-----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, KVhBt63hIhFWxEQGqpw1NOX+/TmGYl8N1pZqCaDALJ8DSVAVNTemhZFlLNN/kYCa 7EkkeeK83nQHAyz73TxFTw== 0000912057-97-031791.txt : 19970929 0000912057-97-031791.hdr.sgml : 19970929 ACCESSION NUMBER: 0000912057-97-031791 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970926 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 SEC ACT: SEC FILE NUMBER: 001-08123 FILM NUMBER: 97686005 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 1 FORM 10-K405 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) For the fiscal year ended June 30, 1997 ---------------------------- 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. $59,500,740 as of August 29, 1997 ------------------------------------------------ -1- TABLE OF CONTENTS PART I PAGE ---- Item 1. Business...................................................... 3-7 Item 2. Properties.................................................... 8 Item 3. Legal Proceedings............................................. 9-12 Item 4. Submission of Matters to a Vote of Security Holders........... 12 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters......................................... 13 Item 6. Selected Financial Data....................................... 13 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations......................... 14-16 Item 8. Financial Statements and Supplementary Data................... 16-30 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......................... 30 PART III Item 10. Directors and Executive Officers of the Registrant............ 31 Item 11. Executive Compensation........................................ 31 Item 12. Security Ownership of Certain Beneficial Owners and Management.............................................. 31 Item 13. Certain Relationships and Related Transactions................ 32 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................................................. 33-36 SIGNATURES................................................................ 37 -2- 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 develop, manufacture and market energy-absorbing highway crash cushions and other highway safety products for the protection of motorists and highway workers to both domestic and international markets. As of June 30, 1997, Quixote Corporation and its subsidiaries employed 373 people. -3- HIGHWAY SAFETY DEVICES - ---------------------- Description of Business - ----------------------- The Company's business is life safety with its current operating subsidiaries concentrating on safety problems and their solutions for the highways. There are two broad categories of products for improving safety on the roads: products which minimize the severity of crashes that occur and products designed to prevent crashes from occurring. In the category of reducing the severity of crashes, the patented highway crash cushions manufactured by Energy Absorption Systems, Inc. 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 Absorption'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 an estimated 28,000 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, steel, urethane foam systems, cardboard, plastic structures, elastometric cylinders and sand. While Energy Absorption's products minimize the severity of crashes that occur, the products of its wholly-owned subsidiary, Safe-Hit Corporation, prevent crashes and help control the flow of traffic. Safe-Hit manufactures and markets a line of flexible sign and guide post systems and a glare screen system through distributors and catalog offerings. The guide posts are extruded from polypropylene and are used to delineate a travel way, 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 oncoming vehicles on roads where the inside lanes are adjacent to the median barrier. Both products are covered by patents. Spin-Cast Plastics, Inc., a wholly-owned subsidiary of Energy Absorption, manufactures rotational molded plastic products including the Energite-Registered Trademark- crash cushion system, plastic components used in Energy Absorption's other product lines, as well as custom designed plastic components for industrial products. Products can be further broken down into permanent and construction zone applications and, as such, are sold to those market segments. Most of the products for permanent and construction zone applications are approved as acceptable highway hardware according to procedures in the National Cooperative Highway Research Project number 230 or 350 which provide various test levels depending on the application. This approval is gained after a formal submission to the FHWA makes the products eligible for federal aid highway projects. Energy Absorption's products all have patented features and include the truck-mounted attenuator (TMA-TM-), the QuadGuard-Registered Trademark- System, the CushionWall-TM- , the BarrierGate-Registered Trademark-, the Energite System-Registered Trademark- and the Triton Barrier-Registered Trademark-. Energy Absorption provides product education, selection and application assistance. Energy Absorption generally does not perform site preparation or installation for any of its products. They are performed through a distributor/contractor network. Most of Safe-Hit's products are 'catalog type' and sold through distributors. Competition and Marketing - ------------------------- -4- Energy Absorption's products are sold in all 50 U.S. states. Six regional managers supervise 28 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 Absorption's domestic products. Energy Absorption 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 mangers who supervise 48 domestic distributors and make sales calls on certain state departments of transportation and contracting firms. Many international governments are now beginning to recognize the need for crash cushions as a method of reducing traffic fatalities. Energy Absorption's products are sold internationally through a network of 44 distributors who make sales to municipal and national governments and contractors who are responding to bids from their respective governments. 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. A number of other companies manufacture flexible guide posts. Government Policies - ------------------- The market for crash cushions is directly affected by federal, state and local governmental policies. A large portion of Energy Absorption'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. The Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), expiring on September 30, 1997, provides authorization for federal funding of highways and highway safety. Total funding of approximately $150 billion was available under ISTEA over a six year period. The states must set aside 10% of the federal funds received each year under ISTEA for safety construction activities such as hazard elimination. In order for highway devices to be eligible for federal funding, such devices must be approved by the FHWA. Energy Absorption is obligated to seek such approval for improvements or upgrades to such devices and for any new devices. A new highway bill to replace ISTEA is currently being discussed in Congress. While the Company believes that a new highway bill, or an extension of the current ISTEA bill, will be signed into law, it appears likely it will be delayed beyond September 30, 1997. Such a delay could cause an interruption in federal funding and may result in a temporary lack of funds for Energy Absorption's products. -5- Backlog - ------- As of June 30, 1997, 1996 and 1995, Energy had a backlog of unfilled orders for highway safety devices of $8,999,000, $8,591,000 and $10,200,000, 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 $2,209,000, $1,536,000 and $1,545,000, in the years 1997, 1996 and 1995, respectively. Energy Absorption 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 Absorption is seeking to develop or to acquire new products which can be sold through its existing distribution networks to its existing customers. 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 of Energy Absorption's highway safety business represents a significant portion of total revenues. Other - ----- Investment in FIP Joint Venture: - -------------------------------- During fiscal 1996, Energy Absorption entered into a joint venture with FIP Industriale S.p.A. of Italy to market their seismic bridge bearings in the United States. The Company, accounting for this investment under the equity method of accounting, took charges of $1,402,000 and $300,000 for 1997 and 1996 respectively. In June 1997, the Company decided to wind down the activities of the joint venture due to the lack of revenues and progress to date. The 1997 charge includes $502,000 in accrued costs to exit this venture. -6- COMPACT DISC MANUFACTURING - -------------------------- In March 1997, the Company sold substantially all of the assets and transferred significant operating liabilities of Disc Manufacturing, Inc. (DMI) to Cinram Ltd. for $80,283,000 in cash. The transaction excluded DMI's Huntsville, Alabama land and building as well as certain DMI litigation. DMI was one of the largest independent manufacturers of compact discs and CD-Roms in the United States. 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. Liabilities retained by the Company at June 30, 1997 include certain repetitive stress injury litigation and liabilities under certain lease obligations. -7- 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 and other plastic products 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 extruded Leased Hayward, California plastic highway safety devices 4905 Moores Mill Road 332,000 sq. ft. Sublet Owned Huntsville, Alabama 200 Corporate Pointe 19,800 sq. ft. Sublet Leased Culver City, California 225 West Washington 5,300 sq. ft. Sublet Leased Chicago, Illinois Note: Present facilities are believed to be adequate to support the Company's current and anticipated requirements. -8- Item 3. Legal Proceedings - -------------------------- A. DISC MANUFACTURING, INC. ET AL. v. MASSEY ET AL., CV-90-H-01029-NE (U.S. District Court for the Northern District of Alabama). On May 21, 1990, Quixote and Disc Manufacturing, Inc. ("DMI"), a discontinued operation, filed this lawsuit against Disctronics Limited, Disctronics (US) Inc., Disctronics, Inc., Moray Investments Limited ("Moray"), Memory-Tech, Inc. ("Memory-Tech") and individuals Peter Massey, Kevin Donovan, David Mackie, and Douglas Adams. This lawsuit alleged that the individual defendants, each a DMI director until April 30, 1990, had in concert with Disctronics Limited and its affiliated companies (the "Disctronics Group"), during the time that the Disctronics Group owned DMI, misappropriated DMI's corporate opportunity to acquire Memory-Tech, a competing compact disc manufacturer located in Plano, Texas. The lawsuit also alleged that the defendants had violated DMI's federal trademark rights in the name "Disctronics". Certain of the defendants filed counterclaims alleging breach of contract, economic duress, tortious interference with contract and business relations, unjust enrichment, fraud, unfair competition and seizure of corporate opportunity among other claims. On September 25, 1992, the Court dismissed all of the defendants' state law counterclaims, in order to allow those claims to be resolved in the parallel state court action. This left only the parties' (including defendants') federal trademark/Lanham Act claims, which were stayed, pending resolution of the state court action, described in B below. B. DISC MANUFACTURING, INC. ET AL. v. MASSEY ET AL., CV90-1214L (Madison County Circuit Court, Alabama). On June 13, 1990, DMI and Quixote refiled their state law corporate opportunity claims (described in A above), along with a claim under the Alabama trademark law, in the Circuit Court for Madison County, Alabama (Huntsville), the jurisdiction in which DMI was located. Following a preliminary injunction hearing, on July 30, 1990, the Court granted the motion for preliminary injunction. In connection with the preliminary injunction and pending the final outcome of the action, Quixote and DMI were required to post a $6 million certificate of deposit as injunction security. (In March 1996, the Court approved DMI's substitution of a $6 million surety bond backed by a $2 million letter of credit to replace the certificate of deposit). The defendants appealed the entry of the preliminary injunction and on May 15, 1992 the Alabama Supreme Court reversed the Circuit Court's issuance of the injunction, remanding the case for further proceedings. Quixote sought a rehearing which was denied on July 10, 1992. On May 21, 1992, defendants filed a Motion for Partial Summary Judgment on all counts of the complaint, asserting breaches of fiduciary duty and using as its basis the Alabama Supreme Court decision. In addition, on March 4, 1991, the corporate defendants filed a counterclaim against Quixote, DMI and James H. DeVries. The counterclaim sought damages of $73.8 million, to invalidate a 1989 Work-Out Agreement among the parties, punitive damages and other relief. In April 1993, the Company and DMI filed a First Amended Complaint which added claims for unjust enrichment, fraud and tortious interference. Defendants moved to dismiss the First Amended Complaint. In May 1995, the Circuit Court ruled on various outstanding motions. The Court dismissed all of the defendants' claims except the following claims: tortious interference with contract and business relations; fraud; breach of contract regarding a $300,000 escrow; a state dilution claim; and a claim for wrongfully seeking injunctive relief. In its May 1995 Order, the Circuit Court also dismissed all of the Company's and DMI's corporate opportunity claims based on breaches of fiduciary duties, along with the claims for unjust enrichment. This left two counts of the Company's and DMI's First Amended Complaint in the case: a count for tortious interference with contract and business relations and a count for fraud in connection with the Disctronics' Memory-Tech Inc. transaction. Both parties appealed the Court's May 1995 ruling. In September 1996, the Alabama Supreme Court ruled on the appeal, reinstating all of DMI's claims which had been dismissed by the Circuit Court except the corporate opportunity to acquire Memory-Tech Inc. and unjust enrichment claims and upholding the dismissal of all of the defendants' claims except a "palming off" claim related to use of the name "Disctronics". Consequently, the Company -9- 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, breach of contract and alleged interference cclaims. Petitions for rehearing were denied in November 1996 and this decision is now final. Defendants subsequently filed an amended counterclaim without seeking leave of court which seeks to assert in slightly different form generically some of the same claims as previously asserted and against which judgment has already been granted and become final. Quixote and DMI have moved to dismiss those claims. Court ordered mediations have not been successful. C. REPETITIVE STRESS INJURY LITIGATION. Stenograph Corporation, a discontinued operation, is one of a number of manufacturers of keyboard and other equipment that have been sued by individuals for arm, wrist and hand injuries, including carpal tunnel syndrome. All thirty cases filed to date against Stenograph, and in some cases the Company, contend that the Stenograph machine (or other keyboard equipment) was defectively designed and that Stenograph failed to provide adequate warnings about how the equipment should be used to avoid injury. The cases request actual damages, in some cases specified as ranging from $500,000 to $1,000,000, and, in most of the cases, punitive damages, with some cases specifying an amount of $10,000,000. Of the 30 cases, six were dismissed in April 1997 after a jury verdict in favor of Stenograph and an appeal is pending. In additions, six cases have been dismissed with prejudice and ten cases have been dismissed without prejudice to refile the complaints. All of the cases have been referred to the Company's insurance carriers and, at this time, the Company believes that liability resulting from these cases, if any, (excluding punitive damages) will be covered by its insurance policies. D. RESORT VIDEO LTD. v. LASERVIDEO, INC. In September 1990, DMI was sued by Resort Video, Ltd. in the Superior Court of the State of California for the County of Los Angeles in an action entitled RESORT VIDEO, LTD. v. LASERVIDEO, INC., No. 74659. Resort Video, a former start-up company, claimed DMI failed to produce certain video discs on schedule, thereby injuring its business. After a trial, on August 25, 1992, the jury awarded Resort Video $975,000 in damages. DMI moved for a new trial which was granted in October 1992. Plaintiff appealed that decision and DMI cross-appealed the jury's decision. In June 1995, the California Court of Appeals affirmed the trial court's order granting a new trial based on excessive damages. Resort Video's petition for a rehearing was denied. Accordingly, the case has been returned to the trial court and a trial on damages is set to begin in February 1998. E. THOMSON S.A. v TIME WARNER, ET AL. In February 1994, Disc Manufacturing, Inc., Quixote Corporation and a number of other companies were sued by Thomson S.A. of France in the United States District Court for the District of Delaware in an action entitled THOMSON S.A. v. TIME WARNER, INC., ET AL., No 94-83. The complaint charged that the defendants infringed four Thomson patents by making and selling audio compact discs and requested an order prohibiting defendants from making or selling compact discs which infringe on the patents. No specified damages were asked for although the complaint asked that damages be trebled because it alleged the infringement was willful. In the fall of 1994, the Denon and Time Warner defendants entered into consent judgments with the plaintiff. After a trial, in July 1996, the jury found that the Thomson patents were invalid. Thomson moved for judgment as a matter of law or, in the alternative, for a new trial, which was denied. In July 1997, Thomson filed an appeal which is pending. -10- F. DISCOVISION ASSOCIATES v. DISC MANUFACTURING, INC. In January 1995, Disc Manufacturing, Inc. was served in an action entitled DISCOVISION ASSOCIATES v. DISC MANUFACTURING, INC., Case No. 95-21, U.S. District Court for the District of Delaware. The complaint alleges that DMI is infringing six DiscoVision patents relating to optical storage discs by the manufacture and sale of compact discs and seeks injunctive relief and unspecified damages, including punitive damages, against DMI. In August 1995, DiscoVision was granted leave to amend its complaint to allege infringement by DMI of four additional patents. Plaintiffs subsequently dropped four patents from the case leaving six patents in issue. In April 1997, the District Court denied a motion by DiscoVision to dismiss portions of the DMI antitrust case. In August 1997, the District Court granted a motion by DMI to limit the time period for which damages could be asserted against DMI and denied DMI's motion to assert the doctrine of laches. The District Court, in September 1997, deconsolidated DMI's antitrust claims for purposes of trial and issued its determination on claims interpretation. Trial is set to begin in October 1997. G. DISC MANUFACTURING, INC. v. PIONEER AND DISCOVISION. In January 1995, DMI filed a complaint against Pioneer Electronic Corp., Pioneer Electronics (USA) Inc., Pioneer Capital Inc., and DiscoVision Associates in the U.S. District Court for the Central District of California, Case No. 95-0306, alleging violations of the antitrust laws and acts of unfair competition based on unlawful activities and anticompetitive tactics involving patents related to optical disc technology. DMI's complaint seeks damages, including punitive damages, and injunctive relief. This case has been transferred to the District Court in Delaware and consolidated with DiscoVision Associates' case against DMI pending in that jurisdiction (described in F. above). H. ESTATE OF THIEL v. ENERGY ABSORPTION SYSTEMS, INC. In December 1994, Energy Absorption Systems, Inc. was served in an action entitled FREDERICK W. THIEL AND MAUREEN THIEL v. SLATTERY ASSOCIATES ET AL., Superior Court of New Jersey, Docket No. MRS-L-1431-94. The complaint 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 Absorption and numerous defendants, including the State of New Jersey, the U.S. Federal Highway Administration and various other governmental entities. The Company has referred the case to its insurance carrier. At this time, the Company believes that liability resulting from this case, if any, will be covered by its insurance policies. Trial is scheduled for January 1998. I. 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 District 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 District Court later determined the award to be $280,386. Energy Absorption filed an appeal and was successful in obtaining a decision from the Court of Appeals for the Federal Circuit reversing the District Court's judgments of invalidity, unenforceability and award of attorney's fees to Roadway. The Court of Appeals affirmed and modified the District Court judgment of literal non-infringement and remanded for consideration of infringement under the doctrine of equivalents. J. ERNEST CHICO v. ENERGY ABSORPTION SYSTEMS, INC. On April 12, 1996 Energy Absorption Systems, Inc. was served in an action entitled ERNEST CHICO V. THE STATE OF INDIANA, ENERGY ABSORPTION SYSTEMS, INC. AND HOOSIER COMPANY IN LAKE SUPERIOR COURT FOR THE STATE OF INDIANA, CAUSE NO. 45DO2-9605-CT-391 which arises from an accident in which the plaintiff hit one of Energy's crash cushions. The Company has referred the case to its insurance carrier and at this time believes that liability resulting from this case will be covered by its insurance policies. The Company has filed a motion for summary judgment which is pending. -11- K. FEATHER V. ENERGY ABSORPTION SYSTEMS, INC., In July 1997, plaintiff filed this action in Superior Court of the State of California, Case No. SCV-6077 in an action entitled SUSAN FEATHER V. ENERGY ABSORPTION SYSTEMS, INC. ET AL. Plaintiff claims special, general and punitive damages because of sexual discrimination/harassment, retaliation, intentional infliction of emotional distress, negligent infliction of emotional distress, and constructive discharge while an employee of Energy Absorption. The Company believes that most of the claims will be covered by its insurance policies. 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 1997. -12- 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 1997 High $ 8 $10-3/4 $ 9-7/8 $ 9-1/8 Low 5-3/4 7-5/8 8-1/4 6-3/4 FISCAL 1996 High $13-1/4 $ 12 $ 8-1/2 $ 8-1/2 Low 10-1/2 7-1/4 6 5-3/4 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 4, 1997, there were approximately 5,775 shareholders including holders of shares held in street name. Dividend Policy - --------------- During 1997, the Company declared semiannual cash dividends of twelve cents and thirteen cents per share each. During 1996, the Company declared semiannual cash dividends of twelve cents per share each. Item 6. Selected Financial Data - -------------------------------- SELECTED FINANCIAL DATA Dollar amounts in thousands, except per share data
For the years ended June 30, 1997 1996 1995 1994 1993 - ---------------------------- -------- -------- ------- ------- ------ Operating results: Net sales $ 45,037 $ 46,750 $ 46,522 $ 43,433 $ 35,648 Gross profit 22,249 24,291 23,382 23,453 20,454 Selling and administrative expenses 14,264 15,059 13,662 13,825 11,146 Research and development 2,209 1,536 1,545 1,978 2,092 Other expense (2,112) (488) (1,887) (928) (605) Earnings from continuing operations 2,907 4,390 4,470 4,989 3,342 Net (loss) earnings (3,831) (9,892) 5,950 11,644 9,441 Per share data: Primary earnings from continuing operations $ .36 $ .55 $ .55 $ .62 $ .42 Net (loss) earnings (.48) (1.24) .73 1.44 1.20 Book value per common share 5.24 5.99 7.49 6.94 5.53 Cash dividends per common share .25 .24 .22 .21 .20 Weighted average common and common equivalent shares outstanding 8,008,893 8,003,924 8,100,385 8,066,192 7,867,658 Financial position: Total assets $ 55,220 $118,888 $135,662 $ 98,999 $ 88,202 Working capital 20,639 4,055 5,541 8,204 6,981 Net property, plant and equipment 12,903 13,113 10,645 8,532 8,075 Long-term debt, net 0 58,000 68,000 38,975 40,000 Shareholders' equity 41,655 47,619 58,915 54,069 41,898
NOTE: OPERATING RESULTS AND FINANCIAL POSITION FOR ALL PERIODS PRESENTED HAVE BEEN RESTATED TO REFLECT THE LEGAL TECHNOLOGIES AND DISC MANUFACTURING SEGMENTS AS DISCONTINUED OPERATIONS. -13- Item 7. Management's Discussion and Analysis of Financial Condition and Results - ------------------------------------------------------------------------------- of Operations - ------------- 1997 Compared to 1996 - --------------------- The Company's sales for 1997 decreased 4% to $45,037,000 from $46,750,000 in 1996. Sales declined in Energy Absorption's permanent system product lines which include the G-R-E-A-T-Registered Trademark- System as well as the newly introduced QuadGuard-Registered Trademark- System. This was due to, among other things, increased competition which resulted in a decline in selling prices and to a lesser extent, a decrease in unit volume. In addition, the Company believes that some customers may have postponed their purchases earlier in 1997 in anticipation of several new products introduced by Energy Absorption that qualify under the new federal testing and evaluation guidelines known as NCHRP 350, coupled with a delay in certifying one of these new products. Sales of the Triton Barrier-Registered Trademark- and Safe-Hit delineator also declined. Somewhat offsetting these product line decreases were increases in the Energite7 III and truck-mounted attenuator (TMA) product lines. The gross profit margin in 1997 decreased to 49.4% from 52.0% in 1996. This was due to a decrease in the average selling prices of its permanent systems products and to a lesser extent, lower sales volume. In addition, the gross margin also declined due to increased overhead from the expansion of Energy Absorption's Pell City, Alabama facility which was doubled in size to 150,000 square feet. Selling and administrative expenses in 1997 decreased 5% to $14,264,000 from $15,059,000 in 1996. This decrease was due principally to last year's $800,000 write-off to discontinue the Company's sewer rehabilitation business. Corporate level administrative expenses remained at a level consistent with last year. Research and development expenses in 1997 increased 44% to $2,209,000 compared to $1,536,000 in 1996. This increase was due to expenditures for the development of new products as well as for the upgrade of the Company's existing product lines in order to meet the revised NCHRP 350 standards. These new Federal Highway Administration guidelines increase the safety standards to accommodate heavier and higher center of gravity vehicles such as sport utility vehicles. Interest income in 1997 was $339,000 compared to $358,000 in 1996. The interest income in 1997 was earned on the Company's cash of approximately $18 million which is being invested in short-term money market instruments until it can be effectively deployed in the business. The 1996 interest income is the result of the interest earned on a $6 million certificate of deposit posted as injunction security for certain litigation. This certificate of deposit was redeemed in the third quarter of 1996 and replaced with a surety bond backed by a letter of credit. Interest expense in 1997 decreased 71% to $497,000 from $1,726,000 in 1996. This was due to a decrease in the average long-term debt outstanding in 1997 compared to 1996. As discussed below in "Liquidity and Capital" Resources, the Company paid off all long-term debt upon the sale of DMI in March 1997. In addition, as a result of the sale of DMI, total interest expense was allocated between continuing and discontinued operations based upon the net asset values of each. The Company recorded a loss of $1,402,000 in 1997 related to the Company's investment in a seismic bridge bearing joint venture with FIP Industriale S.p.A. This compares to a $300,000 loss from this venture in 1996. Due to the lack of sales and progress to date, the Company has decided to cease funding of this venture. Other expenses were $552,000 in 1997 compared to $454,000 in 1996. The Company's effective tax rate decreased in 1997 to 20.7% from 39.1% in 1996 due to the realization of certain tax benefits in the current year along with the settlement of certain tax contingencies. As discussed in Note 3 to the Consolidated Financial Statements, on March 27, 1997, the Company sold substantially all of the assets and transferred significant operating liabilities of DMI to Cinram Ltd. for $80.3 million in cash. The transaction excludes the Huntsville, Alabama land and building as well as certain DMI litigation. The sale, approved by the Company's shareholders, resulted in a loss of $4,507,000 which was net of -14- income tax benefits of $3,004,000. DMI incurred a loss on operations for 1997 and 1996 of $2,231,000 and $1,816000 which are net of income tax benefits of $957,000 and $1,888,000 respectively. These results are presented as discontinued operations in the Company's Consolidated Statements of Operations. The Company used a portion of the proceeds of the sale to repay all of its $37.2 million in bank debt, to redeem all of its $18 million of 8% Convertible Subordinated Debentures and the related accrued interest and to pay transaction costs. The balance of the proceeds will be to invest in the highway safety and equipment business and in other opportunities deemed beneficial to stockholders, including the possible repurchase of a portion of the Company's common stock outstanding. 1996 COMPARED TO 1995 - -------------------------------------------------------- The Company's sales for 1996 increased slightly to $46,750,000 from $46,522,000 in 1995. Sales of Energy Absorption's permanent system product lines increased including the G-R-E-A-T-Registered Trademark- System and G-R-E-A-T-Registered Trademark- CZ products as well as parts sales but were mostly offset by a decrease in TMA sales. Sales of the Energite-Registered Trademark- also declined in 1996. The gross profit margin in 1996 increased to 52.0% from 50.3% in 1995. This was due to a change in product mix and also to less outsourcing of component parts in 1996 than in 1995 as a result of the completion of Energy Absorption's plant expansion in 1996. Selling and administrative expenses in 1996 increased 10% to $15,059,000 from $13,662,000 in 1995 due to an increase in marketing expenses and to the write-off of the investment in a sewer rehabilitation technology of $800,000. Corporate level expenses in 1996 remained at a level consistent with 1995. Research and development expenses in 1996 declined slightly to $1,536,000 compared to $1,545,000 in 1995. The Company increased R&D expenditures which were targeted towards the upgrade of its product line in order to meet the revised NCHRP 350 guidelines. These increased R&D expenditures were largely offset by the suspension in development activities related to the Company's sewer rehabilitation technology. Interest income in 1996 was $358,000 compared to $392,000 in 1995. Interest income in both years relates to interest earned on a $6 million certificate of deposit posted as injunction security for certain litigation. This certificate of deposit was redeemed in the third quarter of 1996. Interest expense in 1996 decreased 13% to $1,726,000 from $1,976,000 in 1995. This was due to a decrease in the average long-term debt outstanding in 1996 compared to 1995. In addition, total interest expense was allocated between continuing and discontinued operations based upon the net asset values of each. Other expenses were $454,000 in 1996 compared to $303,000 in 1995. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------------------------------------------- The Company had cash and cash equivalents of $18,463,000 and access to additional funds of $40,000,000 under its bank arrangements as of June 30, 1997. Operating activities used cash of $607,000 during 1997 due principally to the losses on the operations and sale of DMI. Cash of $78,103,000 was provided by investing activities during the year. This was due principally to the sale of DMI which was completed in March of this year and which generated $80,283,000 in cash. Offsetting this somewhat, the Company invested $1,321,000 in equipment for its highway safety business. Cash of $900,000 was used related to the Company's investment in the FIP joint venture. Other miscellaneous activity provided cash of $41,000. Financing activities used cash of $60,370,000 principally to repay all of the Company's bank debt of $40,000,000 and to redeem all of its 8% Convertible Subordinated Debentures of $18,000,000. The Company also used cash to pay semiannual cash dividends of $1,903,000. In addition, cash of $655,000 was used to purchase 88,514 shares of the Company's own Common Stock for the treasury. Additional shares may be purchased from time to time. Cash of $188,000 was received for the exercise of stock options. -15- During fiscal 1998, the Company anticipates needing less than $2,000,000 in cash for capital expenditures. The Company may also need cash as it considers acquiring additional businesses that complement its existing operations. Also, the Company will require additional investments in working capital to maintain growth and to fund certain obligations related to its discontinued operations. In addition, the Company may need funds to repurchase its own stock from time to time. These expenditures will be financed either through the Company's invested cash, cash generated from its operations, or from borrowings available under the Company's revolving credit facility. The Company believes its existing cash, cash generated from operations and funds available under its existing credit facility are sufficient for all planned operating and capital requirements. 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, 1997 and 1996, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended June 30, 1997. 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, 1997. 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, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 1997 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 8, 1997 -16- CONSOLIDATED STATEMENTS OF OPERATIONS Dollar amounts in thousands, except per share data For each of the three years ended June 30, 1997 1996 1995 - ------------------------------------------ --------- --------- ---------- Net sales................................. $ 45,037 $ 46,750 $ 46,522 Cost of sales............................. 22,788 22,459 23,140 --------- --------- ---------- Gross profit.............................. 22,249 24,291 23,382 Operating expenses: Selling and administrative.............. 14,264 15,059 13,662 Research and development................ 2,209 1,536 1,545 --------- --------- ---------- 16,473 16,595 15,207 --------- --------- ---------- Operating profit.......................... 5,776 7,696 8,175 Other income (expense): Interest income......................... 339 358 392 Interest expense........................ (497) (1,726) (1,976) Gain on sales of assets................. 1,634 Loss on investment in FIP joint venture (1,402) (300) Other................................... (552) (454) (303) --------- --------- ---------- (2,112) (488) (1,887) --------- --------- ---------- Earnings from continuing operations before provision for income taxes....... 3,664 7,208 6,288 Provision for income taxes................ 757 2,818 1,818 --------- --------- ---------- Earnings from continuing operations....... 2,907 4,390 4,470 Discontinued operations: (Loss) earnings from operations, net of income taxes.................. (2,231) (3,369) 1,480 Loss on disposal, net of income taxes (4,507) (10,913) --------- --------- ---------- (Loss) earnings from discontinued operations........................... (6,738) (14,282) 1,480 --------- --------- ---------- Net (loss) earnings....................... $ (3,831) $ (9,892) $ 5,950 ========= ========= ========== Primary earnings per share: Earnings from continuing operations.. $ .36 $ .55 $ .55 ========= ========= ========== Net (loss) earnings.................. $ (.48) $ (1.24) $ .73 ========= ========= ========== Weighted average common and common equivalent shares outstanding 8,008,893 8,003,924 8,100,385 ========= ========= ========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. -17- CONSOLIDATED BALANCE SHEETS As of June 30, Dollar amounts in thousands, except per share data 1997 1996 --------- --------- ASSETS Current assets: Cash and cash equivalents...................... $ 18,463 $ 1,337 Accounts receivable, net of allowance for doubtful accounts of $165 in 1997 and 1996............ 8,494 9,042 Refundable income taxes........................ 1,329 3,016 Inventories.................................... 4,224 3,356 Deferred income tax assets..................... 887 Other current assets........................... 241 490 --------- --------- Total current assets......................... 33,638 17,241 Property, plant and equipment at cost: Land........................................... 1,215 1,215 Buildings and improvements..................... 8,691 8,562 Machinery and equipment........................ 8,118 8,219 Furniture and fixtures......................... 2,812 2,659 Leasehold improvements......................... 519 493 --------- --------- 21,355 21,148 Less: accumulated depreciation and amortization (8,452) (8,035) --------- --------- 12,903 13,113 Other assets..................................... 2,765 3,158 Assets of discontinued operations................ 5,914 85,376 --------- --------- $ 55,220 $ 118,888 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable............................... $1,743 $1,006 Dividends payable.............................. 1,039 946 Accrued expenses: Payroll and commissions...................... 1,366 1,466 Other........................................ 2,802 2,524 Liabilities of discontinued operations......... 6,049 7,244 --------- --------- Total current liabilities.................... 12,999 13,186 Long-term debt................................... 58,000 Deferred income tax liabilities.................. 566 83 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 8,753,333 shares - 1997 and 8,671,101 shares - 1996... 146 145 Capital in excess of par value of stock........ 30,269 29,751 Retained earnings.............................. 17,368 23,196 Treasury stock, at cost, 807,435 shares - 1997 and 718,921 shares - 1996.............. (6,128) (5,473) --------- --------- Total shareholders' equity.................. 41,655 47,619 --------- --------- $ 55,220 $ 118,888 ========= ========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. -18- CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the three years ended June 30, 1997 Capital in Common Excess of Par Retained Treasury Stock Value of Stock Earnings Stock --------- -------------- --------- --------- Dollar amounts in thousands, except per share data: BALANCES, JULY 1, 1994..................................... $ 142 $28,551 $ 30,749 $ (5,373) Exercise of options for 41,922 common shares............... 285 Net earnings - 1995........................................ 5,950 Declaration of semiannual cash dividends ($.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 $15.01 per share................................................ (100) --------- -------------- --------- --------- BALANCES, JUNE 30, 1995.................................... 143 29,268 34,977 (5,473) Exercise of options for 55,006 common shares............... 1 250 Net loss - 1996............................................ (9,892) Declaration of semiannual cash dividends ($.12 per share each).................................... (1,889) Issuance of 34,679 shares pursuant to the stock retirement plan............................. 1 233 --------- -------------- --------- --------- BALANCES, JUNE 30, 1996.................................... 145 29,751 23,196 (5,473) Exercise of options for 39,847 common shares............... 188 Net loss - 1997............................................ (3,831) Declaration of semiannual cash dividends................... (1,997) ($.12 per share and $.13 per share)...................... Issuance of 42,385 shares pursuant to the stock retirement plan............................. 1 330 Purchase of 88,514 common shares at $7.25 to $8.00 per share................................. (655) --------- -------------- --------- --------- BALANCES, JUNE 30, 1997 8,753,333 common shares and 807,435 treasury shares................................. $ 146 $ 30,269 $ 17,368 $ (6,128) ========= ============== ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. -19- CONSOLIDATED STATEMENTS OF CASH FLOWS For each of the three years ended June 30, Dollar amounts in thousands 1997 1996 1995 ---------- -------- ------- Earnings from continuing operations......... $ 2,907 $ 2,574 Discontinued operations Loss from operations, net of income taxes (2,231) (1,553) Loss on disposal, net of income taxes (4,507) (10,913) ---------- -------- ------- Net (loss) earnings......................... (3,831) (9,892) $ 5,950 ADJUSTMENTS TO RECONCILE NET (LOSS) EARNINGS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Depreciation and amortization............. 1,882 14,451 15,583 Provision for losses on accounts receivable (71) (27) Deferred income taxes..................... (404) (1,909) (1,081) Changes in operating assets and liabilities: Accounts receivable.................... 548 2,202 (68) Refundable income taxes................ 1,687 (3,016) Inventories............................ (868) 1,448 (2,254) Other current assets................... 249 (1,505) (528) Accounts payable and accrued expenses.. 744 (1,769) 3,542 Income taxes payable................... (4,110) 188 Discontinued operations-noncash charges and working capital changes........... (2,016) 18,348 Loss on investment in the FIP joint venture 1,402 300 Gain on sale of Quantic Industries, Inc... (1,287) Gain on sale of patent.................... (347) Loss on sewer rehabilitation business..... 601 ---------- -------- ------- Net cash provided by (used in) operating activities................. (607) 13,444 21,305 ---------- -------- ------- INVESTING ACTIVITIES: Purchase of property, plant and equipment (1,321) (24,419) (38,415) Proceeds from sales of discontinued operations 80,283 5,981 Investment in the FIP joint venture....... (900) (300) Proceeds from sale of investment in Quantic Industries, Inc................. 8,050 Proceeds from sale of patent.............. 1,960 Capitalized and purchased systems, design and software costs............... (308) Decrease (increase) in funds deposited with IDB trustee........................ 2,719 (2,719) Cash paid for acquired businesses and equity investments...................... (6,746) Other..................................... 41 (731) (421) ---------- -------- ------- Net cash provided by (used in) investing activities 78,103 (6,740) (48,609) ---------- -------- ------- FINANCING ACTIVITIES: Payments on revolving credit agreement.... (52,050) (32,000) (12,000) Proceeds from revolving credit agreement.. 12,050 23,000 42,000 Payments on convertible debentures........ (18,000) (1,975) Proceeds from redemption of certificate of deposit.................. 6,000 Payment of semi annual cash dividend...... (1,903) (1,805) (1,714) Proceeds from exercise of common stock options 188 251 285 Repurchase of common stock for the treasury (655) (100) ---------- -------- ------- Net cash provided by (used in) financing activities.................. (60,370) (6,529) 28,471 ---------- -------- ------- Net change in cash and cash equivalents..... 17,126 175 1,167 Cash and cash equivalents at beginning of year 1,337 2,075 1,021 ---------- -------- ------- Cash and cash equivalents at end of year.... $ 18,463 $ 2,250 $ 2,188 ========== ======== ======= THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. -20- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF BUSINESS Quixote Corporation and its subsidiaries develop, manufacture and market energy-absorbing highway crash cushions and other highway safety products for the protection of motorists and highway workers to both domestic and international markets. 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 is invested in income-producing investments generally having initial maturities of three months or less. These investments are stated at market value. The Company considers these short-term instruments to be cash equivalents. Cash and cash equivalents in the consolidated statement of cash flows for 1996 and 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 10 to 40 years Machinery and equipment 3 to 12 years Furniture and fixtures 3 to 10 years Leasehold improvements 5 to 10 years The cost and accumulated depreciation and amortization relating to assets retired or otherwise disposed of are eliminated from the respective accounts at the time of retirement or other disposition with the gain or loss credited or charged to earnings. GOODWILL AND PATENTS Goodwill and patents are amortized on a straight-line basis over lives of 7 to 20 years. The Company assesses at each balance sheet date whether there has been a permanent impairment in the value of these assets. Such assessment includes consideration of possible obsolescence, demand, new technology, competition, and other pertinent economic factors and trends that may have an impact on the value or remaining lives of these assets. INCOME TAXES The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. -21- 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. MANAGEMENT ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. Management's estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 128, Earnings per Share (FAS 128), which specifies the computation, presentation, and disclosure requirements for earnings per share in order to simplify the computation of earnings per share. FAS 128 is effective for financial statements ending after December 15, 1997 and earlier application is not permitted. After the effective date, all prior period earnings per share data shall be restated to conform with the provisions of FAS 128. The adoption of FAS 128 is not expected to have a material impact on the Company's earnings per share data. Statement of Financial Accounting Standards No. 129, Disclosure of Information about Capital Structure, (FAS 129), was also issued in February 1997 and is effective for periods ending after December 15, 1997. This statement establishes standards for disclosing information about an entity's capital structure by superseding and consolidating previously issued accounting standards. The financial statements of the Company are prepared in accordance with the requirements of FAS 129. In June 1997, the FASB issued FAS 130, Reporting Comprehensive Income. This statement, effective for fiscal years beginning after December 15, 1997, would require the Company to report components of comprehensive income in a financial statement that is displayed with the same prominence as other financial statements. Comprehensive income is defined by Concepts Statement No. 6, Elements of Financial Statements, as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. The Company has not yet determined its comprehensive income. Also in June 1997, the FASB issued FAS 131, Disclosures about Segments of an Enterprise and Related Information. This statement, effective for financial statements for periods beginning after December 15, 1997, requires that a public business enterprise report financial and descriptive information about its reportable operating segments. Generally, financial information is required to be reported on the basis that it is used internally for evaluating segment performance and deciding how to allocate resources to segments. The Company is evaluating the effects of this pronouncement. RECLASSIFICATIONS Certain amounts for the years ended June 30, 1996 and 1995 were reclassified to conform to the current year presentation. These reclassifications did not affect net income. 3. ACQUISITIONS, DISPOSITIONS AND DISCONTINUED OPERATIONS In March 1997, the Company sold substantially all of the assets and transferred significant operating liabilities of Disc Manufacturing, Inc. (DMI) to Cinram Ltd. for $80,283,000 in cash. The transaction excluded DMI's Huntsville, Alabama land and building as well as certain DMI litigation. The sale, approved by the Company's shareholders, resulted in a loss of $4,507,000 which was net of income tax benefits of $3,004,000. In connection with the sale, stock and cash awards of approximately $1,200,000 were made to certain employees of the Company. -22- During 1996, the Company discontinued the operations of its legal technologies businesses, which had been involved in the development, manufacture and sale of products and systems for the legal community. Under multiple arrangements the Company sold certain assets and liabilities for an aggregate sales price of $5,981,000. The loss on disposal of $10,913,000 is net of income tax benefits of $7,275,000. The accompanying consolidated balance sheets and consolidated statements of operations have been restated in order to present the compact disc and legal technologies segments as discontinued operations for accounting purposes. As part of this restatement, interest expense was allocated between continuing and discontinued operations based upon the net assets of each. The income tax provisions (benefits) for the results of discontinued operations for the years ended 1997, 1996 and 1995 are ($957,000), ($2,613,000) and $1,407,000, respectively. Net sales for the discontinued businesses were $66,206,000 (1997), $109,919,000 (1996) and $138,889,000 (1995). As of June 30, 1997, the following assets and (liabilities) relate to discontinued operations: Dollar amounts in thousands Land and building (net) $ 7,501 Deferred income taxes 4,073 Accrued legal and accounting (5,320) Lease obligations (2,590) Accrued royalties (848) Severance (280) Other accruals (2,671) -------- Net liabilities of discontinued operations $ (135) ======== These remaining assets and liabilities are valued based upon management's estimates, utilizing currently available information as of the balance sheet date. It is reasonably possible, however, that these estimates could change materially. During 1996; Energy Absorption entered into a joint venture with FIP Industriale S.p.A. of Italy to market their seismic bridge bearings in the United States. The Company, accounting for this investment under the equity method of accounting, took charges of $1,402,000 and $300,000 for 1997 and 1996 respectively. In June 1997 the Company decided to wind down the activities of the joint venture due to the lack of revenues and progress to date. The 1997 charge includes $502,000 in accrued costs to exit this venture. In January 1996, the Company sold to Barrier Systems, Inc. certain patents related to its movable traffic barrier system. The sale price of $1,960,000 resulted in a gain of $347,000 which is included in other income for 1996. 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. 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. -23- 4. INVENTORIES Inventories consist of the following at June 30: Dollar amounts in thousands 1997 1996 -------- -------- Finished Goods $ 832 $ 713 Work-in-process 978 627 Raw materials 2,414 2,016 --------- --------- $ 4,224 $ 3,356 ========= ========= 5. LONG-TERM DEBT Long-term debt consists of the following at June 30: Dollar amounts in thousands 1997 1996 -------- -------- Revolving credit note due October 31, 2000, interest at variable rates $ 0 $ 40,000 8% Convertible subordinated debentures due 2011, interest due semiannually, principal payable in annual sinking fund installments of $1,000 0 18,000 -------- -------- Total long-term debt $ 0 $ 58,000 ======== ======== The Company has a three-year unsecured revolving credit agreement with three banks. The agreement provides for a $40 million credit facility and contains both fixed and floating interest rate options, at the prime rate or lower, and contains affirmative and negative covenants including requirements that the Company maintain certain financial ratios and be profitable from continuing operations each year. The agreement may be extended one additional year on each anniversary date upon mutual consent of the Company and the banks. At any time during the three years, the Company may elect to convert the loan to a four year term with equal quarterly principal payments due throughout the term to amortize the loan in full. In April 1997, the Company redeemed its convertible subordinated debentures at face value plus accrued interest. The debentures were 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. Unamortized costs incurred in issuing the debentures at June 30, 1996 were $464,000 and are included in other assets. The fair value of the debentures outstanding at June 30, 1996 is estimated to be $15,840,000 using available market information at that time. During 1996 the Company satisfied its sinking fund requirements for both 1996 and 1997 through the purchase of its debentures on the open market. The gain of $257,000 is included in other income in 1996. 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. -24- Information for the year ended June 30, 1997 with respect to options under the Company's plans is as follows: Number of Option Price Shares per Share --------- ----------------- Shares under option: July 1, 1996 897,949 $ 4.25 to $ 21.00 Granted 137,000 9.00 Exercised ( 54,500) 4.25 to 6.88 Cancelled or expired (108,175) 4.25 to 12.63 --------- June 30, 1997 872,274 $ 4.25 to $ 21.00 ========= Options outstanding at June 30, 1997 are all currently exercisable. As of June 30, 1997, the Company has 968,090 common shares reserved for various conversion privileges and options. During 1997, the Company was required to adopt Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (FAS 123), which encourages entities to adopt a fair value based method of accounting for stock based compensation plans in place of the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25), for all arrangements under which employees receive shares of stock or other equity instruments of the employer. As allowed by FAS 123, the Company will continue to apply the provisions of APB 25 in accounting for its stock-based employee compensation arrangements, and will disclose the pro forma net loss and loss per share information in its footnotes as if the fair value method suggested in FAS 123 had been applied. The Company recognizes compensation cost for stock-based compensation arrangements equal to the difference between the quoted market price of the stock option at the date of grant and the price to be paid by the employee upon exercise in accordance with the provisions of APB 25. Based upon the terms of Company's current stock option plans, the stock price on the date of grant and price paid upon exercise are the same, thus no compensation charge is required to be recognized. Had compensation cost for the Company's Stock Option Plans been determined based on the fair value at grant date for awards in 1997 and 1996 consistent with the provisions of FAS 123, the Company's net loss and loss per share would have been increased to the pro forma amounts indicated below: Dollar amounts in thousands except per share data 1997 1996 -------- -------- Net loss, as reported $ (3,831) $ (9,892) Net loss, pro forma $ (4,872) $ (9,951) Loss per common share, as reported $ ( .48) $ ( 1.24) Loss per common share, pro forma $ ( .61) $ ( 1.24) The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 1997: dividend yield of 1.65%; expected volatility of 52%; risk-free interest rate of 6.12%; and expected life of 4.2 years. The weighted average fair value of options granted in 1997 is $3.15 per share. The weighted average exercise price of the options outstanding is $10.34 and the weighted average remaining contractual life of those options is 3.6 years. -25- 7. SHAREHOLDER RIGHTS PLAN The Company has a Shareholder Rights Plan (the Plan) which was established to deter coercive takeover tactics and to prevent an acquiror from gaining control of the Company without offering a fair price to all of the Company's stockholders. The Plan calls for stockholders of record on July 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 an acquiring person becomes the beneficial holder of more than 20 percent of the Company's outstanding common stock, and then the Company is acquired in a merger or other business combination in which the Company would not be the surviving corporation or 50% or more of the Company's assets or earning power is sold, each holder shall have the right to receive, upon exercise, common stock of the acquiring corporation having a value equal to two times the exercise price of the right or $50. The Company may redeem the rights, for $.01 per right, under certain circumstances. 8. STOCK RETIREMENT PLAN The Company's Long-Term Stock Ownership Incentive Plan contains a provision for a retirement stock award program for certain key executives of the Company. The award consists of shares of the Company's common stock and cash ending with the fiscal year in which the executive attains his or her 62nd birthday. In order to receive each year's stock award, the executive must remain employed with the Company through the end of the fiscal year, unless excused by reason of death or other involuntary termination. Participants are also required to retain the shares awarded for as long as they are employed by the Company or until age 65. The size of each participant's annual award is determined under accepted actuarial principles to provide a retirement income based upon a percentage of the executive's projected compensation and length of service at retirement, but only if the Company's stock price appreciates at a sustained target rate. The Plan resulted in a charge to earnings of $561,000 (1997), $463,000 (1996) and $766,000 (1995). 9. INCOME TAXES The income tax provisions (benefits) from continuing operations are comprised of the following for the three years ended June 30: Dollar amounts in thousands 1997 1996 1995 ------- ------- ------- Current: Federal $ 496 $ 2,660 $ 1,750 State 665 850 294 -------- -------- ------- 1,161 3,510 2.044 -------- -------- ------- Deferred: Federal (26) (536) (175) State (378) (156) (51) -------- -------- -------- $ (404) $ (692) $ (226) -------- -------- -------- Income tax provision for continuing operations $ 757 $ 2,818 $ 1,818 -------- -------- -------- Income tax (benefit) provision from discontinued operations (3,961) (9,888) 1,407 -------- -------- -------- Total income tax (benefit) provision $ (3,204) $(7,070) $ 3,225 ======== ======== ======== -26- The components of the net deferred tax asset (liability) are as follows at June 30: Dollar amounts in thousands 1997 1996 -------- -------- Deferred tax assets: Accounts receivable allowance $ 66 $ 66 Inventory valuation 170 160 Compensated absences and medical claims 130 374 Tax over book basis in affiliates 1,612 1,509 Capital loss carryforwards 967 Other liabilities and reserves 879 641 Net operating loss carryforwards 2,527 2,951 Various tax credit carryforwards 12 30 Contribution carryforwards 9 9 Provision for discontinued operations 4,064 2,589 Valuation allowance (3,480) (4,356) -------- -------- Total $ 5,989 $ 4,940 ======== ======== Deferred tax liabilities: Book over tax basis of capital assets $ 1,595 $ 1,484 -------- -------- Net deferred tax asset $ 4,394 $ 3,456 ======== ======== The valuation allowance relates principally to deferred tax assets that the Company estimates may not be realizable, including portions of tax over book basis in affiliates, net operating loss carryforwards, and tax credit carryforwards. The decrease in the valuation allowance is due principally to the expiration of unutilized net operating loss carryforwards and the utilization of capital loss carryforwards which previously were not expected to be realized. The decrease was partially offset by an increase in the valuation allowance due to a reassessment of the realizability of certain net operating loss carryforwards as a result of the discontinued operations of the subsidiary which generated the net operating losses. At June 30, 1997, certain subsidiaries of the Company have approximately $5,716,000 of federal and $337,500 of state net operating loss carryforwards for tax purposes substantially all of which arose in periods prior to acquisition by the Company. Certain limitations on utilization are present and realization of a significant portion of the carryforwards is uncertain. These carryforwards expire in years from 1998 through 2005. The net deferred tax asset (liability) is presented on the balance sheet as follows at June 30: Dollar amounts in thousands 1997 1996 -------- -------- Current deferred tax asset $ 887 Noncurrent deferred tax liability (566) $ (83) -------- -------- Net deferred tax asset (liability) of continuing operations 321 (83) -------- -------- Current deferred tax asset of discontinued operations 2,458 Noncurrent deferred tax asset of discontinued operations 1,615 3,539 -------- -------- Net deferred tax asset of discontinued operations 4,073 3,539 -------- -------- Net deferred tax asset $ 4,394 $ 3,456 ======== ======== -27- Income tax provisions differed from the taxes calculated at the statutory federal tax rate as follows for the three years ended June 30: Dollar amounts in thousands 1997 1996 1995 -------- -------- -------- Taxes at statutory rate $ 1,246 $ 2,451 $ 2,095 State income taxes 189 458 160 Utilization of capital loss carryforwards (822) (561) Other 144 470 (437) -------- -------- -------- Income tax provision for continuing operations: $ 757 $ 2,818 $ 1,818 ======== ======== ======== 10. EARNINGS PER SHARE Primary earnings per share are computed by dividing the net earnings for each period by the weighted average number of common and common equivalent shares outstanding. For 1996 and 1995 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. 11. COMMITMENTS AND CONTINGENT LIABILITIES Aggregate rental expense under operating leases, principally for office and manufacturing facilities used in continuing operations was $450,000 in 1997, $504,000 in 1996 and $469,000 in 1995. These operating leases include options for renewal. Annual minimum future rentals for lease commitments related to continuing operations range from approximately $480,000 in 1998 to $300,000 in 2002, an aggregate of $1,842,000 through 2002. 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. In 1990, Disc Manufacturing, Inc. (DMI), a discontinued operation, 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. 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. The state court subsequently 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 April 1993, the Company 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 and the parties appealed. In September 1996, the Alabama Supreme Court issued its opinion, reinstating all of DMI's claims which had been dismissed except the corporate opportunity to acquire Memory-Tech, Inc. and unjust enrichment claims. The Supreme Court also upheld the dismissal of all of the claims of the Disctronics Group except a claim -28- related to the use of the name "Disctronics". Petitions for rehearing were denied and the decision is now final. The Disctronics Group has filed an amended counterclaim, certain claims of which DMI has moved to dismiss. 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 and the plaintiffs have appealed. In the other case, DMI filed a lawsuit against the plaintiff for antitrust violations and DMI's lawsuit has been consolidated with the plaintiff's patent case for all purposes. Trial is scheduled to begin in October 1997. Royalties requested by the patent holders could result in a significant cost to the Company. In September 1990, DMI was sued by a customer that claimed DMI failed to produce certain video discs 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. Trial is scheduled to begin in February 1998. 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 30 cases against Stenograph, and in some cases the Company, request damages ranging from $500,000 to $1,000,000, and in most cases, punitive damages, with some plaintiffs claiming an amount of $10,000,000. Of the 30 cases, six were dismissed in April 1997 after a jury verdict in favor of Stenograph and an appeal is pending. In addition, six cases have been dismissed with prejudice and ten cases have been dismissed without prejudice to refile the complaints. All cases have been referred to the Company's insurance carriers and the Company believes that any liability (excluding punitive damages and deductibles in certain years) will be covered under its insurance policies. The Company does not believe there are grounds for the imposition of punitive damages and intends to vigorously defend all claims. 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, liabilities, if any, arising from these legal actions should not have a material effect on the Company's results of operations or financial condition. 12. SUPPLEMENTAL CASH FLOW STATEMENT DISCLOSURES Cash paid for interest was $3,825,000 (1997), $6,105,000 (1996) and $4,015,000 (1995). The Company received a refund from income taxes of $3,954,000 in 1997. Cash paid for income taxes was $1,495,000 (1996) and $4,116,000 (1995). 13. INDUSTRY SEGMENT INFORMATION The Company's operations consist of one industry segment: the manufacture and sale of highway safety products. Substantially all the sales of highway safety devices are to contractors, or to federal, state and local governmental units, either direct or through distributors. -29- 14. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data for years 1997 and 1996 follows:
Three months Ended 1997, Dollar amounts in thousands, except per share data 9/30 12/31 3/31 6/30 ---------- ---------- ---------- ---------- Net sales $ 11,096 $ 9,195 $ 10,268 $ 14,478 Gross profit 5,594 4,311 4,797 7,547 Earnings (loss) from continuing operations 691 (301) 189 2,328 Earnings (loss) from discontinued operations 105 1,340 (8,183) --------- --------- --------- --------- Net earnings (loss) $ 796 $ 1,039 $ (7,994) $ 2,328 --------- --------- --------- --------- Primary earnings (loss) per share: Continuing operations $ .09 $ (.04) $ .02 $ .29 --------- --------- --------- --------- Net earnings (loss) $ .10 $ .13 $ (1.00) $ .29 --------- --------- --------- --------- Fully diluted earnings (loss) per share: Continuing operations $ .08 $ (.04) $ .02 $ .29 --------- --------- --------- --------- Net earnings (loss) $ .10 $ .13 $ (1.00) $ .29 --------- --------- --------- --------- Three months Ended 1996, Dollar amounts in thousands, except per share data 9/30 12/31 3/31 6/30 ---------- ---------- ---------- --------- 1996 Net sales $ 12,214 $ 10,074 $ 10,953 $ 13,509 Gross profit 6,376 4,740 5,777 7,398 Earnings from continuing operations 1,080 228 538 2,544 Earnings (loss) from discontinued operations (11,642) 89 (2,339) (390) --------- --------- --------- --------- Net earnings (loss) $ (10,562) $ 317 $ (1,801) $ 2,154 ---------- --------- --------- --------- Primary earnings (loss) per share: Continuing operations $ .13 $ .03 $ .07 $ .32 --------- --------- --------- --------- Net earnings (loss) $ (1.32) $ .04 $ (.23) $ .27 --------- --------- --------- --------- Fully diluted earnings (loss) per share: Continuing operations $ .13 $ .03 $ .07 $ .29 --------- --------- --------- --------- Net earnings (loss) $ (1.32) $ .04 $ (.23) $ .26 --------- --------- --------- ---------
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial - --------------------------------------------------------------------------- Disclosures - ----------- None. -30- 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 19, 1997 to be filed with the Commission on or about September 29, 1997 and is incorporated herein by reference. The executive officers of the Company, their ages and offices held by each during fiscal 1997 are as follows: Philip E. Rollhaus, Jr. 62 Chairman, Chief Executive Officer & Director - Quixote Corporation Chairman, Energy Absorption Systems, Inc. Leslie J. Jezuit 51 President, Chief Operating Officer & Director - Quixote Corporation, Vice Chairman - Energy Absorption Systems, Inc. Daniel P. Gorey 46 Vice President, Chief Financial Officer & Treasurer - Quixote Corporation Joan R. Riley 44 General Counsel & Secretary - Quixote Corporation George D. Ebersole 61 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. Gorey joined the Company as Manager of Corporate Accounting in July 1985. He was made Controller of the Company in 1987, elected Vice President in 1994, and was elected Chief Financial Officer and Treasurer in November 1996. Ms. Riley joined the Company as Assistant General Counsel and Assistant Secretary in 1991 and was elected General Counsel and Secretary in 1997. Mr. Ebersole joined the Company as President of Energy Absorption Systems, Inc. in 1980. There is no family relationship between any of the officers described above. Except as set forth in Item 3, none of the officers described above are party or otherwise involved in any legal proceedings adverse to the Company or its subsidiaries. Item 11. Executive Compensation - -------------------------------- The information required in response to this item is set forth under the caption "Remuneration of Directors and Executive Officers" of the Registrant's Definitive Proxy Statement for the Annual Meeting of Stockholders to be held on November 19, 1997 to be filed with the Commission on or about September 29, 1997 and is incorporated herein by reference. 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 19, 1997 to be filed with the Commission on or about September 29, 1997 and is incorporated herein by reference. -31- 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 19, 1997 to be filed with the Commission on or about September 29, 1997 and is incorporated herein by reference. -32- 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 16 Consolidated Statements of Operations for the years ended June 30, 1997, 1996 and 1995 17 Consolidated Balance Sheets as of June 30, 1997 and 1996 18 Consolidated Statements of Shareholders' Equity for the years ended June 30, 1997, 1996 and 1995 19 Consolidated Statements of Cash Flows for the years ended June 30, 1997, 1996 and 1995 20 Notes to Consolidated Financial Statements 21-30 (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 April 10, 1997, the Company filed a report on Form 8-K dated March 27, 1997, reporting under "Item 2 Acquisition or Disposition of Assets", that the Company had completed the sale of substantially all of the assets of Disc Manufacturing, Inc. to Cinram Inc. and Cinram Ltd. The Company received $80.3 million in cash from the sale which was used to repay all of its $37.2 million of bank debt, to redeem all of its 8% Convertible Subordinated Debentures and the related accrued interest and to pay transaction costs. The Company reported that the balance would be used to invest in the highway safety and equipment business or in other opportunities deemed beneficial to stockholders, including repurchase of a portion of the Company's outstanding common stock. Included in the Form 8-K filing was the pro forma financial information required pursuant to Article 11 of regulation S-X in connection with the sale. The report on Form 8-K also reported under "Item 5 Other Events", the Company's exercise of its optional redemption rights to redeem on April 30, 1997 all of its 8% Convertible Subordinated Debentures. Also reported was the amendment of the Company's banking arrangements, including the reduction of its borrowing availability from $65 million to $40 million. -33- (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 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) 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 as Exhibit 10(a) to the Company's Form 10-K Report for the fiscal year ended June 30, 1996, File No.0-7903, and incorporated herein by reference; Ninth Amendment to Loan Agreement dated March 24, 1997, filed as Exhibit 2.2 to the Company's Form 8-K Report dated March 27, 1997, File No. 0-7903, and incorporated herein by reference; Revolving Credit Notes dated as of March 31, 1996 from the Company and its subsidiaries to the Northern, NBD and LaSalle, filed as Exhibit 10(a) to the Company's Form 10-K Report for the fiscal year ended June 30, 1996, File No. 0-7903, and incorporated herein by reference. (b)* Restated 1972 Director Stock Option Plan, as amended through June 3, 1988, filed as Exhibit 4.3 to the Company's S-8 Registration Statement No. 33-22289, and incorporated herein by reference; Amendment dated February 12, 1989 to the Restated Director Stock Option Plan, filed as Exhibit 10(d) to the Company's Form 10-K Report for the fiscal year ended June 30, 1989, File No. 0-7903, and incorporated herein by reference. (c)* 1991 Director Stock Option Plan, as amended through August 28, 1997, filed herewith. -34- (d)* 1993 Long-Term Stock Ownership Incentive Plan, as amended through August 28, 1997, filed herewith; 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 as Exhibit 12(f) to the Company's Form 10-K Report for the fiscal year ended June 30, 1996, File No. 0-7903 and incorporated herein by reference; Retirement Award Agreement dated as of June 30, 1997 between the Company and Daniel P. Gorey, filed herewith. (e) Lease Agreement between the Company and United Insurance Company of America ("Company Lease") dated July 2, 1993, filed as Exhibit 10(j) to the Company's Form 10-K Report for the fiscal year ended June 30, 1993, File No. 0-7903, and incorporated herein by reference; Lease Amendment to Company Lease dated as of May 17, 1994, filed as Exhibit 10(h) to the Company's Form 10-K Report for the fiscal year ended June 30, 1994, File No. 0-7903, and incorporated herein by reference; Second Amendment to Company Lease dated January 30, 1995 and Third Amendment to Company Lease dated December 15, 1995, filed as Exhibits 10(b) and 10(c) to the Company's Form 10-Q Report for the quarter ended December 31, 1995, File No. 0-7903, and incorporated herein by reference; Fourth Amendment to Company Lease dated as of September 18, 1996 filed as Exhibit 10(b) to the Company's Form 10-Q Report for the quarter ended December 31, 1996 and incorporated herein by reference; Office Lease between Amberjack, Ltd. and Litigation Sciences, Inc. dated July 2, 1990, filed as Exhibit 10(a) to the Company's Form 10-Q Report for the quarter ended December 31, 1993, File No. 0-7903 and incorporated herein by reference; First Amendment to Office Lease between Amberjack Ltd. and Stenograph Corporation dated as of June 23, 1994, filed as Exhibit 10(h) to the Company's Form 10-K Report for the fiscal year ended June 30, 1994, File No. 0-7903, and incorporated herein by reference; Promissory Note dated December 31, 1996 from Quixote Steno Corporation and Quixote Corporation to Coventry Fund III, Ltd., filed herewith. (f)* Employment agreement ("Employment Agreement") dated as of June 24, 1991 between the Company and Philip E. Rollhaus, Jr., filed as Exhibit 10(k) to the Company's Form 10-K Report for the fiscal year ended June 30, 1991, File No. 0-7903, and incorporated herein by reference; Amended Executive Employment Agreement dated November 14, 1996 to Employment Agreement and Second Amendment to Employment Agreement dated January 12, 1997, filed as Exhibit 10(a) to the Company's form 10-Q Report for the quarter ended December 31, 1996, File No. 0-7903, and incorporated herein by reference; Key Employee Severance Agreement between the Company and George D. Ebersole and 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 Key Employee Severance Agreement dated January 12, 1997 between the Company and George D. Ebersole, filed as Exhibit 10 (a) to the Company's Form 10-Q Report for the quarter ended December 31, 1996, File No. 0-7903, and incorporated herein by reference; 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 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, and 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; Amendment to Key Severance Agreement dated January 12, 1997 between the Company and Leslie J. Jezuit, filed as Exhibit 10 (a) to the Company's Form 10-Q Report for the quarter ended December 31, 1996, -35- File No. 0-7903, and incorporated herein by reference; Key Employee Severance Agreement dated February 17, 1989 and Amendment to Key Employee Severance Agreement dated January 10, 1997 between the Company and Daniel P. Gorey, filed as Exhibit 10 (a) to the Company's Form 10-Q Report for the quarter ended December 31, 1996, File No. 0-7903, and incorporated herein by reference; Letter Agreement dated January 13, 1997 between the Company and Myron R. Shain, filed as Exhibit 10 (a) to the Company's Form 10-Q Report for the quarter ended March 31, 1997; File No. 0-7903, and incorporated herein by reference; Letter Agreement dated August 12, 1997 between the Company and James H. DeVries, filed herewith. (g) 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. (h) Agreements between the Company, Philip E. Rollhaus, Jr. and Yukio Endo dated May 5, 1986, filed as Exhibit 10(a) to the Company's Form 10-Q Report for the quarter ended March 31, 1986, File No. 0-7903, and incorporated herein by reference. (i) Agreement for Purchase and Sale dated February 13, 1996 between Stenograph Acquisition Corp., IIS Acquisition Corp., Pettibone Corp., and Quixote Corporation, Stenograph Corporation, Legal Technologies, Inc., Legal Technologies Limited and Integrated Information Services filed as Exhibit 2.1 to the Company's 8-K Report dated March 4, 1996, File No. 0-7903, and incorporated herein by reference. (j) Agreement for Purchase and Sale dated January 25, 1996 between Stenograph Corporation and LSI Acquisition, Inc. filed as Exhibit 2.2 to the Company's 8-K Report dated March 4, 1996, File No. 0-7903, and incorporated herein by reference. (k) Agreement for Purchase and Sale of Assets dated July 3, 1996 between Integrated Information Services, Inc., Pettibone Corporation, Quixote Corporation and Discovery Products, Inc., filed as Exhibit 10(k) to the Company's Form 10-K for the year ended June 30, 1996, File No. 0-0793, and incorporated herein by reference. (l) Asset Purchase Agreement dated as of December 8, 1996 among the Company, Disc Manufacturing, Inc., Cinram Ltd. and Cinram Inc., filed as Exhibit 10 (c) to the Company's Form 10-Q for the quarter ended December 31, 1996, File No. 0-7903, and incorporated herein by reference. 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 -36- SIGNATURES Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunder duly authorized QUIXOTE CORPORATION (Registrant) Dated: September 26, 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 September 26, 1997 Philip E. Rollhaus, Jr. (Chief Executive Officer) /s/ Leslie J. Jezuit - --------------------------- President and Chief Operating September 26, 1997 Leslie J. Jezuit Officer /s/ Daniel P. Gorey - --------------------------- Vice President, Chief Financial September 26, 1997 Daniel P. Gorey Officer and Treasurer (Chief Accounting and Financial Officer) /s/ James H. DeVries - --------------------------- Director September 26, 1997 James H. DeVries /s/ William G. Fowler - --------------------------- Director September 26, 1997 William G. Fowler /s/ Lawrence C. McQuade - --------------------------- Director September 26, 1997 Lawrence C. McQuade /s/ Robert D. van Roijen, Jr. - --------------------------- Director September 26, 1997 Robert D. van Roijen, Jr. -37- QUIXOTE CORPORATION & SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES For the years ended June 30, 1997, 1996 and 1995
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, 1997 $ 165,000 $ 2,000 $ 2,000 $ 165,000 ========== ========== ========== ========== Year ended June 30, 1996 $ 160,000 $ 21,000 $ 16,000 $ 165,000 ========== ========== ========== ========== Year ended June 30, 1995 $ 160,000 $ 2,000 $ 2,000 $ 160,000 ========== ========== ========== ==========
NOTES: (a) Column D represents accounts written off as uncollectable, net of collections on accounts previously written off. -38- EXHIBIT INDEX EXHIBIT NUMBER EXHIBITS - ---------------------- ----------------------------------------------- 10(c) 1991 DIRECTOR STOCK OPTION PLAN AMENDED AUGUST 28, 1997 10(d) 1993 LONG-TERM STOCK OWNERSHIP INCENTIVE PLAN AMENDED AUGUST 28, 1997 10(d) RETIREMENT AWARD AGREEMENT DATED AS OF JUNE 30, 1997 BETWEEN QUIOXTE CORPORATION AND DANIEL P. GOREY 10(e) PROMISSORY NOTE DATED DECEMBER 31, 1996 TO COVENTRY FUND III, LTD. 10(f) LETTER AGREEMENT DATED AUGUST 12, 1997 BETWEEN QUIXOTE CORPORATION AND JAMES H. DEVRIES 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 -39- EX-10.(C) 2 1991 STOCK OPTION PLAN Exhibit 10(c) QUIXOTE CORPORATION 1991 DIRECTOR STOCK OPTION PLAN Amended August 28, 1997 1. PURPOSE This Stock Option Plan (the "Plan") is intended as an incentive to encourage stock ownership by certain Directors of QUIXOTE CORPORATION (the "Corporation") so that they may acquire or increase their proprietary interest in the success of the Corporation and to encourage them to continue to render their services to the Corporation as Directors. It is further intended that options granted pursuant to this Plan may constitute "incentive stock options" within the meaning of Section 422A of the Internal Revenue Code, as amended (the "Code"), if they satisfy the various requirements specified under Code Sec. 422A. Otherwise, options granted pursuant to this Plan shall be "nonqualified stock options". 2. ADMINISTRATION The Plan shall be administered by a committee appointed by the Board of Directors of the Corporation (the "Committee"). The Committee shall consist of all members of the Corporation's Board of Directors unless the Board adopts a resolution naming other individuals to serve on the Committee. The Board of Directors may from time to time remove members from, or add members to, the Committee. Vacancies on the Committee, howsoever caused, shall be filled by the Board of Directors. The Committee shall select one of its members as Chairman and shall hold meetings at such times and places as it may determine. A majority of the Committee at which a quorum is present, or acts reduced to or approved in writing by a majority of the members of the Committee, shall be the valid acts of the Committee. The Committee shall from time to time at its discretion recommend to the Board of Directors with respect to the Directors who shall be granted options and the amount of stock to be optioned to each. The interpretation and construction by the Committee of any provisions of the Plan or of any option granted under it shall be final unless otherwise determined by the Board of Directors. No member of the Board of Directors or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option granted under it. 3. ELIGIBILITY The persons who shall be eligible to receive options shall be Directors of the Corporation as the Board of Directors shall select from time to time from among those nominated by the Committee, provided however, that only Directors who are also employees of the Corporation shall be eligible to receive "incentive stock options" under this Plan. An optionee may hold more than one option, but only on the terms and subject to the restrictions hereafter set forth. No person shall be eligible to receive an option for a larger number of shares of stock than is recommended for him by the Committee, and in no event shall any optionee in any calendar year receive options under this Plan for stock with an aggregate fair market value (determined at the time of the grant of the option) in excess of the limitations set forth in Section 5(b) of the Plan. The number of shares of stock with respect to which option rights under the Plan may be granted to any individual during the term of the Plan shall not exceed 90,000 shares, subject to adjustment as provided in Section 5(g) of the Plan. 4. STOCK The stock subject to options under the Plan shall be shares of the Corporation's authorized but unissued or reacquired $.01-2/3 par value common stock, hereafter sometimes called Common Stock. The aggregate number of shares that may be issued under options shall not exceed 419,445 shares of Common Stock. The limitations established by each of the preceding sentences shall be subject to adjustment as provided in Section 5(g) of the Plan. In the event that any outstanding option under the Plan for any reason expires or is terminated, the shares of Common Stock allocable to the unexercised portion of such option may again be subjected to an option under the Plan. 5. TERMS AND CONDITIONS OF OPTIONS Stock options granted under the Plan shall be authorized by the Board of Directors and shall be evidenced by agreements in such form as the Committee shall from time to time recommend and the Board of Directors shall from time to time approve, which agreements shall comply with and be subject to the following terms and conditions: (a) OPTIONEE'S AGREEMENT Each optionee shall agree to render to the Corporation his services as a Director (1) for a period of one year from the date of the option, or (2) until his death, whichever first occurs, but such agreement shall not impose upon the Corporation any obligation to retain the optionee in any capacity for any period; provided, however, the agreement shall permit an optionee to exercise the option after a "change of control" (as defined at Section 5(g)) notwithstanding the optionee's failure to have served as a Director for one year from the date of grant. (b) Number of Shares Each option shall state the number of shares to which it pertains. Options granted under this Plan may be considered "incentive stock options" as defined in Code Sec. 422A to the extent that the aggregate fair market value of stock (determined at the time the option is granted) with respect to which any such option is exercisable for the first time in a calendar year is not more than $100,000. (c) Option Price Each option shall state the option price, which shall be not less than 100% of the current market price of the shares of Common Stock of the Corporation on the date of the granting of the option; provided, that in the event an optionee owns stock representing more than ten percent of the voting power or value of the stock of the Corporation on the date of grant, the option price of an option which is intended to qualify as an "incentive stock 2 option" shall not be less than 110% of the current market price of the shares on the date of grant. The current market price of the Common Stock at any date shall be deemed to be the average of the daily closing prices for the thirty (30) consecutive business days before the date in question. The closing price for each day shall be the last reported sale price determined in the regular way or, in case no such reported sale takes place on such day, the average of the last reported bid and asked prices determined in the regular way, in either case on the principal national securities exchange on which the Common Stock is admitted to trading or listed, or if not listed or admitted to trading on any national securities exchange, the average of highest reported bid and lowest reported asked prices as reported by NASDAQ or other similar organization if NASDAQ is no longer reporting such information, or if not so available, the fair market price as determined by the Board of Directors. Subject to the foregoing, the Board of Directors and the Committee shall have full authority and discretion in fixing the option price and be fully protected in doing so. (d) Medium and Time of Payment The option price is to be paid in full in United States dollars upon the exercise of the option and may be paid in cash or by check, or with the approval of the Committee, by the optionee tendering to the Corporation shares of common stock of the Corporation owned by him and having a fair market value (determined at the time the Corporation receives written notice of the optionee's election to exercise the option) equal to the aggregate exercise price of the options being exercised. With the approval of the Board of Directors, the optionee may borrow from the Corporation all or any portion of the funds needed to pay the option price on such terms and conditions as the Committee deems appropriate, provided that: (1) the interest rate for any such loan by the Corporation shall not be less than the "applicable federal rate" (as defined by Code Section 1274(d)(1)(A) in effect on the date of such loan or any other rate as necessary to avoid the imputation of interest under the Code or other applicable law, (2) proceeds of the loan are used solely to pay the exercise price of an option granted pursuant to this Plan, and (3) the optionee executes a promissory note and such other documents as the Committee deems appropriate to evidence the optionee's indebtedness to the Corporation. (e) Term and Exercise of Options Subject to this Section 5(e) and Sections 5(f) and 5(g) of this Plan, no option shall be exercised either in whole or in part prior to twelve months from the date it is granted. Subject to the right of cumulation provided in this Section 5(e), each option granted pursuant to the Plan shall be exercisable to the extent provided for in the agreement between the Corporation and each optionee as determined by the Committee in its discretion. The Committee may provide, however, for the exercise of options after the initial twelve month period, either as to an increased percentage of shares per year or as to all remaining shares, if the optionee shall, with the approval of the Corporation, retire as a Director of the Corporation. To the extent not exercised, installments shall accumulate and be exercisable, in whole or in part, in any subsequent period, prior to the expiration of the term described in the next sentence of this Section 5(e). No option shall be exercisable after the expiration of ten years from the date it is granted, provided that in the event the optionee owned stock representing more than ten 3 percent (10%) of the voting power or value of the stock of the Corporation on the date the option was granted, any option which is intended to qualify as an "incentive stock option" must be exercised within five (5) years from the date of grant. During the optionee's lifetime, the options granted under this Plan may be exercised only by him. (f) Death of Optionee and Transfer of Option If the optionee shall die and shall not have fully exercised the option, the entire unexercised portion of the option may be exercised within one year from the date of the optionee's death by the executors or administrators of the optionee or by any person or persons who shall have acquired the option directly from the optionee by bequest or inheritance, subject to the condition that no option shall be exercisable after the expiration of ten years (five years for an option which is intended to qualify as an "incentive stock option" to an optionee who owned more than ten percent of the value or voting power of the stock of the Corporation on the date of grant) from the date it is granted. No option shall be assignable or transferable by the optionee otherwise than by will or the laws of descent and distribution. (g) Recapitalization Subject to any required action by the stockholders, the number of shares of Common Stock covered by each outstanding option, and the price per share thereof in each such option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock of the Corporation resulting from a subdivision or consolidation of shares or the payment of a stock dividend (but only on the Common Stock) or any other increase or decrease in the number of such shares effected without receipt of consideration by the Corporation. Subject to any required action by the stockholders, if the Corporation shall be the surviving corporation in any merger or consolidation, each outstanding option shall pertain to and apply to the securities to which a holder of the number of shares of Common Stock subject to the option would have been entitled. A dissolution or liquidation of the Corporation, or a merger or consolidation in which the Corporation is not the surviving corporation, or a change in control of the Corporation, as defined, shall cause each optionee to have the right to exercise his option in whole or in part, notwithstanding the provisions of Section 5(e) above: (i) immediately prior to such dissolution or liquidation or merger or consolidation in which the Corporation is not the surviving corporation, and thereafter; or (ii) after such change of control. "Change of control" of the Corporation shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that, without limitation, such a change in control shall be deemed to have occurred if (i) any "person" (as such term is used in Section 13(d) and 14(d) of the Exchange Act) is, or becomes, the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation 4 representing twenty percent (20%) or more of the combined voting power of the Corporation's then outstanding securities; or, (2) during any period of two consecutive years, individuals who at the beginning of such period constitute all members of the Board of Directors of the Corporation who are not employed by the Corporation (the "Outside Directors") shall cease for any reason to constitute at least a majority of the Outside Directors unless the election of each Outside Director, who was not an Outside Director at the beginning of the period, was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who were Directors at the beginning of the period; or, (3) there shall be consummated (A) any consolidation or merger of the Corporation in which the Corporation is not the continuing or surviving corporation or pursuant to which shares of the Corporation's Common Stock would be converted into cash, securities or other property, other than a merger of the Corporation in which the holders of the Corporation's Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Corporation or, (4) the stockholders of the Corporation approve a plan or proposal for the liquidation or dissolution of the Corporation. To the extent that the foregoing adjustments relate to stock or securities of the Corporation, such adjustments shall be made by the Committee, whose determination in that respect shall be final and binding and conclusive; provided that each option granted pursuant to this Plan which could qualify as an "incentive stock option" shall not be adjusted in a manner that causes the option to fail to continue as an "incentive stock option" within the meaning of Code Section 422A. Except as hereinbefore expressly provided in this Section 5(g), the optionee shall have no rights by reason of any subdivision or consolidation of shares of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any change of control, dissolution, liquidation, merger, or consolidation or spin-off of assets or stock of another corporation, and any issue of the Corporation of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to the option. The grant of an option pursuant to the Plan shall not affect in any way the right of power of the Corporation to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge, consolidate, dissolve, liquidate, sell, or transfer all or any part of its business or assets. 5 (h) Rights as a Stockholder An optionee or a transferee of an option shall have no rights as a stockholder with respect to any shares covered by his option until the date of the issuance of a stock certificate to him for such shares. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such stock certificate is issued, except as provided in Section 5(g) hereof. (i) Modification, Extension and Renewal of Options Subject to the terms and conditions and within the limitations of the Plan, the Committee, with the approval of the Board of Directors, may modify, extend or renew outstanding options granted under the Plan, or accept the surrender of outstanding options (to the extent not theretofore exercised) and authorize the granting of new options in substitution therefor (to the extent not theretofore exercised). The Board of Directors shall not, however, modify any outstanding options so as to specify a lower price or accept the surrender of outstanding options and authorize the granting of new options in substitution therefor specifying a lower price. Notwithstanding the foregoing however no modification of an option shall, without the consent of the optionee, alter or impair any rights or obligations under any option theretofore granted under the Plan. (j) Investment Purpose Each option under the Plan shall be granted on the condition that the stock purchased shall be held for investment purposes, and not with a view to resale or distribution except that in the event the stock subject to such option is registered under the Securities Act of 1933, as amended, or in the event a resale of such stock without such registration would otherwise be permissible, such condition shall be inoperative if in the opinion of counsel for the Corporation such condition is not required under the Securities Act of 1933 or any other applicable law, regulation, or rule of any governmental agency. (k) Other Provisions The option agreements authorized under the Plan shall contain such other provisions, including, without limitation, restrictions upon the exercise of the option, as the Committee and the Board of Directors of the Corporation shall deem advisable. 6. TERM OF PLAN Options may be granted under the Plan from time to time within a period of ten years from the date the Plan is adopted, or the date the Plan is approved by the Stockholders, whichever is earlier. 6 7. INDEMNIFICATION OF COMMITTEE In addition to such other rights of indemnification as they may have as Directors or as members of the Committee, the members of the Committee shall be indemnified by the Corporation against the reasonable expenses, including attorneys' fees actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any option granted thereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Corporation) or paid by them in satisfaction of a judgment except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Committee member is liable for negligence or misconduct in the performance of his duties; provided that within sixty (60) days after institution of any such action, suit or proceeding a Committee member shall in writing offer the Corporation the opportunity at its own expense, to handle and defend the same. 8. AMENDMENT OF THE PLAN Upon recommendation of the Committee, the Board of Directors of the Corporation may, insofar as permitted by law, from time to time, with respect to any shares at the time not subject to options, suspend or discontinue the Plan or revise or amend it in any respect whatsoever except that without approval of the stockholders, no such revision or amendment shall change the number of shares subject to the Plan, change the designation of the individuals eligible to receive options, decrease the price at which options may be granted, remove the administration of the Plan from the Committee, or extend the period during which options may be granted. The Board of Directors of the Corporation shall, from time to time, revise, modify, or amend the Plan, in part or in total, without approval of the stockholders, as may be necessary to satisfy the requirements of the Code such that certain stock options which are granted under the Plan may qualify as "incentive stock options" as defined in Code Section 422A and any amendments or revisions thereof. 9. APPLICATION OF FUNDS The proceeds received by the Corporation from the sale of Common Stock pursuant to options will be used for general corporate purposes. 10. NO OBLIGATION TO EXERCISE OPTION The granting of an option shall impose no obligation upon the optionee to exercise such option. 7 Date Plan was adopted by Board of Directors: August 19, 1991 Date Plan was approved by Stockholders: November 19, 1991 Date Plan was amended by Board of Directors: June 25, 1997 Date Plan was amended by Board of Directors: August 28, 1997 Date amended Plan was approved by Stockholders: 1997 ---------- 8 EX-10.(D-1) 3 1993 LONG-TERM STOCK OWNERSHIP INCENTIVE PLAN Exhibit 10(d)-1 QUIXOTE CORPORATION 1993 LONG-TERM STOCK OWNERSHIP INCENTIVE PLAN As Amended August 28, 1997 THE PLAN. Quixote Corporation, a Delaware corporation (the "Company"), hereby amends and restates the substantive provisions of the Quixote Corporation 1991 Incentive Stock Option Plan (the "1991 Plan"), to establish the Quixote Corporation 1993 Long-Term Stock Ownership Incentive Plan as set forth herein and as may from time to time be amended (the "Plan"), in order to add provisions which will provide the Company with the ability to provide its senior executives with stock-based retirement benefits linked to increases in the value of the Company's Stock. The Plan is effective as of June 30, 1993 subject to the approval by a majority of the stockholders at the first annual meeting of stockholders held after the Effective Date. Until such time as stockholder approval of the Plan is obtained, the 1991 Plan will continue to exist and operate independently of the Plan. Options granted and outstanding under the 1991 Plan following stockholder approval of the Plan shall be governed by the provisions of the Plan. Nothing in this Plan is intended to, or shall be deemed to, modify, amend or alter any of the rights and benefits of holders of options granted under the 1991 Plan or provide any additional benefits to such holders. 1. PURPOSE The purposes of the Plan are to encourage selected employees of the Company and its Subsidiaries who are capable of having an impact on the performance of the Company to acquire a long-term proprietary interest in the growth and performance of the Company, to generate an increased incentive to contribute to the Company's future success and prosperity (thus enhancing the value of the Company for the benefit of its stockholders), and to enhance the ability of the Company and its Subsidiaries to attract and retain qualified individuals upon whom the sustained progress, growth, and profitability of the Company depend. It is further intended that options issued pursuant to this Plan shall constitute "incentive stock options" within the meaning of Sec. 422A of the Internal Revenue Code (such options are referred to herein as "Incentive Stock Options"). In the event that stock options granted pursuant to this Plan do not satisfy the requirements specified under Internal Revenue Code Sec. 422A, such options shall be "nonqualified stock options." 2. DEFINITIONS As used in the Plan, terms defined immediately after their use shall have the respective meanings provided by such definitions and the terms set forth below shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): (a) "Affiliate" is a person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with the Company. (b) "Award" means options, Retirement Stock Awards or Retirement Cash Awards granted under the Plan. (c) "Award Agreement" has the meaning specified in Section 4(b)(v). (d) "Board" means the Board of Directors of the Company. (e) "Code" means the Internal Revenue Code of 1986, as amended. References to a particular section of the Code shall include references to successor provisions. (f) "Committee" means the committee of the Board appointed pursuant to Section 4. (g) "Company" has the meaning set forth in the introductory paragraph. (h) "Current Market Price" of the Stock means at any date the average of the daily closing prices for thirty (30) consecutive business days commencing no more than forty-five (45) business days before the day in question. The closing price for each day shall be the last reported sales price determined in the regular way or, in case no such reported sales takes place on such day, the average of the last reported bid and asked prices determined in the regular way, in either case on the principal national securities exchange on which the Stock is admitted to trading or listed, or if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices as reported by NASDAQ or other similar organization if NASDAQ is no longer reporting such information, or if not so available, the fair market price as determined by the Board. (i) "Disability" means, as relates to the exercise of an Incentive Stock Option after termination of employment, a disability within the meaning of Section 22(e)(3) of the Code, and for all other purposes, a mental or physical condition which, in the opinion of the Committee, renders a Grantee unable or incompetent to carry out the job responsibilities which such Grantee held or the tasks to which such Grantee was assigned at the time the disability was incurred, and which is expected to be permanent or for an indefinite duration exceeding one year. (j) "Effective Date" means June 30, 1993; provided that the Plan and any Retirement Awards granted prior to the 1993 annual meeting of the Company's stockholders are subject to approval of the Plan by the stockholders at such annual meeting. (k) "Grant Date" means the date on which the Committee grants the Award or such later date as specified in advance by the Committee; provided however, that references to the Grant Date of an option under this Plan shall, with respect to options granted under the 1991 Plan prior to stockholder approval of the Plan, refer to the date of grant of such option under the 1991 Plan. (l) "Grantee" means an individual who has been granted an Award. (m) "Including" or "includes" means "including, without limitation," or "includes, without limitation." 2 (n) "1934 Act" means the Securities Exchange Act of 1934, as amended. References to a particular section of, or rule under, the 1934 Act shall include references to successor provisions. (o) "Option Price" means the per share purchase price of Stock subject to an option. p) "Plan" has the meaning set forth in the introductory paragraph. (q) "Retirement" means a termination of employment with the Company and its Subsidiaries any time after attaining age 60. (r) "SEC" means the Securities and Exchange Commission. (s) "Section 16 Grantee" means a person subject to potential liability under Section 16(b) of the 1934 Act with respect to transactions involving equity securities of the Company. (t) "Stock" means the common stock of the Company, $0.01-2/3 par value. (u) "Subsidiary" means (i) with respect to Incentive Stock Options, a corporation as defined in Section 424(f) of the Code with the Company being treated as the employer corporation for purposes of this definition, and (ii) for all other purposes any entity in which the Company directly or through intervening subsidiaries owns at least a majority interest of the total combined voting power or value of all classes of stock or, in the case of an unincorporated entity, at least a majority in the capital and profits. (v) "10% Owner" means a person who owns stock (including stock treated as owned under Section 424(d) of the Code) possessing more than 10% of the total combined voting power of all classes of stock of the Company. 3. SCOPE OF THE PLAN (a) An aggregate of One Million and Fifteen Thousand (1,015,000) shares of Stock are hereby made available and reserved for delivery on account of Awards and the exercise of Awards, with Six Hundred Sixty Five Thousand (665,000) shares of Stock being made available and reserved for delivery on account of options and Three Hundred Fifty Thousand (350,000) shares of stock being made available and reserved for delivery on account of Retirement Stock Awards. The limitations established by the preceding sentences shall be subject to adjustment as provided in Section 18 of the Plan. Such shares may be treasury shares, newly issued shares, or shares purchased on the open market (including private purchases) in accordance with applicable securities laws, or any combination of the foregoing, as may be determined from time to time by the Board or the Committee. (b) To the extent an Award shall expire or terminate for any reason without having been exercised in full (including a cancellation and re-grant of an option), or shall be forfeited, without, in either case, the 3 Grantee having enjoyed any of the benefits of Stock ownership (other than voting rights or dividends that are also forfeited), the shares of Stock (including Retirement Stock) associated with such Award shall become available for other Awards. (c) For purposes of this Section 3, (i) The aggregate number of shares covered by a Retirement Award Agreement shall be counted on the Grant Date of such Award (without respect to the timing of the Company's obligation to issue and deliver such shares) against the aggregate number of shares of Stock available for granting Retirement Stock Awards under the Plan; and (ii) the shares of Stock underlying outstanding options (without respect to any vesting schedule) shall be counted while the Award is outstanding against the aggregate number of shares of Stock available for granting Awards under the Plan; and (iii) in the event of a stock-for-stock exercise of an option, the gross number of shares of Stock subject to the option exercised, not the net number of shares actually issued upon exercise shall be counted against the aggregate number of shares of Stock available for granting Awards under the Plan. 4. ADMINISTRATION (a) Subject to Section 4(b), the Plan shall be administered by a committee ("Committee") which shall consist of not less than three persons who are Directors of the Company and who are not employees of the Company. Membership on the Committee shall be subject to such other limitations as the Board deems appropriate to permit transactions in Stock pursuant to the Plan to be exempt from liability under Section 16(b) of the 1934 Act pursuant to Rule 16b-3 thereunder. Unless the Board adopts a resolution naming other individuals to serve on the Committee, the Committee shall consist of all Directors of the Company who are not employees of the Company. The Board may from time to time remove members from, or add members to the Committee. Vacancies on the Committee, however caused, shall be filled by the Board. The Committee shall select one of its members as Chairman, and shall hold meetings at such times and places as it may determine. A majority of the Committee at which a quorum is present, or acts approved in writing by all of the members of the Committee, shall be the valid acts of the Committee. No member of the Committee shall be eligible to receive any grant of any Awards under this Plan. (b) The Committee, unless otherwise determined by the Board, shall have full and final authority, in its discretion, but subject to the express provisions of the Plan, as follows: (i) to grant Awards; (ii) to determine (A) when Awards may be granted, and (B) whether or not specific Awards shall be identified with other specific Awards, and if so, whether they shall be exercisable cumulatively with or alternatively to such other specific Awards; 4 (iii) to interpret the Plan and to make all determinations necessary or advisable for the administration of the Plan; (iv) to prescribe, amend, and rescind rules and regulations relating to the Plan, including rules with respect to the exercisability and non-forfeitability of Awards upon the termination of employment of a Grantee; (v) to determine the terms and provisions and any restrictions or conditions (including specifying such performance criteria as the Committee deems appropriate, and imposing restrictions with respect to Stock acquired upon exercise of an option or Retirement Award, which restrictions may continue beyond the Grantee's termination of employment) of the written agreements by which all Awards shall be evidenced ("Award Agreements") which need not be identical and, with the consent of the Grantee where required by contract law, to modify any such Award Agreement at any time; (vi) to impose, incidental to an Award, conditions with respect to competitive employment or other activities, to the extent such conditions do not conflict with the Plan; (vii) to cancel, with the consent of the Grantee, outstanding Awards and to grant new Awards in substitution therefor; (viii) to accelerate the exercisability of, and to accelerate or waive any or all of the restrictions and conditions applicable to any Award or any group of Awards; (ix) subject to Section 6(c), to extend the time during which any Award or group of Awards may be exercised; (x) to make such adjustments or modifications to Awards to Grantees working outside the United States as are necessary and advisable to fulfill the purposes of the Plan which are not in conflict with the Plan; and (xi) to impose such additional conditions, restrictions, and limitations upon the grant, exercise or retention of Awards as the Committee may, before or concurrently with the grant thereof, deem appropriate, including requiring simultaneous exercise of related identified Awards, and limiting the percentage of Awards which may from time to time be exercised by a Grantee. The determination of the Committee on all matters relating to the Plan or any Award Agreement shall be conclusive and final. No member of the Committee or the Board shall be liable for any action or determination made in good faith with respect to the Plan or any Award. (c) The Board may, in its discretion, reserve to itself or delegate to another committee of the Board, any or all of the authority and responsibility of the Committee with respect to Awards to Grantees who are not Section 16 Grantees at the time any such delegated authority or responsibility is exercised. Such other committee may consist of two or more Directors who may, but need not be, officers or employees of the Company or of any of its 5 Subsidiaries. To the extent that the Board has reserved to itself or delegated to such other committee the authority and responsibility of the Committee, all references to the Committee in the Plan shall be to the Board or such other committee. 5. ELIGIBILITY Awards may be granted to any key employee (including any officer) of the Company or any of its Subsidiaries; provided, however, that Retirement Awards may be granted only to executive officers of the Company or its Subsidiaries who have completed 10 years of continuous service for the Company or its Subsidiaries; provided further that the Committee may, under appropriate circumstances and in its discretion, waive the requirement of ten years continuous service for a particular executive officer. In selecting the individuals to whom Awards may be granted, as well as in determining the number of shares of Stock subject to, and the other terms and conditions applicable to, each Award, the Committee shall take into consideration such factors as it deems relevant in promoting the purposes of the Plan. 6. TERMS AND CONDITIONS OF OPTION GRANTS Stock options granted by the Committee pursuant to the Plan shall be evidenced by Award Agreements in such form as the Committee shall from time to time approve, which agreements shall comply with and be subject to the following terms and conditions: (a) Each option shall state the number of shares to which it pertains. (b) The Option Price of any option shall not be less than 100% of the Current Market Price of the Stock on the Grant Date. (c) Any option granted under this Plan may be considered a Incentive Stock Option to the extent that it: (i) shall only be granted to individuals who are employed by the Company or any of its Subsidiaries on the Grant Date; (ii) shall not be granted to a 10% Owner unless the Option Price is at least 110% of the Current Market Price of the Stock subject to such option on the Grant Date and shall be exercisable for a period of not more than five (5) years from the Grant Date; (iii) except as provided in (ii) above, shall be exercisable for a period of not more than 10 years from the Grant Date, and shall be subject to earlier termination as provided herein or in the applicable Award Agreement; (iv) shall not have an aggregate fair market value (determined for each Incentive Stock Option at its Grant Date) of Stock with respect to which Incentive Stock Options are exercisable for the first time by such Grantee during any calendar year (under the Plan and any other employee stock option plan of the Grantee's employer or any parent or Subsidiary 6 thereof determined in accordance with the provisions of Section 422 of the Code), which exceeds $100,000; and (v) shall require the Grantee to notify the Company of any disposition of any Stock issued pursuant to the exercise of the Incentive Stock Option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), within 10 days of such disposition. Subject to the foregoing, the Committee shall have full authority and discretion in fixing the Option Price and the terms and conditions of the option Awards and shall be fully protected in doing so. (d) All options shall be granted on or before August 19, 2001. (e) Options shall not be assignable or transferable other than by will or the laws of descent and distribution and may be exercised during the Grantee's lifetime only by the Grantee; provided, however, that the Grantee may, to the extent provided in the Plan in any manner specified by the Committee, designate in writing a beneficiary to exercise his/her option after the Grantee's death. (f) Subject to Section 4(b)(viii) and such terms and conditions as the Committee may impose, each option shall be exercisable in one or more installments. Each option shall be exercised by delivery to the Company of written notice of intent to purchase a specific number of shares of Stock subject to the option. The Option Price of any shares of Stock as to which an option shall be exercised shall be paid in full at the time of the exercise. Payment may, at the election of the Grantee, be made in any one or any combination of the following: (i) United States dollars in cash or by check; (ii) Stock held by the Grantee for at least 6 months prior to exercise of the option, valued at its Current Market Price on the date of written notice of optionee's election to exercise the option; or (iii) with the approval of the Committee, shares of Retirement Stock held by the Grantee for at least 6 months prior to exercise of the option, valued at the Current Market Price of a share of Stock on the date of exercise. (g) Except as expressly provided in this Plan or the Award Agreement, no option may be exercised prior to twelve months from its Grant Date. Subject to the right of cumulation provided in the next sentence of this Section 6(g), each option shall be exercisable to the extent provided for in the Award Agreement as determined by the Committee in its discretion. To the extent not exercised, installments shall accumulate and be exercisable, in whole or in part, in any subsequent period, prior to the expiration of the term described in the Award Agreement, provided that no option may be exercised more than ten years from its Grant Date. Notwithstanding the preceding sentence, in the event that the optionee is a 10% Owner (determined on the Grant Date) of the Company, no option intended to qualify as an Incentive Stock Option may be exercised more than five years from the date it 7 is granted. During the lifetime of the optionee, the option shall be exercisable only by him and shall not be assignable or transferable by him and no other person shall acquire any rights therein. (h) In the event that an optionee shall cease to be employed by the Company for any reason other than his death, Disability, or Retirement, subject to the condition that no option shall be exercisable after the expiration of ten years from its Grant Date (five years for an option which is intended to qualify as an Incentive Stock Option that is granted to a 10% Owner on the Grant Date), such optionee may, at the discretion of the Committee, be granted the right to exercise the option at any time within thirty (30) days after such termination of employment to the extent his right to exercise such option had not expired pursuant to Section 6(g) of this Plan, had vested and had not previously been exercised; provided, however, that if the employment of the optionee is terminated by the Company or any of its Subsidiaries for cause, fraud, breach of fiduciary duty, or other dishonesty, the optionee's rights to exercise the option otherwise provided herein shall expire on the last day of his employment. Whether authorized leave of absence or absence for military or governmental service, or any other reason, shall constitute termination of employment, for the purposes of the Plan, shall be determined by the Committee, which determination shall be final and conclusive. (i) (i) In the event an optionee terminates his employment with the Company or any Subsidiary because of a Disability, the Disabled optionee or a lawfully appointed custodian thereof may exercise an option granted pursuant to this Plan for a period of twelve months from the date of termination of employment to the extent his right to exercise such option had not expired pursuant to Section 6(g) of this Plan and had not previously been exercised at the date of such termination. (ii) If the employment of an optionee with the Company or any Subsidiary is terminated by reason of the optionee's Retirement and the optionee has been in the employ of either the Company or a Subsidiary continuously from the date such option was granted until such Retirement (except for leaves of absence approved in writing by the President of the Company or the President of the Subsidiary for which the optionee works), the entire unexercised portion of such option may be exercised by the optionee at any time or times in whole or in part during the three-month period after such retirement to the extent that such three-month period is included in the remainder of such option's term. (j) If the optionee shall die while in the employ of the Company or any Subsidiary and shall not have fully exercised the option, the unexercised portion of an option may be exercised at any time within one year after the optionee's death by the executors or administrators of the optionee or by any person or persons who shall have acquired the option directly from the optionee by bequest or inheritance, subject to the condition that no option shall be exercisable after the expiration of ten years from its Grant Date (five years for an optionee under an Incentive Stock Option who is a 10% Owner on the Grant Date). No option shall be transferable by the optionee otherwise than by will or the laws of descent and distribution. 8 7. TERMS AND CONDITIONS OF RETIREMENT AWARDS Grants of Stock and cash Awards intended to fund retirement benefits for senior executives (the "Retirement Stock Awards" and "Retirement Cash Awards" (each more fully described below), respectively, and collectively the "Retirement Awards") pursuant to the Plan shall be authorized by the Committee and shall be evidenced by agreements in such form as the Committee shall from time to time approve (each a "Retirement Award Agreement"), which agreements shall comply with and be subject to the following terms and conditions: (a) The Committee may grant Retirement Awards to any individual eligible under Section 5 to receive such Retirement Awards. (b) The Committee shall, in its discretion, determine the amount, if any, that a Grantee shall pay for shares of Retirement Stock. Awards shall be granted for no cash consideration or for such minimal cash consideration as may be required by applicable law. If any such cash consideration is required, payment shall be made in full by the Grantee before the delivery of the shares and in any event no later than 10 days after the Grant Date for such shares. In the discretion of the Committee and to the extent permitted by law, payment may also be made in accordance with Section 11. (c) Each Retirement Award Agreement shall state the number of shares of Stock and the amount of cash to which it pertains. (d) The Retirement Award Agreement shall provide for an aggregate Award of Retirement Stock which the Company will agree to issue and deliver to the Grantee. Such Retirement Stock Award will be issued and delivered to the Grantee in equal annual installments commencing with the Grant Date and continuing over a period of years to be determined by the Committee and set forth in the Retirement Award Agreement, subject to the requirement that the Grantee be employed by the Company or any Subsidiary on the last day of the fiscal year in which Retirement Stock is issued and delivered; provided however, the Retirement Award Agreement may include a provision which excepts from this requirement the Grantee's death, disability or other involuntary termination of employment (excluding for cause) which occurs during the same fiscal year. Unless otherwise provided in the Agreement, the Retirement Award Agreement will have an initial term of five (5) years. In its discretion, the Committee may provide that the term of a Retirement Award Agreement be automatically extended for additional one-year periods until the Company gives the Grantee notice of its intention not to extend the Agreement at the end of its then-current term. (e) The Grantee may not sell, transfer, pledge, hypothecate, or otherwise transfer any shares of Retirement Stock he or she receives under the Plan during any period in which he or she is employed by the Company or any Subsidiary; provided, however, that following the earlier of (i) termination of the employment of the Grantee with the Company or any Subsidiary or (ii) the Grantee's attainment of normal retirement age (whether or not Grantee actually retires), all such restrictions with respect to Retirement Stock which has been issued and delivered to such Grantee prior to such time shall terminate. Notwithstanding the above, no Grantee may sell, transfer, pledge, 9 hypothecate any shares of Retirement Stock he or she receives during the six months immediately following the later of Grant Date or the date the Plan is approved by the Company's stockholders unless the Grantee dies before the expiration of the six month period. Each share of Retirement Stock subject to such restrictions shall bear an appropriate legend specifying that such share is non-transferable and subject to the restrictions set forth in the Plan and the Retirement Award Agreement. When all applicable restrictions have ended, the Company shall cause certificates for such shares to be issued or reissued without such legend. (f) In connection with any Retirement Stock Award, the Committee may grant cash bonus awards ("Retirement Cash Awards") to Grantees solely in order to, and in an amount it determines will, cover the federal and state income tax liability, and any other tax liability, to the Grantee, created by, or arising in connection with, the receipt of the Retirement Award by the Grantee. The Retirement Award Agreement shall provide that Retirement Cash Awards will be calculated annually at the time of the issuance of an annual installment of Retirement Stock to which the Retirement Cash Award relates by using the same maximum marginal federal and state income tax percentage which was used in the prior year and the Current Market Price of the Retirement Stock being issued in such year on the date of such issuance (unless the Committee approves an adjustment to that formula). (g) The Retirement Award shall be issued and delivered to the Grantee in accordance with the terms set forth in the Retirement Award Agreement; provided, however, that the Company shall have no obligation to issue or deliver any Retirement Award under a Retirement Award Agreement to any Grantee following (i) the termination of his employment with the Company or its Subsidiaries or (ii) any breach of the Grantee's obligations under the Retirement Award Agreement. (h) Any other provision of the Plan or the Retirement Award Agreement to the contrary notwithstanding, the Committee may at any time remove or limit any restrictions, if it determines that conditions, including but not limited to, changes in the economy, changes in competitive conditions, changes in laws or government regulations, changes in generally accepted accounting principles, changes in the Company's accounting policies, acquisitions or dispositions, or the occurrence of other unusual, unforseen, or extraordinary events, so warrant. (i) Notwithstanding the fact that the Company delivers notice of its intention not to extend the term of a Retirement Award Agreement at the end of its then current term (if such Agreement provides for such a notice), the Company shall remain obligated to issue and deliver all scheduled annual Retirement Awards in accordance with the Retirement Award Agreement. 8. NOTIFICATION UNDER CODE SECTION 83(b) The Committee may, on the Grant Date or any later date, prohibit a Grantee from making the election described in this Section 8. If the Committee has not prohibited such Grantee from making such election, and the Grantee, in connection with the exercise of any option or the grant of Retirement Stock, makes the election permitted under Section 83(b) of the Code (i.e., an election to include in such Grantee's gross income in the year of 10 transfer the amounts specified in Section 83(b) of the Code), such Grantee shall notify the Company of such election within 10 days of filing notice of the election with the Internal Revenue Service, in addition to any filing and notification required pursuant to regulations issued under the authority of Section 83(b) of the Code. 9. MANDATORY WITHHOLDING OF TAXES (a) Whenever under the Plan, cash or shares of Stock are to be delivered upon exercise or payment of an Award or any other event occurs which subjects the Grantee to income taxes with respect to rights and benefits hereunder, the Company shall be entitled to require as a condition of delivery of the Award (i) that the Grantee remit an amount sufficient to satisfy all federal, state, and local withholding tax requirements related thereto, (ii) the withholding of such sums from compensation otherwise due to the Grantee or from any shares of Stock due to the Grantee under the Plan, or (iii) any combination of the foregoing. (b) If any disqualifying disposition described in Section 6(c)(v) is made with respect to shares of Stock acquired by exercising an Incentive Stock Option granted pursuant to the Plan or any election described in Section 8 is made, then the person making such disqualifying disposition or election shall remit to the Company an amount sufficient to satisfy all federal, state, and local withholding taxes thereby incurred; provided that, in lieu of or in addition to the foregoing, the Company shall have the right to withhold such sums from compensation otherwise due to the Grantee or from any shares of Stock due to the Grantee under the Plan. 10. LOANS With the approval of the Committee, the Grantee may borrow from the Company all or any portion of the funds needed to pay the Option Price or to pay for Retirement Stock on such terms and conditions as the Committee deems appropriate, provided that (i) the interest rate for any such loan by the Company shall not be less than the "applicable federal rate" (as defined by Code Section 1274(d)(1)(A)) in effect on the date of such loan or any other rate as necessary to avoid the imputation of interest under the Code or other applicable law, (ii) proceeds of the loan are used solely to pay either the exercise price of an option or to pay for Retirement Stock granted pursuant to this Plan, and (iii) the Grantee executes a promissory note and such other documents as the Committee deems appropriate to evidence the Grantee's indebtedness to the Company, and pledges the Stock received in exchange for such borrowed funds as Collateral for such loan. 11. SECURITIES LAW MATTERS (a) If the Committee deems it necessary to comply with the Securities Act of 1933, Committee may require a written investment intent representation by the Grantee and may require that a restrictive legend be affixed to certificates for shares of Stock. (b) If, based upon the opinion of counsel for the Company, the Committee determines that the exercise or non-forfeitability of, or delivery of benefits pursuant to, any Award would violate any applicable provision of 11 (i) federal or state securities laws or (ii) the listing requirements of any national securities exchange on which are listed any of the Company's equity securities, then the Committee may postpone any such exercise, non-forfeitability or delivery, as the case may be, but the Company shall use its best efforts to cause such exercise, non-forfeitability or delivery to comply with all such provisions at the earliest practicable date. (c) With respect to Section 16 Grantees, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent that any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. 12. FUNDING; RESERVES Cash benefits payable under the Plan to any person shall be paid directly by the Company. The Company shall not be required to fund, or otherwise segregate assets to be used for payment of, cash benefits under the Plan. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Subsidiary and a Grantee or any other person. To the extent that any person acquires a right to receive payments from the Company or any Subsidiary pursuant to an Award, such right shall be no greater than the right of an unsecured general creditor of the Company or any Subsidiary. The Board shall cause the Company to reserve shares of Stock from its authorized but unissued shares for the purpose of making available shares of Stock to fund the Awards. 13. NO EMPLOYMENT RIGHTS Neither the establishment of the Plan, nor the granting of any Award nor the execution of an Award Agreement shall be construed to (a) give any Grantee the right to remain employed by the Company or any of its Subsidiaries or to any benefits not specifically provided by the Plan or an Award Agreement, or (b) in any manner modify the right of the Company or any of its Subsidiaries to modify, amend, or terminate any of its employee benefit plans. Further, the Company or Subsidiary may at any time dismiss a Grantee from employment, free from any liability, or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement. 14. RIGHTS AS A STOCKHOLDER A Grantee shall not, by reason of any Award have any right as a stockholder of the Company with respect to the shares of Stock which may be deliverable in the future upon exercise of such Award, or otherwise as provided in an Award Agreement, until Stock has been actually issued and delivered to the Grantee. Shares of Retirement Stock issued and delivered to a Grantee in accordance with the Retirement Award Agreement shall confer on the Grantee all rights of a stockholder of the Company, except as otherwise provided in the Plan or the specific Retirement Award Agreement. 12 15. NATURE OF PAYMENTS Any and all grants, payments of cash, or deliveries of shares of Stock hereunder shall constitute special incentive payments to the Grantee and shall not be taken into account in computing the amount of salary or compensation of the Grantee for the purposes of determining any pension, retirement, death or other benefits under (a) any pension, retirement, profit-sharing, bonus, life insurance or other employee benefit plan of the Company or any of its Subsidiaries or (b) any agreement between the Company or any Subsidiary, on the one hand, and the Grantee, on the other hand, except as such plan or agreement shall otherwise expressly provide. 16. NON-UNIFORM DETERMINATIONS Determinations made by the Committee or the Board under the Plan do not need to be uniform and may be made by the Committee or the Board selectively among persons who receive, or are eligible to receive, Awards (whether or not such persons are similarly situated). Without limiting the generality of the foregoing, the Committee shall be entitled, among other things, to make non-uniform and selective determinations and to enter into non-uniform and selective Award Agreements, as to (a) the identity of the Grantees, (b) the terms and provisions of Awards, and (c) the treatment under Section 13 of terminations of employment. Notwithstanding the foregoing, the Committee's interpretation of Plan provisions shall be uniform as to similarly situated Grantees. 17. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION (a) Subject to any required action by the Stockholders, the Committee shall make such adjustment, as it shall deem equitable, to any or all of: (i) the aggregate numbers of shares of Stock available under Sections 3(a) and 3(b); (ii) the number of shares of Stock subject to an option or shares of Retirement Stock covered by an Award; (iii) the Option Price; (iv) the Retirement Cash Award; (v) any other terms or provisions of any outstanding grants of options or Retirement Awards: to reflect a stock dividend, stock split, reverse stock split, share combination, recapitalization, merger, consolidation, acquisition of property or shares, separation, asset spin-off, reorganization, stock rights offering, liquidation or similar event, of or by the Company, or, if deemed appropriate, the Committee may make provisions for a cash payment to the holder of an outstanding Award; provided, however, if the Company shall be the surviving corporation in any merger or consolidation, each outstanding option or Award Agreement shall pertain to and apply to the securities to which a holder of the number of shares of Stock subject to the option or Award Agreement would have been entitled; and provided further, upon a dissolution or liquidation of the Company, or a merger or consolidation in which the Company is not the 13 surviving corporation, or a change in control of the Company, as defined in subsection (b) below, each optionee shall have the right to exercise his option in whole or in part notwithstanding the provisions of Section 6(g) above: (i) immediately prior to such dissolution or liquidation or merger or consolidation in which the Company is not the surviving corporation, and thereafter; or (ii) after such change of control. However, with respect to Awards of Incentive Stock Options no such adjustment shall be authorized to the extent that the authority to make such adjustments would cause the Plan to violate Section 422(b)(1) of the Code or any successor provision thereto and the number of shares subject to any Award denominated in shares of Stock shall always be a whole number. (b) "Change of control" of the Company shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 ("Exchange Act"); provided that, without limitation, such a change in control shall be deemed to have occurred if: (i) any person (as that term is defined in Section 13(d) and Section 14(d) of the Exchange Act) is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 20 percent, or more of the combined voting power of the Company's then outstanding securities; or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute all members of the Board who are not employed by the Company (the "Outside Directors") shall cease for any reason to constitute at least a majority of the Outside Directors, unless the election of each Outside Director, who was not an Outside Director at the beginning of such period, was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period; or, (iii) there shall be consummated (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, or, (iv) the stockholders of the Company approve a plan or proposal for the liquidation or dissolution of the Company. (c) In the event of a change in the Stock of the Company as presently constituted, which is limited to a change of all of its authorized shares with par value into the same number of shares with a different par value or without par value, the shares resulting from any such change shall be deemed to be the Stock within the meaning of the Plan. (d) Except as hereinbefore expressly provided in this Section 18, the Grantee shall have no rights by reason of any subdivision or consolidation of shares of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any change of control, dissolution, liquidation, merger, or consolidation or spin-off of assets or stock of another corporation, and any issue of the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, 14 and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Stock subject to Awards. The grant of an Award pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge, consolidate, dissolve, liquidate, sell, or transfer all or any part of its business or assets. 18. AMENDMENT OF THE PLAN Upon recommendation of the Committee, the Board of Directors of the Company may insofar as permitted by law, from time to time, with respect to any shares at the time not subject to options or Award Agreements, suspend or discontinue the Plan or revise or amend it in any respect whatsoever except that, without approval of the stockholders, no such revision or amendment shall: change the number of shares subject to the Plan; change the designation of the class of employees eligible to receive Awards; decrease the price at which Options may be granted; remove the administration of the Plan from the Committee other than as expressly provided by the Plan; extend the period during which Awards may be granted; or render any member of the Committee eligible to receive an Awards under the Plan while serving thereon. Furthermore, the Plan may not without the approval of the stockholders be amended in any manner that will cause Options issued under it to fail to qualify as Incentive Stock Options. Except as provided in this Section 19, the Board shall, from time to time, revise, modify, or amend the Plan, in part or in total, without approval of the stockholders, as may be necessary to satisfy the requirements of the Code and any amendments or revisions thereof, such that certain stock options which are granted under the Plan may qualify as Incentive Stock Options, and to satisfy all other applicable laws and regulations. 19. TERMINATION OF THE PLAN The Plan shall terminate on the tenth (10th) anniversary of the Effective Date or at such earlier time as the Board may determine. Any termination, whether in whole or in part, shall not affect any Award then outstanding under the Plan. 20. OTHER COMPENSATION PLANS Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases. 21. NO ILLEGAL TRANSACTIONS The Plan and all Awards granted pursuant to it are subject to all laws and regulations of any governmental authority which may be applicable thereto; and notwithstanding any provision of the Plan or any Award, Grantees shall not be entitled to exercise Awards or receive the benefits thereof and the Company shall not be obligated to deliver any Stock or pay any benefits to a 15 Grantee if such exercise, delivery, receipt or payment of benefits would constitute a violation by the Grantee or the Company of any provision of any such law or regulation. 22. CONTROLLING LAW The law of the State of Illinois, except its law with respect to choice of law and except as to matters relating to corporate law (in which case the corporate law of the State of Delaware shall control), shall be controlling in all matters relating to the Plan. 23. TAX LITIGATION The Company shall have the right, but not the obligation, to contest, at its expense, any tax ruling or decision, administrative or judicial, on any issue that is related to the Plan and that the Company believes to be important to Grantees and to conduct any such contest or any litigation arising therefrom to a final decision. 24. SEVERABILITY If all or any part of the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not serve to invalidate any portion of the Plan not declared to be unlawful or invalid. Any Section or part of a Section so declared to be unlawful or invalid shall, if possible, be construed in a manner in which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid. 25. INDEMNIFICATION Each person who is or at any time serves as a member of the Board or the Committee shall be indemnified and held harmless by the Company against and from: (i) any loss, cost, liability or expense, including attorneys' fees actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit, or proceeding to which such person may be a party or in which such person may be involved by reason of any action or failure to act under the Plan; and (ii) any and all amounts paid by such person in satisfaction of judgment in any such action, suit or proceeding relating to the Plan. Each person covered by this indemnification provision shall give the Company an opportunity, at its own expense, to handle and defend the same before such person undertakes to handle and defend it on such person's own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the By-Laws of the Company, as a matter of law, or otherwise, or any power that the Company may have to indemnify such person or hold such person harmless. 26. RELIANCE ON REPORTS Each member of the Board and the Committee shall be fully justified in relying or acting in good faith upon any report made by the independent public 16 accountants of, or counsel for, the Company and upon any other information furnished in connection with the Plan. In no event shall any person who is or shall have been a member of the Board or the Committee be liable for any determination made or other action taken or any failure to act in reliance upon any such report or information or for any action taken, including the furnishing of information, or failure to act, if done in good faith. 27. EXPENSES The Company shall bear all expenses of administering the Plan. 28. TITLES AND HEADINGS The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control. 29. APPLICATION OF FUNDS The proceeds received by the Company from the sale of Stock pursuant to any Awards will be used for general corporate purposes. Date Plan was adopted by Board of Directors: June 30, 1993 Date Plan was approved by Stockholders: November 16, 1993 Date Plan was amended by Board of Directors: June 25, 1997 Date Plan was amended by Board of Directors: August 28, 1997 Date amended Plan was approved by Stockholders: 1997 ------------ 17 EX-10.(D-2) 4 RETIREMENT AWARD AGREEMENT EXHIBIT 10(d)-2 RETIREMENT AWARD AGREEMENT This Retirement Award Agreement ("Agreement") is entered into as of this 30th day of June, 1997 between QUIXOTE CORPORATION ("the Company"), a Delaware corporation whose principal place of business is Chicago, Illinois, and DANIEL P. GOREY of Palatine, 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 51,409 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, 1997 2,856 shares June 30, 1998 2,856 shares June 30, 1999 2,856 shares June 30, 2000 2,856 shares June 30, 2001 2,856 shares June 30, 2002 2,856 shares June 30, 2003 2,856 shares June 30, 2004 2,856 shares June 30, 2005 2,856 shares June 30, 2006 2,856 shares June 30, 2007 2,856 shares June 30, 2008 2,856 shares June 30, 2009 2,856 shares June 30, 2010 2,856 shares June 30, 2011 2,856 shares June 30, 2012 2,856 shares June 30, 2013 2,856 shares June 30, 2014 2,857 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: 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 -2- federal and state income tax rate, less the Current Market Price of the Retirement Stock Award (the "Retirement Cash Award Formula"). A Retirement Cash Award shall only be paid in connection with the issuance and delivery of Retirement Stock under this Agreement. The Retirement Cash Award Formula may be changed by the Committee in its discretion. (b) A Retirement Cash Award shall not be paid directly to the Employee, but shall be paid to the appropriate federal and state tax officials by the Company on behalf of Employee. The Company will give the Employee written evidence of such payment. (c) For purposes of this Agreement, the parties agree that, given both the level of activity in the public trading of the Company's Stock and the price volatility of the Stock, the fair market value of the Stock shall mean the Current Market Price. The term "Current Market Price" of the Stock means the average of the daily closing prices for the thirty consecutive business days commencing no more than forty five business days before the day in question. The closing price for each day shall be the last reported sale price determined in the regular way or, in case no such reported sales takes place on such day, the average of the last reported bid and asked prices determined the regular way, in either case in the principal national securities exchange in which the Stock is admitted to trading a listed, or if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices as reported by NASDAQ or other similar organization if NASDAQ is no longer reporting such information, or if not so available, the fair market price is determined by the Board. 3. RESTRICTIONS ON THE RIGHT TO SELL OR TRANSFER RETIREMENT STOCK. (a) As a condition of this Award, the Employee agrees that 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 -3- 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 August 22, 1995 by and between Quixote Corporation and Daniel P. Gorey. The Retirement Award Agreement provides that the restrictions shall automatically expire upon the earlier of (i) the termination of Mr. Gorey's employment by Quixote Corporation or its subsidiaries, or (ii) Mr. Gorey's attaining 65 years of age. (b) Unless on an Issuance Date, there is in the opinion of Company's counsel a valid and effective registration statement under the Securities Act of 1933, as amended, and an appropriate qualification and registration under applicable state securities law with respect to the Retirement Stock to be issued and delivered, the Employee agrees, prior to the issuance and delivery of the Retirement Stock, to provide the Company a representation that 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. (c) If at any time the Committee determines, in its discretion, that the listing, registration or qualification of the Retirement Stock upon any securities exchange or under any state or federal law, or that the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the granting of the Award or in connection with the issuance of Retirement Stock thereunder, the Award may not be granted in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee. -4- 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. -5- 8. TERMINATION. (a) This Agreement shall terminate upon the earlier of (i) July 1, 2014 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, 1998, 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, 2014. 9. NOTICES. All notices, certificates or other communication shall be sufficiently given when given in writing and mailed by first class mail, postage prepaid, with proper address as indicated below. Any of such parties may by written notice given to the other party designate any address or addresses to which notices, certificates or other communications to them shall be sent when required as contemplated by this Agreement. Until otherwise provided by the respective parties, all notices, certificates and communications to each of the parties shall be addressed as follows: To the Company: Quixote Corporation One East Wacker Drive Suite 3000 Chicago, IL 60601 Attn: Philip E. Rollhaus, Jr. With a copy to: James H. DeVries, Esq. Quixote Corporation One East Wacker Drive Suite 3000 Chicago, IL 60601 To the Employee: Daniel P. Gorey 133 North Hale Palatine, IL 60067 -6- 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/ Leslie J. Jezuit -------------------------- Its: President & COO ------------------------ ATTEST: /s/ Joan R. Riley ------------------- /s/ Daniel P. Gorey --------------------- Daniel P. Gorey -7- EX-10.(E) 5 PROMISSORY NOTE DATED 12-31-96 EXHIBIT 10(e) PROMISSORY NOTE $525,927.14 Houston, Texas December 31, 1996 FOR VALUE RECEIVED, Quixote Steno Corporation, a Delaware corporation, and Quixote Corporation, a Delaware corporation, jointly and severally (herein called "Maker," whether one or more), hereby promises to pay to the order of Coventry Fund III, Ltd., a Texas limited partnership ("Payee"), at 1111 Bagby, Suite 1600, Houston, Texas or at such other address as Payee shall from time to time specify in writing, the principal sum of $525,927.14, together with interest on the unpaid principal balance of this Note from day to day outstanding, as hereinafter provided, but calculated on the basis of actual days elapsed over a 365 day year. 1. INTEREST RATE. The unpaid principal balance of this Note shall not bear interest until past due. 2. DEFAULT RATE. Any principal or interest which is not paid within five (5) days after it becomes due shall (to the extent permitted by applicable law) bear interest at a varying rate per annum equal to the "Maximum Rate" from the date due and payable until paid. "Maximum Rate" means the lesser of (a) eighteen percent (18%) per annum, and (b) the maximum nonusurious rate of interest per annum permitted by whichever of applicable United States federal law or Texas law permits the higher interest rate, including to the extent permitted by applicable law, any amendments thereof hereafter or any new law hereafter coming into effect to the extent a higher Maximum Rate is permitted thereby. The Maximum Rate shall be applied by taking into account all amounts characterized by applicable law as interest on the debt evidenced by this Note, so that the aggregate of all interest does not exceed the maximum nonusurious amount permitted by applicable law. 3. FLUCTUATION OF RATE. Without notice to Maker or anyone else, the Maximum Rate shall automatically fluctuate upward and downward as and in the amount such rate or rates of interest permitted by applicable law, respectively, fluctuate. 4. PAYMENT TERMS. This Note shall be due and payable in 48 monthly installments, each in the amount of $10,956.82. The 1st installment in the amount of $10,956.82 shall be due and payable on or before January 1, 1997, and a like installment shall be due and payable on the 1st day of each succeeding calendar month thereafter until this Note shall have been fully paid and satisfied; provided, that on December 1, 2000, the final maturity date of this Note, the entire balance of this Note then unpaid shall be finally due and payable. 5. APPLICATION OF PAYMENTS; LEGAL TENDER. All amounts paid hereunder shall be applied first to all interest then accrued and unpaid hereunder, and the balance, if any, to principal. All sums called for, payable or to be paid hereunder shall be paid in lawful money of the United States of America which at the time of payment is legal tender for the payment of public and private debts therein. 6. PREPAYMENT. Maker shall have the right to prepay this Note, in whole or in part, at any time without penalty or premium. 7. PURPOSE OF LOAN. Reference is made to that one certain Lease Termination Agreement dated as of December 31, 1996 by and between Quixote Steno Corporation (and acknowledged and agreed to by Quixote Corporation) and Coventry Fund III, Ltd., a Texas limited partnership. Maker represents and warrants to Payee and to each present and future owner and holder of this Note that the proceeds of this Note are for business, commercial, investment or similar purposes and will not be used for personal, family, household or agriculture use. 8. DEFAULT. In the event of a default in the payment of any installment of either principal or interest as provided for herein, or in the performance of any agreement or covenant contained in any instrument securing payment hereof, without the giving of any notice of any kind, the holder of this Note shall have the right and option, to declare the unpaid balance of principal and accrued interest on this Note at once due and payable and to foreclose or require foreclosure of any and all liens securing payment hereof, and to exercise any and all other rights and remedies it may have. Failure to exercise this option upon any default shall not constitute a waiver of the right to exercise it in the event of any subsequent default. 9. NO WAIVER OF ENFORCEMENT RIGHTS. Neither the failure by the holder hereof to exercise, nor delay by the holder hereof in exercising, the right to accelerate the maturity of this Note or any other right, power or remedy upon any default shall be construed as a waiver of such default or as a waiver of the right to exercise any such right, power or remedy at any time. No single or partial exercise by the holder hereof of any right, power or remedy shall exhaust the same or shall preclude any other or further exercise thereof, and every such right, power or remedy may be exercised at any time and from time to time. All remedies provided for in this Note and in any other Loan Document are cumulative of each other and of any and all other remedies existing at law or in equity, and the holder hereof shall, in addition to the remedies provided herein or in any other Loan Document, be entitled to avail itself of all such other remedies as may now or hereafter exist at law or in equity for the collection of the indebtedness owing hereunder, and the resort to any remedy provided for hereunder or under any such other Loan Document or provided for by law or in equity shall not prevent the concurrent or subsequent employment of any other appropriate remedy or remedies. Without limiting the generality of the foregoing provisions, the acceptance by the holder hereof from time to time of any payment under this Note which is past due or which is less than the payment in full of all amounts due and payable at the time of such payment, shall not (i) constitute a waiver of or impair or extinguish the rights of the holder hereof to accelerate the maturity of this Note or to exercise any other right, power or remedy at the time or at any subsequent time, or nullify any prior exercise of any such right, power or remedy; or (ii) constitute a waiver of the requirement of punctual payment and performance, or a novation in any respect. 10. ATTORNEYS' FEES; COLLECTION EXPENSES. If any holder of this Note retains an attorney in connection with any default or at maturity or to collect, enforce or defend this Note or any other Loan Document in any lawsuit or in any probate, reorganization, bankruptcy or other proceeding, or if Maker sues any holder in connection with this Note or any other Loan document and does not prevail, then Maker agrees to pay to each such holder, in addition to principal and interest, all reasonable costs and expenses incurred by such holder in trying to collect this Note or in any such suit or proceeding, including reasonable attorneys' fees. 11. NO USURY INTENDED; USURY SAVINGS CLAUSE. It is the intent of Payee and Maker and all other parties to the Loan Documents to conform to and contract in strict compliance with applicable usury law from time to time in effect. All agreements between Payee or any other holder hereof and Maker are hereby limited by the provisions of this paragraph which shall override and control all such agreements, whether now existing or hereafter arising and whether written or oral. In no way, nor in any event or contingency (including, but not limited to, prepayment, default, demand for payment or acceleration of the maturity of any obligation) shall the interest contracted for, charged or received under this Note or otherwise exceed the Maximum Rate. If, from any possible construction of any document, interest would otherwise by payable in excess of the Maximum Rate, any such construction shall be subject to the provisions of this paragraph and such document shall be automatically reformed and the interest payable shall be automatically reduced to the Maximum Rate, without the necessity of execution of any amendment or new document. If the holder hereof shall ever receive anything of value which is characterized as interest under applicable law and which would apart from this provision be in excess of the Maximum Rate, an amount equal to the amount which would have been excessive interest shall, without penalty, be applied to the reduction of the principal amount owing on the secured indebtedness in the inverse order of its maturity and not to the payment of interest, or, at the option of the holder hereof, be refunded to Maker or the other payor thereof if and to the extent such amount which would have been excessive exceeds such unpaid principal. The right to accelerate maturity of this Note or any other indebtedness does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and the holder hereof does not intend to charge or receive any unearned interest in the event of acceleration. All interest paid or agreed to be paid to the holder hereof shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full stated term (including any renewal or extension) of such indebtedness so that the amount of interest on account of such indebtedness does not exceed the maximum permitted by applicable law. Notwithstanding any term or provision hereof to the contrary, Maker hereby confirms to Payee that neither Maker nor its legal counsel is aware of any respect as to which this Note, or the transaction in connection with which this Note was issued, is or may be usurious and, to induce Payee to make the loan evidenced hereby, Maker hereby agrees with and covenants to Payee that if at any time Maker shall believe or discover that any term or provision of this Note or any action taken by Payee in connection herewith is or may be in violation of the usury laws or any other applicable law, Maker shall forthwith give notice to Payee specifying with particularity the nature and extent of any such potential violation of the usury laws or any other applicable law, and afford to Payee a reasonable period (of not less than sixty (60) days) within which to cure same. Maker hereby agrees with and covenants to Payee that in no instance shall Maker make any claim, bring any suit or prosecute any cause of action in respect of any violation of the usury laws or any other applicable law, unless, as a condition precedent thereto, Maker has given to Payee such notice and afforded to Payee such opportunity to cure as hereinabove provided. 12. JOINT AND SEVERAL LIABILITY; WAIVER. If more than one person or entity executes this Note as Maker, all of said parties shall be jointly and severally liable for payment of the indebtedness evidenced hereby. Maker and all sureties, endorsers, guarantors and any other party now or hereafter liable for the payment of this Note, in whole or in part, hereby severally (i) waive demand, presentment for payment, notice of dishonor and of nonpayment, protest, notice of protest, notice of intent to accelerate, notice of acceleration, and all other notices (except only for any notices which are specifically required by this Note), filing of suit and diligence in collection this Note or enforcing any of the security herefor; (ii) agree to any substitution, subordination, exchange or release of any such security or the release of any party primarily or secondarily liable hereon; (iii) agree that the holder hereof shall not be required first to institute suit or exhaust its remedies hereon against Maker or others liable or to become liable hereon or to enforce its rights against them or any security herefor; (iv) consent to any extension or postponement of time of payment of this Note for any period or periods of time and to any partial payments, before or after maturity, and to any other indulgences with respect hereto, without notice thereof to any of them; and (v) submit (and waive all rights to object) to personal jurisdiction in the State of Texas, and venue in Harris County, Texas, for the enforcement of any and all obligations under the Loan Document. 1. NOTICES. All notices permitted hereunder shall be given to the addressee at the following address: if to Payee: Coventry Fund III, Ltd. c/o Coventry Development, Inc. 1111 Bagby, Suite 1600 Houston, Texas 77002 With Copy To: Lawrence B. Chapman Brochstein, Slobin Chapman, P.C. One Riverway, Suite 1950 Houston, Texas 77002 if to Maker: Quixote Steno Corporation One East Wacker Drive Chicago, Illinois 60601 Suite 3000 Quixote Corporation One East Wacker Drive Chicago, Illinois 60601 Suite 3000 All notices given hereunder shall be in writing and shall be considered properly given if mailed by first-class United States mail, postage prepaid, registered or certified with return receipt requested, or by delivering same in person to the addressee, or by prepaid telegram. Any notice given in accordance herewith shall be effective upon receipt at the address of the addressee. 14. SUCCESSORS AND ASSIGNS. This Note inures to and binds the heirs, legal representatives, successors and assigns of Maker and Payee; provided, however, that Maker may not assign this Note or any loan funds, or assign or delegate any of its rights or obligations, without the prior written consent of the holder of this Note in each instance. 15. GOVERNING LAW. THIS NOTE, AND ITS VALIDITY, ENFORCEMENT AND INTERPRETATION, SHALL BE GOVERNED BY TEXAS LAW (WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES) AND APPLICABLE UNITED STATES FEDERAL LAW. 16. CAPTIONS. The captions in this Note are inserted or convenience and are not to be used to interpret or limit the terms herein. MAKER: Quixote Steno Corporation By: /s/ Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President Quixote Corporation By: /s/ Daniel P. Gorey Name: Daniel P. Gorey Title: Chief Financial Officer, Vice President & Controller EX-10.(F) 6 LETTER AGREEMENT DATED 8-12-97 / DEVRIES & QUIXOTE Exhibit 10(f) August 12, 1997 Mr. James H. DeVries 467 Willow Road Winnetka, IL 60093 RE: CONSULTING AGREEMENT Dear Jim: I am writing to summarize our agreement with respect to your performance of consulting services for Quixote Corporation between July 1, 1997 and October 31, 1997, especially in connection with the upcoming DVA trial. Quixote will pay you at a rate of $160 per hour, subject to a maximum of eight (8) hours per day. Quixote is paying the current lease payments on your Audi automobile, but you are responsible for gasoline, maintenance and insurance. We do not anticipate being charged for any commuting time to the Chicago office. You will also submit a weekly schedule of your activities to me, and all air travel plans, both of which will be approved in advance. We anticipate that invoices for your services and expenses shall be provided monthly within 15 business days after the end of each month. Quixote will reimburse your travel expenses upon receipt of our standard expense account form. Sincerely, /s/ Leslie J. Jezuit ------------------------ Agreed: /s/ James H. DeVries ----------------------------- EX-11 7 COMPUTATION OF EARNINGS PER SHARE QUIXOTE CORPORATION & SUBSIDIARIES EXHIBIT 11 - COMPUTATION OF NET EARNINGS PER AVERAGE COMMON AND COMMON EQUIVALENT SHARE For the year ended June 30, 1997 Fully Primary Diluted ------- ------- Net loss as reported $(3,831,000) $(3,831,000) =========== =========== 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 7,996,700 7,996,700 Shares assumed issued upon conversion of debentures Incremental shares outstanding assuming exercise of stock options and warrants using the treasury stock method 42,193 42,193 --------- --------- Average common and common equivalent shares outstanding (B) 8,008,893 8,008,893 ========= ========= Loss per common and common equivalent share outstanding (A/B) $(.48) $(.48) ========= ========= 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. 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. EX-21 8 SUBSIDIARIES OF THE COMPANY EXHIBIT 21 QUIXOTE CORPORATION & SUBSIDIARIES SUBSIDIARIES OF THE COMPANY as of June 30, 1997 Jurisdiction Under Which QUIXOTE CORPORATION (PARENT) Organized - ---------------------------- ------------- 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 QualAir Corporation Delaware Quixote Foreign Sales Corporation U.S. Virgin Islands Quixote Laser Corporation Delaware 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. EX-23 9 CONSENT OF COOPERS & LYBRAND L.L.P. 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 8, 1997, accompanying the consolidated financial statements and financial statement schedules of Quixote Corporation and Subsidiaries as of June 30, 1997 and 1996, and for each of the years ended June 30, 1997, 1996 and 1995, which report is included in this Annual Report on Form 10-K of Quixote Corporation. /s/ Coopers & Lybrand L.L.P. - ------------------------------- Chicago, Illinois September 26, 1997 EX-27 10 FINANCIAL DATA SCHEDULE
5 12-MOS JUN-30-1997 JUL-01-1996 JUN-30-1997 18,463,000 0 8,659,000 165,000 4,224,000 33,638,000 21,355,000 8,452,000 55,220,000 12,999,000 0 0 0 146,000 41,509,000 55,220,000 45,037,000 45,037,000 22,788,000 22,788,000 16,473,000 0 497,000 3,664,000 757,000 2,907,000 (6,738,000) 0 0 (3,831,000) (.48) (.48)
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