-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N/QvbdPqS81xOn+G3SIFiDb56hDM28+WhCGsewrZFCvHRNM6qDc/Kqw9dE24VSyH 32SE+09r2D8Y29jNtMjrgw== 0000912057-97-006929.txt : 19970227 0000912057-97-006929.hdr.sgml : 19970227 ACCESSION NUMBER: 0000912057-97-006929 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19970226 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUIXOTE CORP CENTRAL INDEX KEY: 0000032870 STANDARD INDUSTRIAL CLASSIFICATION: PHONOGRAPH RECORDS & PRERECORDED AUDIO TAPES & DISKS [3652] IRS NUMBER: 362675371 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 000-07903 FILM NUMBER: 97544172 BUSINESS ADDRESS: STREET 1: ONE E WACKER DR STREET 2: STE 3000 CITY: CHICAGO STATE: IL ZIP: 60601 BUSINESS PHONE: 3124676755 MAIL ADDRESS: STREET 1: ONE EAST WACKER DRIVE CITY: CHICAGO STATE: IL ZIP: 60601 FORMER COMPANY: FORMER CONFORMED NAME: ENERGY ABSORPTION SYSTEMS INC DATE OF NAME CHANGE: 19800815 10-K405/A 1 FORM 10-K405/A FORM 10-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) For the fiscal year ended June 30, 1996 ---------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period to ------------------ ------------------- Commission file number 0-7903 -------------------------- Quixote Corporation ------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 36-2675371 - --------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) ONE EAST WACKER DRIVE, CHICAGO, ILLINOIS 60601 - ------------------------------------------ --------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: (312) 467-6755 ------------------ Securities Registered Pursuant to Section 12(g) of the Act: Common Stock ($.01-2/3 Par Value) ----------------------------------------------- (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No -------- ------ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K (X). State the aggregate market value of the voting stock held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within 60 days prior to the date of filing. $56,808,818 as of August 31, 1996 ------------------------------------------------ - 1 - Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. As of August 31, 1996 there were 7,961,680 shares of common stock outstanding. ------------------------------------------------------------------------------ DOCUMENTS INCORPORATED BY REFERENCE The definitive proxy statement relating to the Registrant's Annual Meeting of Stockholders, to be held November 14, 1996, is incorporated by reference in Part III to the extent described therein. - 2 - TABLE OF CONTENTS
PART I PAGE ------- Item 1. Business................................................... 4-10 Item 2. Properties................................................. 11 Item 3. Legal Proceedings.......................................... 12-16 Item 4. Submission of Matters to a Vote of Security Holders........ 16 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters...................................... 17 Item 6. Selected Financial Data.................................... 18 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 18-21 Item 8. Financial Statements and Supplementary Data................ 21-36 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................... 36 PART III Item 10. Directors and Executive Officers of the Registrant......... 37 Item 11. Executive Compensation..................................... 37 Item 12. Security Ownership of Certain Beneficial Owners and Management........................................... 38 Item 13. Certain Relationships and Related Transactions............. 38 PART IV Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.............................................. 39-42 SIGNATURES............................................................. 43
- 3 - PART I THE COMPANY Quixote Corporation was originally incorporated under the laws of the State of Delaware in 1969 as Energy Absorption Systems, Inc. In June, 1980, Energy Absorption Systems, Inc. changed its name to Quixote Corporation. Unless otherwise indicated herein, the terms "Quixote" and the "Company" refer to Quixote Corporation and its subsidiaries. Item 1. Business - ----------------- Quixote Corporation and its subsidiaries operate as a diversified technology company which develops, manufactures and markets specialized products through two industry segments. One segment is involved in the development, manufacturing and marketing of energy-absorbing highway crash cushions and related highway safety products for the protection of motorists and highway workers in markets which include both domestic and international governmental units. The Company's other segment manufactures music compact discs and CD-ROM discs for the domestic entertainment, data storage, multimedia and education markets. As of June 30, 1996, Quixote Corporation and its subsidiaries employed 978 people. - 4 - HIGHWAY SAFETY DEVICES - ---------------------- Description of Business - ----------------------- The patented highway crash cushions manufactured by Energy Absorption Systems, Inc. (Energy) were first conceived and developed in 1969 in response to the high number of fatalities and serious injuries suffered by occupants of errant vehicles in collisions with roadside hazards, such as bridge abutments, overpass piers, overhead sign supports, lane dividers, traffic islands and toll booths. Since that time, various types of Energy's highway crash cushions have been installed in front of thousands of life-threatening roadside hazards. The Federal Highway Administration (FHWA) endorses the installation of highway crash cushions as an effective safety program. Crash cushions have saved over 21,000 lives since 1969. Energy develops, manufactures and markets a line of patented highway crash cushion systems and other barriers which absorb and dissipate the force of impact in collisions between vehicles and fixed roadside objects. The product lines utilize the principles of momentum transfer and kinetic energy to safely decelerate errant vehicles. Energy absorption or energy dissipation is accomplished by using different combinations of water, aluminum and steel shapes, urethane foam systems, cardboard, plastic structures, elastometric cylinders and sand. The product lines can be generally divided into systems for construction zones and permanent mounts. Product lines used primarily in construction and work zones are: the truck mounted attenuator (TMA), the G-R-E-A-T (R) CZ system and the Triton Barrier (R). Product lines used for permanent applications are: the G-R-E-A-T (R) system, the Sandwich systems, the Low Maintenance Attenuator (LMA), the BrakeMaster (R) system, the TREND (R) system, the Sentre (R) system, the CushionWall (TM), the NEAT (TM) system and the BarrierGate (R). The Energite (R) crash cushion system has been used in both construction zone and permanent applications. The performance characteristics of the product lines are formally submitted to the US Federal Highway Administration to be approved as being eligible for federal aid highway projects. All systems are approved as acceptable highway hardware according to procedures in the National Cooperative Highway Research Project number 230 or 350. Energy does provide product education, selection and application assistance. Energy generally does not perform site preparation or installation for any of its products. Installation services must be obtained from others. Spin-Cast Plastics, Inc., a wholly-owned subsidiary of Energy Absorption, manufactures rotational molded plastic products including the Energite (R) system, plastic components used in Energy's other product lines, as well as custom designed plastic components for industrial products. Safe-Hit Corporation, another wholly-owned subsidiary of Energy Absorption, manufactures and markets a line of flexible sign and guide post systems and a glare screen system. The guide posts are extruded from polypropylene, are used to delineate a travel way, channelize vehicles or mark the location of an object. The post features an in-ground anchor system that permits inexpensive repair and replacement techniques. The glare screen system, also made from polypropylene, is installed on top of median barriers to eliminate the distraction of lights from an oncoming vehicle on roads where the inside lanes are adjacent to the median barrier. Both products are covered by patents. In 1989, Energy acquired the world-wide patents and licensing agreements covering the movable traffic barrier system of Quick-Steel Engineering PTY. Ltd. of Botany, Australia. Energy received an 8% royalty on the sales of such products by its licensees. Energy sold the patents and licenses to the US licensee in March 1996. - 5 - In July 1992, Energy purchased the stock of Composite Components, Inc. CCI was a development-stage company organized to develop an Electro-Cured (TM) system for the repair and rehabilitation of underground sewer pipes. CCI perfected the process and made several successful installations, but elected not to commercialize the process and ceased operations in 1996. Competition and Marketing - ------------------------- Energy's products are sold in all 50 U.S. states. Six regional managers supervise Energy's 24 domestic distributors and make direct sales in areas not covered by distributors. Although the Federal government provides matching funds for the purchase of highway safety products made by state and local governmental agencies, it is not a direct purchaser of Energy's products. Energy sells its products principally to either distributors or to contractors (on behalf of state and local governments) with less than 5% sold directly to state and local government agencies. Safe-Hit's products are sold by their own regional managers who supervise a large number of distributors and make sales calls on certain state departments of transportation and contracting firms. A number of other companies manufacture flexible guide posts. Many international governments are now beginning to recognize the need for crash cushions as a method of reducing traffic fatalities. Energy's products have been sold in 36 foreign countries. Energy's two international consultants and 38 foreign agents make sales to municipal and national governments and contractors who are responding to bids from the respective governments. Although Energy does experience competition in specific product lines, particularly in the Energite, G-R-E-A-T and TMA lines, no other company presently markets as broad a line of highway crash cushion systems designed to shield as large a variety of fixed roadside hazards. Government Policies - ------------------- The market for crash cushions is directly affected by federal, state and local governmental policies. A substantial portion of Energy's sales is ultimately financed by funds provided to the states by the federal government. Historically, these funds have covered 75% to 90% of the cost of highway safety projects on roads constructed or maintained with federal assistance. Energy's sales could be adversely affected by a reduction in federal assistance for highway safety projects. The Intermodal Surface Transportation Efficiency Act of 1991, signed into law on December 18, 1991, provides authorization for highways and highway safety. Total funding of approximately $150 billion could be available over a six year period, but there is no assurance that the total $150 billion will be available or will be expended during the six year time period. The funds are distributed to the states each year. The states must set aside 10 percent for safety construction activities such as hazard elimination. In order for highway devices to be eligible for federal funding, such devices must be approved by the Federal Highway Administration. Energy is obligated to seek such approval for improvements or upgrades to such devices and for any new devices. Energy develops new products by working with federal and state highway officials to determine highway traffic safety needs, and then designs products to satisfy those needs. Energy is also active in promoting cooperation among state highway agencies, contractors and engineers to encourage comprehensive repair and maintenance of roadside crash attenuating systems. In addition to developing new products within the impact technology area, Energy is seeking to develop or to acquire new products which can be sold through its existing distribution networks to its existing customers. - 6 - Backlog - ------- As of June 30, 1996, 1995 and 1994, Energy had a backlog of unfilled orders for highway safety devices of $8,591,000, $10,200,000 and $8,057,000, respectively. The Company can usually fill an order within 6 to 8 weeks of receipt. Research and Development; Patents - --------------------------------- Energy conducts its own research, development and testing of new products before introducing them to the marketplace. The expenditures for research and development activities were $1,536,000, $1,545,000 and $1,972,000 in the years 1996, 1995 and 1994, respectively. Energy owns a number of U.S. and foreign patents covering its major highway safety products. It actively seeks patent and trademark protection for new developments. Raw Materials - ------------- The principal raw materials used in the production of highway safety devices are plastic and plastic resins, steel, aluminum and wood components. These raw materials are purchased from various suppliers and have been readily available throughout the last year. Energy believes that adequate supplies of these materials will continue to be available. Major Customers - --------------- No single customer represents a significant portion of Energy's highway safety business. Other - ----- In April 1995 Energy acquired a 40% interest in Quantic Industries, Inc. for $6,700,000. Quantic is a manufacturer of electronic and pyrotechnic devices for the aerospace and defense industries and has also developed a low-cost proprietary initiator for automobile airbag systems. Energy sold its 40% interest in May 1996 for $8,050,000. - 7 - COMPACT DISC MANUFACTURING - -------------------------- Description of Business - ----------------------- In 1975, the Company established a venture in Anaheim, California to conduct research on optical disc technology. In 1983, the venture, which was named LaserVideo, Inc., was one of the first to manufacture an audio CD in the United States. LaserVideo opened its second, significantly larger, CD manufacturing facility in Huntsville, Alabama in 1986. In December, 1987 Quixote sold LaserVideo to LaserVideo Acquisition Corporation (LVAC), a wholly owned subsidiary of Disctronics Australia Limited for $55,500,000, consisting of $29,000,000 in cash and $26,500,000 in a note. As a result of LVAC's failure to pay the note when due and after various legal actions and agreements between the parties, LaserVideo was reacquired on May 1, 1990 and renamed Disc Manufacturing, Inc. (DMI). The Company is involved in litigation related to this reacquisition of DMI which is discussed in Item 3 Legal Proceedings in this Form 10-K. DMI's principal activity is the manufacturing of optical discs. The optical disc is a medium for storing audio, video, text or graphics information and includes compact music discs (CD-Audio) and CD-ROM, as well as other types of optical discs. DMI converts information, generally either music or data, supplied by its customers, to optical disc format and then manufactures these optical discs for its customers. In most cases, DMI will also package these discs such that they would be ready for retail distribution. The advantage of optical discs is that they provide superior sound quality to that of competing audio media and can store vast amounts of information. One CD-ROM can contain up to 650 megabytes of data, or the equivalent of 250,000 pages of text. During 1994, DMI began a three year expansion plan that increased its annual capacity to approximately 200 million discs. In August 1994, DMI acquired a 218,000 square foot building in Anaheim, California to replace its smaller existing facility located nearby. The total cost of the expansion including the purchase of the new Anaheim building and equipment for both facilities was approximately $50 million. During May 1995, DMI began producing CD's at the new Anaheim facility. Approximately 56% of DMI's revenues during 1996 were from the manufacturing of CD-ROM's, 35% of revenues from CD manufacturing and the remainder from services such as special mastering and other contract research and development type activities. DMI is one of the ten largest compact disc manufacturers in the United States. DMI's plant in Huntsville, Alabama has a current annualized capacity of approximately 150 million discs. DMI's Anaheim facility has an annual production capacity of 50 million discs. While the plant continues to produce CD's to meet west coast-based CD-ROM and music companies' requirements, the facility also is used for contract research and development of non-audio optical storage products. - 8 - Competition and Marketing - ------------------------- CD-Audio - -------- Six large multi-national music companies, known as the "majors", have historically accounted for nearly 80 percent of the industry's U.S. music sales. Each of these companies is vertically integrated to varying degrees. The majors are as follows: *WEA (Warner Elektra Atlantic, part of Time Warner); *Sony Music (previously CBS Records); *MCA (a subsidiary of Seagrams); *Capitol/EMI (a subsidiary of Thorn/EMI of the United Kingdom); *PolyGram (partially owned by NV Philips of Holland) and *BMG/RCA (part of the Bertelsmann Group of West Germany). Each of the majors has manufacturing facilities to produce discs for their own needs, and in some cases, actively market for outside disc business as well. Some of the majors use outside sources, as a complement to their own facilities, to manufacture their music. While the majors account for about 80 percent of the U.S. music market, the remainder of the market is comprised of a large group of small independent record companies. These independents typically do not have their own manufacturing facilities. DMI markets CD's through a direct sales force to the majors and to independent record labels. Presently there are more than sixty CD manufacturers in the United States. The Company believes DMI is one of the ten largest manufacturers and one of the five largest independent manufacturers in the United States. Although production capacity exceeds the anticipated calendar year 1996 shipments of CD's, this excess capacity is utilized to meet the seasonal demands and short turnaround times in the CD industry. DMI competes for CD business on price and service. As CD capacities have increased, selling prices for CD's have declined. This has adversely affected profit margins at DMI. The Company expects selling prices to continue to decline within the foreseeable future. CD-ROM - ------ The market for CD-ROM's is much more widely dispersed than music CD's and includes publishers, consumer and commercial software distributors and other companies that need a cost effective way to disseminate large amounts of data with easy search and retrieval capabilities. There are more than 60 manufacturers of CD-ROM's in the United States. These manufacturers include many of those that make music CD's and in addition include companies that manufacture CD-ROM's exclusively. DMI sells CD-ROM's through a direct sales force and value-added resellers. DMI competes on the basis of quality, price and customer service. Selling prices are declining due to competitive pressures. The Company expects a continued decline in selling prices which will adversely affect profit margins at DMI. Backlog - ------- As of June 30, 1996, 1995 and 1994 DMI had a backlog of unfilled orders totaling $2,220,000, $3,552,000 and $2,033,000, respectively. Typically, music and CD-ROM companies demand manufacturing turnaround times (the time from which a sales order is received until that order is shipped) of ten days or less. Because of this, DMI believes the size of the backlog is not an effective indicator of its operating status. - 9 - RESEARCH AND DEVELOPMENT; PATENTS - --------------------------------- DMI is actively involved in developing mastering equipment and replication processes for the new Digital Versatile Disc (DVD) format. This two-sided, dual layer product may ultimately hold up to 17 gigabytes of information. It is expected to be particularly well suited for carrying movies or current multi-disc CD-ROM applications. The industry launch of this product is anticipated in the spring of 1997. DMI has entered into licensing arrangements with certain companies holding patents with respect to optical disc technology. These arrangements require DMI to pay royalties on each disc produced. Other companies have sued DMI for infringement related to their patents on optical disc technology. This litigation is discussed more fully in Item 3 Legal Proceedings in this Form 10-K. RAW MATERIALS - ------------- The principal raw materials in the manufacturing of compact discs are polycarbonate, aluminum, UV curable protective coating and ink. All items are available from multiple sources and competitively priced. DMI believes that adequate supplies of all materials will continue to be available in the long term. MAJOR CUSTOMERS - --------------- DMI has manufactured CD's for all six of the major U.S. music companies. BMG Music, which includes the RCA label, has historically been the largest single customer of DMI, and accounts for 8%, 18% and 21% of Quixote Corporation's annual consolidated revenue during the years ended June 30, 1996, 1995 and 1994, respectively. No other customer accounts for 10% or more of total Company revenues. During 1996, DMI lost BMG Music as its major customer. In September 1996, a new agreement was reached with BMG Music for an unspecified volume which the Company believes will be less than historical levels. LEGAL TECHNOLOGIES - ------------------ During 1996, the Company discontinued the operations of its legal technologies businesses, which had been involved in the development, manufacture and sale of products and systems for the legal community. Under multiple arrangements the Company sold certain assets of this segment for an aggregate sales price of $5,981,000 and the assumption of certain liabilities. Assets and liabilities retained by the Company at June 30, 1996 include accounts receivable, accounts payable, certain repetitive stress injury litigation and liabilities under certain lease obligations. - 10 - Item 2. PROPERTIES - ------------------
OWNED OR LOCATION AVAILABLE SPACE PURPOSE LEASED - -------- --------------- ------- -------- One East Wacker Drive 19,000 sq. ft. Executive Offices Leased Chicago, Illinois 250 Bamberg Drive 160,000 sq. ft. Manufacture of highway Owned Pell City, Alabama safety devices 3617 Cincinnati Avenue 22,000 sq. ft. Warehouse and research Owned Rocklin, California and development facility for highway safety devices 3300 N. Kenmore Street 81,000 sq. ft. Sale and manufacture of Owned South Bend, Indiana highway safety devices 739 College Drive 28,000 sq. ft. Storage facility for Owned South Bend, Indiana highway safety devices 1930 West Winton Avenue 20,000 sq. ft. Manufacture of highway Leased Hayward, California safety devices 4905 Moores Mill Road 332,000 sq. ft. Manufacture of compact Owned Huntsville, Alabama discs and CD-ROM's 3400 E. LaPalma Avenue 218,000 sq. ft. Manufacture of compact Owned Anaheim, California discs and CD-ROM's 1409 Foulk Road 3,000 sq. ft. Sale of CD-ROM's Leased Wilmington, Delaware 1025 North Brand Boulevard 1,500 sq. ft. Sale of Compact Discs Leased Glendale, California 441 Lexington Avenue 1,000 sq. ft. Sale of compact discs Leased New York, New York 1120 Cosby Way 31,000 sq. ft. Vacant - to be sold Owned Anaheim, California 200 Corporate Pointe 19,800 sq. ft. Vacant - to be sublet Leased Culver City, California 111 Bagby Street 8,100 sq. ft. Vacant - to be sublet Leased Houston, Texas 225 West Washington 5,300 sq. ft. Sublet Leased Chicago, Illinois 3000 Executive Parkway 5,000 sq. ft. Sublet Leased San Ramon, California 431 Lakeview Court 4,300 sq. ft. Vacant - to be sublet Leased Mt. Prospect, IL
Note: Present facilities are believed to be adequate to support the Company's current and anticipated requirements. - 11 - Item 3. LEGAL PROCEEDINGS - -------------------------- A. DMI - REACQUISITION RELATED LITIGATION. On January 17, 1989, in a case entitled QUIXOTE CORPORATION v. LASERVIDEO ACQUISITION CORPORATION a/k/a LV ACQUISITION CORP., DISCTRONICS AUSTRALIA LIMITED, AND QUATRO LIMITED, No. 89 CH 370, the Company filed suit in the Circuit Court of Cook County, Illinois, County Department, Chancery Division after LaserVideo Acquisition Corp. ("LVAC") defaulted on a $26.5 million note guaranteed by Quatro Limited ("Quatro") and Disctronics Australia Limited. The note was part of the payment due to Quixote in connection with the sale of its former LaserVideo, Inc. (now known as "Disc Manufacturing, Inc." or "DMI") subsidiary to the "Disctronics Group" (including Disctronics Limited, Disctronics Australia Limited, Quatro, LVAC, and their affiliates). On March 7, 1989, the Court entered a judgment in favor of the Company against LVAC, Disctronics and Quatro in the amount of $26,500,000, following the failure by the Disctronics Group to pay the amount due under a February 3, 1989 agreed settlement order. The judgment additionally entitled the Company to post-judgment interest of 10.5% per annum compounded quarterly until the judgment was satisfied. On March 17, 1989, the parties entered into an agreement pursuant to which, among other things, the parties entered into agreed orders staying the proceedings in the Illinois litigation and in a companion case filed in the Court of Chancery of the State of Delaware, New Castle County, on March 8, 1989 and entitled Civil Action No. 10668, QUIXOTE CORPORATION v. LASERVIDEO ACQUISITION CORPORATION, DISCTRONICS MANUFACTURING, INC., DISCTRONICS LIMITED, DISCTRONICS AUSTRALIA LIMITED AND QUATRO LIMITED. The Cook County and Delaware lawsuits were finally settled in December, 1989, when the parties entered into a comprehensive Work-Out Agreement pursuant to which Quixote became a DMI shareholder. On April 30, 1990, through the mechanisms established in the Work-Out Agreement, and as a result of the failure of the Disctronics Group to exercise an option to purchase Quixote's rights under the Work-Out Agreement, Quixote again became the sole shareholder of DMI. Since then, the following lawsuits have been filed and remain pending. 1. DISC MANUFACTURING, INC. ET AL. v. MASSEY ET AL., CV-90-H-01029-NE (U.S. District Court for the Northern District of Alabama). On May 21, 1990, Quixote and DMI filed this lawsuit against Disctronics Limited, Disctronics (US) Inc., Disctronics, Inc., Moray Investments Limited ("Moray"), Memory-Tech, Inc. ("Memory-Tech") and individuals Peter Massey, Kevin Donovan, David Mackie, and Douglas Adams. This lawsuit alleges that the individual defendants, each a DMI director until April 30, 1990, had in concert with Disctronics Limited and its affiliated companies, misappropriated DMI's corporate opportunity to acquire Memory-Tech, a competing compact disc manufacturer located in Plano, Texas. Rather than present this opportunity to DMI, the Disctronics Group and the individual directors caused Disctronics Limited to acquire Memory-Tech through a new subsidiary, Moray. While DMI and Memory-Tech were operated as an integrated company between March 2, 1990 (the acquisition date of Memory-Tech) and April 30, 1990, Memory-Tech competed with DMI after April 30, when Quixote gained control of DMI pursuant to the Work-Out Agreement. In this lawsuit, Quixote and DMI sought a constructive trust over Memory-Tech in favor of DMI, along with unspecified damages. The lawsuit also alleges that the defendants had violated DMI's federal trademark rights in the name "Disctronics", by operating Memory-Tech under the "Disctronics" name in competition with DMI. DMI was known as Disctronics Manufacturing, Inc. and used the trade name Disctronics, Inc. from approximately - 12 - June, 1988 until May 18, 1990. The complaint seeks both money damages and equitable relief. On June 11, 1990, the Court dismissed the claims against the individual defendants because of a lack of federal jurisdiction, and declined to exercise pendant jurisdiction over the state law corporate opportunity claims. Currently, Quixote and DMI's federal trademark claims are their only claims now pending in the federal district court action. On December 31, 1991 the remaining corporate defendants filed affirmative defenses to DMI's claims and certain of the defendants filed counterclaims alleging breach of contract, economic duress, tortious interference with contract and business relations, unjust enrichment, fraud, unfair competition and seizure of corporate opportunity among other claims. On January 17, 1992 DMI filed an answer and affirmative defenses to the counterclaim and also moved to dismiss the counterclaim and affirmative defenses, which motion was denied on February 10, 1992. On September 25, 1992, the Court dismissed all of the defendants' state law counterclaims, in order to allow those claims to be resolved in the parallel state court action. This left only the parties' federal trademark claims, which were stayed, pending resolution of the state court action. 2. DISC MANUFACTURING, INC. ET AL. v. MASSEY ET AL., CV90-1214L (Madison County Circuit Court, Alabama). On June 13, 1990, DMI and Quixote refiled their state law corporate opportunity claims, along with a claim under the Alabama trademark law, in the Circuit Court for Madison County, Alabama (Huntsville), the jurisdiction in which DMI is located. Quixote and DMI asked the Court to impose a constructive trust on Memory-Tech in addition to an unspecified amount of damages. The Court initially granted a temporary restraining order precluding defendants from transferring any interest in Memory-Tech pending the Court's determination following a preliminary injunction hearing. Following the preliminary injunction hearing, on July 30, 1990, the Court granted the motion for preliminary injunction. In connection with the preliminary injunction and pending the final outcome of the action, Quixote and DMI were required to post a $6 million certificate of deposit as injunction security. The defendants appealed the entry of the preliminary injunction and on May 15, 1992 the Alabama Supreme Court reversed the trial court's issuance of the injunction, remanding the case for further proceedings. Quixote's motion for a rehearing was denied on July 10, 1992. On May 21, 1992 defendants filed a Motion for Partial Summary Judgment on all counts of the complaint asserting breaches of fiduciary duty and using as its basis the Alabama Supreme Court decision. In addition, on March 4, 1991, the corporate defendants filed a counterclaim against Quixote, DMI and James H. DeVries. The counterclaim was made in twelve counts, including breach of the covenant of good faith and fair dealing, economic duress (as to the validity of the Work-Out Agreement), tortious interference with contract and business relations, unjust enrichment (also a claim with respect to the validity of the Work-Out Agreement), fraud, breach of contract (not under the Work-Out Agreement), account stated, claim for money had and received, unfair competition (with respect to the "Disctronics" trademark), state dilution claim, breach of fiduciary duty by Mr. DeVries and seizure of corporate opportunity by Quixote, and a claim for wrongfully seeking injunctive relief. The counterclaim sought damages of $73.8 million, to invalidate the Work-Out Agreement, punitive damages and other relief. The Company and DMI filed motions to dismiss the counterclaim. On September 9, 1992, Quixote and DMI filed three additional counts to specifically enforce a Settlement Agreement reached in June, 1991. On June 21, 1993, the Court entered judgment against Quixote and DMI on those settlement counts, in response to defendants' Motion for Summary Judgment. Quixote and DMI filed a motion for reconsideration of that ruling. - 13 - In April 1993, the Company and DMI filed a First Amended Complaint which added claims for unjust enrichment, fraud and tortious interference. Defendants moved to dismiss the First Amended Complaint. In May 1995, the Circuit Court ruled on various outstanding motions. The Court dismissed all of the Defendants' claims except the following claims: tortious interference with contract and business relations; fraud; breach of contract regarding a $300,000 escrow; a state dilution claim; and a claim for wrongfully seeking injunctive relief. In its May 1995 Order, the Court also dismissed all of the Company's and DMI's corporate opportunity claims based on breaches of fiduciary duties, along with the claims for unjust enrichment. The Court also denied the Company's and DMI's motion for a new trial with respect to the Court's prior summary judgment on the Company's and DMI's settlement-related counts. This left two counts of the Company's and DMI's First Amended Complaint in the case: a count for tortious interference with contract and business relations and a count for fraud. Both parties appealed the Court's May 1995 ruling. In September 1996 the Alabama Supreme Court ruled on the appeal, reversing the dismissal of the Company's claims and upholding the dismissal of all but one of the Defendants' claims which had been at issue. Consequently, the Company and DMI have pending claims for breach of fiduciary duty, tortious interference and fraud. The defendants pending claims are for wrongful injunction, "palming off", fraud and breach of contract. In March 1996, the Court approved DMI's substitution of a $6,000,000 surety bond backed by a $2,000,000 letter of credit to replace the certificate of deposit posted with the Alabama Circuit Court as injunction security. Court ordered mediations have not been successful. B. REPETITIVE STRESS INJURY LITIGATION. Stenograph Corporation, a discontinued operation, is one of a number of manufacturers of keyboard and other equipment that have been sued by individuals for arm, wrist and hand injuries, including carpal tunnel syndrome. All twenty-nine cases filed to date against Stenograph, and in some cases the Company, contend that the Stenograph machine (or other keyboard equipment) was defectively designed and that Stenograph failed to provide adequate warnings about how the equipment should be used to avoid injury. The cases request actual damages, in some cases specified as ranging from $500,000 to $1,000,000, and, in most of the cases, punitive damages, with some cases specifying an amount of $10,000,000. All of the cases have been referred to the Company's insurance carriers and, at this time, the Company believes that liability resulting from these cases, if any, (excluding punitive damages) will be covered by its insurance policies. The cases are in the discovery stage. C. RESORT VIDEO LTD. v. LASERVIDEO, INC. In September 1990, DMI was sued by Resort Video, Ltd. in the Superior Court of the State of California for the County of Los Angeles in an action entitled RESORT VIDEO, LTD. v. LASERVIDEO, INC., No. 74659. Resort Video, a former start-up company, claimed DMI failed to produce certain video discs on schedule, thereby injuring its business. After a trial, on August 25, 1992, the jury awarded Resort Video $975,000 in damages. DMI moved for a new trial which was granted in October 1992. Plaintiff appealed that decision and DMI cross-appealed the jury's decision. In June 1995 the California Court of Appeals affirmed the trial court's order granting a new trial based on excessive damages. Resort Video's petition for a rehearing was denied. No trial date has been set. D. THOMSON S.A. v TIME WARNER, ET AL. In February 1994, Disc Manufacturing, Inc., Quixote Corporation and a number of other companies were sued by Thomson S.A. of France in the United States District Court for the District of Delaware in an action entitled THOMSON S.A. v. TIME WARNER, INC., ET AL., No 94-83. The complaint charged that the defendants infringed four Thomson patents by making and selling audio compact discs and requested an order prohibiting defendants - 14 - from making or selling compact discs which infringe on the patents. No specified damages were asked for although the complaint asked that damages be trebled because it alleged the infringement was willful. In the fall of 1994, the Denon and Time Warner defendants entered into consent judgments with the plaintiff. After a trial, in July 1996, the jury found that the Thomson patents were invalid. Thomson has moved for judgment as a matter of law or, in the alternative, for a new trial and a decision is pending. E. SHERRELL SEARS v. ENERGY ABSORPTION SYSTEMS, INC. In June 1994, the Company, Energy Absorption Systems, and two employees or former employees were sued in an action entitled SHERRELL AND ROY SEARS v. ENERGY ABSORPTION SYSTEMS, INC., QUIXOTE CORPORATION, GERALD HAND, KEN WIMMER, UPJOHN COMPANY, IPI ISOFOAM SYSTEMS AND RELIANCE INSURANCE COMPANY ET AL., in the Circuit Court of St. Clair County, Alabama, No:CV94-128. Plaintiff claimed that she suffered a miscarriage caused by her exposure to fumes while working for Energy. The complaint contained alternating theories of workmen's compensation, tort, product liability, co-employee liability and/or negligent safety inspections. No monetary award was specified. In March 1995, the workmen's compensation claims against Energy were settled for a nominal amount. In August 1995 the Court granted Energy's motion for summary judgment, dismissing the claims against the Company and the Energy employees. That decision was subsequently affirmed on appeal by the Alabama Supreme Court. F. JEFFREY SMITH v. ENERGY ABSORPTION SYSTEMS, INC. In February 1994, Energy was sued in an action entitled JEFFREY AND JODY SMITH v. COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF TRANSPORTATION AND ENERGY ABSORPTION SYSTEMS, INC., in the Court of Common Pleas of Allegheny County, Pennsylvania, No. GD941220. The complaint alleges that leaking fluid from a crash cushion manufactured by Energy Absorption Systems caused plaintiff to lose control of his motorcycle and incur injuries. No monetary award is specified. The case has been referred to the Company's insurance carriers and discovery is proceeding. At this time, the Company believes that liability resulting from this case, if any, will be covered by its insurance policies. G. DISCOVISION ASSOCIATES v. DISC MANUFACTURING, INC. In January 1995, Disc Manufacturing, Inc. was served in an action entitled DISCOVISION ASSOCIATES v. DISC MANUFACTURING, INC., Case No. 95-21, U.S. District Court for the District of Delaware. The complaint alleges that DMI is infringing six DiscoVision patents and seeks injunctive relief and unspecified damages, including punitive damages, against DMI. In August 1995, DiscoVision was granted leave to amend its complaint to allege infringement by DMI of four additional patents. Discovery is proceeding and trial is set to begin in September 1997. H. DISC MANUFACTURING, INC. v. PIONEER AND DISCOVISION. In January 1995, DMI filed a complaint against Pioneer Electronic Corp., Pioneer Electronics (USA) Inc., Pioneer Capital Inc., and DiscoVision Associates in the U.S. District Court for the Central District of California, Case No. 95-0306, alleging violations of the antitrust laws and acts of unfair competition based on unlawful activities and anticompetitive tactics involving patents related to optical disc technology. DMI's complaint seeks damages, including punitive damages, and injunctive relief. This case has been transferred to the District Court in Delaware and consolidated with DiscoVision Associates' case against DMI pending in that jurisdiction (described in G. above). I. ESTATE OF THIEL v. ENERGY ABSORPTION SYSTEMS, INC. In December 1994, Energy Absorption Systems, Inc. was served in an action entitled FREDERICK W. THIEL AND MAUREEN THIEL v. SLATTERY ASSOCIATES ET AL., Superior Court of New Jersey, Docket No. MRS-L-1431-94. The complaint arises from a March 1992 accident in which the decendent lost control of his car and allegedly struck one of Energy's crash cushions. The complaint seeks unspecified damages from Energy and numerous defendants, including the State of New Jersey, the U.S. Federal - 15 - Highway Administration and various other governmental entities. The Company has referred the case to its insurance carrier and discovery is proceeding. At this time, the Company believes that liability resulting from this case, if any, will be covered by its insurance policies. J. ENERGY ABSORPTION SYSTEMS, INC. v. ROADWAY SAFETY. In April 1993, Energy filed suit in U.S. District Court for the Northern District of Illinois in an action entitled ENERGY ABSORPTION SYSTEMS, INC. v. ROADWAY SAFETY SERVICE, INC., No. 93C 2147 for infringement of Energy's U.S. Patent No. 4,289,419 seeking damages and an injunction. Roadway counterclaimed for a declaratory judgment of non- infringement and invalidity. In February 1996 the Court entered judgment in favor of Roadway, holding that Energy's patent was invalid and not infringed and awarded attorneys' fees and costs to Roadway. The Court later determined the award to be $280,386. Energy has appealed and a decision is pending. K. MICRO DYNAMICS v. STENOGRAPH CORPORATION. In 1994, Micro Dynamics, Ltd. sued Stenograph Corporation d/b/a Integrated Information Services, a discontinued operation, in an action entitled MICRO DYNAMICS, LTD. v. COMPULITS, INC. AND STENOGRAPH CORPORATION, U.S. District Court for the District of Maryland, Civil Action No. CD-94-1805, for copyright infringement, trademark infringement, disclosure and misappropriation of trade secrets and quantum meruit, all arising from IIS' use of certain software licensed by Micro Dynamics. Stenograph has denied the allegations and asserted various affirmative defenses and a counterclaim for intentional interference with two contracts between IIS and customers, unfair competition, breach of contract and quantum meruit. Both sides seek damages in excess of $1 million. Stenograph has filed a motion for summary judgment on all of Micro Dynamics' claims and a decision is pending. Discovery is proceeding on Stenograph's counterclaims. L. ERNEST CHICO v. THE STATE OF INDIANA, ENERGY ABSORPTION SYSTEMS, INC. AND HOOSIER COMPANY (Indiana Superior Court). On April 12, 1996 Energy Absorption Systems, Inc. was served in this action which arises from an accident in which the plaintiff hit one of Energy's crash cushions. The Company has referred the case to its insurance carrier and at this time believes that liability resulting from this case will be covered by its insurance policies. M. XEROTEX ET AL. v. INTEGRATED INFORMATION SERVICES, Case No. 96 Civ. 681 (U.S. District Court for the District of New Jersey). In February 1996, the Company was served in this action which arises from the purchase of certain software by Integrated Information Services, Inc. ("IIS") prior to the Company's sale of IIS. The complaint alleges breach of contract by IIS for its alleged failure to market the software and make contractual payments. IIS has answered the complaint and asserted a counterclaim against plaintiffs for breach of warranty, breach of contract, breach of the implied covenant of good faith and fair dealing and breach of the purchase agreement. Discovery is proceeding. The Company is involved in other legal actions, believes it has defenses for all claims, and is vigorously defending the actions. In the opinion of management, based on the advice of legal counsel, liabilities, if any, arising from the Company's legal actions should not have a material effect on the Company's results of operations or financial condition. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------ There were no matters submitted to a vote of security holders during the fourth quarter of fiscal 1996. - 16 - PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - ------------------------------------------------------------------------------- The Company's common stock is quoted on the National Association of Securities Dealers Automated Quotation System (NASDAQ) under the symbol QUIX. Set forth are the daily high and low last sales prices for the Company's common stock for the periods indicated, as reported by the National Quotations Bureau, Inc. These prices represent quotations between dealers in securities, do not include retail markdowns or commissions, and do not necessarily represent actual transactions.
Quarter Ending 9/30 12/31 3/31 6/30 - -------------- ------- ------- -------- ------- FISCAL 1996 High $13-1/4 $ 12 $ 8-1/2 $ 8-1/2 Low 10-1/2 7-1/4 6 5-3/4 FISCAL 1995 High $22-1/4 $19-1/8 $12-1/2 $12-3/4 Low 17-1/2 10-15/16 9-1/4 9-1/4
The current quoted price of the stock is listed daily in The Wall Street Journal in the NASDAQ National Market System section. As of August 5, 1996, there were 1,900 shareholders of record. DIVIDEND POLICY - --------------- During 1996, the Company declared semi-annual cash dividends of twelve cents per share each. During 1995, the Company declared semi-annual cash dividends of eleven cents per share each. - 17 - Item 6. SELECTED FINANCIAL DATA - -------------------------------- SELECTED FINANCIAL DATA Dollar amounts in thousands, except per share data
For the years ended June 30, 1996 1995 1994 1993 1992 - ---------------------------- -------- -------- -------- -------- -------- Operating results: Net sales........................$ 129,159 $ 133,818 $ 126,618 $ 106,061 $ 94,591 Gross profit..................... 38,973 46,147 50,903 43,331 37,519 Selling and administrative expenses 29,231 25,612 23,233 20,002 15,303 Research and development expenses 1,536 1,545 1,978 2,092 1,391 Other income (expense)........... (4,702) (3,406) (2,395) (2,445) (3,357) Earnings from continuing operations 2,574 10,707 15,623 10,302 10,028 Net earnings (loss).............. (9,892) 5,950 11,644 9,441 7,967 Cash dividends per common share.. .24 .22 .21 .20 Per share data: Primary earnings from continuing operations.....................$ .32 $ 1.32 $ 1.94 $ 1.31 $ 1.30 Net earnings (loss).............. (1.24) .73 1.44 1.20 1.03 Book value per common share...... 5.99 7.49 6.94 5.53 4.51 Weighted average common and common equivalent shares outstanding 8,003,924 8,100,385 8,066,192 7,867,658 7,742,825 Financial position: Total assets.....................$ 129,829 $ 164,835 $ 116,602 $ 104,591 $ 95,355 Working capital.................. 19,665 2,319 13,158 10,691 30,087 Net property, plant and equipment 88,326 87,031 53,534 53,343 46,639 Long-term debt, net.............. 58,000 68,000 38,975 40,000 47,187 Shareholders' equity............. 47,619 58,915 54,069 41,898 33,583
Note: Operating results and financial position for all periods presented have been restated to reflect the businesses of the Legal Technologies segment as discontinued operations. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- 1996 COMPARED TO 1995 - --------------------- The Company's sales for 1996 decreased 3% to $129,159,000 from $133,818,000 in 1995 due to reduced sales at Disc Manufacturing, Inc. (DMI). Sales at DMI decreased 6% in 1996 to $82,409,000 from $87,296,000 in 1995 due principally to the loss of a major customer, BMG Music, during 1996. Sales to BMG Music decreased $22,874,000 to $10,410,000 in 1996 from $33,284,000 in 1995. As a result, CD-Audio unit sales decreased 40% in 1996 from 1995. CD-ROM unit sales increased 78% during 1996 from 1995 reflecting continued growth in that market. As a result of declines in the average unit selling price of these products, CD-Audio sales dollars declined 42% and CD-ROM sales dollars only increased 44% during 1996 from 1995. Sales at Energy Absorption for 1996 were $46,750,000, up slightly from $46,522,000 for 1995. Sales of Energy's permanent crash cushions and parts increased but were largely offset by a decrease in truck-mounted attenuator (TMA) sales. - 18 - The gross profit margin in 1996 decreased to 30.2% from 34.5% in 1995 due to margin reductions at DMI. DMI's gross profit margin decreased as a result of a decrease in the selling prices of its products, particularly CD-ROM products, as well as from volume inefficiencies as a result of its capacity expansion concurrent with the loss of a major customer. DMI also had a reduction in gross profit margin due to a change in packaging sales mix. The Company expects to experience continued pressure on disc selling prices which may have a limiting effect on its future gross profit margins. Energy Absorption's gross profit margin for 1996 increased slightly due to a change in product mix and to less outsourcing of component parts than in 1995. Selling and administrative expenses in 1996 increased 14% to $29,231,000 from $25,612,000 in 1995. DMI's selling and administrative expenses increased principally due to an increase in legal expense related to two legal settlements and to an increase in bad debt expense as DMI's customer mix has shifted from the larger music companies to smaller CD-ROM companies. Energy Absorption's selling and administrative expenses increased due to increased marketing expenses and to the write-off of its investment in a sewer rehabilitation technology. Research and development expenses in 1996 were $1,536,000 compared to $1,545,000 in 1995. Research and development on Energy's sewer rehabilitation technology was suspended in 1996 but was offset by an increase in new product development at Energy that will result in the introduction of a new generation of products that will meet or exceed revised U.S. highway safety standards known as NCHRP 350. Interest income in 1996 was $523,000 compared to $392,000 in 1995 due to an increase in the rate of interest earned on its $6 million restricted certificate of deposit. In the third quarter, this CD was redeemed and replaced with a surety bond. Interest expense in 1996 increased 59% to $6,130,000 from $3,859,000 in 1995. This was due to the increase in the average long-term debt outstanding compared to last year. The Company recognized a $1,634,000 gain on asset sales which include the sale of its 40% interest in Quantic Industries, Inc. ($1,287,000) and from the sale of a patent ($347,000). Other expenses in 1996 increased from 1995 due to an increase in goodwill amortization and from a decrease in royalty income as a result of the patent sale. During 1996 the Company discontinued the operations of its legal technologies businesses, which had been involved in the development, manufacture and sale of products and systems for the legal community. As a result, the Company recorded a loss of $12,466,000 (net of income tax benefits of $8,000,000) for the operating losses of these businesses through the date of disposition and for the loss on their disposition. These results are presented as discontinued operations in the Company's Consolidated Statements of Operations. Under multiple arrangements the Company sold certain assets of this segment for an aggregate sales price of $5,981,000 and the assumption of certain liabilities. Assets and liabilities retained by the Company at June 30, 1996 include accounts receivable, accounts payable, certain repetitive stress injury litigation and liabilities under certain lease obligations. 1995 COMPARED TO 1994 - --------------------- The Company's sales for 1995 increased 6% to $133,818,000 from $126,618,000 in 1994 due to revenue growth at both of the Company's business segments. Sales at Energy Absorption for 1995 increased 7% to $46,522,000 from $43,433,000 in 1994 due principally to the inclusion of a full year of sales at Safe-Hit Corporation, a manufacturer of flexible guide posts, acquired in December - 19 - 1993. Safe-Hit contributed sales of $5,304,000 in 1995 compared to sales of $2,799,000 in 1994. DMI sales for 1995 increased 5% to $87,296,000 from $83,185,000 in 1994 due to increased unit sales of its CD-ROM discs. CD-ROM unit sales in 1995 increased 53% from 1994 while CD-Audio unit sales in 1995 increased 2% from 1994. These increases in unit volumes were offset somewhat by declines in the average unit selling prices of these products resulting in CD-ROM sales dollars increasing 21% from 1994 and CD-Audio sales dollars decreasing 5%. The gross profit margin in 1995 decreased to 34.5% from 40.2% in 1994 due to margin reductions at DMI. DMI's gross profit margin decreased as a result of a decrease in the average unit selling price of its products, particularly CD-ROM products, due to competition. This was offset somewhat by volume efficiencies. Energy Absorption's gross profit margin decreased as a result of an unfavorable change in product mix and to the outsourcing of several manufactured component parts. The outsourcing of these component parts continued until Energy Absorption's plant expansion was completed during the first half of fiscal 1996. Energy Absorption's gross profit margin was also reduced due to lower gross profit margins at Safe-Hit Corporation. Selling and administrative expenses in 1995 increased 10% to $25,612,000 from $23,233,000 in 1994 attributable principally to DMI. DMI's selling and administrative expenses increased due to increases in CD-ROM selling and marketing expenses and additional legal expenses. Energy Absorption's selling and administrative expenses also increased but to a lesser extent due to the inclusion of selling and administrative expenses at Safe-Hit Corporation. Research and development expenses in 1995 decreased 22% to $1,545,000 compared to $1,978,000 in 1994. This was due to a decrease in R&D at Energy Absorption as a result of reduced expenditures on its sewer rehabilitation technology. Interest income in 1995 was $392,000 compared to $298,000 in 1994 reflecting an increase in interest rates on invested funds. Interest expense increased 26% in 1995 to $3,859,000 from $3,060,000 in 1994. This was due principally to the increase in long-term debt but also to an increase in interest rates. Other income in 1995 was $61,000, down from income of $367,000 in 1994 as a result of a gain on the sale of a stock investment which occurred in 1994. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Company has cash of $2,250,000 and additional funds of $25,000,000 available under its bank arrangements. Operating activities were a source of cash for the Company providing cash of $13,144,000. Cash of $6,440,000 was used during 1996 for investing activities. The Company's primary investing activity was the purchase of $24,419,000 in plant and equipment. These capital expenditures were made primarily at DMI for the final phase of its expansion program. The Company received an aggregate of $15,991,000 in connection with the sales of its 40% investment in Quantic Industries, Inc., its discontinued operations and a patent. In fiscal 1996, the Company began a strategy of discontinuing and disposing of unprofitable businesses and dedicating its resources to maintain and expand its more profitable businesses. The Company believes that this strategy has had the effect of increasing earnings and improving both financial position and liquidity. The discontinuation of Legal Technologies, Inc. in September 1995 resulted in both the containment of losses ($7.6 million pretax in fiscal 1995) and cash outflows to support that business. In addition, the resulting sale of the various LTI companies generated cash proceeds of approximately $7 million during fiscal 1996. Financing activities used cash of $6,529,000 principally from payments made on both the Company's revolving credit note ($9,000,000) and convertible debentures ($1,975,000) satisfying the Company's sinking fund requirements for both fiscal 1996 and 1997. Proceeds from the redemption of a certificate of deposit generated $6,000,000. During 1997, the Company anticipates the need for approximately $8,000,000 in cash for capital expenditures. The Company may also need additional cash for the acquisition of businesses that complement its existing operating segments. - 20 - Also, each of the Company's operating segments will require additional investments in working capital to maintain growth. These expenditures will be financed either through cash generated from operations or from borrowings on the Company's revolving credit note. The Company believes its cash generated from operations and funds available under its existing credit facility are sufficient for all planned operating and capital requirements. See note 11 to the Consolidated Financial Statements for discussion regarding the Company's existing litigation. IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET EFFECTIVE - --------------------------------------------------------------------- Reference is made to footnote #2 of the Notes to the Consolidated Financial Statements. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ---------------------------------------------------- Report of Independent Accountants To the Shareholders and the Board of Directors of Quixote Corporation We have audited the consolidated balance sheets of Quixote Corporation and Subsidiaries as of June 30, 1996 and 1995, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended June 30, 1996. We have also audited the financial statement schedule listed in Park IV of Form 10-K, Item 14(a)2 for each of the three years in the period ended June 30, 1996. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Quixote Corporation and Subsidiaries as of June 30, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 1996 in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. /s/Coopers & Lybrand L.L.P. Chicago, Illinois August 12, 1996 - 21 - CONSOLIDATED STATEMENTS OF OPERATIONS Dollar amounts in thousands, except per share data
For the years ended June 30, 1996 1995 1994 - ---------------------------------- ---------- ---------- ---------- Net sales..............................$ 129,159 $ 133,818 $ 126,618 Cost of sales.......................... 90,186 87,671 75,715 ---------- ---------- ---------- Gross profit........................... 38,973 46,147 50,903 Operating expenses: Selling and administrative........... 29,231 25,612 23,233 Research and development............. 1,536 1,545 1,978 ---------- ---------- ---------- 30,767 27,157 25,211 ---------- ---------- ---------- Operating profit....................... 8,206 18,990 25,692 ---------- ---------- ---------- Other income (expense): Interest income...................... 523 392 298 Interest expense..................... (6,130) (3,859) (3,060) Gain on sale of assets............... 1,634 Other................................ (729) 61 367 ---------- ---------- ---------- (4,702) (3,406) (2,395) ---------- ---------- ---------- Earnings from continuing operations before provision for income taxes...... 3,504 15,584 23,297 Provision for income taxes............. 930 4,877 7,674 ---------- ---------- ---------- Earnings from continuing operations.... 2,574 10,707 15,623 Discontinued operations: Loss from operations, net of income taxes........................ (1,553) (4,757) (3,979) Loss on disposal, net of income taxes (10,913) ---------- ---------- ---------- Loss from discontinued operations.... (12,466) (4,757) (3,979) ---------- ---------- ---------- Net earnings (loss)....................$ (9,892) $ 5,950 $ 11,644 ========== ========== ========== Per share data: Primary earnings per share: Earnings from continuing operations.$ .32 $ 1.32 $ 1.94 ========== ========== ========== Net earnings (loss).................$ (1.24) $ .73 $ 1.44 ========== ========== ========== Average shares outstanding.......... 8,003,924 8,100,385 8,066,192 ========== ========== ========== Fully diluted earnings per share: Earnings from continuing operations.$ .32 $ 1.28 $ 1.80 ========== ========== ========== Net earnings (loss).................$ (1.24) $ .73 $ 1.37 ========== ========== ========== Average shares outstanding.......... 8,951,562 9,151,701 9,203,492 ========== ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. - 22 - CONSOLIDATED BALANCE SHEETS
Dollar amounts in thousands, except per share data As of June 30, 1996 1995 ---------- ---------- Assets Current assets: Cash and cash equivalents.........................$ 2,250 $ 2,075 Accounts receivable, net of allowance for doubtful accounts of $740 in 1996 and $810 in 1995................................ 22,433 24,564 Refundable income taxes........................... 3,016 Inventories....................................... 5,953 7,401 Deferred income tax assets........................ 2,643 1,582 Other current assets.............................. 1,223 779 ---------- ---------- Total current assets........................... 37,518 36,401 Property, plant and equipment at cost: Land.............................................. 6,773 6,325 Buildings and improvements........................ 29,574 24,354 Machinery and equipment........................... 102,995 94,830 Furniture and fixtures............................ 5,695 4,812 Leasehold improvements............................ 508 501 ---------- ---------- 145,545 130,822 Less accumulated depreciation and amortization.. (57,219) (43,791) ---------- ---------- 88,326 87,031 Other assets, including $6,000 restricted certificate of deposit in 1995.................... 3,985 21,502 Net assets of discontinued operations............... 19,901 ---------- ---------- $ 129,829 $ 164,835 ========== ========== Liabilities and Shareholders' Equity Current liabilities: Current portion of long-term debt................. $ 975 Accounts payable..................................$ 3,648 15,715 Dividends payable................................. 946 861 Income taxes payable.............................. 4,110 Accrued expenses: Payroll and commissions......................... 2,840 3,032 Accrued royalty................................. 1,155 972 Other........................................... 9,264 8,417 ---------- ---------- Total current liabilities..................... 17,853 34,082 Long-term debt, net of current portion.............. 58,000 68,000 Net liabilities of discontinued operations.......... 4,428 Deferred income tax liabilities..................... 1,929 3,838 Commitments and contingent liabilities.............. Shareholders' equity: Preferred stock, no par value; authorized 100,000 shares; none issued Common stock, par value $.01-2/3; authorized 15,000,000 shares; issued 8,671,101 shares-1996 and 8,581,416 shares-1995....................... 145 143 Capital in excess of par value of stock........... 29,751 29,268 Retained earnings................................. 23,196 34,977 Treasury stock, at cost, 718,921 shares-1996 and 1995........................................ (5,473) (5,473) ---------- ---------- Total shareholders' equity.................... 47,619 58,915 ---------- ---------- $ 129,829 $ 164,835 ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. -23- CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the three years ended June 30, 1996 Capital in Dollar amounts in thousands, Excess of Par Retained Treasury except per share data Common Stock Value of Stock Earnings Stock - ------------------------------------------------- ------------ -------------- -------- -------- Balances, July 1, 1993............................. 139 26,629 20,726 (5,596) Exercise of options for 116,096 common shares...... 2 481 11,644 Net earnings - 1994................................ Declaration of semi-annual cash dividends ($0.10 per share and $0.11 per share)............ (1,621) Issuance of 29,509 treasury shares for the acquisition of Safe-Hit Corporation.............. 221 223 Issuance of 69,358 common shares pursuant to the stock retirement plan............................ 1 1,195 Conversion of debentures into 1,315 common shares.. 25 ------------ -------------- -------- -------- Balances, June 30,1994............................. 142 28,551 30,749 (5,373) Exercise of options for 41,922 common shares....... 285 Net earnings - 1995................................ 5,950 Declaration of semi-annual cash dividends ($0.11 per share each)........................... (1,722) Issuance of 34,679 shares pursuant to the stock retirement plan.................................. 1 432 Purchase of 6,661 common shares at $15.01 per share (100) ------------ -------------- -------- -------- Balances, June 30,1995............................. 143 29,268 34,977 (5,473) Exercise of options for 55,006 common shares....... 1 250 Net loss - 1996.................................... (9,892) Declaration of semi-annual cash dividends ($0.12 per share each)........................... (1,889) Issuance of 34,679 shares pursuant to the stock retirement plan.................................. 1 233 ------------ -------------- -------- -------- Balances, June 30, 1996 8,671,101 common shares and 718,921 treasury shares..........................................$ 145 $ 29,751 $ 23,196 $ (5,473) ============ ============== ======== ========
The accompanying notes are an integral part of the consolidated financial statements. -24- CONSOLIDATED STATEMENTS OF CASH FLOWS DOLLAR AMOUNTS IN THOUSANDS
FOR THE YEARS ENDED JUNE 30, ---------------------------------- 1996 1995 1994 ---------- ---------- ---------- Earnings from continuing operations......................................... $ 2,574 $ 5,950 $ 11,644 Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and amortization............................................. 14,451 15,583 14,037 Provision for losses on accounts receivable............................... (71) (27) (423) Deferred income taxes..................................................... (1,909) (1,081) 4 Changes in operating assets and liabilities: Accounts receivable..................................................... 2,202 (68) (4,619) Inventories............................................................. 1,448 (2,254) 370 Refundable income taxes................................................. (3,016) Other current assets.................................................... (1,505) (528) 875 Accounts payable and accrued expenses................................... (1,769) 3,542 1,104 Income taxes payable.................................................... (4,110) 188 (1,993) Gain on sale of Quantic Industries, Inc................................... (1,287) Gain on sale of patent.................................................... (347) Loss on sewer rehabilitation business..................................... 601 ---------- Net cash from continuing operations....................................... 7,262 Discontinued operations Loss from operations, net of income taxes................................. (1,553) Loss on disposal, net of income taxes..................................... (10,913) Depreciation and amortization............................................. 2,025 Changes in operating assets and liabilities: Accounts receivable, net................................................ 9,698 Inventory............................................................... 3,027 Deferred taxes.......................................................... (855) Other current assets.................................................... 660 Property, plant and equipment, net...................................... 6,394 Patents, net............................................................ 584 System software, net.................................................... 100 Goodwill................................................................ 1,296 Accounts payable........................................................ (2,820) Accrued expenses........................................................ (5,227) Lease obligations....................................................... 3,466 ---------- Net cash from discontinued operations..................................... 5,882 ---------- ---------- ---------- Net cash provided by operating activities............................. 13,144 21,305 20,999 ---------- ---------- ---------- Investing activities: Purchase of property, plant and equipment................................. (24,419) (38,415) (10,994) Proceeds from sale of investment in Quantic Industries, Inc............... 8,050 Proceeds from sales of discontinued operations............................ 5,981 Proceeds from sale of patent.............................................. 1,960 Capitalized and purchased systems, design and software costs.............. (308) (1,529) Decrease (Increase) in funds deposited with IDB trustee................... 2,719 (2,719) Cash paid for acquired businesses and equity investments.................. (6,746) (8,075) Other..................................................................... (731) (421) ---------- ---------- ---------- Net cash used in investing activities................................. (6,440) (48,609) (20,598) ---------- ---------- ---------- Financing activities: Proceeds from revolving credit agreement.................................. 23,000 42,000 11,500 Payments on revolving credit agreement.................................... (32,000) (12,000) (13,800) Payments on convertible debentures........................................ (1,975) Proceeds from redemption of certificate of deposit........................ 6,000 Payment of semi-annual cash dividend...................................... (1,805) (1,714) (1,621) Proceeds from exercise of common stock options............................ 251 285 483 Repurchase of common stock for treasury................................... (100) ---------- ---------- ---------- Net cash provided by (used in) financing activities................... (6,529) 28,471 (3,438) ---------- ---------- ---------- Net change in cash and cash equivalents................................... 175 1,167 (3,037) Cash and cash equivalents at beginning of period.......................... 2,075 1,021 4,058 ---------- ---------- ---------- Cash and cash equivalents at end of period................................ $ 2,250 $ 2,188 $ 1,021 ---------- ---------- ---------- ---------- ---------- ----------
The accompanying notes are an integral part of the consolidated financial statements. -25- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF BUSINESS Quixote Corporation and its subsidiaries operate as a diversified technology company which develops, manufactures and markets specialized products through two industry segments. One segment is involved in the development, manufacturing and marketing of energy-absorbing highway crash cushions and related highway safety products for the protection of motorists and highway workers in principal markets which include both domestic and international governmental units. The other segment manufactures music compact discs and CD- ROM discs for the domestic entertainment, data storage, multimedia and education markets. 2. ACCOUNTING POLICIES The principal accounting policies of the Company are as follows: CONSOLIDATION The consolidated financial statements include the accounts of Quixote Corporation and its wholly-owned subsidiaries. CASH AND CASH EQUIVALENTS Cash in excess of operating requirements may be invested in income-producing investments generally having initial maturities of three months or less. These investments are stated at cost, which approximates market value. The Company considers these short-term instruments to be cash equivalents. Cash and cash equivalents in the consolidated statement of cash flows for 1995 includes cash related to discontinued operations. INVENTORIES Inventories are valued at the lower of cost (first-in, first-out method) or market. PROPERTY, PLANT AND EQUIPMENT The Company capitalizes expenditures for major renewals and betterments and charges current operations with the cost of maintenance and repairs. Provisions for depreciation and amortization have been computed on the straight-line method based on the expected useful lives of the assets as indicated below: Buildings and improvements 20 to 40 years Machinery and equipment 3 to 12 years Furniture and fixtures 3 to 10 years Leasehold improvements 5 to 10 years Prior to 1996, machinery and equipment were depreciated over expected useful lives of 3 to 10 years. The cost and accumulated depreciation and amortization relating to assets retired or otherwise disposed of are eliminated from the respective accounts at the time of retirement or other disposition and any resulting gain or loss is credited or charged to earnings. GOODWILL AND PATENTS Goodwill and patents are amortized on a straight-line basis over lives of 7 to 17 years. The Company assesses at each balance sheet date whether there has been a permanent impairment in the value of these assets. Such assessment includes consideration of possible obsolescence, demand, new technology, competition, and other -26- pertinent economic factors and trends that may have an impact on the value or remaining lives of these assets. INCOME TAXES The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. In addition, the amount of any future tax benefits are reduced by a valuation allowance to the extent such benefits are not expected to be fully realized. FINANCIAL INSTRUMENTS The fair value of cash and cash equivalents is assumed to approximate the carrying value of these assets due to their short maturity. The fair value of the Company's convertible debentures is estimated using available market information. MANAGEMENT ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NET ASSETS/LIABILITIES OF DISCONTINUED OPERATIONS The Company reclassifies those assets and liabilities associated with a discontinued business segment as a net amount under the caption "Net Assets (or Liabilities) of Discontinued Operations" on the accompanying consolidated balance sheet. As of June 30, 1996, the Company retained the following (assets) and liabilities related to the discontinued legal technologies operations: Deferred Taxes........................................... $ (863) Accounts Payable......................................... 100 Lease Obligations........................................ 4,275 Sales and other Taxes.................................... 150 Severance................................................ 400 Other.................................................... 366 --------- Net Liabilities of Discontinued Operations............... $ 4,428 --------- ---------
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Stock-Based Compensation. Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," encourages, but does not require, companies to recognize compensation expense for grants of stock, stock options, and other equity instruments to employees based on new fair value accounting rules. Although expense recognition for employee stock-based compensation is not mandatory, the pronouncement requires companies that choose not to adopt the new fair value accounting, to disclose the pro-forma net income and earnings per share under the new method. This new accounting principle is effective for the Company's fiscal year ending June 30, 1997. The Company believes that adoption will not have a material impact on its financial position or results of operations. In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." The statement requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment is evaluated by comparing future cash flows (undiscounted and without interest charges) expected to result from the use of the asset and its eventual disposition to the carrying amount of the asset. This new accounting principle is effective for the Company's fiscal year ending June 30, 1997. The Company believes that adoption will not have a material impact on its financial position. RECLASSIFICATIONS Certain amounts for the years ended June 30, 1995 and 1994 were reclassified to conform to the current year presentation. NOTE 3. ACQUISITIONS, DISPOSITIONS AND DISCONTINUED OPERATIONS In December 1993 the Company acquired the stock of Safe-Hit Corporation, a manufacturer of flexible guide post systems and portable sign systems for highway and parking lot applications. The operating results of Safe-Hit Corporation have been included in the Company's consolidated results of operations since the date of acquisition. In April 1995 the Company acquired a 40% common stock interest in Quantic Industries, Inc. for $6.7 million including expenses. The investment in Quantic, a manufacturer of electronic and pyrotechnic devices, was accounted for under the equity method of accounting. The cost in excess of the Company's pro rata share of the net assets of Quantic (approximately $4 million) is included in other assets in 1995. In May 1996, the Company agreed to sell its 40% interest to the majority shareholders in Quantic for $8,050,000 cash. A gain of $1,287,000 was realized on the sale and is included in other income for 1996. -27- In January 1996, Energy Absorption sold to Barrier Systems, Inc. certain patents related to its movable traffic barrier system. The sale price of $1,960,000 resulted in a gain of $347,000 which is included in other income for 1996. During 1996 the Company discontinued the operations of its legal technologies businesses, which had been involved in the development, manufacture and sale of products and systems for the legal community. Under multiple arrangements the Company sold certain assets and liabilities for an aggregate sales price of $5,981,000. Assets and liabilities retained by the Company at June 30, 1996 include accounts receivable, accounts payable, certain repetitive stress injury litigation as well as liabilities under certain lease obligations. These remaining assets and liabilities are valued based upon management's estimates, utilizing current available information as of the balance sheet date. It is reasonably possible, however, that these estimates could change in the near term. The results of operations of the legal technologies segment and the loss on its disposition are presented as discontinued operations in the accompanying consolidated statements of operations. The income tax benefits for the results of discontinued operations for the years ended 1996, 1995 and 1994 are $725,000, $1,652,000 and $1,479,000 respectively. The loss on disposal of $10,913,000 is net of income tax benefits of $7,275,000. Net sales for the discontinued businesses were $27,510,000 (1996), $51,593,000 (1995) and $50,320,000 (1994). The accompanying consolidated balance sheets and consolidated statements of operations have been restated in order to present the legal technologies segment as a discontinued operation for accounting purposes. NOTE 4. INVENTORIES Inventories consist of the following at June 30: Dollar amounts in thousands 1996 1995 - ---------------------------------------- ---------- ---------- Finished goods.......................... $ 944 $ 1,172 Work in process......................... 1,052 1,034 Raw materials........................... 3,957 5,195 ---------- ---------- $ 5,953 $ 7,401 ---------- ---------- NOTE 5. LONG-TERM DEBT Long-term debt consists of the following at June 30: Dollar amounts in thousands 1996 1995 - ---------------------------------------- ---------- ---------- Revolving credit facility due October 31, 1998, interest at variable rates.........$ 40,000 $ 49,000 8% Convertible subordinated debentures due 2011, interest due semi-annually, principal payable in annual sinking fund installments of $1,000.............. 18,000 19,975 ---------- ---------- Total long-term debt..................... 58,000 68,975 Less current portion..................... (975) ---------- ---------- Long-term debt, net......................$ 58,000 $ 68,000 ---------- ---------- -28- The Company has a three-year unsecured revolving credit agreement with three banks. The agreement provides a $65 million credit facility and contains both fixed and floating interest rate options, at the prime rate or lower, and contains affirmative and negative covenants including requirements that the Company maintain certain financial ratios and be profitable from continuing operations each year. The agreement may be extended one additional year on each anniversary date upon mutual consent of the Company and the banks. At any time during the three years, the Company may elect to convert the loan to a four year term with equal quarterly principal payments due throughout the term to amortize the loan in full. In August 1995, the Company obtained a $10,000,000 short-term loan with the bank group which was replaced with an increase in its revolving credit facility. In the third quarter of 1996, the Company violated certain covenants of its revolving credit facility including the earnings and leverage covenants. The Company received a waiver for these covenant violations and, in addition, reached an agreement with the banks to amend certain future covenants and to cap the credit facility at $65 million, formerly $70 million. The 8% debentures are convertible by the holders at any time prior to maturity into shares of common stock of the Company at a conversion price of $19.00 per share. They are redeemable at the option of the Company at par plus accrued interest and are subordinate to all senior indebtedness of the Company and all obligations under various leases. Unamortized costs incurred in issuing the 8% convertible subordinated debentures were $464,000 and $552,000 at June 30, 1996 and 1995, respectively, and are included in other assets. These costs are being amortized over the term of the agreement. During 1996 the Company satisfied its sinking fund requirements for both 1996 and 1997 through the purchase of its bonds on the open market. The gain of $257,000 is included in other income in 1996. The fair value of the 8% convertible debentures outstanding at June 30, 1996 is estimated to be $15,840,000. The aggregate amount of maturities of long-term debt for the four years subsequent to 1997 assuming renewal of the revolving credit note is as follows: $1,000,000 in 1998, $1,000,000 in 1999, $1,000,000 in 2000 and $1,000,000 in 2001. NOTE 6. STOCK OPTIONS AND STOCK TRANSACTIONS The Company has stock option plans for directors and employees, providing for grants of options as may be determined by the Audit/Compensation Committee of the Board of Directors. Options under the Long-Term Stock Ownership Incentive Plan and the Director Stock Option Plan are to be granted at no less than 100% of the current market price at the date of the grant. No charges are made to earnings in connection with the options. Information for the year ended June 30, 1996 with respect to options under the Company's plan is as follows: Number Option Price of Shares per Share --------- ------------------ Shares under option: July 1, 1995...................... 947,142 $ 4.25 to $21.00 Granted........................... 201,000 6.88 to 12.38 Exercised......................... (55,333) 4.25 to 6.88 Canceled or expired............... (194,860) 4.25 to 12.88 --------- June 30, 1996..................... 897,949 $ 4.25 to $21.00 ========= -29- Options outstanding at June 30, 1996 are exercisable for common shares as follows: 758,948 in 1997, 72,000 in 1998 and 67,001 in 1999. As of June 30, 1996, the Company has 2,104,494 common shares reserved for various conversion privileges and options. NOTE 7. SHAREHOLDER RIGHTS PLAN The Company has a Shareholder Rights Plan (the Plan) which was established to deter coercive takeover tactics and to prevent an acquirer from gaining control of the Company without offering a fair price to all of the Company's stockholders. The Plan calls for stockholders of record on July 25, 1988 to receive a dividend distribution of one right for each outstanding share of the Company's common stock. Each share issued after that date is also granted a right. Each right entitles the holder, upon the occurrence of certain events, to purchase a unit consisting of one one-thousandth of a share of Series A Junior Participating Preferred Stock, no par value, for $25 per unit. In addition, if an acquiring person becomes the beneficial owner of more than 20 percent of the Company's outstanding common stock, each right will entitle the holder (other than such acquiring person) to receive, upon exercise, common stock of the Company having a value equal to two times the exercise price of the right or $50. If after an acquiring person becomes the beneficial holder of more than 20 percent of the Company's outstanding common stock, the Company is acquired in a merger or other business combination in which the Company would not be the surviving corporation, or 50% or more of the Company's assets or earning power is sold, each holder shall have the right to receive, upon exercise, common stock of the acquiring corporation having a value equal to two times the exercise price of the right or $50. The Company may redeem the rights in whole, for $.01 per right, under certain circumstances. NOTE 8. STOCK RETIREMENT PLAN The Company's Long-Term Stock Ownership Incentive Plan contains a provision for a retirement stock award program for certain key executives of the Company. The award consists of shares of the Company's common stock and cash ending with the fiscal year in which the executive attains his or her 62nd birthday. In order to receive each year's stock award, the executive must remain employed with the Company through the end of the fiscal year, unless excused by reason of death or other involuntary termination. Participants are also required to retain the shares awarded for as long as they are employed by the Company or until age 65. The size of each participant's annual award is determined under accepted actuarial principles to provide a retirement income based upon a percentage of the executive's projected compensation and length of service at retirement, but only if the Company's stock price appreciates at a sustained target rate. The Plan resulted in a charge to earnings of $463,000 (1996), $766,000 (1995) and $1,239,000 (1994). -30- NOTE 9. INCOME TAXES The income tax provision (benefit) from continuing operations is comprised of the following for the three years ended June 30: Dollar amounts in thousands 1996 1995 1994 -------- -------- -------- Current: Federal............................$ 3,050 $ 5,154 $ 5,072 State.............................. 850 708 1,681 -------- -------- -------- 3,900 5,862 6,753 -------- -------- -------- Deferred: Federal............................ (2,302) (763) 714 State.............................. (668) (222) 207 -------- -------- -------- $ (2,970) $ (985) $ 921 -------- -------- -------- Provision for income taxes.........$ 930 $ 4,877 $ 7,674 ======== ======== ======== The components of the net deferred tax asset (liability) are as follows at June 30: Dollar amounts in thousands 1996 1995 -------- -------- Deferred tax assets: Accounts receivable allowance.....................$ 296 $ 293 Inventory valuation............................... 769 754 Compensated absences and medical claims........... 591 596 Tax over book basis in affiliates................. 1,509 1,496 Capital loss carryforwards........................ 967 1,589 Other liabilities and reserves.................... 2,272 1,422 Net operating loss carryforwards.................. 2,951 3,238 Provision for discontinued operations............. 2,742 1,887 Valuation allowance............................... (4,356) (5,321) Other............................................. 38 30 -------- -------- Total assets....................................$ 7,779 $ 5,984 ======== ======== Deferred tax liabilities: Book over tax basis of capital assets.............$ 4,323 $ 6,353 -------- -------- Total liabilities...............................$ 4,323 $ 6,353 -------- -------- Net deferred tax asset (liability)..............$ 3,456 $ (369) ======== ======== The valuation allowance relates principally to potential benefits from deferred tax assets that the Company estimates may not be realizable, including portions of tax over book basis in affiliates, capital loss carryforwards, net operating loss carryforwards, and tax credit carryforwards. The decrease in the valuation allowance is due to the expiration of unutilized net operating loss carryforwards and to the utilization of capital loss carryforwards which previously were not expected to be realized. At June 30, 1996, certain subsidiaries of the Company have approximately $7,400,000 of net operating loss carryforwards for tax purposes which arose in periods prior to acquisition by the Company. These carryforwards expire in years from 1997 through 2005. In addition, the Company has approximately $2,400,000 in capital loss carryforwards, substantially all of which will expire in 1997 and 1998. - 31 - The net deferred tax asset (liability) is presented on the balance sheet as follows at June 30: Dollar amounts in thousands 1996 1995 -------- -------- Current deferred tax asset........................$ 2,643 $ 1,582 Noncurrent deferred tax liability................. (1,929) (3,838) -------- -------- Net deferred tax asset (liability) of continuing operations........................ 714 (2,256) Current deferred tax asset of discontinued operations......................... 2,742 1,887 -------- -------- Total net deferred tax asset (liability)..........$ 3,456 $ (369) ======== ======== The current deferred tax asset of discontinued operations is netted against the net liabilities of discontinued operations in the liability section of the balance sheet. The Income tax (benefit) provision differed from the taxes calculated at the statutory federal tax rate as follows for the three years ended June 30: Dollar amounts in thousands 1996 1995 1994 -------- -------- -------- Taxes at statutory rate..........................$ 1,191 $ 6,099 $ 8,441 State income taxes............................... 120 321 1,246 Gain on equity investment........................ (207) Utilization of capital loss carryforwards........ (561) Other, including adjustment of estimates......... 180 (1,543) (1,806) -------- -------- -------- Income tax (benefit) provision...................$ 930 $ 4,877 $ 7,674 ======== ======== ========= NOTE 10. EARNINGS PER SHARE Primary earnings per share is computed by dividing the net earnings for each period by the weighted average number of common and common equivalent shares outstanding. Fully diluted earnings per share is computed based on the assumption that all of the convertible debentures are converted into common shares. Under this assumption, the weighted average number of shares is increased accordingly and net earnings is increased by the amount of interest expense and amortization of deferred debenture costs relating to the convertible debentures, less income tax benefits. Since the effect is anti-dilutive in 1996 and 1995, the amount reported is the same as primary earnings per share. NOTE 11. COMMITMENTS AND CONTINGENT LIABILITIES Aggregate rental expense under operating leases, principally for office and manufacturing facilities used in continuing operations was $844,000 in 1996, $764,000 in 1995 and $634,000 in 1994. These operating leases include options for renewal or purchase of the leased property. Annual minimum future rentals for lease commitments related to continuing operations range from approximately $700,000 in 1997 to $300,000 in 2001, an aggregate of $2,000,000 through 2001. The Company has employment agreements with certain executives, which are designed to retain the services of key employees and to provide for continuity of management in the event of an actual or threatened change in control of the Company. Upon occurrence of a triggering event after a change in control, as defined, the Company would be liable for payment of benefits under these agreements. - 32 - In 1990, Disc Manufacturing, Inc. (DMI) and the Company filed lawsuits in the federal and state courts in Alabama against the Disctronics Group, the former owners of DMI, relating to DMI's misappropriated corporate opportunity to acquire Memory-Tech, a competing compact disc manufacturer located in Plano, Texas, and certain trademark infringement claims. In response to the two Alabama suits, the Disctronics Group filed counterclaims alleging breach of contract, economic duress, fraud, unfair competition and seizure of corporate opportunity, among others. The Disctronics Group also filed an action in Dallas, Texas which was subsequently dismissed. In 1990, the Alabama state court issued a preliminary injunction in favor of the Company and DMI, precluding the Disctronics Group from transferring any interest in Memory-Tech and other restrictions. In connection with this injunction, the Company and DMI were required to post a $6,000,000 certificate of deposit as injunction security. In March 1996, the Circuit Court approved DMI's substitution of a $6,000,000 surety bond backed by a $2,000,000 letter of credit to replace the certificate of deposit. In May 1992, the Alabama Supreme Court reversed the judge's 1990 order granting preliminary injunction. In September 1992, Quixote filed additional counts seeking to enforce a settlement agreement reached in June 1991. The court ruled against the Company and DMI on those counts, in response to the Disctronics Group's motion for summary judgment. The Company and DMI sought reconsideration of that ruling, which the court denied in May 1995. The Company also amended its complaint to add claims for unjust enrichment, fraud and tortious interference, which the defendants moved to dismiss. In a May 1995 order, the court dismissed many of the defendants' and the Company's claims. Subsequent to the May 1995 order, defendants filed a notice of appeal and the Company has cross-appealed. The decision of the Alabama Supreme Court is pending. Court-appointed mediation has not been successful. Several companies holding patents related to optical disc technology have contacted the Company to request that DMI enter into licensing arrangements with them, and two companies have filed suits against DMI for patent infringement in Delaware federal court. In one of the cases, a federal jury ruled that the plaintiff's patents were invalid. In the other case, DMI filed a lawsuit against the plaintiff for antitrust violations and DMI's lawsuit has been consolidated with the plaintiff's patent case for all purposes. Discovery is proceeding. Royalties requested by the patent holder could result in a significant cost to DMI and in reduced future margins if licensing arrangements were required under the terms proposed by the patent holder. In September 1990, DMI was sued by a start-up business that claimed DMI failed to produce certain videodiscs on schedule, thereby injuring its business. After a trial, on August 25, 1992, the jury awarded the plaintiff $975,000 in damages. In October 1992, the court granted DMI's motion for a new trial which was subsequently affirmed by the appellate court. No trial date has been set. Stenograph Corporation, a discontinued operation, and a number of manufacturers of keyboards and related equipment have been sued by individuals for repetitive stress injuries. The 29 cases against Stenograph, and in some cases the Company, request damages ranging from $500,000 to $1,000,000, and in most cases, punitive damages, with some plaintiffs claiming an amount of $10,000,000. All cases have been referred to the Company's insurance carriers and the Company believes that any liability (excluding punitive damages) will be covered under its insurance policies. The Company does not believe there are grounds for the imposition of punitive damages and intends to vigorously defend all claims. The Company is involved in these and other legal actions common to its businesses. The Company has recorded loss contingencies where appropriate within the guidelines established by Statement of Financial Accounting Standards No. 5 "Accounting for Contingencies". The Company believes it has defenses for all such claims and is vigorously defending the actions. In the opinion of management, based on the advice of legal counsel, - 33 - liabilities, if any, arising from these legal actions should not have a material effect on the Company's results of operations or financial condition. NOTE 12. SUPPLEMENTAL CASH FLOW STATEMENT DISCLOSURES Cash paid for interest was $6,105,000 (1996), $4,015,000 (1995) and $3,360,000 (1994). Cash paid for income taxes was $1,495,000 (1996), $4,116,000 (1995) and $7,878,000 (1994). Purchases of property, plant and equipment of $9,225,000 which are included in accounts payable at June 30, 1995 were paid during 1996. NOTE 13. INDUSTRY SEGMENT INFORMATION The Company's operations are comprised of two industry segments: the manufacture and sale of energy absorbing highway safety devices and the manufacture and sale of compact discs. Interest income on corporate investments, interest expense, and certain unallocated corporate expenses have not been added or deducted from earnings from continuing operations before income taxes. Identifiable assets by segment are those assets that are used in the Company's operations by each industry segment. Corporate assets are principally cash and cash equivalents, and equipment. Substantially all the sales of highway safety devices are to contractors providing product and services to federal, state and local governmental units. Sales of the compact disc segment to the recording industry comprised 35% (1996), 58% (1995) and 64% (1994) of the segments sales. The Company derived approximately 8% (1996), 18% (1995) and 21% (1994) of consolidated net sales from a single customer in the compact disc segment. - 34 - Dollar amounts in thousands 1996 1995 1994 -------- -------- -------- Net Sales: Highway safety devices..................$ 46,750 $ 46,522 $ 43,433 Compact discs........................... 82,409 87,296 83,185 -------- -------- -------- Total.................................$129,159 $133,818 $126,618 ======== ======== ======== Earnings (Loss) from Continuing Operations Before Income Taxes: Highway safety devices..................$ 11,640 $ 11,797 $ 11,906 Compact discs........................... (2,529) 8,655 15,508 -------- -------- -------- Subtotal.............................. 9,111 20,452 27,414 Unallocated corporate................... (1,401) (1,355) Interest income (expense), net......................... (5,607) (3,467) (2,762) -------- -------- -------- Total.................................$ 3,504 $ 15,584 $ 23,297 ======== ======== ======== Identifiable Assets at Year-End: Highway safety devices..................$ 28,079 $ 35,809 $ 26,971 Compact discs........................... 93,673 97,888 62,719 Corporate............................... 8,077 11,237 8,594 -------- -------- -------- Total.................................$129,829 $144,934 $ 98,284 ======== ======== ======== Depreciation and Amortization Expenses: Highway safety devices..................$ 1,733 $ 1,676 $ 1,421 Compact discs........................... 12,657 9,732 8,300 Corporate............................... 61 124 126 -------- -------- -------- Total.................................$ 14,451 $ 11,532 $ 9,847 ======== ======== ======== Capital Expenditures: Highway safety devices..................$ 3,703 $ 3,107 $ 1,433 Compact discs........................... 11,483 41,115 8,033 Corporate............................... 8 33 6 -------- -------- -------- Total.................................$ 15,194 $ 44,255 $ 9,472 ======== ======== ======== - 35 - NOTE 14. QUARTERLY AND FINANCIAL DATA (UNAUDITED): Summarized quarterly financial data for years 1996 and 1995 follows:
Three Months Ended Dollar amounts in thousands, except per share data. 9/30 12/31 3/31 6/30 -------- -------- -------- -------- 1996 Net sales............................$ 37,643 $ 36,067 $ 26,426 $29,023 Gross profit......................... 11,759 9,669 6,586 10,959 Earnings (loss) from continuing operations......................... 1,769 452 (1,801) 2,154 Loss from discontinued operations.... (12,331) (135) -------- -------- -------- -------- Net earnings (loss)..................$(10,562) $ 317 $ (1,801) $ 2,154 ======== ======== ======== ======== Primary earnings (loss) per share: Continuing operations..............$ .22 $ .06 $ (.23) $ .27 -------- -------- -------- -------- Net earnings (loss)................$ (1.32) $ .04 $ (.23) $ .27 ======== ======== ======== ======== Fully diluted earnings (loss) per share: Continuing operations..............$ .22 $ .06 $ (.23) $ .26 -------- -------- -------- -------- Net earnings (loss)................$ (1.32) $ .04 $ (.23) $ .26 ======== ======== ======== ======== Three Months Ended Dollar amounts in thousands, except per share data 9/30 12/31 3/31 6/30 -------- -------- -------- -------- 1995 Net sales............................$ 33,768 $ 34,315 $ 32,393 $33,342 Gross profit......................... 12,508 11,721 11,190 10,728 Earnings from continuing operations......................... 3,052 2,481 2,320 2,854 Loss from discontinued operations.... (964) (1,604) (611) (1,578) -------- -------- -------- -------- Net earnings.........................$ 2,088 $ 877 $ 1,709 $ 1,276 ======== ======== ======== ======== Primary earnings per share: Continuing operations..............$ .37 $ .31 $ .28 $ .36 -------- -------- -------- -------- Net earnings.......................$ .25 $ .11 $ .21 $ .16 ======== ======== ======== ======== Fully diluted earnings per share: Continuing operations..............$ .36 $ .30 $ .28 $ .34 -------- -------- -------- -------- Net earnings.......................$ .25 $ .11 $ .21 $ .16 ======== ======== ======== ========
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES - ------------------------------------------------------------------------ None. -36- PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - ------------------------------------------------------------ Some of the information required in response to this item regarding Directors of the Registrant is set forth under "Election of Directors" on pages 2 and 3 of the Registrant's Definitive Proxy Statement for the Annual Meeting of Stockholders to be held on November 14, 1996 to be filed with the Commission on or about October 2, 1996 and is incorporated herein by reference. The executive officers of the Company, their ages and offices held by each during fiscal 1996 are as follows: Philip E. Rollhaus, Jr. 61 Chairman, Chief Executive Officer & Director - Quixote Corporation Chairman, Energy Absorption Systems, Inc. and Disc Manufacturing, Inc. Leslie J. Jezuit 50 President and Chief Operating Officer - Quixote Corporation James H. DeVries 64 Executive Vice President, General Counsel, Secretary & Director Myron R. Shain 56 Executive Vice President - Finance & Treasurer President, Disc Manufacturing, Inc. George D. Ebersole 60 President, Energy Absorption Systems, Inc. Mr. Rollhaus has been the Chairman and Chief Executive Officer and a Director of the Company since its formation in July 1969. Mr. Jezuit joined the Company as President and Chief Operating Officer of Quixote Corporation in 1996. Prior to that time, Mr. Jezuit served as President and Chief Operating Officer of RobertShaw Controls Company. Mr. DeVries joined the Company as Vice President in 1982. Mr. DeVries has been a Director of the Company since its formation. Mr. Shain joined the Company as Controller in April 1972, was elected Treasurer in 1975, Vice President in 1981 and Executive Vice President - Finance in 1986. Mr. Shain was elected President of Disc Manufacturing, Inc. in May 1990. Mr. Ebersole joined the Company as President of Energy Absorption Systems, Inc. in 1980. There is no family relationship between any of the officers described above. Except as set forth in Item 3, none of the officers described above are party or otherwise involved in any legal proceedings adverse to the Company or its subsidiaries. ITEM 11. EXECUTIVE COMPENSATION - -------------------------------- The information required in response to this item is set forth under the caption "Renumeration of Directors and Executive Officers" of the Registrant's Definitive Proxy Statement for the Annual Meeting of Stockholders to be held on November 14, 1996 to be filed with the Commission on or about October 2, 1996 and is incorporated herein by reference. -37- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - ------------------------------------------------------------------------ The information required in response to this item is set forth under the caption "Stock Ownership by Certain Beneficial Owners" of the Registrant's Definitive Proxy Statement for the Annual Meeting of Stockholders to be held on November 14, 1996 to be filed with the Commission on or about October 2, 1996 and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------------------------------------------------------- The information required in response to this item is set forth under the caption "Certain Transactions and Business Relationships" of the Registrant's Definitive Proxy Statement for the Annual Meeting of Stockholders to be held on November 14, 1996 to be filed with the Commission on or about October 2, 1996 and is incorporated herein by reference. -38- PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ---------------------------------------------------------------- Item Page Number in Number This Report - ------ -------------- (a).1. Financial Statements -------------------- Report of Independent Accountants 21 Consolidated Statements of Operations for the years ended June 30, 1996, 1995 and 1994 22 Consolidated Balance Sheets as of June 30, 1996 and 1995 23 Consolidated Statements of Shareholders' Equity for the years ended June 30, 1996, 1995 and 1994 24 Consolidated Statements of Cash Flows for the years ended June 30, 1996, 1995 and 1994 25 Notes to Consolidated Financial Statements 26-36 (a).2. Financial Statement Schedule ----------------------------- The financial statement schedule listed under Item 14(d) is filed as part of this annual report. All other schedules have been omitted because the required information is included in the consolidated financial statements or notes thereto or because they are not applicable or not required. (a).3. The exhibits listed under Item 14(c) are filed as part of this annual report. (b). Reports on Form 8-K ------------------- On May 1, 1996, the Company filed a Form 8-K/A Amendment submitting pro forma financial information required in connection with a report on Form 8-K filed March 4, 1996, reporting the sale of certain assets of Stenograph Corporation and its divisions, Integrated Information Services and Litigation Sciences. (c). Exhibits -------- *Management contract or compensatory plan or agreement 3.(a) Restated Certificate of Incorporation dated June 27, 1980; Certificate of Amendment to Certificate of Incorporation dated November 17, 1981; Certificate of Amendment to Certificate of Incorporation dated February 15, 1985; Certificate of Amendment to Certificate of Incorporation dated February 25, 1986; and Certificate of Designations, Preferences and Rights - 39 - of Series A Junior Participating Preferred Stock dated July 27, 1988, filed as Exhibit 3(a) to the Company's Form 10-K Report for the fiscal year ended June 30, 1991, File No. 0-7903, and incorporated herein by reference. (b) Restated By-Laws of the Company as amended through January 23, 1996,filed as Exhibit 3(b) to the Company's Form 10-Q Report for the quarter ended March 31, 1996, File No. 0-7903, and incorporated herein by reference. 4.(a) Indenture under the Trust Indenture Act of 1939 between the Company and LaSalle National Bank dated April 15, 1986, filed as Exhibit 4(b) to the Company's Form 10-Q Report for the quarter ended March 31, 1986, File No. 0-7903, and incorporated herein by reference. (b) Rights Agreement dated as of July 15, 1988, between the Company and First National Bank of Boston, as Rights Agent, filed as Exhibit 1 to the Company's Form 8-A Registration Statement dated July 25, 1988, File No. 0-7903, and incorporated herein by reference. 10.(a) Loan Agreement ("Loan Agreement") dated as of June 26, 1992 among the Company, Energy Absorption Systems, Inc. ("Energy"), Disc Manufacturing, Inc. ("DMI"), Stenograph Corporation ("Stenograph"), The Northern Trust Company ("Northern"), NBD Bank, N.A. ("NBD") and LaSalle National Bank ("LaSalle") and First Amendment thereto dated as of June 30, 1992, filed as Exhibit 10(a) to the Company's Form 10-K Report for the fiscal year ended June 30, 1992, file No. 0-7903, and incorporated herein by reference; Second Amendment to Loan Agreement dated as of May 28, 1993 and Third Amendment to Loan Agreement dated as of June 26, 1993, filed as Exhibit 10(a) to the Company's Form 10-K Report for the fiscal year ended June 30, 1993, File No. 0-7903, and incorporated herein by reference; Fourth Amendment to Loan Agreement dated as of May 31, 1994, filed as Exhibit 10(a), to the Company's Form 10-K Report for the fiscal year ended June 30, 1994, File No. 0-7903, and incorporated herein by reference; Fifth Amendment to Loan Agreement dated as of December 1, 1994, filed as Exhibit 10(a) to the Company's Form 10-Q for the quarter ended December 31, 1994, File No. 0-7903, and incorporated herein by reference; Sixth Amendment to Loan Agreement dated as of April 3, 1995, filed as Exhibit 10(a) to the Company's Form 10-Q Report for the quarter ended March 31, 1995, File No. 0-7903, and incorporated herein by reference; Seventh Amendment to Loan Agreement dated as of November 10, 1995, filed as Exhibit 10(a) to the Company's Form 10-Q Report for the quarter ended December 31, 1995, File No. 0-7903, and incorporated herein by reference; Eighth Amendment to Loan Agreement effective as of March 31, 1996, filed herewith; Revolving Credit Notes dated as of March 31, 1996 from the Company and its subsidiaries to the Northern, NBD and LaSalle, filed herewith; Guaranty Agreement by and between DMI and the First Alabama Bank dated as of March 31, 1993, filed as Exhibit 10(a) to the Company's Form 10-K Report for the fiscal year ended June 30, 1993, File No. 0-7903, and incorporated herein by reference. (b)* 1981 Employee Incentive Stock Option Plan, as amended through June 3, 1988, filed as Exhibit 4.4 to the Company's Form S-8 Registration Statement No. 33-22289, and incorporated herein by reference; Amendment dated February 12, 1989 to the Employee Incentive Stock Option Plan, filed as Exhibit 10(c) to the Company's Form 10-K Report for the fiscal year ended June 30, 1989, File No. 0-7903, and incorporated herein by reference. (c)* 1991 Incentive Stock Option Plan, filed as Exhibit 4(a) to the Company's S-8 Registration Statement No. 33-50428, and incorporated herein by reference. (d)* Restated 1972 Director Stock Option Plan, as amended through - 40 - June 3, 1988, filed as Exhibit 4.3 to the Company's S-8 Registration Statement No. 33-22289, and incorporated herein by reference; Amendment dated February 12, 1989 to the Restated Director Stock Option Plan, filed as Exhibit 10(d) to the Company's Form 10-K Report for the fiscal year ended June 30, 1989, File No. 0-7903, and incorporated herein by reference. (e)* 1991 Director Stock Option Plan, filed as Exhibit 4(b) to the Company's S-8 Registration Statement No. 33-50428, and incorporated herein by reference. (f)* 1993 Long-Term Stock Ownership Incentive Plan, filed as Exhibit 4(a) to the Company's S-8 Registration Statement No. 33-74488, and incorporated herein by reference; Retirement Award Agreements for Philip E. Rollhaus, Jr., James H. DeVries, Myron R. Shain and George D. Ebersole, dated June 30, 1993 and as amended on August 23, 1996, filed herewith. (g) Lease Agreement between the Company and United Insurance Company of America ("Company Lease") dated July 2, 1993, filed as Exhibit 10(j) to the Company's Form 10-K Report for the fiscal year ended June 30, 1993, File No. 0-7903, and incorporated herein by reference; Lease Amendment to Company Lease dated as of May 17, 1994, filed as Exhibit 10(h) to the Company's Form 10-K Report for the fiscal year ended June 30, 1994, File No. 0-7903, and incorporated herein by reference; Second Amendment to Company Lease dated January 30, 1995 and Third Amendment to Company Lease dated December 15, 1995, filed as Exhibits 10(b) and 10(c) to the Company's Form 10-Q Report for the quarter ended December 31, 1995, File No. 0-7903, and incorporated herein by reference; Amended and Restated Lease Agreement dated as of September 1, 1987 by and between the Industrial Development Board of the City of Huntsville, Alabama, (the "Board") and LaserVideo, Inc. (now known as Disc Manufacturing Inc. ("DMI")), filed as Exhibit 10(g) to the Company's Form 10-K Report for the fiscal year ended June 30, 1990, File No. 0-7903, and incorporated herein by reference; Series 1991 Amendment to Lease Agreement dated as of April 1, 1991 by and between DMI and the Board, filed as Exhibit 10(i) to the Company's Form 10-K Report for the fiscal year ended June 30, 1991, File No. 0-7903, and incorporated herein by reference; Series 1993 Amendment to Lease Agreement dated as of March 1, 1993 by and between DMI and the Board and Financing Statement, filed as Exhibit 10(j) to the Company's Form 10-K Report for the fiscal year ended June 30, 1993, File No. 0-7903, and incorporated herein by reference; Office Lease between Amberjack, Ltd. and Litigation Sciences, Inc. dated July 2, 1990, and Lease Agreement between Coventry Fund III, Ltd. and Litigation Sciences, Inc. dated July 30, 1990, filed as Exhibit 10(a) to the Company's Form 10-Q Report for the quarter ended December 31, 1993, File No. 0-7903 and incorporated herein by reference; First Amendment to Office Lease between Amberjack Ltd. and Stenograph Corporation dated as of June 23, 1994, filed as Exhibit 10(h) to the Company's Form 10-K Report for the fiscal year ended June 30, 1994, File No. 0-7903, and incorporated herein by reference. (h)* Employment agreements dated as of June 24, 1991 between the Company and each of Messrs. Philip E. Rollhaus, Jr., James H. DeVries and Myron R. Shain, filed as Exhibit 10(k) to the Company's Form 10-K Report for the fiscal year ended June 30, 1991, File No. 0-7903, and incorporated herein by reference; Key Employee Severance Agreement between the Company and George D. Ebersole; Trust Agreement dated March 3, 1989 between the Company and The Northern Trust Company, as trustee, filed as Exhibits 28.4 and 28.5, respectively, to the Company's Form 8-K Report dated April 14, 1989, and incorporated herein by reference; Amendment to Trust Agreement dated November 9, 1989, filed as Exhibit 10(j) to the Company's Form 10-K Report for the fiscal year ended June 30, 1990, File No. 0-7903, and incorporated herein by reference; Amendment to Trust Agreement dated as of June 13, 1991, filed as Exhibit 10(k) to the - 41 - Company's Form 10-K Report for the fiscal year ended June 30, 1991, File No. 0-7903, and incorporated herein by reference; Letter Agreement dated December 15, 1995 between the Company and Leslie J. Jezuit, filed as Exhibit 10(d) to the Company's Form 10-Q Report for the quarter ended December 31, 1995, File No. 0-7903, incorporated herein by reference; Key Employee Severance Agreement dated as of April 30, 1996 between the Company and Leslie J. Jezuit, filed as Exhibit 10(a) to the Company's Form 10-Q Report for the quarter ended March 31, 1996, File No. 0-7903, and incorporated herein by reference. (i) Summary Plan Description for the Incentive Savings Plan of the Company Amended and Restated to Reflect Provisions Effective July 1, 1993, filed as Exhibit 10(j) to the Company's Form 10-K Report for the fiscal year ended June 30, 1994, File No. 0-7903, and incorporated herein by reference. (j) Agreements between the Company, Philip E. Rollhaus, Jr. and Yukio Endo dated May 5, 1986, filed as Exhibit 10(a) to the Company's Form 10-Q Report for the quarter ended March 31, 1986, File No. 0-7903, and incorporated herein by reference. (k) Disposition and Development Agreement dated August 30, 1994 by and among The Anaheim Redevelopment Agency, the City of Anaheim and Disc Manufacturing, Inc., filed as Exhibit 10(p) to the Company's Form 10-K Report for the fiscal year ended June 30, 1994, File No. 0-7903, and incorporated herein by reference. (l) Agreement for Purchase and Sale dated February 13, 1996 between Stenograph Acquisition Corp., IIS Acquisition Corp., Pettibone Corp., and Quixote Corporation, Stenograph Corporation, Legal Technologies, Inc., Legal Technologies Limited and Integrated Information Services filed as Exhibit 2.1 to the Company's 8-K Report dated March 4, 1996, File No. 0-7903, and incorporated herein by reference. (m) Agreement for Purchase and Sale dated January 25, 1996 between Stenograph Corporation and LSI Acquisition, Inc. filed as Exhibit 2.2 to the Company's 8-K Report dated March 4, 1996, File No. 0-7903, and incorporated herein by reference. (n) Agreement for Purchase and Sale of Assets dated July 3, 1996 between Integrated Information Services, Inc., Pettibone Corporation, Quixote Corporation and Discovery Products, Inc., filed herewith. 11. Statement regarding computation of earnings per share 21. Subsidiaries of the Company 23. Consent of Coopers & Lybrand, L.L.P. as Independent Certified Public Accountants 27. Financial Data Schedule (d) Schedules: --------- II - Valuation and Qualifying Accounts and Reserves - 42 - SIGNATURES Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunder duly authorized QUIXOTE CORPORATION (Registrant) Dated: February 24, 1997 By: /s/Philip E. Rollhaus, Jr. -------------------------- -------------------------------- Philip E. Rollhaus, Jr., Chairman Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------- ----- ---- /s/Philip E. Rollhaus, Jr. - --------------------------- Chairman and Director February 24, 1997 Philip E. Rollhaus, Jr. (Chief Executive Officer) /s/Leslie J. Jezuit - --------------------------- President and Chief Operating February 24, 1997 Leslie J. Jezuit Officer /s/Daniel P. Gorey - --------------------------- Vice President, Chief Financial February 24, 1997 Daniel P. Gorey Officer and Treasurer (Chief Accounting and Financial Officer) /s/James H. DeVries - --------------------------- Executive Vice President and February 24, 1997 James H. DeVries Secretary, Director /s/William G. Fowler - --------------------------- Director February 24, 1997 William G. Fowler /s/Lawrence C. McQuade - --------------------------- Director February 24, 1997 Lawrence C. McQuade - --------------------------- Director David S. Ruder /s/Robert D. van Roijen, Jr. - --------------------------- Director February 24, 1997 Robert D. van Roijen, Jr.
- 43 - QUIXOTE CORPORATION & SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES For the years ended June 30, 1996, 1995 and 1994
Column A Column B Column C Column D(a) Column E - -------- -------- ----------- ----------- --------- Additions Balance at Charged to Balance at Beginning of Costs and End of Description Period Expenses Deductions Period - ----------- ------------ ---------- ----------- --------- Deducted from Receivables: Allowance for Doubtful Accounts: Year ended June 30, 1996 $ 810,000 $ 530,000 $ 600,000 $ 740,000 ========== ========== ========== ========== Year ended June 30, 1995 $ 665,000 $ 463,000 $ 318,000 $ 810,000 ========== ========== ========== ========== Year ended June 30, 1994 $ 520,000 $ 631,000 $ 486,000 $ 665,000 ========== ========== ========== ==========
NOTES: (a) Column D represents accounts written off as uncollectable, net of collections on accounts previously written off. - 44 - EXHIBIT INDEX
EXHIBIT NUMBER EXHIBITS ---------------------- ------------------------------------------- 10(a) EIGHTH AMENDMENT TO LOAN AGREEMENT EXECUTED AS OF JUNE 4, 1996 AND EFFECTIVE MARCH 31, 1996. 10(a) REVOLVING CREDIT NOTES DATED MARCH 31. 1996. 10(f) RETIREMENT AWARD AGREEMENTS 10(f) AMENDED RETIREMENT AWARD AGREEMENTS DATED AUGUST 23, 1996. 10(n) AGREEMENT FOR PURCHASE AND SALE OF ASSETS DATED JULY 3, 1996. 11 STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE. 21 SUBSIDIARIES OF THE COMPANY. 23 CONSENT OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS. 27 FINANCIAL DATA SCHEDULE
- 45 - EX-10.(A) 2 EXHIBIT 10(A) EXECUTION COPY EIGHTH AMENDMENT TO LOAN AGREEMENT THIS EIGHTH AMENDMENT TO LOAN AGREEMENT ("Eighth Amendment"), executed as of June 4, 1996 and effective as of March 31, 1996, is by and among QUIXOTE CORPORATION, a Delaware corporation ("Quixote"), ENERGY ABSORPTION SYSTEMS, INC., a Delaware corporation ("EAS"), DISC MANUFACTURING, INC., a Delaware corporation ("DMI"), LEGAL TECHNOLOGIES, INC., a Delaware corporation ("LTI"), QUIXOTE STENO CORPORATION (f/k/a Stenograph Corporation), a Delaware corporation ("Stenograph"), DISCOVERY PRODUCTS, INC. (f/k/a Stenograph Legal Services, Inc.), a Delaware corporation ("SLS"), SPIN-CAST PLASTICS, INC., an Indiana corporation ("Spin-Cast"), COURT TECHNOLOGIES, INC., a Delaware corporation ("Court"), COMPOSITE COMPONENTS, INC., a Delaware corporation ("CCI"), QUIXOTE IIS CORPORATION (f/k/a Integrated Information Services, Inc.), a Delaware corporation ("IIS"), QUIXOTE LSI CORPORATION (f/k/a Litigation Sciences, Inc.), a Delaware corporation ("LSI"), and SAFE-HIT CORPORATION, a Nevada corporation ("Safe-Hit"), the lenders ("Lenders") named in the Loan Agreement referred to below, and THE NORTHERN TRUST COMPANY, an Illinois banking corporation ("Northern"), as agent for the Lenders (Northern, in such capacity, being "Agent"). Quixote, EAS, DMI, LTI, Stenograph, SLS, Spin-Cast, Court, CCI, IIS, LSI, and Safe-Hit are individually and collectively referred to herein as "Borrower". RECITALS A. Quixote, EAS, DMI, Stenograph, SLS, Spin-Cast, Court, CCI, IIS, LTI, LSI, Safe-Hit, Agent and Lenders are parties to that certain Loan Agreement dated as of June 26, 1992, as amended by a First Amendment to Loan Agreement dated as of June 30, 1992, as further amended by a Second Amendment to Loan Agreement dated as of May 28, 1993, as further amended by a Third Amendment to Loan Agreement dated as of June 26, 1993, as further amended by a Fourth Amendment to Loan Agreement dated May 31, 1994, as further amended by a Fifth Amendment to Loan Agreement dated December 15, 1994, as further amended by a Sixth Amendment to Loan Agreement dated April 3, 1995 and as further amended by a Seventh Amendment to Loan Agreement dated November 10, 1995 (as so amended and as the same may be hereafter amended, restated, supplemented or otherwise modified, the "Loan Agreement"). B. Effective January 31, 1996, Litigation Sciences, Inc. changed its corporate name to Quixote LSI Corporation. C. Effective May 15, 1996, Stenograph Corporation changed its corporate name to Quixote Steno Corporation. D. Effective May 15, 1996, Integrated Information Services, Inc. changed its corporate name to Quixote IIS Corporation. E. Subject to the terms, covenants, conditions and representations set forth herein and at the request of Borrower, the Lenders wish to waive certain Defaults and/or Events of Default under the Loan Agreement. F. Pursuant to the terms of the Loan Agreement and at the request of Borrower, the parties wish to further amend the Loan Agreement. G. In consideration of the mutual agreements contained herein, and subject to the terms and conditions hereof, the parties hereto agree as follows: 1. AMENDMENTS TO LOAN AGREEMENT. 1.1 TERMS USED. Terms used but not otherwise defined herein are used with the same meanings as provided therefor in the Loan Agreement. 1.2 SECTION 1 OF THE LOAN AGREEMENT. Section 1 of the Loan Agreement is hereby amended by deleting the definition of Maximum Revolving Credit Loan and inserting the following in its stead: "'Maximum Revolving Credit Loan' shall mean an amount equal to $65,000,000, subject to reduction as provided in Section 2.4." 1.3 ADDITIONS TO SECTION 1 OF THE LOAN AGREEMENT. Section 1 of the Loan Agreement is hereby further amended by adding the following definitions thereto in their proper alphabetical order: "'Adjusted EBITDA to Debt Service Payments Ratio' shall mean, for any fiscal period, the ratio of (a) (i) EBITDA during such fiscal period MINUS (ii) Capital Expenditures during such fiscal period to (b) the sum of (i) Interest Expense during such fiscal period PLUS (ii) regularly scheduled payments of principal on Funded Debt during such fiscal period, in each case as determined in accordance with GAAP for Quixote and its Subsidiaries on a consolidated basis. "EBITDA" shall mean, for any fiscal period, (i) Consolidated Net Income PLUS (ii) to the extent deducted in determining Consolidated Net Income, Interest Expense and taxes (as stated in Quixote and its Subsidiaries' consolidated statement of income) PLUS (iii) to the extent deducted in determining Consolidated Net Income, depreciation, amortization and other similar non-cash charges. "Interest Expense" shall mean, for any fiscal period, the interest expense of Quixote and its Subsidiaries (as determined in accordance with GAAP on a consolidated basis) for such period in respect of Funded Debt, excluding the amortization of capitalized debt transaction costs." -2- 1.4 SECTION 2.1 OF THE LOAN AGREEMENT. Section 2.1 of the Loan Agreement is hereby amended by deleting the first and second sentences of such Section and inserting the following in its stead: "The maximum aggregate amount of the Revolving Credit Loan to be made by each Lender (such Lender's "Revolving Credit Loan Commitment") shall be the amount set below such Lender's name on the signature pages to the Eighth Amendment to Loan Agreement effective as of March 31, 1996. The aggregate principal amount of the Revolving Credit Loan Commitments is $65,000,000." 1.5 SECTION 6.3(b) OF THE LOAN AGREEMENT. Section 6.3 of the Loan Agreement is hereby amended by deleting subsection (b) thereof and inserting the following in its stead: "(b) (i) at the end of the Fiscal Quarter ending June 30, 1996, a positive Consolidated Net Income for such Fiscal Quarter, (ii) at the end of the Fiscal Quarter ending September 30, 1996, for the two Fiscal Quarter period then ended, a positive Consolidated Net Income and (iii) at the end of each succeeding Fiscal Quarter, for the three Fiscal Quarter period then ended, a positive Consolidated Net Income (in each case certified by Quixote at the end of such Fiscal Quarter)." 1.6 SECTION 6.3(e) OF THE LOAN AGREEMENT. Section 6.3 of the Loan Agreement is hereby amended by deleting subsection (e) thereof and inserting the following in its stead: "(e)(i) at the end of the Fiscal Quarter ending June 30, 1996, for such Fiscal Quarter, an Adjusted EBITDA to Debt Service Payments Ratio equal to or greater than 1.75 to 1.0, (ii) at the end of the Fiscal Quarter ending September 30, 1996, for the two Fiscal Quarter period then ended, an Adjusted EBITDA to Debt Service Payments Ratio equal to or greater than 1.75 to 1.0, (iii) at the end of the Fiscal Quarter ending December 31, 1996, for the three Fiscal Quarter period then ended, an Adjusted EBITDA to Debt Service Payments Ratio equal to or greater than 1.75 to 1.0, (iv) at the end of each of the Fiscal Quarters ending on March 31, 1997, June 30, 1997 and September 30, 1997, for the four Fiscal Quarter period then ended, an Adjusted EBITDA to Debt Service Payments Ratio equal to or greater than 1.75 to 1.0 and (v) at the end of each Fiscal Quarter ending on or after December 31, 1997, for the four Fiscal Quarter period then ended, an Adjusted EBITDA to Debt Service Payments Ratio equal to or greater than 2.0 to 1.0 (in each case certified by Quixote at the end of each Fiscal Quarter)." 1.7 SECTION 7.1 OF THE LOAN AGREEMENT. Section 7.1 of the Loan Agreement is hereby amended by deleting the term "50%" from the ninth line thereof and inserting the term "30%" in its stead. 1.8 SECTION 7.9 OF THE LOAN AGREEMENT. Section 7.9 of the Loan Agreement is hereby amended by deleting it and inserting the following in its stead: -3- "7.9 CAPITAL EXPENDITURES. Borrower shall not and shall not permit any of its Subsidiaries to make Capital Expenditures within any Fiscal Year that, in the aggregate, shall exceed (i) for the 1996 Fiscal Year, the lesser of (A) $20,000,000 or (B) the sum of Quixote's Consolidated Net Income attributable to its continuing operations plus depreciation and amortization for the 1996 Fiscal Year and (ii) for the 1997 Fiscal Year and each Fiscal Year thereafter, the lesser of (A) $12,000,000 or (B) the sum of Quixote's Consolidated Net Income plus depreciation and amortization for such Fiscal Year." 1.9 EXHIBIT B TO THE LOAN AGREEMENT. Exhibit B to the Loan Agreement is hereby amended by deleting it in its entirety and inserting in lieu thereof a new Exhibit B, which is attached hereto as Annex 1. 1.10 REFERENCES TO STENOGRAPH, IIS AND LSI. The Loan Agreement is hereby amended as follows: (a) effective as of January 31, 1996, all references to "LSI" shall be deemed references to Quixote LSI Corporation (f/k/a Litigation Sciences, Inc.); (b) effective as of May 15, 1996, all references to "Stenograph" shall be deemed references to Quixote Steno Corporation (f/k/a Stenograph Corporation); and (c) effective as of May 15, 1996, all references to "IIS" shall be deemed references to Quixote IIS Corporation (f/k/a Integrated Information Services, Inc.). 2. WAIVER. Subject to the terms, covenants, conditions and representations set forth herein, the Lenders hereby waive any and all Defaults or Events of Default caused by Borrower's failure to comply with the terms of subsections 6.3(b) and 6.3(e) of the Loan Agreement during the Fiscal Quarter ending March 31, 1996. This waiver shall be limited precisely as written and shall not be deemed to prejudice the Lenders' rights and remedies with respect to any future Defaults or Events of Default. 3. REPRESENTATION AND WARRANTIES. In order to induce the Lenders to enter into this Eighth Amendment, each Borrower represents and warrants that: 3.1 The representations and warranties set forth in Section 4 of the Agreement, as hereby amended, are true, correct and complete on the date hereof as if made on and as of the date hereof and that there exists no Default of Event of Default on the date hereof (other than as specifically waived in Section 2 hereof). 3.2 The execution and delivery by each Borrower of this Eighth Amendment has been duly authorized by proper corporate proceedings of each Borrower and this Eighth Amendment, and the Agreement, as amended by this Eighth Amendment, constitutes a valid and binding obligation of each Borrower. -4- 3.3 Neither the execution and delivery by each Borrower of this Eighth Amendment, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof will violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on any Borrower or any Borrower's articles of incorporation or by-laws or the provisions of any indenture, instrument or agreement to which any Borrower is a party or is subject, or by which it or its property, is bound, or conflict with or constitute a default thereunder. 4. EFFECTIVE DATE. This Eighth Amendment shall become effective as of the effective date first above written (the "Effective Date") upon receipt by the Agent of (i) five (5) copies of this Amendment duly executed by each Borrower, the Agent and all Lenders, (ii) Revolving Credit Notes executed by each Borrower in favor of each of the Lenders substantially in the form of ANNEX 1 hereto (the "Replacement Notes"), (iii) copies for each Lender of a certificate executed by each Borrower certifying (a) board resolutions authorizing the execution and delivery of this Eighth Amendment and the Replacement Notes and authorizing the borrowings contemplated thereby and (b) incumbency, and (iv) a $24,000 closing fee. 5. REFERENCE TO LOAN AGREEMENT. From and after the Effective Date hereof, each reference in the Loan Agreement to "this Agreement", "hereof", or "hereunder" or words of like import, and all references to the Loan Agreement in any and all agreements, instruments, documents, notes, certificates and other writings of every kind and nature shall be deemed to mean the Loan Agreement, as amended by this and all previous Amendments. 6. MISCELLANEOUS. 6.1 Except as specifically set forth herein, the Loan Agreement and all provisions of contained therein shall remain and continue in full force and effect. 6.2 The execution delivery and effectiveness of this Eighth Amendment shall not, except as expressly provided in Section 2 hereof, operate as a waiver of (i) any right, power or remedy of the Lenders or the Agent under the Loan Agreement or any of the other Loan Documents, or (ii) any Default or Event of Default under the Loan Agreement or any of the other Loan Documents. 6.3 This Eighth Amendment shall be governed by, and construed and enforced in accordance with, the laws of the State of Illinois applicable to contracts made and performed in such State, without regard to the principles thereof regarding conflict of laws. 6.4 This Eighth Amendment may be executed in any number of separate counterparts, each of which shall, collectively and separately, constitute one agreement. [signature page follows] -5- IN WITNESS WHEREOF, this Eighth Amendment has been duly executed as of June 4, 1996 and when effective shall be effective as of March 31, 1996. THE NORTHERN TRUST COMPANY, as Agent and as Lender By: /s/ Robert T. Jank --------------------------------------- Name: Robert T. Jank Title: Vice President Revolving Credit Loan Commitment: $21,666,668 LA SALLE NATIONAL BANK, as Lender By: /s/ Betty T. Latson --------------------------------------- Name: Betty T. Latson Title: First Vice President Revolving Credit Loan Commitment: $21,666,666 NBD BANK, as Lender By: /s/ Peter K. Gillespie --------------------------------------- Name: Peter K. Gillespie Title: Vice President Revolving Credit Loan Commitment: $21,666,666 -6- QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC. By: /s/ Myron R. Shain By: /s/ Myron R. Shain --------------------------------------- ---------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: Executive Vice President - Finance Title: Vice President DISC MANUFACTURING, INC. QUIXOTE STENO CORPORATION (f/k/a Stenograph Corporation) By: /s/ Myron R.Shain By: /s/ Myron R. Shain --------------------------------------- ---------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: President Title: Vice President LEGAL TECHNOLOGIES, INC. DISCOVERY PRODUCTS (f/k/a Stenograph Legal Services, Inc.) By: /s/ Myron R. Shain By: /s/ Myron R. Shain --------------------------------------- ---------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: Vice President Title: Vice President QUIXOTE IIS CORPORATION SPIN-CAST PLASTICS, INC. (f/k/a Intergrated Information Services, Inc.) By: /s/ Myron R. Shain By: /s/ Myron R. Shain --------------------------------------- ---------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: Vice President Title: Vice President -7- QUIXOTE LSI CORPORATION COURT TECHNOLOGIES, INC. (f/k/a Litigation Sciences, Inc.) By: /s/ Myron R. Shain By: /s/ Myron R. Shain --------------------------------------- ---------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: Vice President Title: Vice President SAFE-HIT CORPORATION COMPOSITE COMPONENTS, INC. By: /s/ Myron R. Shain By: /s/ Myron R. Shain --------------------------------------- ---------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: Vice President Title: Vice President -8- EXHIBIT 1 TO EIGHTH AMENDMENT ---------------- EXHIBIT B --------- FORM OF REVOLVING CREDIT NOTE --------------------- $____________ Chicago, Illinois March 31, 1996 FOR VALUE RECEIVED, the undersigned, QUIXOTE CORPORATION, a Delaware corporation, ENERGY ABSORPTION SYSTEMS, INC., a Delaware corporation, DISC MANUFACTURING, INC., a Delaware corporation, LEGAL TECHNOLOGIES, INC., a Delaware corporation, QUIXOTE STENO CORPORATION (f/k/a Stenographic Corporation) a Delaware corporation, DISCOVERY PRODUCTS, INC, (f/k/a Stenograph Legal Services, Inc.), a Delaware corporation, SPIN-CAST PLASTICS, INC., an Indiana corporation, COURT TECHNOLOGIES, INC., a Delaware corporation, COMPOSITE COMPONENTS, INC., a Delaware corporation, QUIXOTE IIS CORPORATION (f/k/a Integrated Information Services, Inc.), a Delaware corporation, and QUIXOTE LSI CORPORATION (f/k/a Litigation Sciences, Inc.), a Delaware corporation, SAFE-HIT CORPORATION, a Nevada corporation (each individually a "Borrower" and collectively, the "Borrowers"), hereby JOINTLY AND SEVERALLY PROMISE TO PAY to the order of_________________, a ___________ corporation ("Lender"), or its registered assigns, at ________________, or at such other place as the holder of this Note may designate from time to time in writing, in lawful money of the United States of America and in immediately available funds, the principal amount of ________________________ Dollars ($________), or such lesser principal amount as may be outstanding pursuant to the Loan Agreement (as hereinafter defined) with respect to the Revolving Credit Loan, together with interest on the unpaid principal amount of this note outstanding from time to time. This Note is a Revolving Credit Note issued pursuant to Section 2.1(b) of that certain Loan Agreement dated as of June 26, 1992, as amended, among each of the Borrowers, the "Lenders" (as defined therein) and The Northern Trust Company, as agent for such Lenders (the "Loan Agreement"), and is entitled to the benefit and security of the "Loan Documents" (as defined in the Loan Agreement) provided for therein, to which reference is hereby made for a statement of all of the terms and conditions under which the loan evidenced hereby is made. All capitalized terms herein, unless otherwise defined, shall have the meanings ascribed to them in the Loan Agreement. The principal amount of the indebtedness evidenced hereby shall be payable in the amounts and on the dates specified in the Loan Agreement. Interest thereon, less any taxes payable by withholding, shall be paid until such principle amount is paid in full at such interest rates and at such times as are specified in the Loan Agreement. If any payment on this Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. Upon and after the occurrence of an Event of Default, this Note shall or may, as provided in the Loan Agreement, and without demand, notice or legal process of any kind, become or be declared immediately due and payable. The right to receive principal of, and stated interest on, this Note may only be transferred through Borrower's book entry system. Demand, presentment, protest and notice of nonpayment and protest are hereby waived by Borrower. This Note shall be interpreted, governed by, and construed in accordance with the laws of the State of Illinois. THIS REVOLVING CREDIT NOTE HAS BEEN ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $_______ DATED NOVEMBER 10,1995 (WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $_______ DATED MAY 31, 1994) AND NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO DEEM PAID OR FORGIVEN THE UNPAID PRINCIPAL AMOUNT OF, OR UNPAID ACCRUED INTEREST ON, SAID NOTE AT THE TIME OF ITS REPLACEMENT BY THIS NOTE. IN WITNESS WHEREOF, the parties hereto have caused this Revolving Credit Note to be executed by their duly authorized officers as of the day and year first written above. QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC. By:___________________________ By:_____________________________ Name: Myron R. Shain Name: Myron R. Shain Title: Executive Vice President - Finance Title: Vice President -2- DISC MANUFACTURING, INC. QUIXOTE STENO CORPORATION (f/k/a Stenograph Corporation) By:___________________________ By:_____________________________ Name: Myron R. Shain Name: Myron R. Shain Title: President Title: Vice President LEGAL TECHNOLOGIES, INC. DISCOVERY PRODUCTS (f/k/a Stenograph Legal Services, Inc.) By:___________________________ By:_____________________________ Name: Myron R. Shain Name: Myron R. Shain Title: Vice President Title: Vice President QUIXOTE IIS CORPORATION SPIN-CAST PLASTICS, INC. (f/k/a Integrated Information Services, Inc) By:___________________________ By:_____________________________ Name: Myron R. Shain Name: Myron R. Shain Title: Vice President Title: Vice President -3- QUIXOTE LSI CORPORATION COURT TECHNOLOGIES, INC. (f/k/a Litigation Sciences, Inc.) By:___________________________ By:_____________________________ Name: Myron R. Shain Name: Myron R. Shain Title: Vice President Title: Vice President SAFE-HIT CORPORATION COMPOSITE COMPONENTS, INC. By:___________________________ By:_____________________________ Name: Myron R. Shain Name: Myron R. Shain Title: Vice President Title: Vice President -4- Ex. 10(b) REVOLVING CREDIT NOTE (LASALLE NATIONAL BANK) $21,666,666 Chicago, Illinois March 31, 1996 FOR VALUE RECEIVED, the undersigned, QUIXOTE CORPORATION, a Delaware corporation, ENERGY ABSORPTION SYSTEMS, INC., a Delaware corporation, DISC MANUFACTURING, INC., a Delaware corporation, LEGAL TECHNOLOGIES, INC., a Delaware corporation, QUIXOTE STENO CORPORATION (f/k/a Stenograph Corporation), a Delaware Corporation, DISCOVERY PRODUCTS, INC. (f/k/a Stenograph Legal Services, Inc.), a Delaware corporation, SPIN-CAST PLASTICS, INC., an Indiana corporation, COURT TECHNOLOGIES, INC., a Delaware corporation, COMPOSITE COMPONENTS, INC., a Delaware corporation, QUIXOTE IIS CORPORATION (f/k/a Integrated Information Services, Inc.), a Delaware corporation, QUIXOTE LSI CORPORATION (f/k/a Litigation Sciences, Inc.), a Delaware corporation, and SAFE- HIT CORPORATION, a Nevada corporation (each individually a "Borrower" and collectively, the "Borrowers"), hereby JOINTLY AND SEVERALLY PROMISE TO PAY to the order of LASALLE NATIONAL BANK, a national banking association ("Lender"), or its registered assigns, at Fifty South LaSalle Street, or at such other place as the holder of this Note may designate from time to time in writing, in lawful money of the United States of America and in immediately available funds, the principal amount of Twenty-One Million Six Hundred Sixty-Six Thousand Six Hundred Sixty-Six Dollars ($21,666,666), or such lesser principal amount as may be outstanding pursuant to the Loan Agreement (as hereinafter defined) with respect to the Revolving Credit Loan, together with interest on the unpaid principal amount of this note outstanding from time to time. This Note is a Revolving Credit Note issued pursuant to Section 2.1(b) of that certain Loan Agreement dated as of June 26, 1992, as amended, among each of the Borrowers, the "Lenders" (as defined therein) and The Northern Trust Company, as agent for such Lenders (the "Loan Agreement"), and is entitled to the benefit and security of the "Loan Documents" (as defined in the Loan Agreement) provided for therein, to which reference is hereby made for a statement of all of the terms and conditions under which the loan evidenced hereby is made. All capitalized terms herein, unless otherwise defined, shall have the meanings ascribed to them in the Loan Agreement. The principal amount of the indebtedness evidenced hereby shall be payable in the amounts and on the dates specified in the Loan Agreement. Interest thereon, less any taxes payable by withholding, shall be paid until such principal amount is paid in full at such interest rates and at such times as are specified in the Loan Agreement. If any payment on this Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. Upon and after the occurrence of an Event of Default, this Note shall or may, as provided in the Loan Agreement, and without demand, notice or legal process of any kind, become or be declared immediately due and payable. The right to receive principal of, and stated interest on, this Note may only be transferred through Borrower's book entry system. Demand, presentment, protest and notice of nonpayment and protest are hereby waived by Borrower. This Note shall be interpreted, governed by, and construed in accordance with the laws of the State of Illinois. THIS REVOLVING CREDIT NOTE HAS BEEN ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $23,333,333 DATED NOVEMBER 10, 1995 (WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $21,600,000 DATED MAY 31, 1994) AND NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO DEEM PAID OR FORGIVEN THE UNPAID PRINCIPAL AMOUNT OF, OR UNPAID ACCRUED INTEREST ON, SAID NOTE AT THE TIME OF ITS REPLACEMENT BY THIS NOTE. IN WITNESS WHEREOF, the parties hereto have caused this Revolving Credit Note to be executed by their duly authorized officers as of the day and year first written above. QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC. By: /s/ Myron R. Shain By: /s/ Myron R. Shain --------------------------------------- -------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: Executive Vice President - Finance Title: Vice President DISC MANUFACTURING, INC. QUIXOTE STENO CORPORATION (f/k/a Stenograph Corporation) By: /s/ Myron R. Shain By: /s/ Myron R. Shain --------------------------------------- -------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: President Title: Vice President LEGAL TECHNOLOGIES, INC. DISCOVERY PRODUCTS (f/k/a Stenograph Legal Services, Inc.) By: /s/ Myron R. Shain By: /s/ Myron R. Shain --------------------------------------- -------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: Vice President Title: Vice President QUIXOTE IIS CORPORATION SPIN-CAST PLASTICS, INC. (f/k/a Intergrated Information Services, Inc.) By: /s/ Myron R. Shain By: /s/ Myron R. Shain --------------------------------------- -------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: Vice President Title: Vice President QUIXOTE LSI CORPORATION COURT TECHNOLOGIES, INC. (f/k/a Litigation Sciences, Inc.) By: /s/ Myron R. Shain By: /s/ Myron R. Shain --------------------------------------- -------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: Vice President Title: Vice President SAFE-HIT CORPORATION COMPOSITE COMPONENTS, INC. By: /s/ Myron R. Shain By: /s/ Myron R. Shain --------------------------------------- -------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: Vice President Title: Vice President REVOLVING CREDIT NOTE (NBD BANK) $21,666,666 Chicago, Illinois March 31, 1996 FOR VALUE RECEIVED, the undersigned, QUIXOTE CORPORATION, a Delaware corporation, ENERGY ABSORPTION SYSTEMS, INC., a Delaware corporation, DISC MANUFACTURING, INC., a Delaware corporation, LEGAL TECHNOLOGIES, INC., a Delaware corporation, QUIXOTE STENO CORPORATION (f/k/a Stenograph Corporation), a Delaware Corporation, DISCOVERY PRODUCTS, INC. (f/k/a Stenograph Legal Services, Inc.), a Delaware corporation, SPIN-CAST PLASTICS, INC., an Indiana corporation, COURT TECHNOLOGIES, INC., a Delaware corporation, COMPOSITE COMPONENTS, INC., a Delaware corporation, QUIXOTE IIS CORPORATION (f/k/a Integrated Information Services, Inc.), a Delaware corporation, QUIXOTE LSI CORPORATION (f/k/a Litigation Sciences, Inc.), a Delaware corporation, and SAFE- HIT CORPORATION, a Nevada corporation (each individually a "Borrower" and collectively, the "Borrowers"), hereby JOINTLY AND SEVERALLY PROMISE TO PAY to the order of NBD BANK, an Illinois banking corporation ("Lender"), or its registered assigns, at Fifty South LaSalle Street, or at such other place as the holder of this Note may designate from time to time in writing, in lawful money of the United States of America and in immediately available funds, the principal amount of Twenty-One Million Six Hundred Sixty-Six Thousand Six Hundred Sixty-Six Dollars ($21,666,666), or such lesser principal amount as may be outstanding pursuant to the Loan Agreement (as hereinafter defined) with respect to the Revolving Credit Loan, together with interest on the unpaid principal amount of this note outstanding from time to time. This Note is a Revolving Credit Note issued pursuant to Section 2.1(b) of that certain Loan Agreement dated as of June 26, 1992, as amended, among each of the Borrowers, the "Lenders" (as defined therein) and The Northern Trust Company, as agent for such Lenders (the "Loan Agreement"), and is entitled to the benefit and security of the "Loan Documents" (as defined in the Loan Agreement) provided for therein, to which reference is hereby made for a statement of all of the terms and conditions under which the loan evidenced hereby is made. All capitalized terms herein, unless otherwise defined, shall have the meanings ascribed to them in the Loan Agreement. The principal amount of the indebtedness evidenced hereby shall be payable in the amounts and on the dates specified in the Loan Agreement. Interest thereon, less any taxes payable by withholding, shall be paid until such principal amount is paid in full at such interest rates and at such times as are specified in the Loan Agreement. If any payment on this Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. Upon and after the occurrence of an Event of Default, this Note shall or may, as provided in the Loan Agreement, and without demand, notice or legal process of any kind, become or be declared immediately due and payable. The right to receive principal of, and stated interest on, this Note may only be transferred through Borrower's book entry system. Demand, presentment, protest and notice of nonpayment and protest are hereby waived by Borrower. This Note shall be interpreted, governed by, and construed in accordance with the laws of the State of Illinois. THIS REVOLVING CREDIT NOTE HAS BEEN ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $23,333,333 DATED NOVEMBER 10, 1995 (WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $16,800,000 DATED MAY 31, 1994) AND NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO DEEM PAID OR FORGIVEN THE UNPAID PRINCIPAL AMOUNT OF, OR UNPAID ACCRUED INTEREST ON, SAID NOTE AT THE TIME OF ITS REPLACEMENT BY THIS NOTE. IN WITNESS WHEREOF, the parties hereto have caused this Revolving Credit Note to be executed by their duly authorized officers as of the day and year first written above. QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC. By: /s/ Myron R. Shain By: /s/ Myron R. Shain -------------------------------- -------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: Executive Vice Title: Vice President President - Finance DISC MANUFACTURING, INC. QUIXOTE STENO CORPORATION (f/k/a Stenograph Corporation) By: /s/ Myron R. Shain By: /s/ Myron R. Shain -------------------------------- -------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: President Title: Vice President LEGAL TECHNOLOGIES, INC. DISCOVERY PRODUCTS (f/k/a Stenograph Legal Services, Inc.) By: /s/ Myron R. Shain By: /s/ Myron R. Shain -------------------------------- -------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: Vice President Title: Vice President QUIXOTE IIS CORPORATION SPIN-CAST PLASTICS, INC. (f/k/a Intergrated Information Services, Inc.) By: /s/ Myron R. Shain By: /s/ Myron R. Shain -------------------------------- -------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: Vice President Title: Vice President QUIXOTE LSI CORPORATION COURT TECHNOLOGIES, INC. (f/k/a Litigation Sciences, Inc.) By: /s/ Myron R. Shain By: /s/ Myron R. Shain -------------------------------- -------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: Vice President Title: Vice President SAFE-HIT CORPORATION COMPOSITE COMPONENTS, INC. By: /s/ Myron R. Shain By: /s/ Myron R. Shain -------------------------------- -------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: Vice President Title: Vice President REVOLVING CREDIT NOTE (THE NORTHERN TRUST COMPANY) $21,666,668 Chicago, Illinois March 31, 1996 FOR VALUE RECEIVED, the undersigned, QUIXOTE CORPORATION, a Delaware corporation, ENERGY ABSORPTION SYSTEMS, INC., a Delaware corporation, DISC MANUFACTURING, INC., a Delaware corporation, LEGAL TECHNOLOGIES, INC., a Delaware corporation, QUIXOTE STENO CORPORATION (f/k/a Stenograph Corporation), a Delaware Corporation, DISCOVERY PRODUCTS, INC. (f/k/a Stenograph Legal Services, Inc.), a Delaware corporation, SPIN-CAST PLASTICS, INC., an Indiana corporation, COURT TECHNOLOGIES, INC., a Delaware corporation, COMPOSITE COMPONENTS, INC., a Delaware corporation, QUIXOTE IIS CORPORATION (f/k/a Integrated Information Services, Inc.), a Delaware corporation, QUIXOTE LSI CORPORATION (f/k/a Litigation Sciences, Inc.), a Delaware corporation, and SAFE- HIT CORPORATION, a Nevada corporation (each individually a "Borrower" and collectively, the "Borrowers"), hereby JOINTLY AND SEVERALLY PROMISE TO PAY to the order of THE NORTHERN TRUST COMPANY, an Illinois banking corporation ("Lender"), or its registered assigns, at Fifty South LaSalle Street, or at such other place as the holder of this Note may designate from time to time in writing, in lawful money of the United States of America and in immediately available funds, the principal amount of Twenty-One Million Six Hundred Sixty- Six Thousand Six Hundred Sixty-Eight Dollars ($21,666,668), or such lesser principal amount as may be outstanding pursuant to the Loan Agreement (as hereinafter defined) with respect to the Revolving Credit Loan, together with interest on the unpaid principal amount of this note outstanding from time to time. This Note is a Revolving Credit Note issued pursuant to Section 2.1(b) of that certain Loan Agreement dated as of June 26, 1992, as amended, among each of the Borrowers, the "Lenders" (as defined therein) and The Northern Trust Company, as agent for such Lenders (the "Loan Agreement"), and is entitled to the benefit and security of the "Loan Documents" (as defined in the Loan Agreement) provided for therein, to which reference is hereby made for a statement of all of the terms and conditions under which the loan evidenced hereby is made. All capitalized terms herein, unless otherwise defined, shall have the meanings ascribed to them in the Loan Agreement. The principal amount of the indebtedness evidenced hereby shall be payable in the amounts and on the dates specified in the Loan Agreement. Interest thereon, less any taxes payable by withholding, shall be paid until such principal amount is paid in full at such interest rates and at such times as are specified in the Loan Agreement. If any payment on this Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. Upon and after the occurrence of an Event of Default, this Note shall or may, as provided in the Loan Agreement, and without demand, notice or legal process of any kind, become or be declared immediately due and payable. The right to receive principal of, and stated interest on, this Note may only be transferred through Borrower's book entry system. Demand, presentment, protest and notice of nonpayment and protest are hereby waived by Borrower. This Note shall be interpreted, governed by, and construed in accordance with the laws of the State of Illinois. THIS REVOLVING CREDIT NOTE HAS BEEN ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $23,333,334 DATED NOVEMBER 10, 1995 (WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $21,600,000 DATED MAY 31, 1994) AND NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO DEEM PAID OR FORGIVEN THE UNPAID PRINCIPAL AMOUNT OF, OR UNPAID ACCRUED INTEREST ON, SAID NOTE AT THE TIME OF ITS REPLACEMENT BY THIS NOTE. IN WITNESS WHEREOF, the parties hereto have caused this Revolving Credit Note to be executed by their duly authorized officers as of the day and year first written above. QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC. By: /s/ Myron R. Shain By: /s/ Myron R. Shain --------------------------- --------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: Executive Vice President - Finance Title: Vice President DISC MANUFACTURING, INC. QUIXOTE STENO CORPORATION (f/k/a Stenograph Corporation) By: /s/ Myron R. Shain By: /s/ Myron R. Shain --------------------------- --------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: President Title: Vice President LEGAL TECHNOLOGIES, INC. DISCOVERY PRODUCTS (f/k/a Stenograph Legal Services, Inc.) By: /s/ Myron R. Shain By: /s/ Myron R. Shain --------------------------- ------------------------------ Name: Myron R. Shain Name: Myron R. Shain Title: Vice President Title: Vice President QUIXOTE IIS CORPORATION SPIN-CAST PLASTICS, INC. (f/k/a Intergrated Information Services, Inc.) By: /s/ Myron R. Shain By: /s/ Myron R. Shain -------------------------- ----------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: Vice President Title: Vice President QUIXOTE LSI CORPORATION COURT TECHNOLOGIES, INC. (f/k/a Litigation Sciences, Inc.) By: /s/ Myron R. Shain By: /s/ Myron R. Shain -------------------------- ----------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: Vice President Title: Vice President SAFE-HIT CORPORATION COMPOSITE COMPONENTS, INC. By: /s/ Myron R. Shain By: /s/ Myron R. Shain -------------------------- ----------------------------- Name: Myron R. Shain Name: Myron R. Shain Title: Vice President Title: Vice President EX-10.(F) 3 EXHIBIT 10(F) EX. 10(f) RETIREMENT AWARD AGREEMENT This Retirement Award Agreement ("Agreement") is entered into as of this 30th day of June, 1993 between QUIXOTE CORPORATION ("the Company"), a Delaware corporation whose principal place of business is Chicago, Illinois, and PHILIP E. ROLLHAUS, JR, of Chicago, Illinois ("Employee"). RECITALS WHEREAS, the Board of Directors of the Company adopted the Quixote Corporation 1993 Long-Term Stock Ownership Incentive Plan (the "Long-Term Plan") by amending and restating the Quixote Corporation 1991 Incentive Stock Option Plan, which is subject to approval by the stockholders of the Company, and; WHEREAS, the Long-Term Plan authorizes the Audit/Compensation Committee of the Board of Directors (the "Committee") to select certain employees of the Company or any of its subsidiaries who are key executives and who have completed ten years of continuous service for the Company or its subsidiaries to receive Retirement Awards; and WHEREAS, the Long-Term Plan provides that Retirement Awards may be in the form of Retirement Stock Awards and Retirement Cash Awards as those terms are defined in the Long-Term Plan; and WHEREAS, the Committee has selected the Employee as a grantee of a Retirement Award subject to the terms and conditions set forth in this Agreement; and WHEREAS, the Long-Term Plan requires that any Retirement Awards be documented by a written agreement with such terms and conditions as the Committee may determine. AGREEMENTS NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties agree as follows: 1. GRANT OF RETIREMENT AWARD (a) Subject to the other terms and conditions of this Agreement and the Long-Term Plan, the Company hereby grants to Employee an aggregate Retirement Stock Award of 91,530 shares of the Company common stock, $.01 2/3 par value (the "Stock"), to be issued and delivered to Employee as fully paid and non- assessable Stock on the following Issuance Dates in the following amounts: Number of Issuance Date Shares June 30, 1993 18,306 shares June 30, 1994 18,306 shares June 30, 1995 18,306 shares June 30, 1996 18,306 shares June 30, 1997 18,306 shares (b) The Company shall issue and deliver the shares set forth in paragraph (a) above to the Employee on each Issuance Date only if on such date the Employee is employed by the Company or its subsidiaries. Notwithstanding the immediately preceding sentence, the Company shall issue and deliver the shares set forth above on an Issuance Date to the Employee even if the Employee is not employed by the Company or its subsidiaries on such Issuance Date solely because the Employee's employment was terminated during the fiscal year ending on that Issuance Date by reason of the Employee's death, disability or other involuntary termination of employment (excluding termination for cause). The Company will deliver to the Employee a Certificate with respect to that number of shares issued and delivered as of the Issuance Date. 2. GRANT OF RETIREMENT CASH AWARD (a) Subject to the other terms and conditions of this Agreement and the Long-Term Plan, the Company hereby grants to the Employee a Retirement Cash Award for the sole purpose of paying federal and state income taxes arising from the issuance and delivery of Retirement Awards to the Employee pursuant to this Agreement, calculated as follows: (i) As of each Issuance Date, the Employee will receive a Retirement Cash Award equal to the product of (x) the Current Market Price of the Retirement Stock Award issued and delivered on that Issuance Date and (y) the percentage which is equal to 1 less the maximum marginal federal and state income tax rate then in effect (the "Retirement Cash Award Formula"). (ii) The Retirement Cash Award calculated for the Employee as of the initial Issuance Date of June 30, 1993 pursuant to the Retirement Cash Award Formula is as set forth on Schedule 1. A Retirement Cash Award shall only be paid in connection with the issuance and delivery of Retirement Stock under this Agreement. The Retirement Cash Award Formula may be changed by the Committee in its discretion. (b) A Retirement Cash Award shall not be paid directly to the Employee, but shall be paid to the appropriate federal and state tax officials by the Company on behalf of Employee. The Company will give the Employee written evidence of such payment. (c) For purposes of this Agreement, the parties agree that, given both the level of activity in the public trading of the Company's Stock and the price volatility of the Stock, the fair market value of the Stock shall mean the Current Market Price. The term "Current Market Price" of the Stock means the average of the daily closing prices for the thirty consecutive business days commencing no more than forty five business days before the day in question. The closing price for each day shall be the last reported sale price determined in the regular way or, in case no such reported sales takes place on such day, the average of the last reported bid and asked prices determined the regular way, in either case in the principal national securities exchange in which the Stock is admitted to trading a listed, or if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices as reported by NASDAQ or other similar organization if NASDAQ is no longer reporting such information, or if not so available, the fair market price is determined by the Board. 3. RESTRICTIONS ON THE RIGHT TO SELL OR TRANSFER RETIREMENT STOCK (a) As a condition of this Award, the Employee agrees that he will not sell, transfer, pledge, hypothecate, or otherwise transfer any Retirement Stock he receives pursuant to this Agreement during the period he is employed by the Company or its subsidiaries; provided, however, following the earlier of (i) the termination of the employment of the Employee with the Company or its subsidiaries, or (ii) the Employee's attaining age 65 (whether or not the Employee actually retires from employment), these restrictions shall terminate. The Employee agrees that the Company shall instruct its transfer agent to place a legend on each share certificate representing the Retirement Stock with respect to such restrictions in substantially the following form, and the Company shall cause such certificates to be issued without a legend when the applicable restrictions have terminated as provided herein: The sale, transfer, pledge, hypothecation or other transfer of the shares represented by this Certificate are subject to the terms and conditions of a Retirement Award Agreement dated as of June 30, 1993 by and between Quixote Corporation and Philip E. Rollhaus, Jr.. The Retirement Award Agreement provides that the restrictions shall automatically expire upon the earlier of (i) the termination of Mr. Rollhaus' employment by Quixote Corporation or its subsidiaries, or (ii) Mr. Rollhaus' attaining 65 years of age. (b) Notwithstanding anything in this Section 3 to the contrary, the Employee agrees that he will not sell, transfer, pledge, hypothecate, or otherwise transfer any Retirement Stock he receives pursuant to this Agreement, during the period prior to, and during the six-month period following, the meeting of the stockholders of the Company at which the Long-Term Plan is approved by stockholders. (c) Unless on an Issuance Date, there is in the opinion of Company's counsel a valid and effective registration statement under the Securities Act of 1933, as amended, and an appropriate qualification and registration under applicable state securities law with respect to the Retirement Stock to be issued and delivered, the Employee agrees, prior to the issuance and delivery of the Retirement Stock, to provide the Company a representation that he is acquiring the Stock for his own account for investment and not with a view to, or for sale in connection with, the resale or distribution of any such Stock and shall provide such other representations and covenants to the Company as may, in the opinion of its counsel, be required. In the event that any Retirement Stock issued is not so registered, then the Employee agrees that the certificates representing the Retirement Stock shall bear a restrictive legend, and that stop transfer instructions shall be issued to Company's transfer agents until such time as the Retirement Stock is registered. (d) If at any time the Committee determines, in its discretion, that the listing, registration or qualification of the Retirement Stock upon any securities exchange or under any state or federal law, or that the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the granting of the Award or in connection with the issuance of Retirement Stock thereunder, the Award may not be granted in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee. 4. STOCKHOLDER RIGHTS AND ADJUSTMENTS TO STOCK (a) The Employee shall not by reason of any Retirement Stock Award or by reason of this Agreement have any right as a stockholder of the Company with respect to the shares of Stock to which the Company has agreed to issue and deliver to the Employee in the future until such time as the Retirement Stock has been actually issued and delivered to the Employee. Except as provided in the Long-Term Plan, no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to an Issuance Date for such Retirement Stock, and all adjustments to the Retirement Stock by reason of a stock dividend, merger, consolidation or otherwise shall be made in accordance with the terms of the Long-Term Plan. (b) This Agreement shall not affect in any way the right or power of the Company to make adjustments, reclassification, reorganizations or changes of its capital or business structure or to merge, consolidate, dissolve, liquidate, sell or transfer all or any part of its business or assets. 5. NO EMPLOYMENT RIGHTS Neither the establishment of the Long-Term Plan nor the granting of this Award nor the execution of this Agreement shall be construed to give the Employee the right to remain employed by the Company or any of its subsidiaries, or to any benefits not specifically provided by the Long-Term Plan or by this Agreement, or in any manner modify the right of the Company or any of its subsidiaries to modify, amend or terminate any of its employee benefit plans or other arrangements available to Employee. The Company and or any of its subsidiaries may at any time dismiss the Employee from employment free from any liability or any claim under the Long-Term Plan. 6. SUCCESSORS AND ASSIGNS The Award shall be binding in accordance with its terms upon any successors of the Company and upon the heirs, executors, administrators and successors of Employee. 7. GOVERNING LAW This Agreement and the Retirement Award shall be governed by and construed in accordance with the laws of the State of Illinois relating to contracts made and to be performed in that state. 8. TERMINATION (a) This Agreement shall terminate upon the earlier of (i) July 1, 1998 or (ii) the date of termination of the Employee's employment with the Company or subsidiaries. 9. NOTICES All notices, certificates or other communication shall be sufficiently given when given in writing and mailed by first class mail, postage prepaid, with proper address as indicated below. Any of such parties may be written notice given to the other party designate any address or addresses to which notices, certificates or other communications to them shall be sent when required as contemplated by this Agreement. Until otherwise provided by the respective parties, all notices, certificates and communications to each of the parties shall be addressed as follows: To the Company: Quixote Corporation One East Wacker Drive Suite 3000 Chicago, Illinois 60601 Attn.: President With a copy to: _____________________________ _____________________________ _____________________________ _____________________________ To the Employee: Philip E. Rollhaus, Jr. 1500 Lake Shore Drive 11A Chicago, IL 60610 10. PRE-REQUISITE STOCKHOLDER APPROVAL The Company and the Employee agree that, notwithstanding any of the provisions herein, this Agreement shall become null and void in the event the stockholders of the Company fail to approve the adoption of the Long-Term Plan. If the stockholders fail to approve the Long-Term Plan, neither the Company nor the Employee shall have any rights under this Agreement or under the Long-Term Plan. IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement as of the day and year first above written. QUIXOTE CORPORATION By: /s/ Philip E. Rollhaus, Jr. Its: President ATTEST: /s/ Joan R. Riley /s/ Philip E. Rollhaus, Jr. --------------------------- Philip E. Rollhaus, Jr. SCHEDULE 1 The initial Retirement Cash Award payable as of June 30, 1993, is $190,204, calculated as follows: A x B x C = $190,204, where: A = Number of Shares Issued B = Current Market Value on June 30, 1993 C = 100% - 42.6% which is the percentage equal to sum of maximum marginal federal and state income tax rates. RETIREMENT AWARD AGREEMENT This Retirement Award Agreement ("Agreement") is entered into as of this 30th day of June, 1993 between QUIXOTE CORPORATION ("the Company"), a Delaware corporation whose principal place of business is Chicago, Illinois, and JAMES H. DEVRIES, of Winnetka, Illinois ("Employee"). RECITALS WHEREAS, the Board of Directors of the Company adopted the Quixote Corporation 1993 Long-Term Stock Ownership Incentive Plan (the "Long-Term Plan") by amending and restating the Quixote Corporation 1991 Incentive Stock Option Plan, which is subject to approval by the stockholders of the Company, and; WHEREAS, the Long-Term Plan authorizes the Audit/Compensation Committee of the Board of Directors (the "Committee") to select certain employees of the Company or any of its subsidiaries who are key executives and who have completed ten years of continuous service for the Company or its subsidiaries to receive Retirement Awards; and WHEREAS, the Long-Term Plan provides that Retirement Awards may be in the form of Retirement Stock Awards and Retirement Cash Awards as those terms are defined in the Long-Term Plan; and WHEREAS, the Committee has selected the Employee as a grantee of a Retirement Award subject to the terms and conditions set forth in this Agreement; and WHEREAS, the Long-Term Plan requires that any Retirement Awards be documented by a written agreement with such terms and conditions as the Committee may determine. AGREEMENTS NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties agree as follows: 1. GRANT OF RETIREMENT AWARD (a) Subject to the other terms and conditions of this Agreement and the Long-Term Plan, the Company hereby grants to Employee an aggregate Retirement Stock Award of 32,410 shares of the Company common stock, $.01 2/3 par value (the "Stock"), to be issued and delivered to Employee as fully paid and non- assessable Stock on the following Issuance Dates in the following amounts: Number of Issuance Date Shares June 30, 1993 6,482 shares June 30, 1994 6,482 shares June 30, 1995 6,482 shares June 30, 1996 6,482 shares June 30, 1997 6,482 shares (b) The Company shall issue and deliver the shares set forth in paragraph (a) above to the Employee on each Issuance Date only if on such date the Employee is employed by the Company or its subsidiaries. Notwithstanding the immediately preceding sentence, the Company shall issue and deliver the shares set forth above on an Issuance Date to the Employee even if the Employee is not employed by the Company or its subsidiaries on such Issuance Date solely because the Employee's employment was terminated during the fiscal year ending on that Issuance Date by reason of the Employee's death, disability or other involuntary termination of employment (excluding termination for cause). The Company will deliver to the Employee a Certificate with respect to that number of shares issued and delivered as of the Issuance Date. 2. GRANT OF RETIREMENT CASH AWARD (a) Subject to the other terms and conditions of this Agreement and the Long-Term Plan, the Company hereby grants to the Employee a Retirement Cash Award for the sole purpose of paying federal and state income taxes arising from the issuance and delivery of Retirement Awards to the Employee pursuant to this Agreement, calculated as follows: (i) As of each Issuance Date, the Employee will receive a Retirement Cash Award equal to the product of (x) the Current Market Price of the Retirement Stock Award issued and delivered on that Issuance Date and (y) the percentage which is equal to 1 less the maximum marginal federal and state income tax rate then in effect (the "Retirement Cash Award Formula"). (ii) The Retirement Cash Award calculated for the Employee as of the initial Issuance Date of June 30, 1993 pursuant to the Retirement Cash Award Formula is as set forth on Schedule 1. A Retirement Cash Award shall only be paid in connection with the issuance and delivery of Retirement Stock under this Agreement. The Retirement Cash Award Formula may be changed by the Committee in its discretion. (b) A Retirement Cash Award shall not be paid directly to the Employee, but shall be paid to the appropriate federal and state tax officials by the Company on behalf of Employee. The Company will give the Employee written evidence of such payment. (c) For purposes of this Agreement, the parties agree that, given both the level of activity in the public trading of the Company's Stock and the price volatility of the Stock, the fair market value of the Stock shall mean the Current Market Price. The term "Current Market Price" of the Stock means the average of the daily closing prices for the thirty consecutive business days commencing no more than forty five business days before the day in question. The closing price for each day shall be the last reported sale price determined in the regular way or, in case no such reported sales takes place on such day, the average of the last reported bid and asked prices determined the regular way, in either case in the principal national securities exchange in which the Stock is admitted to trading a listed, or if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices as reported by NASDAQ or other similar organization if NASDAQ is no longer reporting such information, or if not so available, the fair market price is determined by the Board. 3. RESTRICTIONS ON THE RIGHT TO SELL OR TRANSFER RETIREMENT STOCK (a) As a condition of this Award, the Employee agrees that he will not sell, transfer, pledge, hypothecate, or otherwise transfer any Retirement Stock he receives pursuant to this Agreement during the period he is employed by the Company or its subsidiaries; provided, however, following the earlier of (i) the termination of the employment of the Employee with the Company or its subsidiaries, or (ii) the Employee's attaining age 65 (whether or not the Employee actually retires from employment), these restrictions shall terminate. The Employee agrees that the Company shall instruct its transfer agent to place a legend on each share certificate representing the Retirement Stock with respect to such restrictions in substantially the following form, and the Company shall cause such certificates to be issued without a legend when the applicable restrictions have terminated as provided herein: The sale, transfer, pledge, hypothecation or other transfer of the shares represented by this Certificate are subject to the terms and conditions of a Retirement Award Agreement dated as of June 30, 1993 by and between Quixote Corporation and James H. DeVries. The Retirement Award Agreement provides that the restrictions shall automatically expire upon the earlier of (i) the termination of Mr. DeVries' employment by Quixote Corporation or its subsidiaries, or (ii) Mr. DeVries' attaining 65 years of age. (b) Notwithstanding anything in this Section 3 to the contrary, the Employee agrees that he will not sell, transfer, pledge, hypothecate, or otherwise transfer any Retirement Stock he receives pursuant to this Agreement, during the period prior to, and during the six-month period following, the meeting of the stockholders of the Company at which the Long-Term Plan is approved by stockholders. (c) Unless on an Issuance Date, there is in the opinion of Company's counsel a valid and effective registration statement under the Securities Act of 1933, as amended, and an appropriate qualification and registration under applicable state securities law with respect to the Retirement Stock to be issued and delivered, the Employee agrees, prior to the issuance and delivery of the Retirement Stock, to provide the Company a representation that he is acquiring the Stock for his own account for investment and not with a view to, or for sale in connection with, the resale or distribution of any such Stock and shall provide such other representations and covenants to the Company as may, in the opinion of its counsel, be required. In the event that any Retirement Stock issued is not so registered, then the Employee agrees that the certificates representing the Retirement Stock shall bear a restrictive legend, and that stop transfer instructions shall be issued to Company's transfer agents until such time as the Retirement Stock is registered. (d) If at any time the Committee determines, in its discretion, that the listing, registration or qualification of the Retirement Stock upon any securities exchange or under any state or federal law, or that the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the granting of the Award or in connection with the issuance of Retirement Stock thereunder, the Award may not be granted in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee. 4. STOCKHOLDER RIGHTS AND ADJUSTMENTS TO STOCK (a) The Employee shall not by reason of any Retirement Stock Award or by reason of this Agreement have any right as a stockholder of the Company with respect to the shares of Stock to which the Company has agreed to issue and deliver to the Employee in the future until such time as the Retirement Stock has been actually issued and delivered to the Employee. Except as provided in the Long-Term Plan, no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to an Issuance Date for such Retirement Stock, and all adjustments to the Retirement Stock by reason of a stock dividend, merger, consolidation or otherwise shall be made in accordance with the terms of the Long-Term Plan. (b) This Agreement shall not affect in any way the right or power of the Company to make adjustments, reclassification, reorganizations or changes of its capital or business structure or to merge, consolidate, dissolve, liquidate, sell or transfer all or any part of its business or assets. 5. NO EMPLOYMENT RIGHTS Neither the establishment of the Long-Term Plan nor the granting of this Award nor the execution of this Agreement shall be construed to give the Employee the right to remain employed by the Company or any of its subsidiaries, or to any benefits not specifically provided by the Long-Term Plan or by this Agreement, or in any manner modify the right of the Company or any of its subsidiaries to modify, amend or terminate any of its employee benefit plans or other arrangements available to Employee. The Company and or any of its subsidiaries may at any time dismiss the Employee from employment free from any liability or any claim under the Long-Term Plan. 6. SUCCESSORS AND ASSIGNS The Award shall be binding in accordance with its terms upon any successors of the Company and upon the heirs, executors, administrators and successors of Employee. 7. GOVERNING LAW This Agreement and the Retirement Award shall be governed by and construed in accordance with the laws of the State of Illinois relating to contracts made and to be performed in that state. 8. TERMINATION (a) This Agreement shall terminate upon the earlier of (i) July 1, 1998 or (ii) the date of termination of the Employee's employment with the Company or subsidiaries. 9. NOTICES All notices, certificates or other communication shall be sufficiently given when given in writing and mailed by first class mail, postage prepaid, with proper address as indicated below. Any of such parties may be written notice given to the other party designate any address or addresses to which notices, certificates or other communications to them shall be sent when required as contemplated by this Agreement. Until otherwise provided by the respective parties, all notices, certificates and communications to each of the parties shall be addressed as follows: To the Company: Quixote Corporation One East Wacker Drive Suite 3000 Chicago, Illinois 60601 Attn.: President With a copy to: ___________________________________ ___________________________________ ___________________________________ ___________________________________ To the Employee: James H. DeVries 467 Willow Road Winnetka, IL 60093 10. PRE-REQUISITE STOCKHOLDER APPROVAL The Company and the Employee agree that, notwithstanding any of the provisions herein, this Agreement shall become null and void in the event the stockholders of the Company fail to approve the adoption of the Long-Term Plan. If the stockholders fail to approve the Long-Term Plan, neither the Company nor the Employee shall have any rights under this Agreement or under the Long-Term Plan. IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement as of the day and year first above written. QUIXOTE CORPORATION By: /s/ Myron R. Shain Its: Executive Vice President-Finance ATTEST: /s/ Joan R. Riley /s/ James H. DeVries -------------------- James H. DeVries SCHEDULE 1 The initial Retirement Cash Award payable as of June 30, 1993, is $67,350, calculated as follows: A x B x C = $67,350, where: A = Number of Shares Issued B = Current Market Value on June 30, 1993 C = 100% - 42.6% which is the percentage equal to sum of maximum marginal federal and state income tax rates. RETIREMENT AWARD AGREEMENT This Retirement Award Agreement ("Agreement") is entered into as of this 30th day of June, 1993 between QUIXOTE CORPORATION ("the Company"), a Delaware corporation whose principal place of business is Chicago, Illinois, and MYRON R. SHAIN, of Palos Hills, Illinois ("Employee"). RECITALS WHEREAS, the Board of Directors of the Company adopted the Quixote Corporation 1993 Long-Term Stock Ownership Incentive Plan (the "Long-Term Plan") by amending and restating the Quixote Corporation 1991 Incentive Stock Option Plan, which is subject to approval by the stockholders of the Company, and; WHEREAS, the Long-Term Plan authorizes the Audit/Compensation Committee of the Board of Directors (the "Committee") to select certain employees of the Company or any of its subsidiaries who are key executives and who have completed ten years of continuous service for the Company or its subsidiaries to receive Retirement Awards; and WHEREAS, the Long-Term Plan provides that Retirement Awards may be in the form of Retirement Stock Awards and Retirement Cash Awards as those terms are defined in the Long-Term Plan; and WHEREAS, the Committee has selected the Employee as a grantee of a Retirement Award subject to the terms and conditions set forth in this Agreement; and WHEREAS, the Long-Term Plan requires that any Retirement Awards be documented by a written agreement with such terms and conditions as the Committee may determine. AGREEMENTS NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties agree as follows: 1. GRANT OF RETIREMENT AWARD (a) Subject to the other terms and conditions of this Agreement and the Long-Term Plan, the Company hereby grants to Employee an aggregate Retirement Stock Award of 46,000 shares of the Company common stock, $.01 2/3 par value (the "Stock"), to be issued and delivered to Employee as fully paid and non- assessable Stock on the following Issuance Dates in the following amounts: Number of Issuance Date Shares ------------- --------- June 30, 1993 4,600 shares June 30, 1994 4,600 shares June 30, 1995 4,600 shares June 30, 1996 4,600 shares June 30, 1997 4,600 shares June 30, 1998 4,600 shares June 30, 1999 4,600 shares June 30, 2000 4,600 shares June 30, 2001 4,600 shares June 30, 2002 4,600 shares (b) The Company shall issue and deliver the shares set forth in paragraph (a) above to the Employee on each Issuance Date only if on such date the Employee is employed by the Company or its subsidiaries and the term of this Agreement has not been terminated pursuant to Section 8(b). Notwithstanding the immediately preceding sentence, the Company shall issue and deliver the shares set forth above on an Issuance Date to the Employee even if the Employee is not employed by the Company or its subsidiaries on such Issuance Date solely because the Employee's employment was terminated during the fiscal year ending on that Issuance Date by reason of the Employee's death, disability or other involuntary termination of employment (excluding termination for cause). The Company will deliver to the Employee a Certificate with respect to that number of shares issued and delivered as of the Issuance Date. 2. GRANT OF RETIREMENT CASH AWARD (a) Subject to the other terms and conditions of this Agreement and the Long-Term Plan, the Company hereby grants to the Employee a Retirement Cash Award for the sole purpose of paying federal and state income taxes arising from the issuance and delivery of Retirement Awards to the Employee pursuant to this Agreement, calculated as follows: (i) As of each Issuance Date, the Employee will receive a Retirement Cash Award equal to the product of (x) the Current Market Price of the Retirement Stock Award issued and delivered on that Issuance Date and (y) the percentage which is equal to 1 less the maximum marginal federal and state income tax rate then in effect (the "Retirement Cash Award Formula"). (ii) The Retirement Cash Award calculated for the Employee as of the initial Issuance Date of June 30, 1993 pursuant to the Retirement Cash Award Formula is as set forth on Schedule 1. A Retirement Cash Award shall only be paid in connection with the issuance and delivery of Retirement Stock under this Agreement. The Retirement Cash Award Formula may be changed by the Committee in its discretion. (b) A Retirement Cash Award shall not be paid directly to the Employee, but shall be paid to the appropriate federal and state tax officials by the Company on behalf of Employee. The Company will give the Employee written evidence of such payment. (c) For purposes of this Agreement, the parties agree that, given both the level of activity in the public trading of the Company's Stock and the price volatility of the Stock, the fair market value of the Stock shall mean the Current Market Price. The term "Current Market Price" of the Stock means the average of the daily closing prices for the thirty consecutive business days commencing no more than forty five business days before the day in question. The closing price for each day shall be the last reported sale price determined in the regular way or, in case no such reported sales takes place on such day, the average of the last reported bid and asked prices determined the regular way, in either case in the principal national securities exchange in which the Stock is admitted to trading a listed, or if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices as reported by NASDAQ or other similar organization if NASDAQ is no longer reporting such information, or if not so available, the fair market price is determined by the Board. 3. RESTRICTIONS ON THE RIGHT TO SELL OR TRANSFER RETIREMENT STOCK (a) As a condition of this Award, the Employee agrees that he will not sell, transfer, pledge, hypothecate, or otherwise transfer any Retirement Stock he receives pursuant to this Agreement during the period he is employed by the Company or its subsidiaries; provided, however, following the earlier of (i) the termination of the employment of the Employee with the Company or its subsidiaries, or (ii) the Employee's attaining age 65 (whether or not the Employee actually retires from employment), these restrictions shall terminate. The Employee agrees that the Company shall instruct its transfer agent to place a legend on each share certificate representing the Retirement Stock with respect to such restrictions in substantially the following form, and the Company shall cause such certificates to be issued without a legend when the applicable restrictions have terminated as provided herein: The sale, transfer, pledge, hypothecation or other transfer of the shares represented by this Certificate are subject to the terms and conditions of a Retirement Award Agreement dated as of June 30, 1993 by and between Quixote Corporation and Myron R. Shain. The Retirement Award Agreement provides that the restrictions shall automatically expire upon the earlier of (i) the termination of Mr. Shain's employment by Quixote Corporation or its subsidiaries, or (ii) Mr. Shain's attaining 65 years of age. (b) Notwithstanding anything in this Section 3 to the contrary, the Employee agrees that he will not sell, transfer, pledge, hypothecate, or otherwise transfer any Retirement Stock he receives pursuant to this Agreement, during the period prior to, and during the six-month period following, the meeting of the stockholders of the Company at which the Long-Term Plan is approved by stockholders. (c) Unless on an Issuance Date, there is in the opinion of Company's counsel a valid and effective registration statement under the Securities Act of 1933, as amended, and an appropriate qualification and registration under applicable state securities law with respect to the Retirement Stock to be issued and delivered, the Employee agrees, prior to the issuance and delivery of the Retirement Stock, to provide the Company a representation that he is acquiring the Stock for his own account for investment and not with a view to, or for sale in connection with, the resale or distribution of any such Stock and shall provide such other representations and covenants to the Company as may, in the opinion of its counsel, be required. In the event that any Retirement Stock issued is not so registered, then the Employee agrees that the certificates representing the Retirement Stock shall bear a restrictive legend, and that stop transfer instructions shall be issued to Company's transfer agents until such time as the Retirement Stock is registered. (d) If at any time the Committee determines, in its discretion, that the listing, registration or qualification of the Retirement Stock upon any securities exchange or under any state or federal law, or that the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the granting of the Award or in connection with the issuance of Retirement Stock thereunder, the Award may not be granted in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee. 4. STOCKHOLDER RIGHTS AND ADJUSTMENTS TO STOCK (a) The Employee shall not by reason of any Retirement Stock Award or by reason of this Agreement have any right as a stockholder of the Company with respect to the shares of Stock to which the Company has agreed to issue and deliver to the Employee in the future until such time as the Retirement Stock has been actually issued and delivered to the Employee. Except as provided in the Long-Term Plan, no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to an Issuance Date for such Retirement Stock, and all adjustments to the Retirement Stock by reason of a stock dividend, merger, consolidation or otherwise shall be made in accordance with the terms of the Long-Term Plan. (b) This Agreement shall not affect in any way the right or power of the Company to make adjustments, reclassification, reorganizations or changes of its capital or business structure or to merge, consolidate, dissolve, liquidate, sell or transfer all or any part of its business or assets. 5. NO EMPLOYMENT RIGHTS Neither the establishment of the Long-Term Plan nor the granting of this Award nor the execution of this Agreement shall be construed to give the Employee the right to remain employed by the Company or any of its subsidiaries, or to any benefits not specifically provided by the Long-Term Plan or by this Agreement, or in any manner modify the right of the Company or any of its subsidiaries to modify, amend or terminate any of its employee benefit plans or other arrangements available to Employee. The Company and or any of its subsidiaries may at any time dismiss the Employee from employment free from any liability or any claim under the Long-Term Plan. 6. SUCCESSORS AND ASSIGNS The Award shall be binding in accordance with its terms upon any successors of the Company and upon the heirs, executors, administrators and successors of Employee. 7. GOVERNING LAW This Agreement and the Retirement Award shall be governed by and construed in accordance with the laws of the State of Illinois relating to contracts made and to be performed in that state. 8. TERMINATION (a) This Agreement shall terminate upon the earlier of (i) July 1, 1998 or (ii) the date of termination of the Employee's employment with the Company or subsidiaries, unless extended pursuant to section 8(b) below. (b) Unless on or before March 1 of each year commencing March 1, 1994, the Company notifies the Employee in writing that the Company does not intend to extend the term of this Agreement, the term of this Agreement shall automatically be extended for an additional period of one year; provided, however, under no circumstances shall the term of this Agreement extend beyond July 1, 2002. 9. NOTICES All notices, certificates or other communication shall be sufficiently given when given in writing and mailed by first class mail, postage prepaid, with proper address as indicated below. Any of such parties may be written notice given to the other party designate any address or addresses to which notices, certificates or other communications to them shall be sent when required as contemplated by this Agreement. Until otherwise provided by the respective parties, all notices, certificates and communications to each of the parties shall be addressed as follows: To the Company: Quixote Corporation One East Wacker Drive Suite 3000 Chicago, Illinois 60601 Attn.: President With a copy to: _____________________________ _____________________________ _____________________________ _____________________________ To the Employee: Myron R. Shain 9723 Hickory Crest Palos Hills, IL 60465 10. PRE-REQUISITE STOCKHOLDER APPROVAL The Company and the Employee agree that, notwithstanding any of the provisions herein, this Agreement shall become null and void in the event the stockholders of the Company fail to approve the adoption of the Long-Term Plan. If the stockholders fail to approve the Long-Term Plan, neither the Company nor the Employee shall have any rights under this Agreement or under the Long-Term Plan. IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement as of the day and year first above written. QUIXOTE CORPORATION By: /s/ James H. DeVries Its: Executive Vice President ATTEST: /s/ Joan R. Riley /s/ Myron R. Shain ------------------ Myron R. Shain SCHEDULE 1 The initial Retirement Cash Award payable as of June 30, 1993, is $47,795, calculated as follows: A x B x C = $47,795, where: A = Number of Shares Issued B = Current Market Value on June 30, 1993 C = 100% - 42.6% which is the percentage equal to sum of maximum marginal federal and state income tax rates. RETIREMENT AWARD AGREEMENT This Retirement Award Agreement ("Agreement") is entered into as of this 30th day of June, 1993 between QUIXOTE CORPORATION ("the Company"), a Delaware corporation whose principal place of business is Chicago, Illinois, and GEORGE D. EBERSOLE, of Palos Heights, Illinois ("Employee"). RECITALS WHEREAS, the Board of Directors of the Company adopted the Quixote Corporation 1993 Long-Term Stock Ownership Incentive Plan (the "Long-Term Plan") by amending and restating the Quixote Corporation 1991 Incentive Stock Option Plan, which is subject to approval by the stockholders of the Company, and; WHEREAS, the Long-Term Plan authorizes the Audit/Compensation Committee of the Board of Directors (the "Committee") to select certain employees of the Company or any of its subsidiaries who are key executives and who have completed ten years of continuous service for the Company or its subsidiaries to receive Retirement Awards; and WHEREAS, the Long-Term Plan provides that Retirement Awards may be in the form of Retirement Stock Awards and Retirement Cash Awards as those terms are defined in the Long-Term Plan; and WHEREAS, the Committee has selected the Employee as a grantee of a Retirement Award subject to the terms and conditions set forth in this Agreement; and WHEREAS, the Long-Term Plan requires that any Retirement Awards be documented by a written agreement with such terms and conditions as the Committee may determine. AGREEMENTS NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties agree as follows: 1. GRANT OF RETIREMENT AWARD (a) Subject to the other terms and conditions of this Agreement and the Long-Term Plan, the Company hereby grants to Employee an aggregate Retirement Stock Award of 37,037 shares of the Company common stock, $.01 2/3 par value (the "Stock"), to be issued and delivered to Employee as fully paid and non- assessable Stock on the following Issuance Dates in the following amounts: Number of Issuance Date Shares June 30, 1993 5,291 shares June 30, 1994 5,291 shares June 30, 1995 5,291 shares June 30, 1996 5,291 shares June 30, 1997 5,291 shares June 30, 1998 5,291 shares June 30, 1999 5,291 shares (b) The Company shall issue and deliver the shares set forth in paragraph (a) above to the Employee on each Issuance Date only if on such date the Employee is employed by the Company or its subsidiaries and the term of this Agreement has not been terminated pursuant to Section 8(b). Notwithstanding the immediately preceding sentence, the Company shall issue and deliver the shares set forth above on an Issuance Date to the Employee even if the Employee is not employed by the Company or its subsidiaries on such Issuance Date solely because the Employee s employment was terminated during the fiscal year ending on that Issuance Date by reason of the Employee's death, disability or other involuntary termination of employment (excluding termination for cause). The Company will deliver to the Employee a Certificate with respect to that number of shares issued and delivered as of the Issuance Date. 2. GRANT OF RETIREMENT CASH AWARD (a) Subject to the other terms and conditions of this Agreement and the Long-Term Plan, the Company hereby grants to the Employee a Retirement Cash Award for the sole purpose of paying federal and state income taxes arising from the issuance and delivery of Retirement Awards to the Employee pursuant to this Agreement, calculated as follows: (i) As of each Issuance Date, the Employee will receive a Retirement Cash Award equal to the product of (x) the Current Market Price of the Retirement Stock Award issued and delivered on that Issuance Date and (y) the percentage which is equal to 1 less the maximum marginal federal and state income tax rate then in effect (the "Retirement Cash Award Formula"). (ii) The Retirement Cash Award calculated for the Employee as of the initial Issuance Date of June 30, 1993 pursuant to the Retirement Cash Award Formula is as set forth on Schedule 1. A Retirement Cash Award shall only be paid in connection with the issuance and delivery of Retirement Stock under this Agreement. The Retirement Cash Award Formula may be changed by the Committee in its discretion. (b) A Retirement Cash Award shall not be paid directly to the Employee, but shall be paid to the appropriate federal and state tax officials by the Company on behalf of Employee. The Company will give the Employee written evidence of such payment. (c) For purposes of this Agreement, the parties agree that, given both the level of activity in the public trading of the Company's Stock and the price volatility of the Stock, the fair market value of the Stock shall mean the Current Market Price. The term "Current Market Price of the Stock means the average of the daily closing prices for the thirty consecutive business days commencing no more than forty five business days before the day in question. The closing price for each day shall be the last reported sale price determined in the regular way or, in case no such reported sales takes place on such day, the average of the last reported bid and asked prices determined the regular way, in either case in the principal national securities exchange in which the Stock is admitted to trading a listed, or if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices as reported by NASDAQ or other similar organization if NASDAQ is no longer reporting such information, or if not so available, the fair market price is determined by the Board. 3. RESTRICTIONS ON THE RIGHT TO SELL OR TRANSFER RETIREMENT STOCK (a) As a condition of this Award, the Employee agrees that he will not sell, transfer, pledge, hypothecate, or otherwise transfer any Retirement Stock he receives pursuant to this Agreement during the period he is employed by the Company or its subsidiaries; provided, however, following the earlier of (i) the termination of the employment of the Employee with the Company or its subsidiaries, or (ii) the Employee's attaining age 65 (whether or not the Employee actually retires from employment), these restrictions shall terminate. The Employee agrees that the Company shall instruct its transfer agent to place a legend on each share certificate representing the Retirement Stock with respect to such restrictions in substantially the following form, and the Company shall cause such certificates to be issued without a legend when the applicable restrictions have terminated as provided herein: The sale, transfer, pledge, hypothecation or other transfer of the shares represented by this Certificate are subject to the terms and conditions of a Retirement Award Agreement dated as of June 30, 1993 by and between Quixote Corporation and George D. Ebersole. The Retirement Award Agreement provides that the restrictions shall automatically expire upon the earlier of (i) the termination of Mr. Ebersole's employment by Quixote Corporation or its subsidiaries, or (ii) Mr. Ebersole's attaining 65 years of age. (b) Notwithstanding anything in this Section 3 to the contrary, the Employee agrees that he will not sell, transfer, pledge, hypothecate, or otherwise transfer any Retirement Stock he receives pursuant to this Agreement, during the period prior to, and during the six-month period following, the meeting of the stockholders of the Company at which the Long-Term Plan is approved by stockholders. (c) Unless on an Issuance Date, there is in the opinion of Company's counsel a valid and effective registration statement under the Securities Act of 1933, as amended, and an appropriate qualification and registration under applicable state securities law with respect to the Retirement Stock to be issued and delivered, the Employee agrees, prior to the issuance and delivery of the Retirement Stock, to provide the Company a representation that he is acquiring the Stock for his own account for investment and not with a view to, or for sale in connection with, the resale or distribution of any such Stock and shall provide such other representations and covenants to the Company as may, in the opinion of its counsel, be required. In the event that any Retirement Stock issued is not so registered, then the Employee agrees that the certificates representing the Retirement Stock shall bear a restrictive legend, and that stop transfer instructions shall be issued to Company's transfer agents until such time as the Retirement Stock is registered. (d) If at any time the Committee determines, in its discretion, that the listing, registration or qualification of the Retirement Stock upon any securities exchange or under any state or federal law, or that the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the granting of the Award or in connection with the issuance of Retirement Stock thereunder, the Award may not be granted in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee. 4. STOCKHOLDER RIGHTS AND ADJUSTMENTS TO STOCK (a) The Employee shall not by reason of any Retirement Stock Award or by reason of this Agreement have any right as a stockholder of the Company with respect to the shares of Stock to which the Company has agreed to issue and deliver to the Employee in the future until such time as the Retirement Stock has been actually issued and delivered to the Employee. Except as provided in the Long-Term Plan, no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to an Issuance Date for such Retirement Stock, and all adjustments to the Retirement Stock by reason of a stock dividend, merger, consolidation or otherwise shall be made in accordance with the terms of the Long-Term Plan. (b) This Agreement shall not affect in any way the right or power of the Company to make adjustments, reclassification, reorganizations or changes of its capital or business structure or to merge, consolidate, dissolve, liquidate, sell or transfer all or any part of its business or assets. 5. NO EMPLOYMENT RIGHTS Neither the establishment of the Long-Term Plan nor the granting of this Award nor the execution of this Agreement shall be construed to give the Employee the right to remain employed by the Company or any of its subsidiaries, or to any benefits not specifically provided by the Long-Term Plan or by this Agreement, or in any manner modify the right of the Company or any of its subsidiaries to modify, amend or terminate any of its employee benefit plans or other arrangements available to Employee. The Company and or any of its subsidiaries may at any time dismiss the Employee from employment free from any liability or any claim under the Long-Term Plan. 6. SUCCESSORS AND ASSIGNS The Award shall be binding in accordance with its terms upon any successors of the Company and upon the heirs, executors, administrators and successors of Employee. 7. GOVERNING LAW This Agreement and the Retirement Award shall be governed by and construed in accordance with the laws of the State of Illinois relating to contracts made and to be performed in that state. 8. TERMINATION (a) This Agreement shall terminate upon the earlier of (i) July 1, 1998 or (ii) the date of termination of the Employee's employment with the Company or subsidiaries, unless extended pursuant to section 8(b) below. (b) Unless on or before March 1 of each year commencing March 1, 1994, the Company notifies the Employee in writing that the Company does not intend to extend the term of this Agreement, the term of this Agreement shall automatically be extended for an additional period of one year; provided, however, under no circumstances shall the term of this Agreement extend beyond July 1, 1999. 9. NOTICES All notices, certificates or other communication shall be sufficiently given when given in writing and mailed by first class mail, postage prepaid, with proper address as indicated below. Any of such parties may be written notice given to the other party designate any address or addresses to which notices, certificates or other communications to them shall be sent when required as contemplated by this Agreement. Until otherwise provided by the respective parties, all notices, certificates and communications to each of the parties shall be addressed as follows: To the Company: Quixote Corporation One East Wacker Drive Suite 3000 Chicago, Illinois 60601 Attn.: President With a copy to: _____________________________ _____________________________ _____________________________ _____________________________ To the Employee: George D. Ebersole 7831 Foresthill Lane Palos Heights, IL 60463 10. PRE-REQUISITE STOCKHOLDER APPROVAL The Company and the Employee agree that, notwithstanding any of the provisions herein, this Agreement shall become null and void in the event the stockholders of the Company fail to approve the adoption of the Long-Term Plan. If the stockholders fail to approve the Long-Term Plan, neither the Company nor the Employee shall have any rights under this Agreement or under the Long-Term Plan. IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement as of the day and year first above written. QUIXOTE CORPORATION By: /s/ James H. DeVries Its: Executive Vice President ATTEST: /s/ Joan R. Riley /s/ George D. Ebersole ---------------------- George D. Ebersole SCHEDULE 1 The initial Retirement Cash Award payable as of June 30, 1993, is $54,975, calculated as follows: A x B x C = $54,975, where: A = Number of Shares Issued B = Current Market Value on June 30, 1993 C = 100% - 42.6% which is the percentage equal to sum of maximum marginal federal and state income tax rates. AMENDED RETIREMENT AWARD AGREEMENT This Amended Retirement Award Agreement ("Amendment Agreement") is entered into as of this 23rd day of August, 1996 between QUIXOTE CORPORATION (the "Company"), a Delaware corporation whose place of business is in Chicago, Illinois, and PHILIP E. ROLLHAUS, JR. of Chicago, Illinois ("Employee"). RECITALS: WHEREAS, the Company and the Employee are parties to a Retirement Award Agreement entered into as of June 30, 1993 ("Agreement"), which provides for certain retirement awards, including a retirement cash award (as those terms are defined) in the Quixote Corporation 1993 Long-Term Stock Ownership Incentive Plan (the "Long-Term Plan"); WHEREAS, the formula for determining the retirement cash award provided in Section 2 of the Agreement is inconsistent with the Long-Term Plan and its purposes; WHEREAS, the parties agree that the Agreement should be amended to reflect accurately the formula for determining the retirement cash award. NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties agree as follows: 1. Section 2 of the Agreement should be amended as of June 30, 1993 to read as follows: (a) Subject to the other terms and conditions of this Agreement and the Long-Term Plan, the Company hereby grants to the Employee a Retirement Cash Award for the sole purpose of paying federal and state income taxes arising from the issuance and delivery of Retirement Awards to the Employee pursuant to this Agreement, calculated as follows: As of each Issuance Date, the Employee will receive a Retirement Cash Award equal to the quotient of (x) the Current Market Price of the Retirement Stock Award issued and delivered on that Issuance Date divided by (y) the percentage which is equal to 1 minus the maximum marginal federal and state income tax rate, less the Current Market Price of the Retirement Stock Award (the "Retirement Cash Award Formula"). A Retirement Cash Award shall only be paid in connection with the issuance and delivery of Retirement Stock under this Agreement. The Retirement Cash Award Formula may be changed by the Committee in its discretion. (b) A Retirement Cash Award shall not be paid directly to the Employee, but shall be paid to the appropriate federal and state tax officials by the Company on behalf of Employee. The Company will give the Employee written evidence of such payment. (c) For purposes of this Agreement, the parties agree that, given both the level of activity in the public trading of the Company's Stock and the price volatility of the Stock, the fair market value of the Stock shall mean the Current Market Price. The term "Current Market Price" of the Stock means the average of the daily closing prices for the thirty consecutive business days commencing no more than forty five business days before the day in question. The closing price for each day shall be the last reported sale price determined in the regular way or, in case no such reported sales takes place on such day, the average of the last reported bid and asked prices determined the regular way, in either case in the principal national securities exchange in which the Stock is admitted to trading a listed, or if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices as reported by NASDAQ or other similar organization if NASDAQ is no longer reporting such information, or if not so available, the fair market price is determined by the Board. 2. Except as provided in Section 1, above, there shall be no other changes to the Agreement. IN WITNESS WHEREOF, the Company and Employee have executed this Amendment Agreement as of the day and year first above written. QUIXOTE CORPORATION PHILIP E. ROLLHAUS, JR. By: /s/ Philip E. Rollhaus Jr. /s/ Philip E. Rollhaus Jr. --------------------------- --------------------------- Its: Chairman and Chief Executive Officer ---------------------------- ATTEST: /s/ Joan R. Riley - --------------------------------- AMENDED RETIREMENT AWARD AGREEMENT This Amended Retirement Award Agreement ("Amendment Agreement") is entered into as of this 23rd day of August, 1996 between QUIXOTE CORPORATION (the "Company"), a Delaware corporation whose place of business is in Chicago, Illinois, and JAMES H. DEVRIES of Winnetka, Illinois ("Employee"). RECITALS: WHEREAS, the Company and the Employee are parties to a Retirement Award Agreement entered into as of June 30, 1993 ("Agreement"), which provides for certain retirement awards, including a retirement cash award (as those terms are defined) in the Quixote Corporation 1993 Long-Term Stock Ownership Incentive Plan (the " Long-Term Plan"); WHEREAS, the formula for determining the retirement cash award provided in Section 2 of the Agreement is inconsistent with the Long-Term Plan and its purposes; WHEREAS, the parties agree that the Agreement should be amended to reflect accurately the formula for determining the retirement cash award. NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties agree as follows: 1. Section 2 of the Agreement should be amended effective as of June 30, 1993 to read as follows: (a) Subject to the other terms and conditions of this Agreement and the Long-Term Plan, the Company hereby grants to the Employee a Retirement Cash Award for the sole purpose of paying federal and state income taxes arising from the issuance and delivery of Retirement Awards to the Employee pursuant to this Agreement, calculated as follows: As of each Issuance Date, the Employee will receive a Retirement Cash Award equal to the quotient of (x) the Current Market Price of the Retirement Stock Award issued and delivered on that Issuance Date divided by (y) the percentage which is equal to 1 minus the maximum marginal federal and state income tax rate, less the Current Market Price of the Retirement Stock Award (the "Retirement Cash Award Formula"). A Retirement Cash Award shall only be paid in connection with the issuance and delivery of Retirement Stock under this Agreement. The Retirement Cash Award Formula may be changed by the Committee in its discretion. (b) A Retirement Cash Award shall not be paid directly to the Employee, but shall be paid to the appropriate federal and state tax officials by the Company on behalf of Employee. The Company will give the Employee written evidence of such payment. (c) For purposes of this Agreement, the parties agree that, given both the level of activity in the public trading of the Company's Stock and the price volatility of the Stock, the fair market value of the Stock shall mean the Current Market Price. The term "Current Market Price" of the Stock means the average of the daily closing prices for the thirty consecutive business days commencing no more than forty five business days before the day in question. The closing price for each day shall be the last reported sale price determined in the regular way or, in case no such reported sales takes place on such day, the average of the last reported bid and asked prices determined the regular way, in either case in the principal national securities exchange in which the Stock is admitted to trading a listed, or if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices as reported by NASDAQ or other similar organization if NASDAQ is no longer reporting such information, or if not so available, the fair market price is determined by the Board. 2. Except as provided in Section 1, above, there shall be no other changes to the Agreement. IN WITNESS WHEREOF, the Company and Employee have executed this Amendment Agreement as of the day and year first above written. QUIXOTE CORPORATION JAMES H. DeVRIES By: /s/ Philip E. Rollhaus Jr. /s/ James H. DeVries ----------------------------- --------------------------- Its: Chairman and Chief Executive Officer ----------------------------- ATTEST: /s/ Joan R. Riley - ------------------------- AMENDED RETIREMENT AWARD AGREEMENT This Amended Retirement Award Agreement ("Amendment Agreement") is entered into as of this 23rd day of August, 1996 between QUIXOTE CORPORATION (the "Company"), a Delaware corporation whose place of business is in Chicago, Illinois, and MYRON R. SHAIN of Palos Hills, Illinois ("Employee"). RECITALS: WHEREAS, the Company and the Employee are parties to a Retirement Award Agreement entered into as of June 30, 1993 ("Agreement"), which provides for certain retirement awards, including a retirement cash award (as those terms are defined) in the Quixote Corporation 1993 Long-Term Stock Ownership Incentive Plan (the "Long-Term Plan"); WHEREAS, the formula for determining the retirement cash award provided in Section 2 of the Agreement is inconsistent with the Long-Term Plan and its purposes; WHEREAS, the parties agree that the Agreement should be amended to reflect accurately the formula for determining the retirement cash award. NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties agree as follows: 1. Section 2 of the Agreement should be amended effective as of June 30, 1993 to read as follows: (a) Subject to the other terms and conditions of this Agreement and the Long-Term Plan, the Company hereby grants to the Employee a Retirement Cash Award for the sole purpose of paying federal and state income taxes arising from the issuance and delivery of Retirement Awards to the Employee pursuant to this Agreement, calculated as follows: As of each Issuance Date, the Employee will receive a Retirement Cash Award equal to the quotient of (x) the Current Market Price of the Retirement Stock Award issued and delivered on that Issuance Date divided by (y) the percentage which is equal to 1 minus the maximum marginal federal and state income tax rate, less the Current Market Price of the Retirement Stock Award (the "Retirement Cash Award Formula"). A Retirement Cash Award shall only be paid in connection with the issuance and delivery of Retirement Stock under this Agreement. The Retirement Cash Award Formula may be changed by the Committee in its discretion. (b) A Retirement Cash Award shall not be paid directly to the Employee, but shall be paid to the appropriate federal and state tax officials by the Company on behalf of Employee. The Company will give the Employee written evidence of such payment. (c) For purposes of this Agreement, the parties agree that, given both the level of activity in the public trading of the Company's Stock and the price volatility of the Stock, the fair market value of the Stock shall mean the Current Market Price. The term "Current Market Price" of the Stock means the average of the daily closing prices for the thirty consecutive business days commencing no more than forty five business days before the day in question. The closing price for each day shall be the last reported sale price determined in the regular way or, in case no such reported sales takes place on such day, the average of the last reported bid and asked prices determined the regular way, in either case in the principal national securities exchange in which the Stock is admitted to trading a listed, or if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices as reported by NASDAQ or other similar organization if NASDAQ is no longer reporting such information, or if not so available, the fair market price is determined by the Board. 2. Except as provided in Section 1, above, there shall be no other changes to the Agreement. IN WITNESS WHEREOF, the Company and Employee have executed this Amendment Agreement as of the day and year first above written. QUIXOTE CORPORATION MYRON R. SHAIN By: /s/ Philip E. Rollhaus Jr. /s/ Myron R. Shain --------------------------- --------------------------- Its: Chairman and Chief Executive Officer --------------------------- ATTEST: /s/ Joan R. Riley - ------------------------- AMENDED RETIREMENT AWARD AGREEMENT This Amended Retirement Award Agreement ("Amendment Agreement") is entered into as of this 23rd day of August, 1996 between QUIXOTE CORPORATION (the "Company"), a Delaware corporation whose place of business is in Chicago, Illinois, and GEORGE D. EBERSOLE of Palos Heights, Illinois ("Employee"). RECITALS: WHEREAS, the Company and the Employee are parties to a Retirement Award Agreement entered into as of June 30, 1993 ("Agreement"), which provides for certain retirement awards, including a retirement cash award (as those terms are defined) in the Quixote Corporation 1993 Long-Term Stock Ownership Incentive Plan (the "Long-Term Plan"); WHEREAS, the formula for determining the retirement cash award provided in Section 2 of the Agreement is inconsistent with the Long-Term Plan and its purposes; WHEREAS, the parties agree that the Agreement should be amended to reflect accurately the formula for determining the retirement cash award. NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties agree as follows: 1. Section 2 of the Agreement should be amended effective as of June 30, 1993 to read as follows: (a) Subject to the other terms and conditions of this Agreement and the Long-Term Plan, the Company hereby grants to the Employee a Retirement Cash Award for the sole purpose of paying federal and state income taxes arising from the issuance and delivery of Retirement Awards to the Employee pursuant to this Agreement, calculated as follows: As of each Issuance Date, the Employee will receive a Retirement Cash Award equal to the quotient of (x) the Current Market Price of the Retirement Stock Award issued and delivered on that Issuance Date divided by (y) the percentage which is equal to 1 minus the maximum marginal federal and state income tax rate, less the Current Market Price of the Retirement Stock Award (the "Retirement Cash Award Formula"). A Retirement Cash Award shall only be paid in connection with the issuance and delivery of Retirement Stock under this Agreement. The Retirement Cash Award Formula may be changed by the Committee in its discretion. (b) A Retirement Cash Award shall not be paid directly to the Employee, but shall be paid to the appropriate federal and state tax officials by the Company on behalf of Employee. The Company will give the Employee written evidence of such payment. (c) For purposes of this Agreement, the parties agree that, given both the level of activity in the public trading of the Company's Stock and the price volatility of the Stock, the fair market value of the Stock shall mean the Current Market Price. The term "Current Market Price" of the Stock means the average of the daily closing prices for the thirty consecutive business days commencing no more than forty five business days before the day in question. The closing price for each day shall be the last reported sale price determined in the regular way or, in case no such reported sales takes place on such day, the average of the last reported bid and asked prices determined the regular way, in either case in the principal national securities exchange in which the Stock is admitted to trading a listed, or if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices as reported by NASDAQ or other similar organization if NASDAQ is no longer reporting such information, or if not so available, the fair market price is determined by the Board. 2. Except as provided in Section 1, above, there shall be no other changes to the Agreement. IN WITNESS WHEREOF, the Company and Employee have executed this Amendment Agreement as of the day and year first above written. QUIXOTE CORPORATION GEORGE D. EBERSOLE By: /s/ Philip E. Rollhaus Jr. /s/ George D. Ebersole ----------------------------- --------------------------- Its: Chairman and Chief Executive Officer ----------------------------- ATTEST: /s/ Joan R. Riley - ------------------------- EX-10.(N) 4 EXHIBIT 10(N) Ex. 10(n) AGREEMENT FOR PURCHASE AND SALE OF ASSETS THIS AGREEMENT is made and entered into this 3rd day of July, 1996, by and between Integrated Information Services, Inc., a Nevada corporation ("IIS") and Pettibone Corporation, a Delaware corporation, (collectively, IIS and Pettibone Corporation are referred to herein as the "Buyer"), on the one hand and Quixote Corporation, a Delaware corporation ("Parent"), Discovery Products, Inc., a Delaware corporation ("DPI"), on the other hand (collectively, DPI and Parent are referred to herein as the "Selling Entities"). WHEREAS, through DPI, Parent is engaged in the business of development and sale of software for searching and annotating depositions and trial transcripts (the "Business"); WHEREAS, the Selling Entities lease certain facilities in 431 Lakeview Court, Suite E. Mt. Prospect, Illinois 60056 (the "Facility") at which the Business is conducted; WHEREAS, Buyer desires to purchase from the Selling Entities and the Selling Entities desire to sell to Buyer the assets and business of the Business; NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements herein contained, the parties agree as follows: ARTICLE I THE TRANSACTION 1.1 PURCHASE AND SALE OF ASSETS. Upon the terms and subject to the conditions of this Agreement, at the Closing, the Selling Entities shall sell, transfer, assign and deliver to the Buyer (or its affiliated designee), and the Buyer (or its affiliated designee) shall purchase, accept and receive, all right, title and interest in and to the Purchased Assets (as defined below). 1.2 PURCHASED ASSETS. The "Purchased Assets" means (i) all of the Business, (ii) all of the assets used in the operation of the Business, and (iii) all of the assets, properties and rights of DPI, including the following: (a) all tools, machinery and equipment, office furniture and office equipment; (b) all computer software programs, source codes, object codes, information systems, program specifications and related material and documentation and any and all licenses and copies thereof and rights thereto (the "Software"); (c) all information in the nature of know-how, trade secrets, inventions, processes, designs, devices and related information and documentation (the "Technical Information"); (d) all patents, trademarks, trade names, trade styles, logos, product designations and service marks and all applications (pending or in process) and registrations therefor and licenses thereof, including the name Discovery Products, Inc. and Stenograph Legal Services, Inc. and all associated goodwill (the "Intellectual Property"); (e) all packaging inventory, Software manuals, Initialize Software protect devices, Software diskettes and Software protect devices; (f) all documents and records relating to the Business and the Purchased Assets; (g) all records relating to those employees subsequently hired by Buyer; (h) all permits, licenses, approvals, registrations, authorizations and indicia of authority and pending applications for any thereof ("Licenses and Permits"); and (i) all contractual rights and interests of the applicable Selling Entity under the contracts referred to in SCHEDULE 1.3(a). The definition of Purchased Assets shall not include the following (the "Excluded Assets"): (a) all interests in real property and real property leases, (b) all interests in personal property leases, (c) all inventory (other than packaging, Software manuals, PC board to program or initialize Software protect devices, Software diskettes and Software protect devices), (d) all cash and cash equivalents, (e) all accounts and notes receivable, (f) all security deposits and prepaid expenses, and (g) all interests in the stock of Court Technologies, Inc. and all of its assets, including intellectual property. 1.3 LIABILITIES AND OBLIGATIONS. Buyer shall not assume and shall not be liable or responsible for any debt, obligation or liability of or relating to the Facility, the Business, the Purchased Assets, any Selling Entity or otherwise of any kind, whether known or unknown, contingent, absolute, or otherwise, except for obligations under the agreements described on SCHEDULE 1.3(a) to the extent obligations thereunder are required to be performed after the end of the Closing Date, were incurred in the ordinary course of business and do not relate to any failure to perform, improper performance or other breach by any Selling Entity prior to the end of the Closing Date (the "Assumed Liabilities"). IIS agrees to timely discharge and perform all of the Assumed Liabilities. 1.4 EXCLUDED LIABILITIES. Except for the Assumed Liabilities, each Selling Entity agrees to timely discharge and -2- perform all of its liabilities and obligations related to the Business or the Purchased Assets payable after Closing as they become due, including the following (the foregoing, including the following being the "Excluded Liabilities"): (a) liabilities and obligations relating to products sold prior to the end of the Closing Date, including product liability claims and claims for damages to person or property; (b) liabilities and obligations for any products sold prior to the end of the Closing Date that do not comply with applicable warranties or that are otherwise defective; (c) liabilities and obligations relating to any federal, foreign, state, county and other tax returns, reports and declarations of every nature (including income, employment, excise, property, sales and use taxes); (d) liabilities and obligations relating to any Plan (as hereinafter defined), as well as any and all claims of and obligations to (including wages, salary and overtime) employees of the Business to the extent related to the period through the end of the Closing Date or otherwise related to the acts of the Selling Entities except for severance liabilities arising from Buyer's failure to offer employment as required by SECTION 7.1; and (e) liabilities and obligations to the Selling Entities and their Affiliates (as hereinafter defined) except as arising pursuant to this Agreement. The Buyer agrees that any benefits, rights, actions, settlements, or assets arising from any of the Excluded Liabilities and not the Purchased Assets or the Assumed Liabilities shall belong exclusively to the Selling Entities, and Buyer hereby waives any right or claim thereto. ARTICLE II CONSIDERATION FOR TRANSFER 2.1 CONSIDERATION. The aggregate consideration for the Purchased Assets shall be as follows (the "Purchase Price"): (a) Three Hundred Thousand Dollars ($300,000); and (b) the assumption of the Assumed Liabilities by IIS. 2.2 TRANSFER TAXES. At Closing, the Selling Entities shall pay or provide for the transfer taxes and sales taxes payable as a result of the transfer of the Purchased Assets provided for herein. -3- 2.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated among the Selling Entities and the Purchased Assets as provided on an Allocation Schedule in form provided by Buyer to the Selling Entities promptly after Closing (the "Allocation Schedule"). Buyer and the Selling Entities agree (i) to jointly complete and timely file Form 8594, and any other required reports in accordance with SECTION 1060 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder, with their respective federal income tax returns for the tax year in which the Closing Date occurs (and any amended Form 8594, if necessary) in accordance with the Allocation Schedule and (ii) that no party will take a position on any report, return, or other documents filed with any governmental authority in any judicial or administrative proceeding, that is in any manner inconsistent with the Allocation Schedule. ARTICLE III THE CLOSING AND TRANSFER OF ASSETS 3.1 CLOSING. The transfer of assets contemplated by this Agreement shall be effective as of the end of the Closing Date, as hereafter defined (the "Closing") and shall occur at the offices of McDermott, Will & Emery, 227 West Monroe Street, Chicago, Illinois at 10:00 A.M. on July 3, 1996 or at such other time or place as may be mutually agreed upon by the parties (the "Closing Date"). 3.2 DELIVERIES BY BUYER. At the Closing, Buyer shall deliver (or cause to be delivered) the following: (a) $300,000 payable by wire transfer of immediately available funds; (b) such other instruments or documents as may be necessary or appropriate to carry out the transactions contemplated hereby. 3.3 DELIVERIES BY THE SELLING ENTITIES. At the Closing, the Selling Entities shall deliver the following: (a) a bill (or bills) of sale in the form provided by Buyer; (b) the Consents referred to in SECTION 6.6; -4- (c) patent, trademark and copyright assignments for items included in the Purchased Assets in form provided by Buyer; (d) such other instruments or documents as may be necessary or appropriate to carry out the transactions contemplated by this Agreement. At the Closing, the Selling Entities shall have taken all steps necessary to place the Buyer in actual possession and operating control of the Business and the Purchased Assets. The Selling Entities shall allow employees, agents or representatives of the Buyer access to the Facility ("Access") in order to take delivery of the Purchased Assets. Access will be made available during regular business hours from the date of Closing until 5:00 p.m. July 19, 1996. 3.4 CLOSING AGREEMENTS. At the Closing, the parties shall execute, acknowledge and deliver such other instruments or documents as may be necessary or appropriate to carry out the transactions contemplated by this Agreement. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLING ENTITIES The Selling Entities hereby jointly and severally represent and warrant to Buyer, as of the date hereof, and as of the Closing Date, as set forth below. For purposes of this Agreement, "Material Adverse Effect" shall mean any effect which is materially adverse to the operations (as presently conducted), assets, liabilities, condition (financial or otherwise) or to each Selling Entity's knowledge the prospects of the Purchased Assets, the Business or the Facilities. 4.1 AUTHORITY. Each Selling Entity has the full corporate right, power and authority, without the consent of any other person, to execute and deliver this Agreement and the agreements it is hereby contemplated to execute and to carry out the transactions contemplated hereby and thereby, including the transfer of each of the Purchased Assets. All corporate and other acts or proceedings required to be taken by each Selling Entity to authorize the execution, delivery and performance of this Agreement and all agreements and transactions contemplated hereby have been duly and properly taken. -5- 4.2 VALIDITY. This Agreement has been, and the agreements and other documents to be delivered by each Selling Entity at Closing will be, duly executed and delivered and constitute the valid and legally binding obligations of each Selling Entity enforceable in accordance with their respective terms. 4.3 VIOLATIONS AND APPROVALS. The execution and delivery of this Agreement and the agreements contemplated hereby and the consummation of the transactions contemplated hereby and thereby will not (immediately, upon notice, with the passage of time or both) result in the creation of any lien, charge or encumbrance of any kind or the termination or acceleration of any obligation of or relating to the Business or the Purchased Assets and are not prohibited by, do not and will not violate or conflict with any provision of, and do not and will not (immediately, upon notice, with the passage of time or both) constitute a default under or a breach of (i) the charter or by-laws of any Selling Entity, (ii) any note, bond, indenture, contract, agreement, permit, license or other instrument to which any Selling Entity is a party or, by which any Selling Entity, the Business or the Purchased Assets are bound, (iii) any order, writ, injunction, decree or judgment of any court or governmental agency applicable to any Selling Entity, the Business, or the Purchased Assets or (iv) any law, rule or regulation applicable to any Selling Entity, the Business or the Purchased Assets. Except as set forth on SCHEDULE 4.3, and consents to assignment and other consents that are obtained in connection with the Closing, no approval, authorization, registration, consent, order or other action of or filing with any person, including any court, administrative agency or other governmental authority of any country, is required for the execution and delivery by each Selling Entity of this Agreement or the agreements contemplated hereby or the consummation of the transactions contemplated hereby and thereby. 4.4 DUE ORGANIZATION. Each Selling Entity is a corporation duly organized and validly existing under the laws of its state or jurisdiction of incorporation. Each Selling Entity, as applicable, has full power and authority and all requisite rights, licenses, permits and franchises to own and operate the Purchased Assets and to carry on the Business. For purposes of the Business, the applicable Selling Entities are duly qualified to do business in Illinois. DPI is qualified to do business in California. The Selling Entities are not required to be qualified to do business in any other state. 4.5 FINANCIAL STATEMENTS AND TAXES. The financial statements of the Business for the year ended June 30, 1995 and -6- the ten months ended April 30, 1996 attached hereto as SCHEDULE 4.5 (the "Financial Statements") are (a) in accordance with the books of account and records of the Selling Entities, (b) fair presentations of the financial condition and the results of operations as of the dates and for the periods indicated and (c) prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods covered thereby (except as specified therein and except for the lack of footnotes, and in the case of interim Financial Statements subject to year-end audit adjustments consisting only of normally recurring accruals which in the aggregate are not material). All federal, foreign, state, county and other tax returns, reports and declarations of every nature (including income, employment, excise, property, sales and use taxes) required to be filed by or on behalf of the Selling Entities (as it relates to the Business) and the Business have been filed and such returns are complete and accurate in all material respects and disclose all taxes required to be paid for the periods covered thereby. All taxes required to be paid, withheld or accrued by the Selling Entities (as related to the Business) and the Business and any deficiency assessments, penalties and interest have been paid, withheld or accrued. All tax payments related to employees, including income tax withholding, FICA, FUTA, unemployment and worker's compensation, required to be made by the Selling Entities (relating to the Business) and the Business have been fully and properly paid, withheld, accrued or recorded. There are no outstanding federal, state or local tax audits related to the Business. 4.6 INTERIM CHANGE. Except as set forth in SCHEDULE 4.6, since November 30, 1995, the Selling Entities have operated the Business in the ordinary course, consistent with past operations, and there has not been any of the following in connection with the Business: (a) any event resulting in, or that is reasonably likely to result in, a Material Adverse Effect; (b) any material change in significant personnel or relationships with third parties, including suppliers, customers and others; (c) any damage to or destruction of a material asset, or any disposition of assets or transfers of assets from any Facility, other than sales of finished goods and use and disposal of assets in the ordinary course of business on terms consistent with past practice; or (d) any agreement to take any of the foregoing actions. 4.7 PURCHASED ASSETS. The Selling Entities are the sole and exclusive legal and equitable owner of all right, title and interest in and have good and marketable title to all of the Purchased Assets free and clear of the interests and rights of any other party. None of the Purchased Assets are subject to any -7- lease, license, security interest, mortgage, pledge, lien, charge, encumbrance, claim, covenant or restriction of any kind or character. The Purchased Assets are in good repair, order and condition (reasonable wear and tear excepted), are suitable for the purposes for which they are presently being used, and are adequate to meet all present and reasonably anticipated requirements of the Business as the Selling Entities conduct the Business. The Purchased Assets will furnish Buyer with all of the capacity and rights to operate the Business in the same manner as presently operated by the Selling Entities. 4.8 ENVIRONMENTAL MATTERS. Each of the Selling Entities is currently complying in all respects with its obligations under all laws relating to the environment in connection with the operation of its Business, its occupancy of its Facilities and otherwise. No environmentally hazardous materials have ever been released, unlawfully generated, treated, stored, or disposed of or in connection with the Business. 4.9 SOFTWARE AND INFORMATION SYSTEMS. SCHEDULE 4.9 sets forth an accurate and complete list and summary description of all the Software. SCHEDULE 4.9 identifies or describes (i) Software which is owned by the Selling Entities; and (ii) Software which is licensed to the Selling Entities by third parties. Except as provided on SCHEDULE 4.9, with respect to the Software that is reflected as being owned by one or more of the Selling Entities: (a) all Software documentation for the end user is reasonably current, accurate and sufficient in detail and content to identify, explain the nature and permit the intended use thereof; (b) all source codes, object codes and source code comments included in the Software are sufficient to the extent reasonably necessary to enable Buyer to maintain and modify the Software, using persons skilled in the programming language, operating systems, and hardware involved; (c) Except for Incorporated Products (as hereinafter defined), the applicable Selling Entity has good, sole, and marketable right, title, and interest in and to the Software (including the exclusive right to make, copy, sell, exploit, and provide to others the use of the Software and all derivative works thereof) free and clear of any liens, claims, encumbrances and adverse rights of every kind, nature, and description. The applicable Selling Entity is in actual and sole -8- possession of and will transfer to Buyer at Closing all copies of the source code, source code comments and object code (except for copies of object code held by licensees) and other proprietary rights included in the Software. SCHEDULE 4.9 lists all current and former employees of the Selling Entities who were authors of the Software and to the knowledge of the Selling Entities any other person or entity who materially participated in the development of the Software or any portion thereof or performed any work related to the Software (such authors and other persons or entities are collectively referred to as the "Software Authors"). Each Software Author identified as "internal" made his contribution to the Software within the scope of employment with the applicable Selling Entity, as "work made for hire." Except for the Incorporated Products, the Software and every portion thereof is an original creation of the Software Authors (or other persons not having any rights thereto) and does not contain any source code or portions of source code (including any "canned program") created by any parties other than the Software Authors (or other persons not having any rights thereto). The Selling Entities have not, by any acts or omissions, or by acts or omissions of affiliates, directors, officers, employees, agents, or representatives caused any of their proprietary rights in the Software, including copyrights, trademarks, and trade secrets to be transferred, diminished, or adversely affected to any material extent. (d) Except as set forth in SCHEDULE 4.9: (i) there are no defects or errors in the Software, which defects or errors could materially and adversely affect Buyer's or any licensee's use of the Software or the functioning of the Software in accordance with the specifications for the Software published by the applicable Selling Entity or provided to customers, the Software has all the features described in the user manuals or advertisements and materials made available to the applicable Selling Entity's customers; and the Software does not contain any "back door," "time bomb," "Trojan horse," "worm," "drop dead device," "virus" (as these terms are commonly used in the computer software industry), or other software routines or -9- hardware components designed to permit unauthorized access, to disable or erase software, hardware, or data in a manner unauthorized by, and contrary to the intentions of, the user, or to perform any other similar unauthorized destructive type of functions; (ii) no person or entity other than the applicable Selling Entity has any interest of any kind or nature in or with respect to the Software, including the right to use, make, copy, sell, exploit and provide to others the use of, the Software and all derivative works thereof, and no government funding or university or college facilities were used in the development of the Software, and the Software was not developed pursuant to an agreement giving any person or entity rights to the Software, and no situation, matter, or agreement exists that would preclude Buyer from making any change to the Software or combining it with other software in any lawful manner; (iii) all copies of copyrighted Software contain copyright legends; the Selling Entities have no knowledge that any third party is violating or has violated any of the applicable Selling Entity's proprietary rights in the Software; other than license fees for Incorporated Products, no third party has any interest in, or right to compensation from the Selling Entities by reason of, the use, exploitation, or sale of the Software; there are no restrictions on the ability of the Selling Entities (or any successor or assignee of the Selling Entities, including Buyer) to use or otherwise exploit the Software, and such use or exploitation does not and will not obligate the Selling Entities (or any successor or assignee of the Selling Entities, including Buyer) to pay any royalty, fee, or other compensation to any person or entity other than license fees for Incorporated Products; and the Selling Entities have not received any notice and do not have any knowledge of any complaint, -10- assertion, threat, or allegation inconsistent with the preceding statements in this paragraph; and (iv) the Software has been licensed for use by third parties only pursuant to the terms of the standard license agreement in form attached to SCHEDULE 4.9. (e) The Selling Entities have delivered or will deliver at Closing all of their records with respect to Software fixes (including fixes currently in progress), problem lists, maintenance of the Software, and customer complaints, and all warranty claims (including any pending claims) related to the Software all of which are described in SCHEDULE 4.9. Except as set forth in SCHEDULE 4.9, there are no representations and warranties that have been made with respect to the Software. (f) SCHEDULE 4.9 contains a complete list of all third party software and patent rights which are a component of or incorporated in or specifically required to develop or support any of the Software ("Incorporated Products"), and a list of all restrictions on the Selling Entities' unrestricted right to use, incorporate or distribute the Incorporated Products. The Selling Entities are not in violation of any license, sublicense or agreement with respect to an Incorporated Product. (g) No person or entity is entitled to receive the source code for any Software for any reason; and the Selling Entities have not disclosed the source code for any Software to any third party except as set forth on SCHEDULE 4.9. Prior to Closing, no employee, Consultant or agent of the Selling Entities has improperly used, taken or copied the Software. 4.10 CUSTOMERS AND SUPPLIERS. The Selling Entities have no knowledge of any fact, condition or event which would cause Buyer's relationship with any customer or supplier to be materially and adversely different than the current relationship of such supplier with respect to the Business. 4.11 EMPLOYEES. The Selling Entities have delivered to Buyer accurate and complete information in writing containing, with respect to the Business: (a) a list of all employees (including name, title and position); -11- (b) the employee's length of service; and (c) the compensation (including terms of payment, bonuses, commissions and deferred compensation, as well as any benefits) of each employee. With respect to the Business, except as set forth on SCHEDULE 4.11, (i) there have not been in the past five years and are not pending any labor disputes, any work stoppages, request for representations, pickets or work slow-downs due to labor disagreements, (ii) there are and have been no unresolved violations of any local, state, or federal laws respecting the employment of any employees, including the National Labor Relations Act, the Fair Labor Standards Act, the Americans with Disabilities Act, wage-payment laws, laws prohibiting employment discrimination, and laws addressing workplace safety and health; (iii) there is no unfair labor practice, charge or complaint pending, unresolved or, to the knowledge of the Selling Entities, threatened before the National Labor Relations Board; (iv) there is no employment handbook, personnel policy manual, or similar document that creates prospective employment rights or obligations; (v) the employees of the Business are not covered by any collective bargaining agreement; (vi) each Selling Entity has provided or will timely provide prior to Closing all notices required by law to be given prior to Closing of the transactions contemplated by this Agreement to all local, state, or federal labor, wage-payment, equal employment opportunity, unemployment-insurance and related agencies; (vii) each Selling Entity has paid or properly accrued in the ordinary course of business all wages and compensation due to employees, including all vacations or vacation pay, holidays or holiday pay, sick days or sick pay, and bonuses; and (viii) the transactions contemplated by this Agreement will not create liability under any local, state, or federal law respecting reductions in force or the impact on employees on plant closing or sales of businesses. 4.12 EMPLOYEE BENEFIT PLANS. For purposes hereof, a "Plan" shall mean any employee benefit plan, contract or arrangement, established, maintained or contributed to by one of the Selling Entities with respect to the employees of the Business. All Plans have been administered in accordance with applicable law and the terms thereof. Buyer will not incur any liability under any Plan as a result of the transactions contemplated hereby. 4.13 LICENSES AND PERMITS. SCHEDULE 4.13 contains an accurate and complete list and summary description of each License and Permit. The Licenses and Permits are valid and in full force and effect, no violations of any Selling Entity in -12- respect of the Business exist in respect thereof and there are not pending, or to the knowledge of any Selling Entity, threatened any proceedings or circumstances which could result in the termination, revocation, limitation or impairment of any License or Permit in respect of the Business. The Licenses and Permits included in the Purchased Assets are all of such items that are necessary to own the Purchased Assets and conduct the Business as presently owned, operated or conducted except for such items where failure to have such item could not result in any material expense or liability and that can be readily obtained without any material cost. Except as set forth as described in SCHEDULE 4.13, all Licenses and Permits are freely assignable to Buyer without the consent or approval of any third party, unless provided otherwise on SCHEDULE 4.13. No violations of any Selling Entity or its agents have been recorded in respect of any Licenses and Permits in the past three years, and the Selling Entities know of no basis therefor. 4.14 MATERIAL CONTRACTS. SCHEDULE 4.14 hereto sets forth an accurate, correct and complete list of all contracts, instruments, commitments, agreements, arrangements and understandings including all amendments and supplements thereto, relating to the Business, to which any Selling Entity is a party or is bound, or by which any of the assets of any Selling Entity are subject or bound (i) which involve benefits or obligations with a value individually or in the aggregate, of $15,000 or more, or (ii) which otherwise involve any of the following types of contracts (the items in (i) and (ii) being collectively referred to herein as the "MATERIAL CONTRACTS"): (a) any sales, license, service or distribution agreements and contracts; (b) all agreements, arrangements or understandings, written or oral (the "Employment Contracts"), regarding services to be rendered, terms and conditions of employment, confidentiality and assignment of inventions; (c) all licenses, agreements, contracts and other instruments affecting the Intellectual Property or the Software; (d) all agreements and contracts containing requirements or "take or pay" provisions; (e) all agreements and contracts with state, federal, local, regulatory or other governmental entities; -13- (f) all agreements and contracts not to compete or otherwise restricting activities; (g) all agreements and contracts containing a provision to indemnify any party or assume any tax, environmental or other liability; and (h) any other contract, commitment, agreement, arrangement or understanding which provides for payment or performance by any party thereto having an aggregate value of $15,000 or more or which is otherwise material to the Business. All Material Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect and none of the parties to any Material Contract are in breach of, violation of, or in default under the terms of any such Material Contract except for such breaches, violations and defaults which can be readily cured by Buyer and which will not result any material expense or liability. No event has occurred which with notice or passage of time or both would result in a breach of, violation of, or in default under, the terms of any Material Contract. The consummation of the transactions contemplated hereby, without notice to or consent or approval of any party, will not constitute a breach of, violation of, or default under any provision of any Material Contract. Except as set forth on SCHEDULE 4.14, there is no adverse claim on the rights of any Selling Entity under any Material Contract. None of the rights of any Selling Entity under any Material Contract will be impaired by the consummation of the transactions contemplated by this Agreement (except for such impairments as can be readily cured by Buyer without any material expense or liability), and all of such rights will be enforceable by Buyer after the Closing Date without the consent or agreement of any other party, including all rights to renew the applicable Material Contract. The Selling Entities have delivered accurate, correct and complete copies of each Material Contract to Buyer. 4.15 INTELLECTUAL PROPERTY. SCHEDULE 4.15 sets forth an accurate and complete list and summary description of all Intellectual Property and contains an indication of any renewals, taxes or fees due in respect thereof within ninety (90) days of the Closing Date. Except as set forth in SCHEDULE 4.15, with respect to the Intellectual Property, (i) the applicable Selling Entity is the sole and exclusive owner and has the sole and exclusive right to use the Intellectual Property and no other person has any interest in any Intellectual Property; (ii) no action, suit, proceeding or investigation has been instituted and is pending, unresolved or, to Selling Entity's knowledge, -14- threatened; (iii) none of the Intellectual Property or products or methods of the Business interferes with, infringes upon, conflicts with or otherwise violates the rights of others or, to the knowledge of the Selling Entities, is being interfered with or infringed upon by others, and none is subject to any outstanding order, decree or judgment except for such infringements, conflicts or violations as could not result in any material expense or liability and which can be readily cured by Buyer without any material expense or liability; (iv) there are no royalty, commission or similar arrangements, and no licenses, sublicenses or agreements, pertaining to any of the Intellectual Property or products or methods of the Business; (v) the Selling Entities have not agreed to indemnify any person for or against any infringement of or by the Intellectual Property or the Purchased Assets; (vi) all registrable items of Intellectual Property currently being used are properly registered under applicable law; and (vii) the Intellectual Property constitutes all such assets, properties and rights which are used in or necessary for the conduct of the operations of the Business and the Facility as currently conducted. Except as set forth on SCHEDULE 4.15, all rights of the applicable Selling Entity in and to the Intellectual Property are transferable to Buyer as contemplated herein without any consent or other approval. Buyer has been provided with accurate and complete copies or written descriptions of all studies, opinions and searches of which the Selling Entities have knowledge relating to any Intellectual Property or any infringement of or by any Intellectual Property, all of which are listed on SCHEDULE 4.15. 4.16 TECHNICAL INFORMATION. SCHEDULE 4.16 sets forth an accurate and complete list and summary description of all Technical Information. All Technical Information: (a) is owned solely and exclusively by the applicable Selling Entity or available for use by Buyer without payment to any person; and (b) is documented in a manner comparable to that of similarly situated businesses and in condition for conveyance to and readily useable by Buyer. All Technical Information and any copies thereof shall be delivered to Buyer at Closing. There is no violation of any patents, trademarks, trade secret rights, copyrights or other proprietary rights by, or with respect to, the Technical Information. Buyer has been provided with accurate and complete copies or written descriptions of all studies, opinions and searches of which the Selling Entities have knowledge relating to -15- any Technical Information or any infringement of or by any Technical Information, all of which are listed on SCHEDULE 4.16. 4.17 LEGAL PROCEEDINGS. The Selling Entities are not engaged in or a party to or, to the knowledge of any Selling Entity, threatened with any dispute, action, suit or other proceeding relating to the Business or any of the Purchased Assets. To the knowledge of the Selling Entities, no basis exists for any such proceeding which could have a Material Adverse Effect. The Selling Entities have no knowledge of any investigation threatened or contemplated by any governmental or regulatory authority. 4.18 COMPLIANCE WITH LAW. As of and prior to the Closing, the Business, each Facility and the Purchased Assets conform to all applicable statutes, codes, laws, ordinances, rules and regulations and each Selling Entity has complied with all such statutes, codes, laws, ordinances, rules and regulations as they apply to the Business and where the failure of such compliance can be readily cured and will not result in any material liability or expense. Neither the Selling Entities, nor, to the knowledge of the Selling Entities, any employee or representative thereof has made any unlawful gratuities or other payments (or taken similar actions) for the purpose of benefiting the Selling Entities with respect to the Business. 4.19 BROKERS. The Selling Entities have not retained any broker, finder or agent or incurred any liability or obligation for any brokerage fees, commissions or finders fees with respect to this Agreement or the transactions contemplated hereby, except for those to whom Buyer will have no liability or obligation. 4.20 DISCLOSURE. The representations and warranties of the Selling Entities contained in this Agreement and each agreement, attachment, schedule, certificate or other written statement delivered pursuant to this Agreement or in connection with the transactions contemplated herein and therein are accurate and complete in all material respects, and do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements and information contained herein or therein not misleading. -16- ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER Each Buyer hereby represents and warrants to the Selling Entities as of the date hereof, and as of the Closing Date, as set forth below. 5.1 AUTHORITY. Buyer has full corporate right, power and authority, without the consent of any other person, to execute and deliver this Agreement and the agreements contemplated hereby and to consummate the transactions contemplated hereby and thereby. All corporate and other acts or proceedings required to be taken by Buyer to authorize the execution, delivery and performance of this Agreement and the agreements contemplated hereby and all transactions contemplated hereby and thereby have been duly and properly taken. 5.2 VALIDITY. This Agreement has been, and the agreements and other documents to be delivered at Closing will be, duly executed and delivered by Buyer and will constitute lawful, valid and legally binding obligations of Buyer, enforceable in accordance with their respective terms. 5.3 VIOLATIONS AND APPROVALS. The execution and delivery of this Agreement and the agreements contemplated hereby and the consummation of the transactions contemplated hereby and thereby will not (immediately, with notice, the passage of time or both) result in the creation of any lien, charge or encumbrance or the acceleration of any indebtedness or other obligation of Buyer and are not prohibited by, do not violate or conflict with any provision of, and do not and will not (immediately, with notice, the passage of time or both) result in a default under or a breach of (i) the charter or by-laws of Buyer, (ii) any contract, agreement, permit, license or other instrument to which Buyer is a party or by which it is bound, (iii) any order, writ, injunction, decree or judgment of any court or governmental agency, or (iv) any law, rule or regulation applicable to Buyer, except for such creations, terminations, violations, conflicts, breaches, defaults, charges or encumbrances which, in the aggregate will not have an adverse effect on Buyer's ability to consummate the transactions contemplated hereby. 5.4 BROKERS. Buyer has not retained any broker or finder or incurred any liability or obligation for any brokerage fees, commissions or finders fees with respect to this Agreement or the transactions contemplated hereby. -17- 5.5 DUE ORGANIZATION. Each Buyer is a corporation duly organized and validly existing under the laws of its state of incorporation and has full corporate power and authority to acquire and operate each Facility and to own, lease and operate the Purchased Assets and to carry on the Business. ARTICLE VI ADDITIONAL COVENANTS AND AGREEMENTS OF SELLING ENTITIES AND BUYER The Selling Entities jointly and severally hereby agree to keep, perform and fully discharge the following covenants and agreements. 6.1 FURTHER ASSURANCES; COOPERATION. From time to time, after Closing at Buyer's request and without further consideration, the Selling Entities shall execute, acknowledge and deliver such documents, instruments or assurances and take such other actions as Buyer may reasonably request with respect to assigning, conveying and transferring to Buyer any of the Purchased Assets. 6.2 RECORDS AND DOCUMENTS. Following the Closing Date, the Selling Entities shall retain and grant to Buyer and its representatives, at Buyer's request (and subject to Buyer's reimbursement of the Selling Entities out-of- pocket expenses), access to and the right to make or obtain copies of those records and documents related to the Business or the Purchased Assets, possession of which is retained by the Selling Entities, as may be necessary or useful in connection with Buyer's operation of the Business after the Closing. If during the seven year period following Closing, the Selling Entities elect to dispose of such records, the Selling Entities shall first give Buyer sixty (60) days' written notice, during which period Buyer shall have the right to obtain the records without further consideration; PROVIDED, HOWEVER, that the Selling Entities shall have no liability to Buyer for disposal of any record unless done intentionally in contravention of this Section. If reasonably necessary, the Selling Entities shall also make reasonably available their employees and agents to provide information related to the Business, or the Purchased Assets on the same basis. 6.3 CONSUMMATION. Subject to the terms and conditions provided herein, the Selling Entities and the Buyers agree to use all reasonable efforts to take, or cause to be taken all actions and to do, or cause to be done all things necessary, proper or -18- advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by the Agreement in accordance with its terms. The Selling Entities and the Buyer shall not take any action inconsistent with their obligations hereunder or which would hinder or delay the consummation of the transactions contemplated hereby. 6.4 NONCOMPETITION AND NONDISCLOSURE. 6.4.1 NONCOMPETITION. In order to protect the value of the Business and the Purchased Assets, each Selling Entity and its Affiliates (collectively, the "Seller Group") agrees for three (3) years from the Closing Date, not to (i) engage, directly or indirectly, in any manner in the Business anywhere in the United States or Europe, (ii) directly or indirectly engage in any activity that competes with the Business anywhere in the United States or Europe, (iii) solicit any customer of the Business for products or services directly or indirectly competitive with the Business and (iv) attempt in any way, directly or indirectly, to obtain for itself, or others, or to divert from Buyer and its subsidiaries and affiliates, any rights benefits, sales or profits arising out of or in connection with the Purchased Assets or the Business. For purposes hereof, an "Affiliate" means any entity controlling, controlled by or under common control with another entity or person. 6.4.2 NONDISCLOSURE. After the Closing, except as required by law or court order, the Seller Group will not disclose, or use directly or indirectly, to, or for the benefit of any person or entity other than Buyer, any Technical Information or confidential information, data or materials related to the Business. 6.4.3 BREACH. The Seller Group agrees that any breach of SECTIONS 6.4.1 or 6.4.2 above will result in irreparable damage to Buyer for which Buyer will have no adequate remedy at law, and, therefore if such a breach should occur, the Seller Group consents to any temporary or permanent injunction or decree of specific performance by any court of competent jurisdiction in favor of Buyer enjoining any such breach, without prejudice to any other right or remedy to which Buyer shall be entitled. In the event that any portion of this SECTION 6.4 shall be determined by any court of competent jurisdiction to be unenforceable by reason of its being extended over too great a period of time or too large a geographic area or over too great a range of activities, it shall be interpreted to extend only over the maximum lesser period of time, geographic area, or range of activities as to which it may be enforceable. Each of the covenants herein shall be deemed a separate and severable -19- covenant. In the event any member of the Seller Group breaches any provision of this SECTION 6.4, Buyer shall be entitled to recover all costs of enforcement, including reasonable attorneys' fees. 6.5 CHANGE OF NAMES. Within ten (10) business days after the Closing, DPI will provide evidence to Buyer that it has taken all necessary action and made all necessary state filings to change its corporate name to "Quixote DPI Corporation". The Selling Entities will terminate the use of any and all "d/b/a's" currently used by DPI. 6.6 CONSENTS. The Selling Entities have obtained consents necessary to assign the contracts described on SCHEDULE 6.6 prior to Closing and will obtain consents necessary to assign all other contracts described on SCHEDULE 1.3(a) as promptly as practicable after Closing. ___________________________ Buyer hereby agrees to keep, perform and fully discharge the following covenants and agreements: 6.7 RECORDS AND DOCUMENTS. Following the Closing Date, Buyer shall grant to each Selling Entity and its representatives, at the Selling Entity's request (and subject to the Selling Entity's reimbursement of Buyer's out-of- pocket expenses), access to and the right to make or obtain copies of those records and documents related to the Business or the Purchased Assets, possession of which is transferred to Buyer, as may be reasonably necessary for the Selling Entity's tax, employee benefit, collection of receivables or financial reporting obligations or other investigation required by law or, for the Selling Entity's dealing with, handling or discharging of any debt, obligation or liability of or relating to the Business or the Purchased Assets which is not an Assumed Liability. If during the seven year period following Closing, the Buyer elects to dispose of such records, the Buyer shall first give the Selling Entities written notice, during which period the Selling Entities shall have the right to obtain the records without further consideration; PROVIDED, HOWEVER, that the Buyer shall have no liability to the Selling Entities for disposal of any record unless done intentionally in contravention of this Section. If reasonably necessary, Buyer shall also make reasonably available its employees to provide information for the same purposes on the same basis. -20- ARTICLE VII EMPLOYEES 7.1 CONTINUED ASSOCIATION WITH THE BUSINESS. Buyer will offer employment to at least 3 employees of the Business. The Selling Entities will use all reasonable efforts to retain all present employees through the Closing. None of the Selling Entities nor their Affiliates have or will offer employment to any of such 3 employees in respect of any period after Closing. Buyer shall not incur any liability or obligation with respect to any employee that does not accept employment with Buyer. The Buyer shall use reasonable efforts to request each employee that accepts employment to confirm the acceptance of employment in writing. Buyer will not incur as a result of the transfer of the Purchased Assets, any present, future or contingent liability or obligation to pay any pension benefits, medical benefits, compensation for loss of employment or other compensation or benefits to any employee terminated at or prior to Closing. The employees of the Business hired by Buyer are referred to herein as the "Buyer Employees". 7.2 SECTION 401(k) PLANS. The Selling Entities have made all existing payment options available to the employees of the Business participating in any applicable 401(K) Plan. As soon as practicable after the Closing Date, the parties will transfer the account balances of Buyer Employees from the trustee of the Quixote 401(k) Plan (the "Quixote 401(k) Plan") to the trustee of the Pettibone 401(k) Plan. The Selling Entities will take all action necessary so that Buyer Employees will be fully vested in their accounts in the Quixote 401(k) Plan as of the Closing Date. Assets of the Quixote 401(k) Plan equal to the sum of the account balances of the Buyer Employees in such plan as of the last day of the month coincident with or immediately preceding the date of transfer (the "Transfer Date") shall be transferred to the Pettibone 401(k) Plan as soon as practicable following the Closing Date and the Selling Entities shall be responsible for determining whether the correct amount of balances are transferred to the Pettibone 401(k) Plan. The transfer will be made after any distributions that Buyer Employees are entitled to receive under the Quixote 401(k) Plan before the Transfer Date have been made and after Buyer presents to the Selling Entities a copy of a current IRS favorable determination letter or other evidence that the Pettibone 401(k) Plan is a "qualified" plan within the meaning of Section 401(a) of the Internal Revenue Code. The Selling Entities will allow each Buyer Employee to elect any benefit option available under the Quixote 401(k) Plan, and transfers to the Pettibone 401(k) Plan will occur only if such employee elects such a transfer. -21- The transfer will be made in cash. The Selling Entities represent that the transfer described in this Section shall be made in accordance with Section 414(l) of the Internal Revenue Code. 7.3 COBRA OBLIGATIONS. The Selling Entities shall retain all liabilities, perform all obligations and maintain all insurance under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") with respect to its employees and former employees of the Business and their covered dependents, whether or not such employees accept employment with Buyer. 7.4 SEVERANCE. The Selling Entities shall be liable for any severance, separation or similar liabilities, that are payable (i) to any person whose right to severance or separation benefits arises as a result of the transactions contemplated by this Agreement, (ii) to any person whose employment with a Selling Entity was terminated prior to the Closing, and (iii) to any employee of any of the Selling Entities not hired by Buyer (a "Seller Employee"). Buyer shall be liable for any severance, separation or similar liabilities for all Buyer Employees under Buyer's employment policies and procedures. 7.5 WORKERS COMPENSATION. The Selling Entities shall be liable for the administration and payment of all workers' compensation liabilities and benefits with respect to (i) Buyer Employees to the extent resulting from claims, events, circumstances, exposures, conditions or occurrences occurring prior to the Closing Date, and (ii) Seller Employees. Buyer shall be responsible for the administration and payment of all workers' compensation liabilities and benefits with respect to Buyer Employees resulting from claims reported following the Closing Date, to the extent resulting from events, circumstances, exposures, conditions, or occurrences after the Closing Date. 7.6 HEALTH BENEFITS. The Selling Entities shall be liable for the administration and payment of all health and welfare liabilities and benefits under the Plans with respect to (i) Buyer Employees to the extent resulting from claims, events, circumstances, exposures, conditions or occurrences occurring through the end of the Closing Date, and (ii) Seller Employees. Buyer shall be responsible for the administration and payment of all health and welfare liabilities and benefits under the Buyer's benefit programs with respect to Buyer Employees resulting from claims reported following the Closing Date, to the extent resulting from events, circumstances, exposures, conditions, or occurrences after the end of the Closing Date. The Selling Entities shall retain responsibility for health and welfare benefits and liabilities for any disabled employees of the -22- Business and disabled dependents of employees of the Business until such persons are no longer disabled. ARTICLE VIII SURVIVAL AND INDEMNIFICATION 8.1 SURVIVAL. All covenants and agreements contained in this Agreement or in any agreement or other document delivered pursuant hereto shall be deemed to be material and to have been relied upon by the parties hereto and shall survive the Closing and be enforceable until the covenant or agreement has been fully performed. Unless otherwise specified, the representations and/or warranties contained in this Agreement or in any agreement or other document delivered pursuant hereto shall be deemed to be material and to have been relied upon by the parties hereto and shall survive the Closing for a period ending two years from the Closing Date, provided that (i) the representations and warranties in the following Sections shall survive and be enforceable indefinitely: Section 4.1, Section 4.2, the first sentence of Section 4.4, the first sentence of Section 4.7, Section 5.1, Section 5.2, Section 5.5, and (ii) the representations and warranties in SECTION 4.9 shall survive for two years and (iii) the representations and warranties in Section 4.6 as to tax matters only, shall survive until expiration of the applicable statutes of limitation and any extensions thereof. Any claim for indemnification under the representations and warranties that survive for a period of time that is asserted in writing within the survival period shall survive until resolved or judicially determined. The representations and warranties set forth in this Agreement or in any agreement or other document delivered pursuant hereto shall not be affected by any investigation, verification or examination by any party hereto or by anyone on behalf of any such party. The survival period for the representations and warranties shall in no way affect Buyer's responsibility to indemnify the Selling Entities with respect to the Assumed Liabilities, nor the Selling Entities responsibility to indemnify Buyer for the Excluded Liabilities. 8.2 INDEMNIFICATION. Buyer shall jointly and severally indemnify and hold harmless the Selling Entities, from and against any and all loss, diminution in value, damage, cost, expense (including court costs and attorneys' fees and expenses and costs of investigation), suit, action, claim, deficiency, liability or obligation related to, caused by or arising from (i) any misrepresentation, breach of warranty or failure to fulfill any covenant or agreement of Buyer contained herein or in any agreement or other document delivered pursuant hereto; (ii) any and all claims of third parties made based upon facts alleged -23- that, if true, would have constituted such a misrepresentation, breach or failure; and (iii) the Assumed Liabilities. The Selling Entities shall jointly and severally indemnify and hold harmless Buyer, from and against any and all loss, diminution in value, damage, cost, expense (including court costs and attorneys' fees and expenses and costs of investigation), suit, action, claim, deficiency, liability or obligation related to, caused by or arising from (i) any misrepresentation, breach of warranty or failure to fulfill any covenant or agreement of any Selling Entity contained herein or in any agreement or other document delivered pursuant hereto; (ii) any and all claims of third parties made based upon facts alleged that, if true, would constitute such a misrepresentation, breach or failure; (iii) the Excluded Liabilities. The party seeking indemnification shall give written notice to the indemnifying party of the facts and circumstances giving rise to any claim for indemnification. All rights contained in this Article are cumulative and are in addition to all other rights and remedies which are otherwise available, pursuant to the terms of this Agreement or applicable law. All indemnification rights shall be deemed to apply in favor of the indemnified party's officers, directors, representatives, subsidiaries, affiliates, successors and assigns. 8.3 GENERAL. Neither the Selling Entities nor the Buyer shall have any right to indemnification for any breach of representation or warranty hereunder until it has claims of at least $5,000 in the aggregate and then the indemnifying party or parties shall only be responsible for claims in excess of the first $5,000. ARTICLE IX GENERAL PROVISIONS 9.1 AMENDMENTS AND WAIVER. No amendment, waiver or consent with respect to any provision of this Agreement shall in any event be effective, unless the same shall be in writing and signed by the parties hereto, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 9.2 NOTICES. All notices, requests, consents, demands and other communications hereunder must be in writing and shall be delivered in person, by courier service or by telecopy, telegram or telex as follows: -24- (a) If to the Selling Entities: With copies to: Quixote Corporation McBride Baker & Coles One East Wacker Drive 500 W. Madison Street Chicago, Illinois 60601 40th Floor Telephone No.: (312) 467-6755 Chicago, IL 60621 Telecopy No.: (312) 467-0197 Telephone No.: (312) 715-5700 Attn: James H. DeVries Telecopy No.: (312) 993-9350 Attn: Anne Hamblin Schiave, P.C. (b) If to Buyer: With copies to: Integrated Information Services, Inc. McDermott, Will & Emery c/o Heico Acquisitions 227 West Monroe Street 5600 Three First National Plaza Chicago, IL 60606 Chicago, Illinois 60602 Telephone No.: (312) 372-2000 Telephone No.: (312) 419-8220 Telecopy No.: (312) 984-3669 Telecopy No.: (312) 419-9417 Attn: Stanley H. Meadows, P.C. Attn.: Michael E. Heisley Notice shall be deemed given when sent or delivered as provided herein. Any party may change its address or add or change parties for receiving notice by written notice given to the others named above. 9.3 EXPENSES. Except as otherwise expressly provided herein, each party to this Agreement shall pay its own costs and expenses in connection with the transactions contemplated hereby. 9.4 RULES OF CONSTRUCTION. The word "including" shall mean including, without limitation. The Article, Section and other headings contained herein are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 9.5 COUNTERPARTS. This Agreement may be executed (which may be by facsimile with hard copy by express delivery) in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 9.6 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the benefit of the parties named herein and their respective successors and assigns. The Selling Entities may not -25- assign any rights, benefits, duties or obligations under this Agreement. Each Buyer may assign its rights, benefits, duties and obligations to an affiliated corporation or a purchaser of the Business. 9.7 ENTIRE AGREEMENT. This Agreement and the documents referred to herein contain the entire agreement and understanding among the parties with respect to the transactions contemplated hereby and supersede all other agreements, understandings and undertakings among the parties on the subject matter hereof. 9.8 ANNOUNCEMENTS. No announcement of the specific terms of this Agreement shall be made by any party without the written approval of the other party (which approval shall not be unreasonably withheld), except filings required to be made with the Securities and Exchange Commission and as otherwise required by applicable law or rules of a national securities exchange. 9.9 PARTIAL INVALIDITY. In the event that any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. 9.10 APPLICABLE LAW. This Agreement shall be interpreted in accordance with the substantive laws of the State of Illinois applicable to contracts made and to be performed wholly within said State. -26- IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by a duly authorized officer all as of the date first written above. INTEGRATED INFORMATION QUIXOTE CORPORATION SERVICES, INC. By: /s/ Michael J. Felvy By: /s/ Daniel P. Gorey ------------------------- ------------------------------- Its: Vice President Its: Vice President and Controller ------------------------- ------------------------------- PETTIBONE CORPORATION DISCOVERY PRODUCTS, INC. By: /s/ Larry Gies By: /s/ Daniel P. Gorey ------------------------- ------------------------------- Its: Executive V.P. - CFO Its: Vice President ------------------------- ------------------------------- -27- EX-11 5 EXHIBIT 11 QUIXOTE CORPORATION & SUBSIDIARIES EXHIBIT 11 - COMPUTATION OF NET EARNINGS PER AVERAGE COMMON AND COMMON EQUIVALENT SHARE For the year ended June 30, 1996 Fully Primary Diluted ------- ------- Net loss as reported ($9,892,000) ($9,892,000) Add interest expense and deferred charge (net of income taxes) assuming conversion of debentures 886,000 (a) ------------ ------------ Adjusted net loss for computation (A) ($9,892,000) ($9,006,000) ============ ============ Average common shares outstanding would be adjusted for the additional shares that would be issued assuming conversion of the debentures and exercise of stock options as follows: Weighted average shares outstanding 7,875,585 7,875,585 Shares assumed issued upon conversion of debentures 947,638 Incremental shares outstanding assuming exercise of stock options and warrants using the treasury stock method 128,034 128,034 Shares issuable under retirement plan 305 305 --------- --------- Average common and common equivalent shares outstanding (B) 8,003,924 8,951,562 ============ ============ Loss per common and common equivalent share outstanding (A/B) ($1.24) ($1.01) ======= ======= NOTE: (a) The net loss for the fully diluted calculation is adjusted for interest expense and deferred charge amortization, assuming exercise of the conversion privilege on the 8% convertible debentures. -46- QUIXOTE CORPORATION & SUBSIDIARIES EXHIBIT 11 - COMPUTATION OF NET EARNINGS PER AVERAGE COMMON AND COMMON EQUIVALENT SHARE For the year ended June 30, 1995
Fully Primary Diluted ------- ------- Net earnings as reported $5,950,000 $5,950,000 Add interest expense and deferred charge (net of income taxes) assuming conversion of debentures 981,000 (a) ---------- ---------- Adjusted net earnings for computation (A) $5,950,000 $6,931,000 ========== ========== Average common shares outstanding would be adjusted for the additional shares that would be issued assuming conversion of the debentures and exercise of stock options and warrants as follows: Weighted average shares outstanding 7,819,537 7,819,537 Shares assumed issued upon conversion of debentures 1,051,316 Incremental shares outstanding assuming exercise of stock options and warrants using the treasury stock method 280,848 280,848 ---------- --------- Average common and common equivalent shares outstanding (B) 8,100,385 9,151,701 ========== ========== Earnings per common and common equivalent share outstanding (A/B) $ .73 $ .76 ===== =====
NOTE: (a) Net earnings for the fully diluted calculation is adjusted for interest expense and deferred charge amortization, assuming exercise of the conversion privilege on the 8% convertible debentures. 47 QUIXOTE CORPORATION & SUBSIDIARIES EXHIBIT 11 - COMPUTATION OF NET EARNINGS PER AVERAGE COMMON AND COMMON EQUIVALENT SHARE For the year ended June 30, 1994 Fully Primary Diluted ------- ------- Net earnings as reported $11,644,000 $11,644,000 Add interest expense and deferred charge (net of income taxes) assuming conversion of debentures 981,000 (a) ----------- ----------- Adjusted net earnings for computation (A) $11,644,000 $12,625,000 =========== ========== Average common shares outstanding would be adjusted for the additional shares that would be issued assuming conversion of the debentures and exercise of stock options and warrants as follows: Weighted average shares outstanding 7,680,192 7,680,192 Shares assumed issued upon conversion of debentures 1,051,316 Incremental shares outstanding assuming exercise of stock options and warrants using the treasury stock method 386,000 471,984 --------- --------- Average common and common equivalent shares outstanding (B) 8,066,192 9,203,492 =========== ========== Earnings per common and common equivalent share outstanding (A/B) $1.44 $1.37 ===== ===== NOTE: (a) Net earnings for the fully diluted calculation is adjusted for interest expense and deferred charge amortization, assuming exercise of the conversion privilege on the 8% convertible debentures. - 48 - EX-21 6 EXHIBIT 21 EXHIBIT 21 QUIXOTE CORPORATION & SUBSIDIARIES SUBSIDIARIES OF THE COMPANY as of June 30, 1996 Jurisdiction Under Which QUIXOTE CORPORATION (PARENT) Organized - ---------------------------- ------------- Disc Manufacturing, Inc. Delaware Energy Absorption Systems, Inc. Delaware Composite Components, Inc. Delaware E-Tech Testing Services, Inc. Delaware Safe-Hit Corporation Nevada Spin-Cast Plastics, Inc. Indiana LaserVideo Acquisition Corporation Delaware Legal Technologies, Inc. Delaware Litigation Communications, Inc. Delaware Quixote Steno Corporation Delaware Quixote DPI Corporation Delaware Court Technologies, Inc. Delaware Quixote IIS Corporation Delaware Quixote Limited United Kingdom Quixote LSI Corporation Delaware Myriad Entertainment, Inc. Delaware QualAir Corporation Delaware Quixote Foreign Sales Corporation U.S. Virgin Islands Quixote Research Corporation Delaware All of the subsidiaries listed above are wholly-owned by Quixote except as follows: Energy Absorption Systems, Inc. is the sole shareholder of Composite Components, Inc., E-Tech Testing Services, Inc., Safe-Hit Corporation and Spin-Cast Plastics, Inc. Legal Technologies, Inc. is the sole shareholder of Litigation Communications, Inc. and Quixote Steno Corporation. Quixote Steno Corporation is the sole shareholder of Quixote DPI Corporation, Quixote IIS Corporation, Quixote Limited and Quixote LSI Corporation. Quixote DPI Corporation is the sole shareholder of Court Technologies, Inc. The Company owns all of the preferred stock of LaserVideo Acquisition Corporation (LVAC) and shares voting power with respect to the outstanding common stock. The preferred stock has voting rights and represents 50% of the voting stock of LVAC. - 49 - EX-23 7 EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements on Form S-8 (File Nos. 2-76697, 33-1805, 33-22289, 33-50248 and 33-74488) and the registration statements on Form S-3 (Files Nos. 2-96502 and 33-14873 Amendment No. 1) of our reports, dated August 12, 1996, accompanying the consolidated financial statements and financial statement schedules of Quixote Corporation and Subsidiaries as of June 30, 1996 and 1995, and for each of the years ended June 30, 1996, 1995 and 1994, which report is included in this Annual Report on Form 10-K/A of Quixote Corporation. /s/ Coopers & Lybrand L.L.P. Chicago, Illinois February 24, 1997 EX-27 8 FINANCIAL DATA SCHEDULE
5 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 2,250,000 0 23,173,000 740,000 5,953,000 37,518,000 145,545,000 57,219,000 129,829,000 17,853,000 58,000,000 0 0 145,000 47,474,000 129,829,000 129,159,000 129,159,000 90,186,000 90,186,000 30,767,000 0 6,130,000 3,504,000 930,000 2,574,000 (12,466,000) 0 0 (9,892,000) (1.24) (1.24)
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