execution hereof, all of
the representations and warranties set forth in Section 4 of the Loan
Agreement as amended hereby and as amended and supplemented by Schedule 1
hereto, and additionally represents and warrants that: (a) the borrowings
under the Loan Agreement as amended hereby, the execution and delivery by the
Borrower of this Second Amendment and the performance by the Borrower of its
obligations under this Second Amendment and the Loan Agreement as amended
hereby are within the Borrower's corporate powers, have been authorized by
all necessary corporate action, have received all necessary governmental
approval (if any shall be required) and do not and will not contravene or
conflict with any provision of law or of the charter or by-laws of the
Borrower or any subsidiary or of any agreement binding upon the Borrower or
any subsidiary; (b) no Default or Event of Default under the Loan Agreement
as amended hereby has occurred and is continuing on the date of execution
hereof; and (c) the information provided herein and in Schedule 1 hereto with
respect to HIS and Nu-Metrics, with respect to the mergers involving EAS
described in the Recitals hereto, with respect to the dissolution of LSI and
LTI and with respect to all other matters contained herein and therein, is
true and complete in all respects and fully and completely amends and
supplements all of the schedules provided by the Borrower pursuant to the
Loan Agreement as necessary to make the information contained in such
schedules accurate and complete as of the date hereof.
4. CONDITIONS OF EFFECTIVENESS.
The effectiveness of this Second Amendment is subject to the conditions
precedent that the Agent shall have received all of the following, in form
and substance satisfactory to the Agent and its counsel, at the expense of
the Borrower, and, as appropriate, dated as of the date hereof and in such
number of signed counterparts as the Agent may request:
(a) Second Amendment. This Second Amendment;
(b) Resolutions/Incumbency. A certificate from the Secretary or
Assistant Secretary of each Borrower certifying (i) the name(s) of the
officer or officers of the Borrower authorized to sign this Second Amendment
and the other documents provided for in this Second Amendment, together with
a sample of the true signature of each such officer (the Agent may
conclusively rely on each such certificate until formally advised by a like
certificate of any changes therein), (ii) true and correct copies of any
resolutions of the Board of Directors of each Borrower authorizing or
<PAGE>
ratifying the execution, delivery and performance of this Second Amendment,
the Loan Agreement as amended hereby, the Amended and Restated Revolving
Credit Notes and other documents provided for in this Second Amendment,
(iii) for the each of the certificates of TranSafe, E-Tech, Roadway and
Safe-Hit, there has been no change in the Certificate of Incorporation or
Bylaws for such Borrower since June 30, 1997 and such Certificate of
Incorporation and Bylaws are in full force and effect as of the date hereof
and no steps have been taken by the directors or stockholders of such
Borrower to effect or authorize any amendment or modification thereto; and
(iv) for the certificates of each of Quixote, Spin-Cast, EAS, HIS and
Nu-Metrics, respectively, true and correct copies of (A) the Certificate of
Incorporation of each of Quixote, Spin-Cast, EAS, HIS and Nu-Metrics, and all
amendments thereto, as certified by the Secretary of State of the state of
incorporation for each entity, and (B) the Bylaws of each of Quixote,
Spin-Cast, EAS, HIS and Nu-Metrics;
(c) No Default - Representations Accurate. A certificate of each
Borrower, dated the date hereof, that (i) no Default or Event of Default has
occurred and is continuing and (ii) all representations and warranties
contained in the Loan Agreement as further amended hereby and as amended and
supplemented by the information set forth in Schedule 1 attached hereto, are
true and complete as of the date hereof;
(d) Amended and Restated Revolving Credit Notes. An original Amended and
Restated Revolving Credit Note dated as of the date hereof in the form of
Exhibit B attached hereto in favor of each Lender and executed by each
Borrower as replacements for the Revolving Credit Notes executed and
delivered on the Closing Date pursuant to Section 2.1(b) of the Loan
Agreement;
(e) Return and Cancellation of Existing Revolving Credit Notes. The
Revolving Credit Notes executed and delivered on the Closing Date for
cancellation and return to the Borrower;
(f) Lien Searches. UCC lien search reports of filings against HIS and
Nu-Metrics and tax lien and judgment searches relating to HIS and Nu-Metrics
for such jurisdictions as Agent deems appropriate;
(g) Good Standing Certificates. Good Standing Certificates for each of
HIS and Nu-Metrics from the Secretaries of State of each state in which they
are qualified to do business;
(h) Legal Opinion. The opinion of Joan R. Riley, General Counsel of
Borrower, addressed to the Lenders and the Agent in the form of Exhibit D
attached hereto and made a part hereof;
(i) Documents Relating to Corporate Restructuring. Certificates of
Dissolution, Certificates of Merger or other certificates, certified by the
<PAGE>
appropriate Secretaries of State in the jurisdictions where filed, and other
appropriate documents as required by the Agent, relating to the merger
agreements involving EAS and the dissolution of LSI and LTI;
(j) Accountant's Letter. A letter to PricewaterhouseCoopers, L.L.P., the
independent accountants for Borrower, in form and substance satisfactory to
Agent, executed by the Borrower; and
(k) Miscellaneous. Such other documents as the Agent may request.
5. MISCELLANEOUS.
5.1 Counterparts. This Second Amendment may be executed by the parties on
any number of separate counterparts and by each party on separate
counterparts; each counterpart shall be deemed an original instrument; and
all of the counterparts taken together shall be deemed to constitute one and
the same instrument.
5.2 Exhibits and Schedules. All exhibits and schedules attached hereto are
made a part hereof and incorporated herein as though fully set forth herein.
5.3 Successors and Assigns. This Second Amendment and the Loan Agreement as
amended hereby shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Agent and their respective successors and assigns.
5.4 Captions. Captions in this Second Amendment are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.
5.5 Fees. The Borrower agrees to pay or reimburse the Agent for all
reasonable costs and expenses of preparing and seeking advice in regard to
this Second Amendment and any document or instrument executed in connection
herewith and therewith (including legal fees and reasonable time charges of
attorneys who may be employees of the Agent, whether in or out of court, in
original or appellate proceedings or in bankruptcy).
5.6 CONSTRUCTION. THIS SECOND AMENDMENT, THE LOAN AGREEMENT AS AMENDED
HEREBY AND ANY DOCUMENT OR INSTRUMENT EXECUTED IN CONNECTION HEREWITH OR
THEREWITH SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE
AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF
REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA. AGENT, EACH LENDER AND BORROWER AGREE TO SUBMIT TO PERSONAL
JURISDICTION AND TO WAIVE ANY OBJECTION AS TO VENUE IN THE COUNTY OF COOK,
STATE OF ILLINOIS. BORROWER AGREES NOTHING HEREIN SHALL PRECLUDE AGENT, ANY
LENDER OR BORROWER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY
OTHER JURISDICTION.
<PAGE>
5.7 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES
DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE
LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE
JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTON, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND
ANY RIGHTS OR REMEDIES UNDER THIS SECOND AMENDMENT, ANY OF THE OTHER LOAN
DOCUMENTS OR ANY OF THE OTHER AGREEMENTS.
5.8 Amendment to Loan Agreement. This Second Amendment shall be deemed to
be an amendment to the Loan Agreement. All references to the Loan Agreement
in any other document or instrument shall be deemed to refer to the Loan
Agreement as amended hereby. As hereby amended, the Loan Agreement is hereby
ratified and confirmed in each and every respect.
[signature page to follow]
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
be executed by their duly authorized officers as of the day and year first
written above.
THE NORTHERN TRUST COMPANY,
as Agent and as Lender
By: /s/ Robert T. Jank
----------------------------------
Name: Robert T. Jank
-------------------------------
Title: Senior Vice President
-------------------------------
LASALLE NATIONAL BANK,
as Lender
By: /s/ Betty Latson
----------------------------------
Name: Betty Latson
-------------------------------
Title: Senior Vice President
-------------------------------
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO,
as Lender
By: /s/ Stacey J. Huels
----------------------------------
Name: Stacey J. Huels
-------------------------------
Title: Vice President
-------------------------------
<PAGE>
QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC.
By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey
--------------------------------- --------------------------------
Name: Daniel P. Gorey Name: Daniel P. Gorey
Title(s): Vice President and Treasurer Title(s): Vice President and
Treasurer
HIGHWAY INFORMATION SYSTEMS, NU-METRICS, INC.
INC.
By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey
--------------------------------- --------------------------------
Name: Daniel P. Gorey Name: Daniel P. Gorey
Title(s): Vice President and Treasurer Title(s): Vice President and
Treasurer
ROADWAY SAFETY SERVICE, INC. TRANSAFE CORPORATION
By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey
--------------------------------- --------------------------------
Name: Daniel P. Gorey Name: Daniel P. Gorey
Title(s): Vice President and Treasurer Title(s): Vice President and
Treasurer
E-TECH TESTING SERVICES, INC. SPIN-CAST PLASTICS, INC.
By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey
--------------------------------- --------------------------------
Name: Daniel P. Gorey Name: Daniel P. Gorey
Title(s): Vice President and Treasurer Title(s): Vice President and
Treasurer
QUIXOTE LASER CORPORATION SAFE-HIT CORPORATION
(f/k/a Disc Manufacturing, Inc.)
By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey
--------------------------------- --------------------------------
Name: Daniel P. Gorey Name: Daniel P. Gorey
Title(s): Vice President and Treasurer Title(s): Vice President and
Treasurer
<PAGE>
AMENDED AND RESTATED
REVOLVING CREDIT NOTE
(The Northern Trust Company)
$13,334,000 Chicago, Illinois
March 15, 1999
FOR VALUE RECEIVED, the undersigned, QUIXOTE CORPORATION, ENERGY
ABSORPTION SYSTEMS, INC. (f/k/a Quixote Steno Corporation and successor by
merger to Energy Absorption Systems, Inc. and Litigation Communications,
Inc.), QUIXOTE LASER CORPORATION (f/k/a Disc Manufacturing, Inc.), TRANSAFE
CORPORATION, SPIN-CAST PLASTICS, INC., E-TECH TESTING SERVICES, INC., ROADWAY
SAFETY SERVICE, INC., SAFE-HIT CORPORATION, HIGHWAY INFORMATION SYSTEMS, INC.
and NU-METRICS, INC., (each individually a "Borrower" and collectively, the
"Borrowers") hereby JOINTLY AND SEVERALLY PROMISE TO PAY to the order of THE
NORTHERN TRUST COMPANY, an Illinois banking corporation ("Lender"), or its
registered assigns, at 50 South LaSalle Street, Chicago, Illinois 60675, or
at such other place as the holder of this Note may designate from time to
time in writing, in lawful money of the United States of America and in
immediately available funds, the principal amount of THIRTEEN MILLION THREE
HUNDRED THIRTY-FOUR THOUSAND DOLLARS ($13,334,000), or such lesser principal
amount as may be outstanding pursuant to the Loan Agreement (as hereinafter
defined) with respect to the Revolving Credit Loan, together with interest on
the unpaid principal amount of this note outstanding from time to time.
This Note is the Revolving Credit Note referred to in, and
evidences certain indebtedness incurred under, the Amended and Restated Loan
Agreement dated as of June 30, 1997 (herein as it may be amended, modified or
supplemented from time to time, the "Loan Agreement"), among each Borrower,
"Lenders" (as defined therein) and The Northern Trust Company, as agent for
such Lenders, and is entitled to the benefit and security of the "Loan
Documents" (as defined in the Loan Agreement) provided for therein, to which
reference is hereby made for a statement of all of the terms and conditions
under which the loan evidenced hereby is made. All capitalized terms herein,
unless otherwise defined, shall have the meanings ascribed to them in the
Loan Agreement.
The principal amount of the indebtedness evidenced hereby shall be
payable in the amounts and on the dates specified in the Loan Agreement.
Interest thereon, less any taxes payable by withholding, shall be paid until
such principal amount is paid in full at such interest rates and at such
times as are specified in the Loan Agreement.
If any payment on this Note becomes due and payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
<PAGE>
Upon and after the occurrence of an Event of Default, this Note
shall or may, as provided in the Loan Agreement, and without demand, notice
or legal process of any kind, become or be declared immediately due and
payable.
The right to receive principal of, and stated interest on, this
Note may only be transferred through Borrower's book entry system.
Demand, presentment, protest and notice of nonpayment and protest
are hereby waived by Borrower.
This Note shall be interpreted, governed by, and construed in
accordance with the internal laws of the State of Illinois.
THIS NOTE, ISSUED AND DELIVERED ON THE DATE HEREOF TO THE AGENT, ON
BEHALF OF THE LENDERS, IS ISSUED IN REPLACEMENT AND SUBSTITUTION FOR, AND NOT
IN PAYMENT OF THAT CERTAIN AMENDED AND RESTATED REVOLVING CREDIT NOTE IN THE
ORIGINAL PRINCIPAL AMOUNT OF $13,334,000 DATED JUNE 30, 1997 (WHICH IN TURN
WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT
NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $21,666,668 DATED MARCH 31, 1996
WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN
REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $23,333,334 DATED NOVEMBER
10, 1995) AND NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO DEEM PAID OR
FORGIVEN THE UNPAID PRINCIPAL AMOUNT OF, OR UNPAID ACCRUED INTEREST ON, SAID
NOTE AT THE TIME OF ITS REPLACEMENT BY THIS NOTE.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Revolving
Credit Note to be executed by their duly authorized officers as of the day
and year first written above.
QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC.
By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey
--------------------------------- --------------------------------
Name: Daniel P. Gorey Name: Daniel P. Gorey
Title: Vice President and Treasurer Title: Vice President and
Treasurer
QUIXOTE LASER CORPORATION ROADWAY SAFETY SERVICE, INC.
(f/k/a Disc Manufacturing, Inc.)
By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey
--------------------------------- --------------------------------
Name: Daniel P. Gorey Name: Daniel P. Gorey
Title: Vice President and Treasurer Title: Vice President and Treasurer
HIGHWAY INFORMATION SYSTEMS, TRANSAFE CORPORATION
INC.
By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey
--------------------------------- --------------------------------
Name: Daniel P. Gorey Name: Daniel P. Gorey
Title: Vice President and Treasurer Title: Vice President and Treasurer
NU-METRICS, INC. SPIN-CAST PLASTICS, INC.
By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey
--------------------------------- --------------------------------
Name: Daniel P. Gorey Name: Daniel P. Gorey
Title: Vice President and Treasurer Title: Vice President and Treasurer
E-TECH TESTING SERVICES, INC. SAFE-HIT CORPORATION
By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey
--------------------------------- --------------------------------
Name: Daniel P. Gorey Name: Daniel P. Gorey
Title: Vice President and Treasurer Title: Vice President and Treasurer
<PAGE>
AMENDED AND RESTATED
REVOLVING CREDIT NOTE
(LaSalle National Bank)
$13,333,000 Chicago, Illinois
March 15, 1999
FOR VALUE RECEIVED, the undersigned, QUIXOTE CORPORATION, ENERGY
ABSORPTION SYSTEMS, INC. (f/k/a Quixote Steno Corporation and successor by
merger to Energy Absorption System, Inc. and Litigation Communications,
Inc.), QUIXOTE LASER CORPORATION (f/k/a Disc Manufacturing, Inc.), TRANSAFE
CORPORATION, SPIN-CAST PLASTICS, INC., E-TECH TESTING SERVICES, INC., ROADWAY
SAFETY SERVICE, INC., SAFE-HIT CORPORATION, HIGHWAY INFORMATION SYSTEMS, INC.
and NU-METRICS, INC., (each individually a "Borrower" and collectively, the
"Borrowers") hereby JOINTLY AND SEVERALLY PROMISE TO PAY to the order of
LASALLE NATIONAL BANK, a national banking association ("Lender"), or its
registered assigns, at 120 South LaSalle Street, Chicago, Illinois 60603, or
at such other place as the holder of this Note may designate from time to
time in writing, in lawful money of the United States of America and in
immediately available funds, the principal amount of THIRTEEN MILLION THREE
HUNDRED THIRTY-THREE THOUSAND DOLLARS ($13,333,000), or such lesser principal
amount as may be outstanding pursuant to the Loan Agreement (as hereinafter
defined) with respect to the Revolving Credit Loan, together with interest on
the unpaid principal amount of this note outstanding from time to time.
This Note is the Revolving Credit Note referred to in, and
evidences certain indebtedness incurred under, the Amended and Restated Loan
Agreement dated as of June 30, 1997 (herein as it may be amended, modified or
supplemented from time to time, the "Loan Agreement"), among each Borrower,
"Lenders" (as defined therein) and The Northern Trust Company, as agent for
such Lenders, and is entitled to the benefit and security of the "Loan
Documents" (as defined in the Loan Agreement) provided for therein, to which
reference is hereby made for a statement of all of the terms and conditions
under which the loan evidenced hereby is made. All capitalized terms herein,
unless otherwise defined, shall have the meanings ascribed to them in the
Loan Agreement.
The principal amount of the indebtedness evidenced hereby shall be
payable in the amounts and on the dates specified in the Loan Agreement.
Interest thereon, less any taxes payable by withholding, shall be paid until
such principal amount is paid in full at such interest rates and at such
times as are specified in the Loan Agreement.
If any payment on this Note becomes due and payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
<PAGE>
Upon and after the occurrence of an Event of Default, this Note
shall or may, as provided in the Loan Agreement, and without demand, notice
or legal process of any kind, become or be declared immediately due and
payable.
The right to receive principal of, and stated interest on, this
Note may only be transferred through Borrower's book entry system.
Demand, presentment, protest and notice of nonpayment and protest
are hereby waived by Borrower.
This Note shall be interpreted, governed by, and construed in
accordance with the internal laws of the State of Illinois.
THIS NOTE, ISSUED AND DELIVERED ON THE DATE HEREOF TO THE AGENT, ON
BEHALF OF THE LENDERS, IS ISSUED IN REPLACEMENT AND SUBSTITUTION FOR, AND NOT
IN PAYMENT OF THAT CERTAIN AMENDED AND RESTATED REVOLVING CREDIT NOTE IN THE
ORIGINAL PRINCIPAL AMOUNT OF $13,333,000 DATED JUNE 30, 1997 (WHICH IN TURN
WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT
NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $21,666,666 DATED MARCH 31, 1996
WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN
REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $23,333,333 DATED NOVEMBER
10, 1995) AND NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO DEEM PAID OR
FORGIVEN THE UNPAID PRINCIPAL AMOUNT OF, OR UNPAID ACCRUED INTEREST ON, SAID
NOTE AT THE TIME OF ITS REPLACEMENT BY THIS NOTE.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Revolving Credit Note to be executed by their duly authorized officers
as of the day and year first written above.
QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC.
By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey
--------------------------------- --------------------------------
Name: Daniel P. Gorey Name: Daniel P. Gorey
Title: Vice President and Treasurer Title: Vice President and Treasurer
QUIXOTE LASER CORPORATION ROADWAY SAFETY SERVICES, INC.
(f/k/a Disc Manufacturing, Inc.)
By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey
--------------------------------- --------------------------------
Name: Daniel P. Gorey Name: Daniel P. Gorey
Title: Vice President and Treasurer Title: Vice President and Treasurer
HIGHWAY INFORMATION SYSTEMS, TRANSAFE CORPORATION
INC.
By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey
--------------------------------- --------------------------------
Name: Daniel P. Gorey Name: Daniel P. Gorey
Title: Vice President and Treasurer Title: Vice President and Treasurer
NU-METRICS, INC. SPIN-CAST PLASTICS, INC.
By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey
--------------------------------- --------------------------------
Name: Daniel P. Gorey Name: Daniel P. Gorey
Title: Vice President and Treasurer Title: Vice President and Treasurer
E-TECH TESTING SERVICES, INC. SAFE-HIT CORPORATION
By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey
--------------------------------- --------------------------------
Name: Daniel P. Gorey Name: Daniel P. Gorey
Title: Vice President and Treasurer Title: Vice President and Treasurer
<PAGE>
AMENDED AND RESTATED
REVOLVING CREDIT NOTE
(American National Bank and Trust Company of Chicago)
$13,333,000 Chicago, Illinois
March 15, 1999
FOR VALUE RECEIVED, the undersigned, QUIXOTE CORPORATION, ENERGY
ABSORPTION SYSTEMS, INC. (f/k/a Quixote Steno Corporation and successor by
merger to Energy Absorption Systems, Inc. and Litigation Communications,
Inc.), QUIXOTE LASER CORPORATION (f/k/a Disc Manufacturing, Inc.), TRANSAFE
CORPORATION, SPIN-CAST PLASTICS, INC., E-TECH TESTING SERVICES, INC., ROADWAY
SAFETY SERVICE, INC., SAFE-HIT CORPORATION, HIGHWAY INFORMATION SYSTEMS, INC.
and NU-METRICS, INC., (each individually a "Borrower" and collectively, the
"Borrowers") hereby JOINTLY AND SEVERALLY PROMISE TO PAY to the order of
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO ("Lender"), or its
registered assigns, at 30 South Wacker Drive, Chicago, Illinois 60606, or at
such other place as the holder of this Note may designate from time to time
in writing, in lawful money of the United States of America and in
immediately available funds, the principal amount of THIRTEEN MILLION THREE
HUNDRED THIRTY-THREE THOUSAND DOLLARS ($13,333,000), or such lesser principal
amount as may be outstanding pursuant to the Loan Agreement (as hereinafter
defined) with respect to the Revolving Credit Loan, together with interest on
the unpaid principal amount of this note outstanding from time to time.
This Note is the Revolving Credit Note referred to in, and
evidences certain indebtedness incurred under, the Amended and Restated Loan
Agreement dated as of June 30, 1997 (herein as it may be amended, modified or
supplemented from time to time, the "Loan Agreement"), among each Borrower,
"Lenders" (as defined therein) and The Northern Trust Company, as agent for
such Lenders, and is entitled to the benefit and security of the "Loan
Documents" (as defined in the Loan Agreement) provided for therein, to which
reference is hereby made for a statement of all of the terms and conditions
under which the loan evidenced hereby is made. All capitalized terms herein,
unless otherwise defined, shall have the meanings ascribed to them in the
Loan Agreement.
The principal amount of the indebtedness evidenced hereby shall be
payable in the amounts and on the dates specified in the Loan Agreement.
Interest thereon, less any taxes payable by withholding, shall be paid until
such principal amount is paid in full at such interest rates and at such
times as are specified in the Loan Agreement.
If any payment on this Note becomes due and payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
<PAGE>
Upon and after the occurrence of an Event of Default, this Note
shall or may, as provided in the Loan Agreement, and without demand, notice
or legal process of any kind, become or be declared immediately due and
payable.
The right to receive principal of, and stated interest on, this
Note may only be transferred through Borrower's book entry system.
Demand, presentment, protest and notice of nonpayment and protest
are hereby waived by Borrower.
This Note shall be interpreted, governed by, and construed in
accordance with the internal laws of the State of Illinois.
THIS NOTE, ISSUED AND DELIVERED ON THE DATE HEREOF TO THE AGENT, ON
BEHALF OF THE LENDERS, IS ISSUED IN REPLACEMENT AND SUBSTITUTION FOR, AND NOT
IN PAYMENT OF THAT CERTAIN AMENDED AND RESTATED REVOLVING CREDIT NOTE IN THE
ORIGINAL PRINCIPAL AMOUNT OF $13,333,000 DATED JUNE 30, 1997 (WHICH IN TURN
WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT
NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $21,666,666 DATED MARCH 31, 1996
WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN
REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $23,333,333 DATED NOVEMBER
10, 1995) AND NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO DEEM PAID OR
FORGIVEN THE UNPAID PRINCIPAL AMOUNT OF, OR UNPAID ACCRUED INTEREST ON, SAID
NOTE AT THE TIME OF ITS REPLACEMENT BY THIS NOTE.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Revolving
Credit Note to be executed by their duly authorized officers as of the day and
year first written above.
QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC.
By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey
--------------------------------- --------------------------------
Name: Daniel P. Gorey Name: Daniel P. Gorey
Title: Vice President and Treasurer Title: Vice President and Treasurer
QUIXOTE LASER CORPORATION ROADWAY SAFETY SERVICE, INC.
(f/k/a Disc Manufacturing, Inc.)
By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey
--------------------------------- --------------------------------
Name: Daniel P. Gorey Name: Daniel P. Gorey
Title: Vice President and Treasurer Title: Vice President and Treasurer
HIGHWAY INFORMATION SYSTEMS, TRANSAFE CORPORATION
INC.
By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey
--------------------------------- --------------------------------
Name: Daniel P. Gorey Name: Daniel P. Gorey
Title: Vice President and Treasurer Title: Vice President and Treasurer
NU-METRICS, INC. SPIN-CAST PLASTICS, INC.
By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey
--------------------------------- --------------------------------
Name: Daniel P. Gorey Name: Daniel P. Gorey
Title: Vice President and Treasurer Title: Vice President and Treasurer
E-TECH TESTING SERVICES, INC. SAFE-HIT CORPORATION
By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey
--------------------------------- --------------------------------
Name: Daniel P. Gorey Name: Daniel P. Gorey
Title: Vice President and Treasurer Title: Vice President and Treasurer
<PAGE>
PARTIAL ASSIGNMENT OF LEASE AND EQUITY IN PROJECT
THIS ASSIGNMENT is made as of the 26th day of March, 1999 by and between
DISC MANUFACTURING, INC. (n/k/a Quixote Laser Corporation), a Delaware
corporation (the "Assignor"), and CINRAM, INC., a Delaware corporation, (the
"Assignee") and THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF HUNTSVILLE,
an Alabama public corporation (the "Board").
W I T N E S S E T H
WHEREAS, the Board was organized pursuant to the provisions of Act No.
648 adopted at the 1949 Regular Session of the Legislature of the State of
Alabama, approved September 19, 1949, as amended (said Act being codified as
Code of Alabama (1975), Section 11-54-80 ET SEQ., and hereinafter referred to
as the "Act"); and
WHEREAS, the Board and the Assignor did enter into that certain Amended
and Restated Lease Agreement dated as of September 1, 1987, and recorded in
Deed Book 705, pages 207 ET SEQ. in the Office of the Judge of Probate of
Madison County, Alabama (the "Original Lease"), as so amended by that certain
Amendment to Lease Agreement dated as of October 12, 1990, and recorded in
Deed Book 775, pages 1120 ET SEQ. in the Office of the Judge of Probate of
Madison County, Alabama (the "First Amendment"), as further amended by that
certain Series 1991 Amendment to Lease Agreement dated as of April 1, 1991,
and recorded in Deed Book 775, page 1130 ET SEQ. in the office of the Judge
of Probate of Madison County, Alabama (the "Second Amendment"), and as
further amended by that certain Series 1993 Amendment to Lease Agreement
dated as of March 1, 1993, and recorded in Deed Book 810, Page 191 ET SEQ. in
the Office of the Judge of Probate of Madison County, Alabama (the "Third
Amendment") (the Original Lease as so amended is hereto referred to as the
"Lease"), under which the Board leased to the Assignor the Project as
hereinafter defined.
WHEREAS, the Board has heretofore executed and delivered to the Trustee
thereunder (Regions Bank f/k/a First Alabama Bank, hereinafter referred to as
the "Trustee"), that certain Mortgage and Trust Indenture dated as of
September 1, 1987 (the "Original Indenture") recorded in Mortgage Book 1528,
page 1089 ET SEQ. in the Office of the Judge of Probate of Madison County,
Alabama, pursuant to which the Board issued its Industrial Development First
Mortgage Revenue Bonds (Disc Manufacturing, Inc. Project) Series 1987, in the
principal amount of $23,500,000 (the "Series 1987 Bonds") to finance the cost
of acquiring land as more particularly described therein and constructing and
equipping thereon an industrial facility (hereinafter referred to as the
"Original Project"); and
WHEREAS, to finance the cost of expanding the Original
<PAGE>
Project by acquiring additional equipment and personal property (the "Project
Additions" and together with the Original Project is herein referred to as
the "Project"), the Board has heretofore executed and delivered to the
Trustee (i) that certain Supplemental Mortgage and Trust Indenture dated as
of April 1, 1991 (the "Supplemental Indenture") recorded in Mortgage Book
1742, page 686, ET SEQ. in the Office of the Judge of Probate of Madison
County, Alabama, pursuant to which the Board issued its Industrial
Development First Mortgage Revenue Bonds (Disc Manufacturing Inc. Project)
Series 1991, in the aggregate principal amount of $7,000,000 (the "Series
1991 Bonds") and (ii) that certain Second Supplemental Mortgage and Indenture
of Trust (the "Second Supplemental Indenture") recorded in Mortgage Book
1895, Page 852, ET SEQ. in the Office of the Judge of Probate of Madison
County, Alabama, pursuant to which the Board issued its First Mortgage
Industrial Revenue Bond (Disc Manufacturing, Inc. Project) Series 1993 in the
principal amount of $33,000,000 (the "Series 1993 Bonds") (the Original
Indenture as amended and supplemented by the Supplemental Indenture and the
Second Supplemental Indenture is herein referred to as the "Indenture"); and
WHEREAS, pursuant to that certain Partial Assignment of Lease and Equity
in Project dated March 27, 1997, between Assignor and Assignee (the "1997
Assignment"), Assignor assigned to Assignee Assignor's rights under the Lease
to the equipment and other personal property listed on Exhibit "A" of the
1997 Assignment and made a part hereof by reference (the "Huntsville
Equipment"), which equipment and personal property constitute a portion of
the Project; and
WHEREAS, in connection with the execution of the 1997 Assignment, the
Series 1987 Bond, the Series 1991 Bonds and the Series 1993 Bonds were paid
in full and the Trustee satisfied and released the Indenture as evidenced by
that certain Full Release of Mortgage and Trust Indenture, dated March 26,
1997, and recorded in the Office of the Judge of Probate of Madison County,
Alabama, in Mortgage Book 2266, at page 522 ET SEQ.; and
WHEREAS, the Assignor desires to assign to Assignee all of Assignor's
rights under the Lease to the real property located in Madison County,
Alabama more particularly described on Exhibit "A" hereto and all
improvements located thereon (said real property together with all
improvements thereon is herein called the "Building");
<PAGE>
NOW, THEREFORE, in consideration of the premises, the assumption of the
Assignee of all of Assignor's obligations under the Lease arising after the
date of this Assignment with respect to the Building, and $10.00 in hand paid
by Assignee to Assignor, and other valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the Board and Assignor and
Assignee hereby agree as follows:
1. The Assignor does hereby assign to Assignee (a) All right, title
and interest of Assignor under the Lease with respect to the Building and all
right, title and interest of Assignor in and to the Building, including but
not limited to the Assignor's option to purchase the Building after payment
of the Bonds as provided in Section 11.2 of the Lease; and (b) the Assignor's
right to any equity in the Building; all subject however to the reservation
by Assignor for its benefit and the benefit of its successors and/or assigns
of that certain easement and rights created and described in that certain
Non-Exclusive Easement Agreement recorded in Deed Book 893 Page 88 in the
Office of the Judge of Probate of Madison County, Alabama.
2. The Assignor hereby covenants and warrants that no event of default
currently exists under the Lease (with respect to the Building) and no event
has occurred which with the passage of time or the giving of notice would
constitute an event of default under the Lease (with respect to the
Building). The Assignee hereby covenants and warrants that it has not
operated or used the Building in any manner that would cause an event of
default to exist presently or to exist with the passage of time or the giving
of notice. The Assignor further covenants and warrants that it has full
power and authority to assign its interest in the Lease, that such interest
is free and clear of all liens or encumbrances, and that no consent or
approval is necessary for it to assign such interest other than the consent
of the Board.
3. The Assignee hereby assumes any and all obligations of the Assignor
under the Lease that relate to the Building and that arise after the date of
this Assignment. The Board hereby releases the Assignor from any and all
obligations under the Lease that relate to the Building and that arise after
the date of this Assignment and the Board agrees to look solely to the
Assignee to perform any such obligations and the Board agrees that the
Board's remedy for any such default shall be solely a suit against Assignee
for specific performance or for damages.
4. The Assignor, the Assignee and the Board hereby agree that if
requested by the Assignee, the parties hereto shall execute such instruments
as are necessary to remove the Building from the scope of the Lease and, at
the direction of the Assignee the Board shall either (i) lease the Building
to the Assignee on all the terms and conditions of the Lease, which are
incorporated herein by reference; provided, however, with respect to said new
lease the term Project as defined in the Lease shall mean the Building, or
(ii) convey the Building to the Assignee in accordance with Section 11.2 of
the Lease.
5. The Board and the Assignee agree that if on February 1,
<PAGE>
2000 or on any February 1 thereafter the Assignee pays the Board the sum of
$278,000 plus the sum of $39,000 multiplied by the number of twelve month
periods that have elapsed since February 1, 2000 (the "Purchase Price
Modification Payment"), then the Board and the Assignee shall modify Section
9(b) of the Second Amendment and Section 9(b) of the Third Amendment to
delete the same in their entirety and substitute in lieu thereof an agreement
that in addition to the $55,000 payment to be made pursuant to Section 11.2
of the Original Lease, the Assignee shall pay as the purchase price described
in such Section 11.2 an amount equal to $1,000 multiplied by the number of
full 12 month periods that have elapsed since April 1, 1991 and the date the
Assignee exercises the purchase option contained in Section 11.2 of the
Original Lease. In the event the Assignee makes the Purchase Price
Modification Payment, the Board and the Assignee agree to execute, as soon as
practicable, a modification of the Lease to effectuate the provisions of this
paragraph 5.
6. The Primary Term of the Lease as outlined in Section 5.1 of the
Lease shall not change from the original term thereof and shall continue
until 11:59 p.m. on September 1, 2010 and the renewal term outlined in
Section 11.4 of the Lease shall not change and shall remain for the period of
September 1, 2010 until 11:59 p.m. on September 15, 2015.
7. The Board hereby consents to the Assignment of Assignor's interest
in the Building to Assignee and hereby states that to its knowledge no
default currently exists under the Lease, nor has any event occurred which
with the passage of time or the giving of notice would constitute a default
under the Lease.
IN WITNESS THEREOF, the Assignor has caused this Assignment to be
executed, attested, sealed and witnessed, all by the Assignor's duly
authorized officers, this 22nd day of March, 1999, the Assignee has caused
this Assignment to be executed, attested, sealed and witnessed, all by the
Assignee's duly authorized officers, this 23rd day of March, 1999, and the
Board has caused this Assignment to be executed, attested, sealed and
witnessed, all by the Board's duly authorized officers, this 25th day of
March, 1999, all effective as of March 26, 1999.
DISC MANUFACTURING, INC.
(n/k/a QUIXOTE LASER
CORPORATION, as Assignor
ATTEST:
By: /s/ Joan R. Riley By: /s/ Daniel P. Gorey
------------------------- -------------------------------
Its: Secretary Its: Vice President & Treasurer
------------------------- -------------------------------
[Assignee has executed this Assignment on the following page 5]
<PAGE>
CINRAM INC., as Assignee
By: /s/ David Rubenstein
-------------------------------
Its: President
-------------------------------
[The Board has executed this Assignment on the following page 6]
<PAGE>
THE INDUSTRIAL DEVELOPMENT BOARD
OF THE CITY OF HUNTSVILLE
ATTEST:
By: By: /s/ W. F. Sanders
------------------------- -------------------------------
Its: Its: Vice Chairman
------------------------- -------------------------------
<PAGE>
STATE OF ILLINOIS )
)
COOK COUNTY )
I, the undersigned, a Notary Public in and for said County in said
State, hereby certify that Daniel P. Gorey, whose name as Vice President &
Treasurer of DISC MANUFACTURING, INC. (n/k/a QUIXOTE LASER CORPORATION), a
Delaware corporation, is signed to the foregoing instrument, and who is known
to me, and known to me to be such officer, acknowledged before me on this day
that, being informed of the contents of the within instrument, he, as such
officer and will full authority, executed the same voluntarily for and as the
act of the said corporation.
Given under my hand and official seal of office, this the 22nd day of
March, 1999.
/s/ Wendy H. Cary
--------------------------------------
Notary Public
My Commission Expires: 3/29/00
<PAGE>
STATE OF CALIFORNIA )
)
ORANGE COUNTY )
I, the undersigned, a Notary Public in and for said County in said
State, hereby certify that David Rubenstein, whose name as President of
CINRAM INC., a Delaware corporation, is signed to the foregoing instrument,
and who is known to me, and known to me to be such officer, acknowledged
before me on this day that, being informed of the contents of the within
instrument, he, as such officer and will full authority, executed the same
voluntarily for and as the act of the said corporation.
Given under my hand and official seal of office, this the 23rd day of
March, 1999.
/s/ Katherine R. Falcenda
---------------------------------
Notary Public
My Commission Expires: 6/25/99
<PAGE>
STATE OF ALABAMA )
)
MADISON COUNTY )
I, the undersigned, a Notary Public in and for said County in said
State, hereby certify that W. F. Sanders, whose name as Vice Chairman of The
Industrial Development Board of the City of Huntsville, an Alabama public
corporation, is signed to the foregoing instrument, and who is known to me,
and known to me to be such officer, acknowledged before me on this day that,
being informed of the contents of the within instrument, he, as such officer
and will full authority, executed the same voluntarily for and as the act of
the said corporation.
Given under my hand and official seal of office, this the 25th day of
March, 1999.
/s/ Johnnie F. Vann
--------------------------------------
Notary Public
My Commission Expires: 07/08/01
This Instrument prepared by:
Johnnie F. Vann
Sirote & Permutt, P.C.
200 Clinton Avenue
AmSouth Center, Suite 1000
P. O. Box 18248
Huntsville, Alabama 35804
<PAGE>
"EXHIBIT "A"
All that part of Section 17, Township 3 South, Range 1 East in the City of
Huntsville, Madison County, Alabama, particularly described as beginning at
the point of intersection of the Southern right-of-way of Southern Railroad
with the Western right-of-way of Moores Mill Road; said point is further
described as being located South 00 degrees 19 minutes West 1561.48 feet and
North 76 degrees 16 minutes West 25.70 feet from the Northeast corner of said
Section 17;
Thence from the true point of beginning along the Western right-of-way of
Moores Mill Road South 00 degrees 19 minutes 00 seconds West 1157.00 feet to
the PC of a curve to the right having a radius of 834.42 feet;
Thence around the arc of said curve 377.32 feet, a chord bearing and distance
of South 13 degrees 16 minutes 19 seconds West 374.12 feet;
Thence continuing along the Western right-of-way of Moores Mill Road South 26
degrees 18 minutes 35 seconds West 936.79 feet;
Thence continuing along the Western right-of-way of Moores Mill Road North 76
degrees 49 minutes West 9.81 feet;
Thence continuing along the Western right-of-way of Moores Mill Road South 58
degrees 55 minutes 39 seconds West 165.06 feet to the Northern right-of-way
of Highway 72 East;
Thence along said right-of-way North 85 degrees 15 minutes 30 seconds West
1163.95 feet;
Thence North 00 degrees 21 minutes 49 seconds East 2787.94 feet to the
Southern right-of-way of Southern Railroad;
Thence along said right-of-way South 76 degrees 15 minutes 50 seconds East
1853.67 feet to the true point of beginning containing 102.18 acres, more or
less.
<PAGE>
TERMINATION OF SUBLEASE
THIS TERMINATION is made as of the 26th day of March, 1999 by and
between DISC MANUFACTURING, INC. (n/k/a Quixote Laser Corporation), a
Delaware corporation ("DMI"), and CINRAM, INC., a Delaware corporation,
("Cinram").
W I T N E S S E T H
WHEREAS, DMI subleased to Cinram and Cinram subleased from DMI certain
real property located in Huntsville, Madison County, Alabama pursuant to that
certain Sublease dated March 27, 1997 (the "Sublease") between DMI and Cinram
for which a Memorandum of Lease was recorded March 27, 1997 in Deed Book 893,
Page 93 in the Office of the Judge of Probate of Madison County, Alabama; and
WHEREAS, the Sublease contained an option under which Cinram could
purchase DMI's leasehold estate in the real estate described in the Sublease;
and
WHEREAS, Simultaneously, herewith, Cinram has purchased said leasehold
estate from DMI; and
WHEREAS, it is the desire of the parties hereto to terminate the
Sublease.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, DMI and Cinram agree that the Sublease is hereby terminated and
of no further force and effect.
IN WITNESS THEREOF, DMI has caused this Termination to be executed,
attested, sealed and witnessed, all by DMI's duly authorized officers, this
22nd day of March, 1999, and Cinram has caused this Termination to be
executed, attested, sealed and witnessed, all by Cinram's duly authorized
officers, this 23rd day of March, 1999, all effective as of March 26, 1999.
DISC MANUFACTURING, INC.
(n/k/a QUIXOTE LASER
CORPORATION
ATTEST:
By: /s/ Joan R. Riley By: /s/ Daniel P. Gorey
-------------------------- -----------------------------
Its: Secretary Its: Vice President & Treasurer
-------------------------- -----------------------------
[Cinram has executed this Termination on the following page 2]
<PAGE>
CINRAM INC.
By: /s/ David Rubenstein
-----------------------------
Its: President
-----------------------------
STATE OF CALIFORNIA )
)
ORANGE COUNTY )
I, the undersigned, a Notary Public in and for said County in said
State, hereby certify that David Rubenstein, whose name as PRESIDENT of
CINRAM INC., a Delaware corporation, is signed to the foregoing instrument,
and who is known to me, and known to me to be such officer, acknowledged
before me on this day that, being informed of the contents of the within
instrument, he, as such officer and will full authority, executed the same
voluntarily for and as the act of the said corporation.
Given under my hand and official seal of office, this the 23rd day of
March, 1999.
/s/ Katherine R. Falcenda
-------------------------------------
Notary Public
My Commission Expires: 6/25/99
<PAGE>
STATE OF ILLINOIS )
)
COOK COUNTY )
I, the undersigned, a Notary Public in and for said County in said
State, hereby certify that Daniel P. Gorey, whose name as Vice President &
Treasurer of DISC MANUFACTURING, INC. (n/k/a QUIXOTE LASER CORPORATION), a
Delaware corporation, is signed to the foregoing instrument, and who is known
to me, and known to me to be such officer, acknowledged before me on this day
that, being informed of the contents of the within instrument, he, as such
officer and will full authority, executed the same voluntarily for and as the
act of the said corporation.
Given under my hand and official seal of office, this the 22nd day of
March, 1999.
/s/ Wendy C. Cary
-----------------------------------
Notary Public
My Commission Expires: 3/29/00
This Instrument prepared by:
Johnnie F. Vann
Sirote & Permutt, P.C.
200 Clinton Avenue
AmSouth Center, Suite 1000
P. O. Box 18248
Huntsville, Alabama 35804
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 1,340,000
<SECURITIES> 0
<RECEIVABLES> 16,068,000
<ALLOWANCES> 475,000
<INVENTORY> 9,132,000
<CURRENT-ASSETS> 29,804,000
<PP&E> 26,375,000
<DEPRECIATION> 10,777,000
<TOTAL-ASSETS> 70,862,000
<CURRENT-LIABILITIES> 10,935,000
<BONDS> 14,908,000
0
0
<COMMON> 151,000
<OTHER-SE> 42,826,000
<TOTAL-LIABILITY-AND-EQUITY> 70,862,000
<SALES> 49,212,000
<TOTAL-REVENUES> 49,212,000
<CGS> 27,400,000
<TOTAL-COSTS> 27,400,000
<OTHER-EXPENSES> 15,513,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 723,000
<INCOME-PRETAX> 5,681,000
<INCOME-TAX> 1,988,000
<INCOME-CONTINUING> 3,693,000
<DISCONTINUED> 240,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,933,000
<EPS-PRIMARY> .49
<EPS-DILUTED> .48
</TABLE>
