-----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, PJS6iqoX92lykPUMHd9j6VHYLK5C9+hpMEzRbxoIOfj/YWV91eV8CoDfNcc8O13i J2igdc4/tLqzQTYJHAdxFg== 0000912057-97-031781.txt : 19970929 0000912057-97-031781.hdr.sgml : 19970929 ACCESSION NUMBER: 0000912057-97-031781 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971119 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: DEF 14A SEC ACT: SEC FILE NUMBER: 001-08123 FILM NUMBER: 97685864 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 DEF 14A 1 PROXY CARD AND LETTER SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the registrant /X/ Filed by a party other than the registrant / / Check the appropriate box: / / Preliminary proxy statement /X/ Definitive proxy statement / / Definitive additional materials / / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12 / / Confidential, For Use of the Commission Only (as Permitted by Rule 14a-6(e)(2)) QUIXOTE CORPORATION - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of filing fee (Check the appropriate box): /X/ No fee required. / / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: ----------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: ----------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and how it is determined): ----------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: ----------------------------------------------------------------------- (5) Total fee paid: ----------------------------------------------------------------------- / / Fee paid previously with preliminary materials. / / Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. (1) Amount Previously Paid: ----------------------------------------------------------------------- (2) Form, schedule or registration statement no.: ----------------------------------------------------------------------- (3) Filing party: ----------------------------------------------------------------------- (4) Date Filed: ----------------------------------------------------------------------- [LOGO] NOTICE AND AGENDA OF THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD WEDNESDAY, NOVEMBER 19, 1997 -------------------- TO THE STOCKHOLDERS OF QUIXOTE CORPORATION: Notice is hereby given that the Annual Meeting of Stockholders of Quixote Corporation (the "Company") will be held on Wednesday, November 19, 1997, in the Assembly Room at The Northern Trust Company, 50 South LaSalle Street, Chicago, Illinois 60675. The meeting, which will commence at 10:00 a.m. Central Standard Time, will consider: 1. The election of two (2) directors to serve for a three-year term expiring at the Annual Meeting of Stockholders to be held in 2000; 2. The election of one (1) director to serve for a two-year term expiring at the Annual Meeting of Stockholders to be held in 1999; 3. The approval of the amendment to the Company's 1993 Long-Term Stock Ownership Incentive Plan; 4. The approval of the amendment to the Company's 1991 Director Stock Option Plan; 5. The approval of the amendment to the Company's Certificate of Incorporation; and 6. The approval of Coopers & Lybrand L.L.P. as independent auditors for the Company. The Annual Meeting will also transact such other business as may properly come before it. Only stockholders of record at the close of business on September 23, 1997, will be entitled to notice of, and to vote at, the meeting. Stockholders are encouraged to attend the meeting in person. To ensure that your shares will be represented, we urge you to vote, date, sign and mail the enclosed Proxy Card in the envelope which is provided, whether or not you expect to be present at the meeting. The prompt return of your Proxy Card will be appreciated. It will also save the Company the expense of a reminder mailing. IT IS IMPORTANT TO YOU AND TO YOUR COMPANY THAT YOU VOTE YOUR SHARES BY COMPLETING AND RETURNING THE ENCLOSED PROXY CARD. WE APPRECIATE YOUR COOPERATION AND WE THANK YOU. By order of the Board of Directors, [/S/] JOAN R. RILEY SECRETARY Chicago, Illinois September 29, 1997 I M P O R T A N T A PROXY STATEMENT AND PROXY CARD ARE SUBMITTED WITH THIS NOTICE. ALL STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT AND TO COMPLETE AND MAIL THE PROXY CARD PROMPTLY. THE ENCLOSED ENVELOPE FOR THE RETURN OF THE PROXY CARD REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. A LIST OF STOCKHOLDERS ENTITLED TO VOTE AT THE ANNUAL MEETING WILL BE AVAILABLE FOR INSPECTION BY ANY STOCKHOLDER FOR ANY PURPOSE GERMANE TO THE MEETING DURING ORDINARY BUSINESS HOURS FOR A PERIOD OF TEN DAYS PRIOR TO THE MEETING AT THE PRINCIPAL OFFICES OF THE COMPANY, ONE EAST WACKER DRIVE, 30TH FLOOR, CHICAGO, ILLINOIS. [LOGO] SEPTEMBER 29, 1997 ------------------------ PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD WEDNESDAY, NOVEMBER 19, 1997 -------------------- PROXY SOLICITATION This Proxy Statement is furnished to stockholders of Quixote Corporation (the "Company"), on or about September 29, 1997, in connection with the solicitation of proxies on behalf of the Board of Directors to be voted at the Annual Meeting of Stockholders on Wednesday, November 19, 1997, at 10:00 a.m., Central Standard Time, in the Assembly Room at The Northern Trust Company, 50 South LaSalle Street, Chicago, Illinois 60675, and at any adjournment thereof. The person voting the enclosed proxy may revoke it at any time before it is exercised by writing to the Secretary of the Company at its principal office, One East Wacker Drive, Chicago, Illinois 60601, or by attending the Annual Meeting and voting in person, in which case any prior proxy given will be automatically revoked. Properly executed proxies received prior to the meeting will be voted at the meeting. If a stockholder designates how the proxy is to be voted on any business to come before the meeting, the signed proxy will be voted in accordance with such designation. If a stockholder fails to designate how his proxy should be voted, the signed proxy will be voted for: the election of the nominees named below as Directors; the approval of the amendment of the 1993 Long-Term Stock Ownership Incentive Plan (the "Long-Term Plan"); the approval of the amendment of the 1991 Director Stock Option Plan (the "Director Plan"); the approval of the amendment of the Company's Certificate of Incorporation; and the approval of Coopers & Lybrand L.L.P. as the Company's independent auditors. The costs of this solicitation will be paid by the Company. Such costs include preparation, printing and mailing of the Notice of Annual Meeting, Proxy Card and this Proxy Statement. The officers and employees of the Company and its subsidiaries may solicit proxies personally or by telephone and telegram. Arrangements will be made with brokerage houses and other custodians, nominees and fiduciaries for proxy material to be sent to the principals, and the Company will reimburse such persons for their expenses. The Company has also retained the firm of 1 Morrow & Co., Inc. to assist in the solicitation of proxies at a cost of approximately $7,500 plus reasonable out-of-pocket expenses. VOTING AT THE ANNUAL MEETING Stockholders of record owning the Company's common stock, $.01 2/3 par value ("Common Stock"), at the close of business on September 23, 1997, will be entitled to vote at the Annual Meeting. On that date, 8,024,576 shares of Common Stock were outstanding. Each outstanding share of Common Stock entitles the holder to one vote upon each matter presented at the Annual Meeting. The affirmative vote of a majority of all of the shares of Common Stock of the Company present in person or represented by proxy and entitled to vote at the meeting is necessary to approve the amendment of the Director Plan, the amendment of the Long-Term Plan, and the approval of Coopers & Lybrand, L.L.P., as independent auditors for the Company. The nominees for Director will be elected if they receive the affirmative vote of at least sixty percent of all votes entitled to be cast at this meeting. The approval of the amendment of the Certificate of Incorporation will be approved if it receives the affirmative vote of at least sixty percent of all votes entitled to be cast at this meeting. Shares voted as abstentions on any matter (or a "withhold vote for" as to Directors) will be counted as shares that are present and entitled to vote for purposes of determining a quorum at the meeting and as unvoted, although present and entitled to vote, for purposes of determining the approval of each matter as to which the stockholder has abstained. Abstentions and withheld votes have the effect of votes against a matter. Pursuant to the New York Stock Exchange rules, brokers who hold shares of Common Stock as nominees will have discretionary authority to vote those shares on the proposals. However, if a broker submits a proxy that indicates the broker does not have discretionary authority (known as "broker non-votes"), such non-votes will be counted as shares that are present and entitled to vote for purposes of determining a quorum at the meeting, but will not be considered as present and entitled to vote with respect to such matters. Accordingly, broker non-votes will have the effect of votes against a matter. While the Notice of Annual Meeting calls for the transaction of such other business as may properly come before the meeting, management has no knowledge of any matters to be presented for action by the stockholders except as already set forth. The enclosed proxy gives discretionary authority to the persons holding those proxies to vote in accordance with their best judgment as to any other business. ELECTION OF DIRECTORS At the Annual Meeting, two (2) Directors are to be elected to serve three year terms until the Annual Meeting to be held in 2000 and until their successors are elected and qualified. The Company is soliciting proxies to vote for its nominees, James H. DeVries and Lawrence C. McQuade, as Directors of the Company. At the Annual Meeting, one (1) Director is to be elected to fill the vacancy created by the resignation of David S. Ruder. The term shall be for a two year term until the Annual Meeting to be held in 1999 and until a successor is elected and qualified. In May 1997 the Board of Directors elected Leslie J. Jezuit to fill the vacancy until the Annual Meeting and the Company is soliciting proxies for Mr. Jezuit as a Director of the Company. All proxies will be voted in accordance with the stated instructions. If any nominee ceases to be a candidate for election for any reason, the proxy will be voted for a substitute nominee designated by the Board. The Board of Directors currently has no reason to believe that any 2 nominee will be either unwilling or unable to serve as a Director if elected. Proxies given by stockholders cannot be voted for more than three (3) persons. The nominees for Director will be elected if they receive the affirmative vote of at least sixty percent (60%) of all votes entitled to be cast at this meeting. INFORMATION CONCERNING NOMINEES FOR DIRECTOR AND DIRECTORS CONTINUING IN OFFICE. The information appearing in this section in regard to age and principal occupation or employment has been furnished to the Company by the respective nominees for Director and by the respective Directors continuing in office. Information relating to the beneficial ownership of the Company's Common Stock by Directors and nominees for Director is set forth in the table on page 24. NOMINEES FOR DIRECTOR FOR A THREE-YEAR TERM EXPIRING IN 2000 JAMES H. DEVRIES Mr. DeVries, 65, has served as a Director of the Company since July 1969. Prior to his retirement from the Company in June 1997, Mr. DeVries served as Executive Vice President and Secretary of the Company, and as Secretary of Energy Absorption Systems, Inc. LAWRENCE C. MCQUADE Mr. McQuade, 70, is Chairman of Qualitas International (since 1994). In addition, he serves as a Director of Bunzl P.L.C. (since 1991) and of Oxford Analytica, Inc. (since 1988), and is a founding partner of River Capital International L.L.C. Mr. McQuade was Vice Chairman of Prudential Mutual Fund Management, Inc. from 1988 through April 1995. He was Executive Vice President and a Director of W.R. Grace & Co. from 1975 to 1987. Mr. McQuade served as Chairman of the Czech & Slovak American Enterprise Fund from August 1995 to March 1996. In 1967 to 1969 he served as Assistant Secretary, U.S. Department of Commerce. He is a graduate of Yale University, Oxford University (Rhodes Scholar), and Harvard Law School. Mr. McQuade has served as a Director of the Company since February 1992 and is a member of the Audit/Compensation Committee. NOMINEE FOR DIRECTOR FOR A TWO-YEAR TERM EXPIRING IN 1999 LESLIE J. JEZUIT Leslie J. Jezuit, 51, was elected by the Board of Directors in May 1997 to fill the vacancy created by the resignation of David S. Ruder. Mr. Jezuit has served as President and Chief Operating Officer of the Company since January 1996 and is also Vice Chairman and a Director of Energy Absorption Systems, Inc. Mr. Jezuit is a former member of the Board of Directors of Prospectus Plus, Inc. Prior to joining the Company, Mr. Jezuit served from 1991 to 1995 as President and Chief Operating Officer of Robertshaw Controls Company, a $500 million manufacturer of HVAC, appliance and pneumatic controls. He also served as Vice President and General Manager of the Cutler-Hammer division of Eaton Corporation (1985-1991); in various positions at Federal Signal Corporation, including Group President and Vice President of Corporate Development (1980-1985); as Vice President of Marketing at Mead Digital Systems (1975-1980); and in various management positions at the Graphic Systems Division of Rockwell International (1968-1975). 3 THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE ELECTION OF MR. DEVRIES, MR. MCQUADE, AND MR. JEZUIT AS DIRECTORS OF THE COMPANY. DIRECTORS CONTINUING IN OFFICE WILLIAM G. FOWLER Mr. Fowler, 69, is an attorney at, and a shareholder of, the law firm of Van Cott, Bagley, Cornwall & McCarthy of Salt Lake City, Utah. He joined the Board in January 1973. Mr. Fowler is the Chairman of the Audit/Compensation Committee. His current term as Director expires at the Annual Meeting to be held in 1998. ROBERT D. VAN ROIJEN, JR. Mr. van Roijen, 58, has been the President of Tox Financial Company, a private investment firm, since 1988. He was formerly associated with Control Laser Corporation, serving in various capacities from 1977 to 1987, including as Chairman of the Board and as President and Chief Executive Officer. Mr. van Roijen is also a director of Commonwealth Scientific; Applied Digital Technology; St. Leonard's Corporation; and Security Storage Company, and is a former director of Sonex Research, Inc. and AMBAR Corp. Mr. van Roijen has served as a Director of the Company since May 1993 and is a member of the Audit/Compensation Committee. His current term as Director expires at the Annual Meeting to be held in 1998. PHILIP E. ROLLHAUS, JR. Mr. Rollhaus, 63, is Chairman of the Board and the Chief Executive Officer of the Company. Mr. Rollhaus has served in these capacities and as a Director of the Company since the Company was founded in July 1969. Mr. Rollhaus also served as President of the Company from July 1969 until Mr. Leslie J. Jezuit's appointment to that office in January 1996. Mr. Rollhaus is Chairman and Chief Executive Officer of Energy Absorption Systems, Inc., a wholly-owned subsidiary of the Company. His current term as Director expires at the Annual Meeting to be held in 1999. AUDIT/COMPENSATION COMMITTEE The Audit/Compensation Committee recommends the accounting firm to be employed as the Company's independent auditors to the Board; consults with the auditors regarding the audit; reviews the auditors' report or proposed report and resulting letter of comments to management; consults with the auditors and management regarding the adequacy of internal controls; determines adjustments to salaries, bonuses and other forms of compensation (including stock option grants) afforded the principal Officers of the Company and its subsidiaries; and considers any other matter relating to the Company's affairs that the Committee, in its discretion, deems appropriate. The Audit/Compensation Committee had four meetings during fiscal 1997. The Board of Directors does not have a nominating committee. The Board of Directors as a whole performs the functions normally performed by nominating committees. REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS COMPENSATION OF DIRECTORS In fiscal 1997, Directors who were also employees of the Company were paid a fee of $1,000 for each day of scheduled meetings of the Board, plus expenses. Non-employee Directors were paid a fee of $2,000 for each day of scheduled meetings of the Board and the Audit/Compensation Committee, plus traveling and related expenses, and $500 for each telephone conference 4 meeting. There were eight scheduled meetings (nine meeting days) and five telephone conference meetings of the Board in fiscal 1997. There was one scheduled meeting and three telephone conference meetings in fiscal 1997 of the Audit/Compensation Committee. Present and future Directors are eligible to receive stock options as granted from time to time by the Board of Directors pursuant to the Director Plan, subject to certain limits on the number of shares any individual Director may receive. Options are granted under the Director Plan at 100% of fair market value on the grant date and require continued service as a Director for at least a year from the grant date as a condition of exercise. On March 6, 1997, the Company granted each of the Directors options to purchase 2,000 shares of Common Stock at $9.00 per share. The Company maintains accidental death and disability insurance coverage in the amount of $500,000 on behalf of each of the non-employee Directors, payable to the designated beneficiary of each Director. The Company paid premiums of $385.00 for each Director to provide such insurance in fiscal 1997. SUMMARY COMPENSATION TABLE The following table summarizes the total compensation earned or paid for services rendered in all capacities during each of the years ended June 30, 1997, 1996 and 1995, by the named Executive Officers. SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION AWARDS ------------------------------------------ ANNUAL COMPENSATION RESTRICTED ------------------------------- OTHER ANNUAL STOCK OPTIONS/ SALARY BONUS COMPENSATION(1) AWARD(S)(2) SARS NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) - ---------------------------------------- --------- --------- --------- ---------------- ----------- ----------- Philip E. Rollhaus, Jr ................. 1997 $ 425,000 100,000 $ 280,072 $ 196,875 32,000 Chairman and Chief Executive Officer, 1996 425,000 130,000 101,706 0 42,000 Quixote Corporation and Energy 1995 425,000 135,000 180,825 0 27,060 Absorption Systems, Inc. Leslie J. Jezuit ....................... 1997 275,000 100,000 177,501 157,500 25,000 President and Chief Operating Officer, 1996(3) 137,500 70,000 35,411 0 55,000 Quixote Corporation; Vice Chairman, Energy Absorption Systems, Inc. George D. Ebersole ..................... 1997 215,000 75,000 32,825 0 10,000 President and Chief Operating Officer, 1996 215,000 100,000 26,506 0 15,000 Energy Absorption Systems, Inc. 1995 210,000 125,000 49,085 0 9,710 James H. DeVries (Retired June 1997 270,000 35,000 141,398 70,875 2,000 30,1997) . 1996 270,000 35,000 74,821 0 2,000 Executive Vice President and Secretary, 1995 270,000 30,000 71,134 0 22,210 Quixote Corporation; Secretary, Energy Absorption Systems, Inc. Myron R. Shain (Retired June 30, 1997 225,000 0 119,406 55,125 0 1997) ................................. 1996 225,000 35,000 60,369 0 10,000 Executive Vice President--Finance and 1995 225,000 80,000 42,674 0 7,765 Treasurer, Quixote Corporation; Vice President and Treasurer, Energy Absorption Systems, Inc. ALL OTHER COMPENSATION(4) NAME AND PRINCIPAL POSITION ($) - ---------------------------------------- ---------------- Philip E. Rollhaus, Jr ................. $ 3,200 Chairman and Chief Executive Officer, 3,000 Quixote Corporation and Energy 3,000 Absorption Systems, Inc. Leslie J. Jezuit ....................... 3,200 President and Chief Operating Officer, 0 Quixote Corporation; Vice Chairman, Energy Absorption Systems, Inc. George D. Ebersole ..................... 3,050 President and Chief Operating Officer, 3,000 Energy Absorption Systems, Inc. 3,105 James H. DeVries (Retired June 2,843 30,1997) . 3,083 Executive Vice President and Secretary, 3,008 Quixote Corporation; Secretary, Energy Absorption Systems, Inc. Myron R. Shain (Retired June 30, 579,500 1997) ................................. 3,000 Executive Vice President--Finance and 3,126 Treasurer, Quixote Corporation; Vice President and Treasurer, Energy Absorption Systems, Inc.
- ------------------------ (1) The amounts disclosed include (a) cash paid under the Quixote Corporation Long-Term Stock Ownership Incentive Plan (the "Long-Term Plan") to cover the federal, state and other taxes arising from the restricted stock issued in the fiscal year to Messrs. Rollhaus, DeVries, Shain and Ebersole pursuant to the Long-Term Plan and, (b) cash paid to cover the federal, state and other taxes arising from a restricted stock award granted on June 25, 1997 to Messrs. Rollhaus, Jezuit, DeVries and Shain. The amounts disclosed for Messrs. Rollhaus, Jezuit and Mr. DeVries also include compensation of $9,000 paid to Messrs. Rollhaus 5 and DeVries and $1,000 paid to Mr. Jezuit for their services as Directors of the Company. The amount disclosed for Mr. Jezuit includes the second installment of a guaranteed payment provided for in his original terms of employment and paid in January 1997 in the amount of $50,000. Perquisites and other personal benefits are disclosed for Mr. DeVries and Mr. Shain, including an automobile allowance of $21,743 for Mr. DeVries and an automobile allowance of $19,180 and Exec-U-Care reimbursement of $18,135 for Mr. Shain. The aggregate amount of perquisites and other personal benefits for Messrs. Rollhaus, Jezuit and Ebersole did not exceed the lesser of $50,000 or ten percent (10%) of the total annual salary and bonus reported for each of them and is therefore not included. (2) The amounts disclosed for Messrs. Rollhaus, Jezuit, DeVries and Shain include the dollar value of restricted stock awards granted to them on June 25, 1997 associated with the performance of DMI and its eventual sale. The fair market value of the shares on the date of grant was $7.88. The total number of shares awarded are as follows: Mr. Rollhaus - 25,000 shares; Mr. Jezuit - 20,000 shares; Mr. DeVries - 9,000 shares; and Mr. Shain - 7,000 shares. The restricted shares are fully vested, but are subject to transfer restrictions until June 25, 1998, at which time 50% of the shares shall become unrestricted shares. On June 25, 1999 all restrictions shall lapse. The transfer restrictions lapse upon the employee's death, disability, termination of employment or change-in-control of the Company. Dividends will be paid on the restricted stock. In addition to the amounts disclosed, restricted stock awards also were granted to Messrs. Rollhaus, DeVries, Shain and Ebersole in 1993 pursuant to the Long-Term Plan. The number of shares covered by the 1993 restricted stock awards and the number of shares vested, respectively, are as follows: Mr. Rollhaus - 91,530/91,530; Mr. DeVries - 32,410/32,410; Mr. Shain - 46,000/23,000; and Mr. Ebersole - 37,037/26,455. Due to Mr. Shain's retirement on June 30, 1997, no further shares from the stock award will vest for him. The number and value of each employee's aggregate restricted stock holdings, respectively, as of June 30,1997 were as follows: Mr. Rollhaus - 116,530 shares/$932,240; Mr. Jezuit - 20,000 shares/$160,000; Mr. DeVries - 41,410 shares/$331,280; Mr. Shain - 30,000 shares/$240,000; and Mr. Ebersole - 26,455 shares/$211,640. Pursuant to the terms of the Long-Term Plan, the remaining restricted stock covered by the 1993 award granted to Mr. Ebersole will be issued in two equal annual installments on June 30 of the next two fiscal years, subject to the continuation of employment and transferability restrictions described below, and subject further to the Company's right to terminate the agreement at any time after June 30, 1998. In order to receive an annual issuance of restricted stock, Mr. Ebersole must be employed by the Company or its subsidiaries on the last day of the fiscal year in which such stock issued (except in the case of his death, disability or termination of employment other than for cause). Mr. Ebersole may not sell or transfer any restricted stock received under the Long-Term Plan until the earlier of the date his employment is terminated or the date he reaches retirement age (whether he actually retires at that time or not). Pursuant to the terms of the Long-Term Plan, dividends are paid only on shares of restricted stock issued and delivered to the named Executive. (3) Mr. Jezuit began his employment with the Company on December 29, 1995. (4) Amounts shown for Messrs. Rollhaus, Jezuit, DeVries and Ebersole for fiscal 1997 are matching contributions by the Company under the Company's 401(k) Plan. The amount shown for Mr. Shain includes $575,877 paid, payable or accrued to him in connection with his retirement and $3,623 in matching contributions by the Company under the Company's 401(k) Plan. STOCK OPTION GRANTS IN FISCAL YEAR 1997 The following table shows the options granted to the named Executive Officers during fiscal 1997 and the potential realizable value of those grants (on a pre-tax basis) determined in accordance with SEC rules. The information in this table shows how much the named Executive Officers may eventually realize in future dollars under three hypothetical situations: if the price of the Company's Common Stock does not increase, and if the stock gains 5% or 10% in value per year, compounded over the life of the options. These amounts represent assumed rates of appreciation, and are not intended to forecast future appreciation of the Company's Common Stock. The options described in this table have exercise prices equal to the current market value of a share of Common Stock on the date they were granted. Unless the Company's stock price appreciates and the recipient continues to be employed until the options vest, the options will have no value. 6 OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS -------------------------- POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK % OF TOTAL PRICE APPRECIATION FOR OPTION TERM(2) OPTIONS ----------------------------------------------------------- GRANTED TO EXERCISE OPTIONS EMPLOYEES OR BASE GRANTED IN FISCAL PRICE EXPIRATION 0% NAME (#) (1) YEAR ($/SH) DATE -- 5% ($) 10% ($) - ------------------------------------------- ----------- ------------- ----------- ----------- --------- --------- Philip E. Rollhaus, Jr..................... 30,000 23.3% 9.00 03/06/02 0 74,596 164,838 2,000 1.6% 9.00 03/06/07 0 11,320 28,687 Leslie J. Jezuit........................... 25,000 19.4% 9.00 03/06/02 0 62,163 137,365 George D. Ebersole......................... 10,000 7.8% 9.00 03/06/02 0 24,865 54,946 James H. DeVries (Retired June 30, 1997)... 2,000 1.6% 9.00 03/06/07 0 11,320 28,687 Myron R. Shain (Retired June 30, 1997)..... 0 0 0 0 0 0 0
- ------------------------ (1) The options which expire on March 6, 2002 were granted on March 6, 1997 under the Long-Term Plan and the options which expire March 6, 2007 were granted on the same date under the Director Plan. All options were granted at the Current Market Price (as defined in the Plans) on such date and became exercisable in March 1997. All option rights under the Long-Term Plan lapse upon termination of employment except for limited exercise periods. In the event of a change in control of the Company (as defined in the Long-Term Plan and Director Plan), the Plans give each optionee the right, within 30 days of such change in control, to exercise his options, notwithstanding the other provisions of the Plans. (2) The potential realizable value to all stockholders at the appreciation rates of 0%, 5% and 10% would be $0, $17,562,441 and $38,808,402 (based on shares outstanding at June 30, 1997 and assuming such shares were purchased for $8.00 on June 30, 1997 and held until June 30, 2002). AGGREGATED OPTION EXERCISES AND OPTION VALUES TABLE The following table shows information concerning the exercise of stock options by each of the named Executive Officers during fiscal 1997, and the value of all remaining exercisable and unexercisable options at June 30, 1997, on a pre-tax basis. AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
VALUE OF UNEXERCISED SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS/SARS AT ACQUIRED ON VALUE OPTIONS/SARS AT 6/30/97(#) 6/30/97($) (1) EXERCISE REALIZED -------------------------------- ------------------------------ NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ------------------------------- ----------- ----------- ----------- ------------------- ----------- ----------------- Philip E. Rollhaus, Jr......... 0 $ 0 209,060 0 $ 85,720 $ 0 Leslie J. Jezuit............... 0 0 80,000 0 16,875 0 George D. Ebersole............. 0 0 34,710 0 16,875 0 James H. DeVries............... 25,000 68,750 72,210 0 16,220 0 Myron R. Shain................. 0 0 17,765 0 11,250 0
- ------------------------ (1) Based on the closing price of the Company's Common Stock as reported on the NASDAQ-NMS on June 30, 1997 ($8.00). 7 EMPLOYMENT AGREEMENTS AND TERMINATION BENEFITS The Company has an employment agreement with Philip E. Rollhaus, Jr. that was entered into in February 1989 (the "Employment Agreement"). The Company had employment agreements with James H. DeVries and Myron R. Shain that terminated with their retirement in June 1997. The Company also has a separation agreement with George D. Ebersole that was entered into in February 1989 and with Leslie J. Jezuit that was entered into in April 1996 (the "Severance Agreements"). The Employment Agreement and Severance Agreements are collectively referred to as the "Agreements". Each Severance Agreement provides for an initial two-year term and for automatic one-year extensions of such term on each Agreement's anniversary unless the Board of Directors gives the executive a required notice of the Company's intent not to extend his Severance Agreement. Mr. Ebersole's Severance Agreement was automatically extended in February 1997, and Mr. Jezuit's Severance Agreement was automatically extended in April 1997, for one year. Mr. Rollhaus' Employment Agreement, amended in June 1991, provides for an initial three-year term with an automatic one-year extension of such term each year on the Agreement's anniversary date unless the Board of Directors should previously determine not to extend the term. The Employment Agreement was automatically extended in June 1997 for one year. The Board of Directors believes that the Agreements assure fair treatment of the Executive Officers in relation to their careers with the Company by assuring them of some financial security. The Agreements also protect the stockholders by encouraging the Executive Officers to continue their attention to their duties without distraction in a potentially disturbing circumstance and neutralizing any bias they might have in evaluating proposals for the acquisition of the Company. In addition to providing for the payment of a base annual salary included in the above summary compensation table and other employee fringe benefits, Mr. Rollhaus' Employment Agreement provides for special separation pay and benefits in the event of termination of his employment under certain circumstances. The Employment Agreement provides that upon termination, Mr. Rollhaus will receive his base salary through the termination date determined in accordance with such Agreement. If his employment is terminated due to disability, his Employment Agreement provides for a separation payment equal to two times the sum of the annual base salary and the average of his yearly bonus payments over the preceding two years. If, after a change in control of the Company, the Company terminates Mr. Rollhaus' employment, other than for cause or disability, or if Mr. Rollhaus terminates his employment for good reason, the Company will pay him a separation payment equal to 300% of the sum of his then current base salary and average yearly bonus payment for the last two years. Such payments will be made on a semi-monthly basis over a period of 36 months following termination of employment. If the Company fails to make an installment payment when due, Mr. Rollhaus has the right to accelerate all remaining compensation owned him. If such termination occurs prior to a change in control of the Company, the Employment Agreement provides that the Company will pay Mr. Rollhaus a separation payment equal to twice his base salary. Whether or not a change in control has occurred, upon such termination Mr. Rollhaus must be offered continued participation in (or comparable replacement of) retirement and group insurance benefits through the later of the expiration of the term of the Employment Agreement or the date of termination. The Employment Agreement further provides that if any excise tax is imposed pursuant to Section 4999 of the Internal Revenue Code on any payments to be received by Mr. Rollhaus in connection with a change in control of the Company or termination of his employment pursuant to the Employment Agreement or otherwise (the "Total Payments"), any severance payments will be reduced to the extent necessary so that no portion of the Total Payments is subject to the excise tax. 8 The Severance Agreements provide if, after a change of control of the Company, the employment of the executive is terminated other than (i) by death or disability, (ii) by the Company or employing subsidiary for cause, or (iii) by the executive for other than good reason, the Company will pay the executive a separation payment equal to 200% of the sum of his base salary and average yearly bonus payment for the last two years, with such payment being reduced by the present value of any other payments made to, or on behalf of, the executive which would constitute a "parachute payment" within the meaning of that term as defined in Section 280G of the Internal Revenue Code of 1986, as amended. The Agreements define a "change in control" as a change in the stock ownership of a magnitude which requires the filing of reports under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). For the purposes of the Agreements, a "change in control" shall be deemed to have occurred if any of the following occur: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities; (ii) if during any period of two consecutive years, there is a change in the composition of the Board of Directors of the Company such that 50% of the non-employee Board members have not been slated by the Board; (iii) a consolidation or merger occurs and the Company is not the surviving company or the Company sells all or substantially all of its assets; or (iv) the Company is liquidated or dissolved. The term "good reason" is generally defined by the Agreements to mean any unfavorable change in the executive's or employee's position, duties, compensation or benefits and "cause" is generally defined as willful conduct of an executive or employee demonstrably injurious to the Company or employing subsidiary. The Agreements also contain provisions for the payment of legal expenses incurred by the executives and the employees as a result of any termination of employment after a change in control. REPORT OF THE AUDIT/COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION The Audit/Compensation Committee (the "Compensation Committee" or "Committee") of the Board of Directors of the Company, which is composed of three independent, non-employee Directors (see page 12), is responsible for reviewing the recommendations of the Chairman and Chief Executive Officer and the President and Chief Operating Officer and determining the compensation and other remuneration afforded the Officers of the Company, including the persons who are listed in the Summary Compensation Table on page 5 (hereinafter collectively referred to as the "Executive Officers"). Determinations of the Compensation Committee relating to executive compensation are reviewed by the entire Board. Action regarding awards under the 1993 Long-Term Stock Ownership Incentive Plan (the "Plan") are made solely by the Compensation Committee in compliance with Rule 16b-3 of the Securities Exchange Act. COMPENSATION PRINCIPLES AND POLICIES OF THE COMPANY The Board has delegated to the Compensation Committee the responsibility to be certain that the Officers of the Company are compensated fairly and effectively in a manner consistent with the compensation philosophy and policies of the Company. The compensation philosophy and its attributes have an historical basis aimed at growing the Company in a responsible and progressive manner to enhance the value of its shares. Philip E. Rollhaus, Jr., founder, Chairman of the Board and Chief Executive Officer, has been at the helm and guided the management team through the 28 years of the Company's existence. During fiscal 1997, the Board and management, cooperatively, have taken bold steps to consolidate around Quixote's highway and transportation safety business, Energy Absorption Systems, Inc. The Company naturally suffered 9 realizable losses attributable to discontinued operations, but, nonetheless, has made substantial progress by redirecting its resources toward the business which offers the greatest future potential. Due to the consolidation, two senior executives who retired in fiscal 1997 and whose combined salaries and bonuses exceeded $500,000, will not be replaced and additional related cost reductions should be achieved over time. Significantly, the Company, at the same time, also eliminated all debt and ended the year with a sizable amount of cash and a strong balance sheet to support anticipated future growth. Furthermore, the Company has been able to continue to adhere to its basic policy of investing in the technologies relating to its highway and transportation safety business, and remains a leader in these industries. Fiscal 1997 was dedicated to the purposeful consolidation and redirection of the Company's near and long-term strategies. During the year, the Company sold substantially all of the assets of its Disc Manufacturing, Inc. subsidiary for $80.3 million in cash, which was near book value, reflecting management's decision to exit the compact disc business due to declining selling prices and other adverse market conditions, and concentrate its energies and resources on Energy Absorption Systems, Inc., which offers the greatest potential for growth and profit. Despite charges of $1.4 million related to Energy Absorption's investment in the FIP Industriale S.p. A. joint venture, which management has determined to phase down, and a 44% increase in research and development expenditures for new products, Energy Absorption recorded substantial profits in fiscal 1997. In addition, Energy Absorption ended fiscal 1997 with record sales in the fourth quarter, reflecting, in part, the introduction of several new products. In addition to considering the Company's profitability for the year, the Compensation Committee critically evaluates management's performance in dealing with competition and economic issues, as well as performance in implementing the Company's long-term strategies. Share value depends in large part upon such performance. Temporary declines in earnings can be a natural consequence of forward-thinking business strategies. Accordingly, the attainment of strategic objectives and enhanced long-term financial results are as significant in the Committee's evaluation process as are short-term changes in profitability. The Committee procedures in fixing compensation include engaging the services of an independent compensation consultant to evaluate compensation levels and to advise it regarding competitive influences upon compensation policies. The Company's compensation program includes base salary and the consideration of annual bonus and stock option awards. The Compensation Committee considers all three components together in determining the total compensation of executives. This program provides incentives compatible with current and long-term management goals of the Company and its competitiveness in the marketplace, while recognizing individual performance. The ultimate objective of the program is the enhancement of shareholder value. An effective compensation policy requires that a significant portion of each officer's compensation be at risk in the form of bonuses and stock options. The Executive Officer group owned approximately 600,559 shares of Company Common Stock at June 30, 1997, or an average of about 120,111 common shares per Executive Officer. In particular, the Committee believes that granting stock options and encouraging executive stock ownership further relates compensation to the enhancement of share value. The Committee endorses the strategy of refocusing and growing the Company around its core business of highway and transportation safety, and is confidant that the current management is in the process of successfully pursuing that strategy. BASE SALARY AND ANNUAL BONUS The annual review of each officer's base salary, which is subject to annual adjustment, takes into account the officer's performance as well as material modifications affecting the officer's 10 responsibilities. The review also considers competitive opportunities that exist for executives of various levels of experience both within and outside the Company's current industry and the desire to retain and groom various executives for more expanding duties and responsibilities. The Committee felt that the Company's temporarily reduced size should not influence salaries as the refocused strategy, including the recent divestiture of DMI, which was directed by the Board and overwhelmingly approved by the shareholders, was implemented successfully by management. Balancing all considerations, including the current expectation that the Company should attain higher levels of revenue through the introduction of new products and acquisitions, the Committee recommended, and the Board approved, small cost-of-living adjustments to the top-level salaries and significant reductions in annual bonuses from previous levels for each of those executives. Accordingly, Mr. Rollhaus' salary was increased from $425,000 in fiscal 1997 to $445,000 in fiscal 1998. The Company historically has provided annual bonuses selectively to its Officers to encourage sustained high performance. The use of such bonuses places a significant portion of total annual compensation at risk. In lieu of a cash bonus associated with the performance of DMI and its eventual sale during the year, the Board felt a stock award at the market price of $7 7/8 better aligned our executives with the continuing task of improving earnings and, in turn, shareholder value. It also placed additional shares in the hands of several of our executives who form the new nucleus of the management team. Generally, cash bonuses were reduced for senior executives in fiscal 1997. Mr. Rollhaus' bonus was reduced to $100,000. STOCK OPTIONS Quixote Corporation utilizes stock options, granted pursuant to the Plan, as one of the three components of the Company's management compensation package. Stock options are acceptable as an incentive to increase the Company's value. Substantial stock ownership by its executives has been a hallmark of the Company, and stock options are an important ingredient of total compensation. Options generally vest over a three-year period and are exercisable over a specified period of time following the date of grant, which is typically five years. Option recipients must be employed by the Company at the time of vesting and at the time the options are exercised. Without meaningful stock options the Company would find it difficult to attract and retain highly talented and qualified management employees. For the last three fiscal years, the Company has granted options to employees to purchase an annual average of 176,503 shares at the market price on the date of grant. In fiscal 1997, the Committee granted Mr. Rollhaus employee options to purchase 30,000 shares of the Company's Common Stock at the fair market value of such stock on the date of grant. STOCK BASED RETIREMENT PLAN The Company maintains a stock-based retirement plan (the "Retirement Plan"), which is a component of its 1993 Long-Term Stock Ownership Incentive Plan, to provide its executives with a competitive retirement program. Under the Retirement Plan, which is in lieu of any supplemental executive retirement program, the Compensation Committee makes annual awards of Company stock to selected key executives. The share awards, together with a cash award intended to cover the concomitant income tax burden, are calculated under accepted actuarial principles as the number required to provide a targeted competitive retirement benefit. The targeted benefit, however, will be achieved at retirement only if the value of the Company's stock grows at a sustained compounded 11 level established by the Board. Furthermore, in order to receive each year's award, the executive must remain in the employ of the Company through the end of the fiscal year in which it is awarded (except in the case of the Officer's death, disability or termination of employment other than for cause during that year), and he or she must have retained all shares previously awarded under the Retirement Plan. The Compensation Committee believes that the Retirement Plan mutually benefits the Company, its stockholders and its most senior executives. OTHER COMPENSATION The Company has an Incentive Savings Plan (the "Plan") which offers all employees (subject to certain eligibility requirements), including the named Executive Officers, tax advantages pursuant to Section 401(k) of the Internal Revenue Code. During fiscal year 1997, the Company made a matching contribution to the Plan of $.40 on each dollar of the first 5% of compensation contributed by the participant, subject to legal maximums imposed by the Internal Revenue Code. Contributions are made by participants by means of a payroll deduction program. The total aggregate amount of the Company's matching contribution for the named Executive Officers is included in the Summary Compensation Table on page 5. The Company maintains an Exec-U-Care Medical Reimbursement Plan which provides additional health and life insurance protection for certain Officers of the Company and its subsidiaries, in addition to the group health and life insurance policies provided to all employees. The participants in the Exec-U-Care Plan include Messrs. Rollhaus, Jezuit and Ebersole. The total aggregate cost to the Company during fiscal year 1997 under the Plan for those Executive Officers was $18,480. LIMITATION ON DEDUCTIBILITY OF COMPENSATION In 1993, the tax laws were amended by the addition of Section 162(m) of the Internal Revenue Code. Effective for fiscal years beginning after 1993, that Section limits the deductibility of compensation paid by a publicly-held company to its chief executive officer and to the four other Officers who are most highly compensated. Generally, amounts paid in excess of $1 million to a covered executive, other than performance-based compensation, cannot be deducted. No Executive Officer was affected by this limitation in fiscal 1997. AUDIT/COMPENSATION COMMITTEE William G. Fowler, Chairman Lawrence C. McQuade Robert D. van Roijen, Jr. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The current members of the Compensation Committee are William G. Fowler, who serves as Chairman, Lawrence C. McQuade and Robert D. van Roijen, Jr. 12 COMMON STOCK PERFORMANCE GRAPH COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG QUIXOTE CORPORATION, THE RUSSELL 2000 INDEX AND THE S&P MANUFACTURING (DIVERSIFIED INDUSTRY) INDEX. The following graph compares the five year cumulative total return of the Company's Common Stock with the Russell 2000 Index and the Standard & Poor's Manufacturing (Diversified Industry) Index assuming the investment of $100 on June 30, 1992 and the reinvestment of dividends. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
QUIXOTE CORPORATION RUSSEL 2000 S & P MANUFACTURING (DIVERSIFIED) 6/92 100 100 100 6/93 106 126 119 6/94 162 131 132 6/95 100 158 175 6/96 56 196 223 6/97 68 228 332
CERTAIN TRANSACTIONS AND BUSINESS RELATIONSHIPS See "Employment Agreements and Termination Benefits" and the "Summary Compensation Table" above for a description of certain transactions and business relationships involving management of the Company. In addition, James H. DeVries, a Director of the Company and its former Executive Vice President and General Counsel, has entered into an arrangement with the Company to provide consulting services for the period July 1, 1997 through October 31, 1997 in connection with certain litigation matters. The arrangement provides for Mr. DeVries to be paid $160 per hour up to a maximum of 8 hours per day plus expenses. 13 APPROVAL OF THE AMENDMENT OF THE QUIXOTE CORPORATION 1993 LONG-TERM STOCK OWNERSHIP INCENTIVE PLAN The Board of Directors has adopted, subject to approval of the stockholders, certain amendments to the 1993 Long-Term Stock Ownership Incentive Plan (the "Long-Term Plan"). The first amendment increases the aggregate number of shares available for grant under the Long-Term Plan from 750,000 shares to 1,015,000 shares, an increase of 265,000 shares, in order to assure that an adequate number of shares is available for grant during the remainder of the term of the Long-Term Plan. There are currently less than 2,000 shares available for grant under the Long-Term Plan. The Long-Term Plan expires June 30, 2003, except that options may not be granted after August 19, 2001. A second amendment to the Long-Term Plan permits the Audit/ Compensation Committee to grant Retirement Awards (as defined below) to persons who have served as employees of the Company or Subsidiaries for less than 10 years. No other substantive amendments are being made to the Long-Term Plan. The purpose of the Long-Term Plan is to advance the growth and prosperity of the Company and its Subsidiaries by providing officers and key employees with additional incentives. The Company's management believes that the Company's future success and profitability will depend to a great extent on its ability to continue to attract, retain and motivate highly qualified individuals and that an effective compensation policy for these individuals includes not only a competitive annual salary, but also long-term incentives linked to stockholder return and Company performance. The Company believes an important role is played by stock-based incentives in retaining the services of outstanding personnel and in encouraging such employees to have greater personal financial investment and stock ownership in the Company. Because the granting of Options (as defined below) and other Awards (as defined below) under the provisions of the amended Long-Term Plan will continue to be entirely in the discretion of the Audit/Compensation Committee, it is not possible to designate the employees to whom Awards will be granted under the amended Long-Term Plan or the number of shares to be covered by such Awards. It is expected that the aggregate number of persons eligible to participate under the Long-Term Plan will not exceed 50. Grants of Awards under the Long-Term Plan made during the year ended June 30, 1997 are show in the table on page 5. The following is a summary of the principal provisions of the Long-Term Plan. Capitalized terms used in this summary which are not defined herein have the meanings ascribed to them in the Long-Term Plan. A copy of the Long-Term Plan will be available at the forthcoming Annual Meeting of Stockholders or in advance of the meeting to any stockholder to whom this Proxy Statement is furnished upon written or oral request directed to: Joan R. Riley, Secretary, Quixote Corporation, One East Wacker Drive, Chicago, Illinois 60601; telephone number (312) 467-6755. GENERAL INFORMATION The Long-Term Plan provides for the granting of stock options and retirement awards (payable in cash and stock) (collectively, the "Awards"). Such Awards, which will expire not more than 10 years after their respective Grant Dates, may be granted alone or in conjunction with one or more other Awards. Options may be granted to any employee (including officers) of the Company or of any of its Subsidiaries. Retirement Awards (as defined below) may be granted only to key executives who have completed 10 years of continuous service for the Company or its Subsidiaries. The amendment to the Long-Term Plan will authorize the Audit/Compensation Committee to waive in its discretion that requirement. 14 SCOPE OF THE LONG-TERM PLAN The Long-Term Plan provided that an aggregate of 750,000 shares of the Company's Common Stock were available and reserved for delivery on account of Awards and the exercise of Awards, with 500,000 shares of Common Stock available and reserved for delivery on account of options and 250,000 shares of Common Stock available and reserved for delivery on account of Retirement Stock Awards (as defined below). If any Award expires or terminates without having been exercised or distributed in full or is forfeited, the shares of Common Stock associated with such expired or terminated Award shall become available for other Awards. The amendment will add 265,000 shares of the Company's Common Stock to the Long-Term Plan, with 165,000 additional shares of Common Stock reserved and available for delivery on account of options and 100,000 additional shares of Common Stock reserved and available for delivery on account of Retirement Stock Awards. Common Stock issued under the Long-Term Plan may be either newly issued shares, shares purchased on the open market, treasury shares or any combination thereof. In addition, certain benefits under the Long-Term Plan may be payable in cash. PLAN ADMINISTRATION Except for certain duties and responsibilities expressly reserved by the Board or delegated to another committee pursuant to the terms of the Long-Term Plan, the Long-Term Plan will be administered by a committee of the Board composed of not less than three directors who are not employees of the Company (the "Committee"). The Committee under the Long-Term Plan is the Audit/Compensation Committee, whose members are identified on page 12. Among other things, the Committee has exclusive discretion (subject to the provisions of the Long-Term Plan): to select the persons to whom, and the times when, Awards are to be granted, as well as the type, size and terms of such Awards; within certain limits, to modify the terms of any Award which has been granted; to interpret the Long-Term Plan and prescribe rules and regulations thereunder; to accelerate the exercisability of, and to waive the restrictions and conditions applicable to, Awards; and, subject to certain restrictions, to extend the time during which Awards may be exercised, but not beyond 10 years after the Grant Date of an Award. The determinations of the Committee are conclusive and final. No Committee member is liable for any action or determination made in good faith. AWARDS UNDER THE LONG-TERM PLAN STOCK OPTIONS. The Long-Term Plan provides both for incentive stock options ("ISOs") specifically tailored to the provisions of the Internal Revenue Code of 1986 (the "Code") and for options not qualifying as ISOs ("Non-Qualified Options"), each of which may (but need not) be granted in conjunction with other Awards. Pursuant to the Long-Term Plan, the Committee shall determine the exercise price to be paid by an optionee (the "Option Price") for each share issued in connection with an ISO or a Non-Qualified Option (collectively referred to as "Options"). The Option Price cannot be less than 100% of the Current Market Value of the Common Stock on the Grant Date. Payment of the Option Price may be made in cash or through the exchange of Common Stock held by the optionee for at least six months. The Committee may allow a grantee to use a Company loan to fund the amounts needed for the Option Price. The fair market value of stock subject to ISOs granted under the Long-Term Plan and exercisable for the first time by a grantee during a particular calendar year shall not exceed, in 15 the aggregate, $100,000. Such fair market value shall be determined as of the date on which the ISOs are granted. Non-Qualified Options are not subject to this restriction. If an optionee ceases to be employed by the Company or any Subsidiary for any reason other than his death, total disability or retirement, the optionee may, at the discretion of the Committee, be granted the right to exercise any Option at any time within thirty (30) days after such termination, to the extent the right to exercise such option has accrued, such Option has not previously been exercised and such Option has not expired; PROVIDED, HOWEVER, that if the optionee's employment is terminated by the Company or any Subsidiary for cause, fraud, breach of fiduciary duty, or other dishonesty, the optionee's rights to exercise any option shall expire on the last day of his employment. If an optionee retires and such optionee has been in the employ of the Company or a Subsidiary continuously from the date such Option was granted until retirement, the optionee may, within the three (3) month period after such retirement, exercise such Option to the extent that such three month period is included in the remainder of the applicable Option's term. If an optionee dies or becomes totally disabled while employed by the Company or a Subsidiary and previously has not fully exercised his or her Options, his or her Options may be exercised to the extent that those Options had not previously been exercised, at any time within one year after his death or disability (absent earlier expiration of the Option) by the optionee or his legally appointed guardian, in the case of disability, or in the case of an optionee's death, by the executors or administrators of his or her estate or the person who acquires the Option directly from the optionee by bequest or inheritance. RETIREMENT AWARDS. Under the Long-Term Plan, the Committee may make awards of Company Common Stock ("Retirement Stock Awards") and cash sufficient to pay the federal, state and other taxes arising from such awards ("Retirement Cash Awards") to provide a retirement benefit for senior executives of the Company and its Subsidiaries. The Retirement Stock Awards and Retirement Cash Awards are collectively referred to as "Retirement Awards". Each Retirement Award is made pursuant to a written agreement between the Company and the executive which provides for the award of a set aggregate amount of Retirement Stock to be issued in at least five equal annual installments, together with a Retirement Cash Award in an amount to be calculated annually in accordance with a formula determined by the Committee and set forth in the agreement. Dividends are paid only on Retirement Stock which has been issued and delivered to an executive. In order to receive an annual issuance of a Retirement Award, the executive must be employed by the Company or its Subsidiaries on the last day of the Company's fiscal year in which such stock is issued except in case of death, disability or termination of employment other than for cause. The executive may not sell or transfer any Retirement Stock he receives while he is employed by the Company or its Subsidiaries. The transfer restrictions lapse on the earlier of the date (i) when the executive's employment is terminated or (ii) when the executive reaches his normal retirement age, regardless of whether he actually retires at that time. AMENDMENT AND TERMINATION The Long-Term Plan terminates on the tenth anniversary of its effective date, but Options may not be granted under the Long-Term Plan after August 19, 2001. The Board of Directors may from time to time, insofar as permitted by law, suspend, revise or amend the Long-Term Plan in any respect whatsoever except that, without the approval of the stockholders, no such revision or amendment shall: (1) change the number of shares subject to the Long-Term Plan; (2) change the designation of the class of employees eligible to receive Awards; (3) decrease the price at which Options may be granted; (4) remove the administration of the Long-Term Plan from the Committee; (5) render any Committee member eligible to receive an Award under the Long-Term Plan while serving on the Committee; (6) extend the period during which Awards may 16 be granted; or (7) amend the Long-Term Plan in any manner that will cause the Options issued under it to fail to qualify as ISOs. The Board of Directors is specifically directed to revise, modify or amend the Long-Term Plan, without the approval of the stockholders, as may be necessary to satisfy the requirements of the Internal Revenue Code, as amended, to assure that the Options granted thereunder may be treated as ISOs. Termination of the Long-Term Plan will not affect any Awards then outstanding. OTHER TERMS AND CONDITIONS For purposes of the Long-Term Plan, the "Current Market Price" of the Company's Common Stock is the average of the daily closing prices for such Common Stock for the thirty (30) business days preceding the referenced date. Awards granted under the Long-Term Plan will be evidenced by written agreements consistent with the Long-Term Plan in such form as the Committee may prescribe. Neither the Long-Term Plan nor such agreements confer any right to continued employment upon any grantee. Awards (other than shares of Retirement Stock) are generally non-transferable other than by will or the laws of descent and may be exercised, during a grantee's lifetime, only by the grantee. Restrictions with respect to Retirement Stock are described above. Adjustments in the amount of Awards issuable under the Long-Term Plan and in any Awards outstanding may be made in order to preserve the benefits or potential benefits intended to be made available to participants, in the event of merger, consolidation, reorganization, the sale of all or substantially all of the assets of the Company, recapitalization, reclassification, stock splits, stock dividends or similar events. The holder of an Award will have no rights as a stockholder with respect to any shares of Common Stock covered by such Award until the date the Common Stock relating to such Award is issued and delivered to such holder. VOTING INFORMATION FOR THE PROPOSAL The affirmative vote of the holders of a majority of the shares of the Company's Common Stock present in person or represented by proxy and entitled to vote at the Annual Meeting is required to approve the amendment to the Long-Term Plan. RECOMMENDATION The Board believes that adoption of the amendment of the Long-Term Plan is advisable both to increase the share authorization for stock-based plans and to provide the Company with greater flexibility in the types of incentives that may be awarded to employees. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE LONG-TERM PLAN. 17 APPROVAL OF THE AMENDMENT OF THE QUIXOTE CORPORATION 1991 DIRECTOR STOCK OPTION PLAN The Board of Directors has adopted, subject to approval of the stockholders, certain amendments to the 1991 Director Stock Option Plan (the "Director Plan"). The first amendment increases the aggregate number of shares available for grant under the Director Plan from 299,445 shares to 419,445 shares, an increase of 120,000 shares, to assure that an adequate number of shares is available for grant during the remaining term of the Director Plan. There are currently no shares available for grant under the Director Plan. The Director Plan expires August 19, 2001. A second amendment is intended to permit Directors to exercise options notwithstanding the fact they have failed to serve one year after the date of grant, only in the event of a change of control of the Company. The purpose of the Director Plan is to provide the Company's Directors with an opportunity to increase their equity ownership in the Company and thereby tie their economic interests to other stockholders' interests. The Company's Board of Directors and management believe that properly designed options for the Company's Common Stock also provides a valuable inducement to qualified persons to become and remain affiliated with the Company as Directors. The Company's management believes that the Company's future success and profitability will depend to a great extent on its ability to continue to attract and retain highly qualified individuals as Directors. Because the granting of options under the provisions of the amended Director Plan will be entirely within the discretion of the Board of Directors or a committee designated by it, it is not possible to designate the number of options to be granted to individual Directors under the amended Director Plan. It is expected that the number of optionees under the amended Director Plan will not exceed six persons. In fiscal 1997, there was one grant to each Director of options to purchase 2,000 shares of Common Stock at $9.00 per share. The following is a summary of the principal provisions of the Director Plan. Capitalized terms used in this summary which are not defined herein have the meanings ascribed to them in the Director Plan. A copy of the Director Plan will be available at the forthcoming Annual Meeting of Stockholders or in advance of the meeting to any stockholder to whom this Proxy Statement is furnished upon written or oral request directed to: Joan R. Riley, General Counsel, Quixote Corporation, One East Wacker Drive, Chicago, Illinois 60601; telephone number (312) 467-6755. GENERAL INFORMATION Under the Director Plan, the Board of Directors is authorized to grant options to Directors subject to limitations of the Plan, including the limitation that no Director may be granted options for more than 90,000 shares. The Director Plan provides that any option requires continued service as a Director for at least one year from the date of grant as a condition of exercise, and such options may thereafter be exercised as the Board of Directors determines. The amendment to the Director Plan will permit Directors to exercise options in the event of a change-in-control of the Company, notwithstanding the fact that he or she has failed to serve as a Director for one year from the date of grant. The purchase price of the shares covered by an option granted under the Director Plan cannot be less than 100% of the current market price of the shares at the date of grant. Current market price is deemed to be the average of the daily closing prices of the Common Stock for the 30 consecutive business days before the date of grant. 18 The Director Plan gives the Board the discretion to determine when options may be exercised. Options granted under the Director Plan cannot have a term of more than ten years. Only Directors who are also employees of the Company are eligible to receive incentive stock options (ISOs) within the meaning of the Internal Revenue Code under the Director Plan. See the discussion regarding ISOs at page 15, "Awards Under the Long-Term Plan". There are currently six Directors eligible to participate in the Director Plan. An optionee electing to exercise an option must, at the time of exercise, pay the full price of the shares being purchased. Payment of the purchase price may be made in cash or in the Company's Common Stock valued at fair market value on the date of exercise. In the event of a change in control of the Company (as defined in the Plan), the Director Plan currently gives each optionee the right, within 30 days of such change in control, to exercise his options whether the option is otherwise exercisable, if the Director has served as a Director for at least one year since the date of grant. The amendment to the Director Plan will revise this provision to permit an optionee to exercise an option after a change-in-control, notwithstanding his failure to serve as a Director for at least one year since the date of grant of that option. SCOPE OF THE DIRECTOR PLAN The Director Plan provided that an aggregate of 299,445 shares of the Company's Common Stock were available and reserved for delivery on account of options granted pursuant to the Plan. If an option expires or terminates without having been exercised, the shares of Common Stock associated with that option shall become available for other option grants. The proposed amendment will add 120,000 shares of the Company's Common Stock to the Director Plan to be reserved and available for delivery on the account of options. PLAN ADMINISTRATION The Plan shall be administered by a Committee appointed by the Board of Directors of the Company which shall consist of all members of the Board of Directors unless the Board names other individuals to serve on the Committee. The Committee shall from time to time, at its discretion, recommend to the Board of Directors with respect to option grants and proposed optionees. Interpretation and construction of the provisions of the Plan or of any option granted pursuant to it by the Committee are final unless otherwise determined by the Board of Directors. No member of the Board of Directors or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option granted thereunder. AMENDMENT AND TERMINATION OF THE PLAN Options may not be granted under the Director Plan after August 19, 2001. The Board of Directors may from time to time, insofar as permitted by law, suspend, discontinue, revise or amend the Director Plan in any respect whatsoever except that, without the approval of the stockholders, no such revision or amendment shall; (1) change the number of shares subject to the Director Plan; (2) change the designation of the individuals eligible to receive options; (3) decrease the price at which options may be granted; (4) remove the administration of the Director Plan from the Committee; or (5) extend the period during which options may be granted. The Board of Directors is specifically directed to revise, modify or amend the Director Plan, without the approval of the stockholders, as may be necessary to satisfy the requirements of the Internal Revenue Code, as amended, to assure that the Options granted thereunder may be treated as ISOs. Termination of the Director Plan will not affect any options then outstanding. 19 VOTING INFORMATION FOR THE PROPOSAL The affirmative vote of the holders of a majority of the shares of the Company's Common Stock present in person or represented by proxy and entitled to vote at the Annual Meeting is required to approve the amendment to the Director Plan. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE DIRECTOR PLAN. FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS GRANTED UNDER THE LONG-TERM AND DIRECTOR PLANS The following discussion is intended as a brief summary of the federal income tax treatment of the Options granted under the Long-Term Plan and the Director Plan (together, the "Plans"), under the laws and regulations in effect as of the date of this proxy statement. Because this discussion does not consider all income tax aspects of the Plans, optionees should consult their own tax advisors as to the federal, state and local income tax consequences relating to their particular situations. The granting of a Non-Qualified Option authorized under the Plans will not be a taxable event. Non-Qualified Options include options which do not qualify as ISOs. When a Non-Qualified Option is exercised, the optionee generally will be taxed on an amount of compensation income equal to the excess of the market value of the option shares at the time of exercise over the amount paid for such shares. However, under certain circumstances, the income of an optionee who exercises a Non-Qualified Option and is subject to Section 16(b) of the Securities Exchange Act of 1934 (the "1934 Act") may be measured on the basis of the market value of the Option shares as of the date such option is no longer subject to suit under Section 16(b) of the 1934 Act, unless the optionee makes an election under Section 83(b) of the Internal Revenue Code of 1986, as amended (the "Code"), within thirty (30) days of the exercise of the Non-Qualified Option. Upon the sale or other disposition of Non-Qualified Option shares, the difference between the proceeds received and the sum of the option price plus the compensation income recognized as described above will be capital gain or loss. While compensation income is subject to federal income tax at a maximum rate of 39.6%, capital gains recognized by individuals are now taxed at various rates following the recent enactment of the Taxpayer Relief Act of 1997 (the "1997 Tax Act"); the taxation of capital gains is discussed below. Capital losses will be deductible against capital gains, if any, plus up to $3,000 of other income; individuals may carry forward any unused capital losses indefinitely. The Plans authorize the granting of ISOs to key employees of the Company. ISOs are intended to qualify as "incentive stock options" as defined in Section 422 of the Code. Generally, the optionee recognizes no income on the grant or the exercise of an ISO. If the shares acquired by the exercise of an ISO are disposed more than two years from the Grant Date and more than one year from the date of exercise, the optionee will recognize a capital gain or loss measured by the difference between the sale proceeds and the option price. If the ISO shares are sold before the end of the above described holding periods, however, the optionee will recognize compensation income in an amount equal to the difference between the lesser of the market value of the shares on the date of exercise or the sale price of such shares and the Option Price, with the balance of any remaining gain taxed as capital gain. In the year of exercise of an ISO, an individual optionee must increase his or her alternative minimum taxable income by an amount equal to the difference between the market price of the Company Common Stock subject to the ISO on the date of exercise and the option price for 20 purposes of computing liability for the alternative minimum tax. A taxpayer's alternative minimum taxable income is subject to the alternative minimum tax, which can now be as high as 28% but is payable only to the extent it exceeds the taxpayer's regular income tax. The 1997 Tax Act provides revised holding periods and tax rates for capital gains. The date on which an asset is sold or otherwise disposed will determine the applicable holding period and tax rate. While "short-term" capital gains that are taxed at regular income tax rates (which can be as high as 39.6%), more favorable tax treatment is accorded to "long-term" capital gains. Assets disposed of prior to July 29, 1997 must have been held for more than 12 months for long-term capital gain rates to apply; for sales or exchanges after July 28, 1997, the most favorable long-term capital gain rates will apply only if the asset was held for more than 18 months. The maximum tax rate applicable to long-term capital gains from the sale or exchange of asset prior to May 7, 1997, is 28%. However, for assets, such as option shares acquired under the Plans, which are sold or exchanged after May 6, 1997, long-term capital gains will be taxed at a maximum rate of 20%. Moreover, individuals in the 15% income tax bracket (e.g., for the 1997 tax year, single filers with $24,650 or less of taxable income or married persons filing jointly with taxable income of $41,000 or less) will pay tax at a maximum rate of 10% on their long-term capital gains recognized after May 6, 1997. (If an asset is sold after July 28, 1997, and was held for more than 12 months but not more than 18 months, any capital gain from the sale will be taxed at a maximum rate of 28%). The maximum rate on long-term capital gains will be reduced to 18% (8% for individuals in the 15% income tax bracket) for assets sold or exchanged after December 31, 2000, and held for more than five years; however, the 18% rate will only apply to the disposition of assets acquired after December 31, 2000, and for purposes of determining eligibility for this lower rate, the holding period of option shares will begin on the date that the option is granted. The lower tax rates provided by the 1997 Tax Act will also apply for purposes of the alternative minimum tax. Optionees may, at the discretion of the Committee in the case of the Long-Term Plan, or the Board in the case of the Director Plan, pay all or part of the exercise price for their Options by delivering Company Common Stock already owned by them. Based on a Revenue Ruling published by the Internal Revenue Service in 1980, if shares of Company Common Stock already owned by an optionee are used to pay the exercise price of a Non-Qualified Option, no gain or loss will be recognized with respect to the disposition of the previously owned shares. However, the tax basis of the shares delivered as payment will carry over to the shares received upon the exercise of the Option, share for share, to the extent the number of shares received equals the number of shares delivered as payment. The optionee will recognize ordinary income equal to the fair market value on the exchange date of the balance of shares received in the exchange (the number of shares received in excess of the number of shares delivered). The tax basis of these shares will be equal to the taxable income recognized by the optionee in the exchange. Under proposed Treasury Department Regulations, an optionee who exercises an ISO by surrendering previously acquired Company Common Stock generally will not recognize taxable gain or loss upon the exchange. The optionee's tax basis of the shares delivered as payment will carry over to the equivalent number of shares received and the tax basis in the remaining shares will be zero. All shares received will be subject to the holding period restrictions applicable to ISOs; upon the disposition of any such shares prior to the expiration of these holding periods, the shares with the lowest tax basis will be deemed to be disposed of first. If payment of the exercise price of an ISO is made with Company Common Stock acquired by an earlier exercise of an ISO that has not been held by the optionee for the applicable holding periods, the optionee will recognize ordinary income to the same extent as if the surrendered stock had been sold in a premature disposition of shares subject to an ISO, but will realize no capital gain or loss in the 21 exchange. However, the stock acquired by this exercise of an ISO will qualify for favorable tax treatment. The Company will be entitled to claim a tax deduction for the amount of compensation income recognized by an optionee upon the exercise of a Non-Qualified Option. No such deduction will be available to Company as the result of the exercise of an ISO unless the ISO shares are sold or disposed before the relevant holding periods expire, in which case Company would be allowed a tax deduction equal to the compensation income recognized by the optionee. Neither the Long-Term Plan nor the Director Plan is qualified under Section 401(a) of the Code or is subject to any provisions of the Employee Retirement Income Security Act of 1974. THE PRECEDING DISCUSSION DOES NOT COVER ALL POSSIBLE FEDERAL INCOME TAX CONSEQUENCES, AND IS INTENDED ONLY AS A SUMMARY THEREOF. GRANTEES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO FEDERAL AND STATE TAX CONSEQUENCES. AMENDMENT OF CERTIFICATE OF INCORPORATION WITH RESPECT TO THE LIABILITY OF DIRECTORS In connection with the Company's re-direction of its business after the sale of the disc manufacturing and legal technologies businesses, the Company is trying to reduce expense levels. As part of its plan to reduce expenses, the Board of Directors has determined that it is in the Company's best interest to take advantage of the statutory authority under the General Corporation Law of the State of Delaware (the "Delaware GCL") which permits Delaware corporations to include in their certificate of incorporation a provision limiting or eliminating the potential monetary liability of directors to the corporation or its stockholders for breach of their fiduciary duties as directors. By amending the Company's Certificate of Incorporation to limit the liability of directors, the Company will be able to reduce the amount of director and officer insurance coverage the Company must provide. Accordingly, the Board of Directors has voted to approve an amendment (the "Proposed Amendment") to the Company's Certificate of Incorporation set forth at Annex A and to recommend its approval and adoption by the stockholders. PROPOSED AMENDMENT As permitted by the Delaware GCL, the Proposed Amendment would relieve directors from personal liability to the Company or its stockholders for monetary damages for breach of their duty of care (which requires directors to exercise informed business judgment in the discharge of their duties). Thus, if adopted by the stockholders, the Proposed Amendment would relieve directors of liability for negligence, including gross negligence, in the performance of their duty of care. Directors would continue to be potentially liable for any breach of their duty of loyalty; for acts or omissions not in good faith or involving intentional misconduct or a knowing violation of the law; for the willful or negligent payment of unlawful dividends or unlawful stock repurchases or redemptions; and for any transaction in which the director received an improper personal benefit. Moreover, stockholders' rights to seek equitable remedies (such as an action to enjoin or rescind a transaction involving a breach of the director's duty of care) would remain unimpaired, though it should be noted that there can be no assurance that equitable remedies may always be available or practical in particular cases. The Proposed Amendment would not apply to any act or omission occurring prior to the effective date, to claims against a director arising out of his role as an officer (or in any other capacity except as a director), or to a director's responsibilities and potential liability for monetary damages or other relief under other laws, including federal securities laws. 22 In order to afford the Company the benefits of the Delaware GCL, the Board of Directors has approved, and recommends that the stockholders adopt, the following resolution to amend the Company's Certificate of Incorporation: NOW, THEREFORE, BE IT RESOLVED, that the Company's Certificate of Incorporation shall be amended by adding a provision eliminating the personal liability of a director to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, such amendment to be in the form attached as Annex A to the Company's Proxy Statement dated September 29, 1997; provided that such provision shall not eliminate the liability of a director: (A) for any breach of the director's duty of loyalty to the Company or its stockholders; (B) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law; (C) with respect to liabilities imposed by Section 174 of the Delaware General Corporation Law regarding unlawful payment of dividends or unlawful purchase or redemption of stock; or (D) for any transaction from which the director derived an improper personal benefit. The Board of Directors recognizes that adoption of the Proposed Amendment may have the effect of reducing the likelihood of derivative litigation against directors, and also may discourage or deter stockholders from bringing a lawsuit against directors for breach of their duty of care, even though such an action, if successful, might benefit the Company and its stockholders. Since the Proposed Amendment limits the potential liability of directors, they have a personal interest in the adoption of the proposal, and stockholders should recognize that they would be giving up a cause of action against directors for breach of their duty of care. Moreover, to the extent director liability could be established, the limitation on actions against directors is at the expense of stockholders' potential right of recovery. The Board of Directors has determined that it is in the best interests of the Company to amend the Certificate of Incorporation as permitted by the Delaware GCL, and specifically, to adopt the Proposed Amendment. The Company currently maintains directors' and officers' liability insurance, but the premiums for that coverage can be reduced. Moreover, future changes in the market for directors' and officers' liability insurance, the cost of such policies and the scope of coverages available could make adequate insurance costly for the Company to maintain in the future. Finally, the Board of Directors believes that the diligence exercised by directors stems primarily from their desire to act in the best interests of the Company, and not from a fear of monetary damage awards. Consequently, the Board of Directors believes that the level of scrutiny and care exercised by directors will not be diminished by the adoption of the Proposed Amendment. The management of the Company is not aware of any claims alleging breach of fiduciary duty by any director of the Company. Approval by the affirmative vote of the holders of 60% of the outstanding shares of Common Stock is required for adoption of the Proposed Amendment. If such vote is obtained, the Proposed Amendment will become effective upon filing of the requisite Certificate of Amendment with the Secretary of State of Delaware. For purposes of the vote on the Proposed Amendment, abstentions and broker non-votes will have the effect as votes against the proposal. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED AMENDMENT. APPROVAL OF AUDITORS The Directors have recommended that the stockholders approve Coopers & Lybrand L.L.P., a certified public accounting firm, as independent auditors for the Company. A representative of 23 Coopers & Lybrand L.L.P. is expected to be present at the Annual Meeting and will have an opportunity to make an independent statement if he or she desires to do so. The representative is expected to be available to respond to appropriate questions. The affirmative vote of the holders of a majority of the outstanding shares of the Company's Common Stock represented at the meeting and entitled to vote is necessary to approve Coopers & Lybrand L.L.P. as the Company's auditors. THE BOARD OF DIRECTORS RECOMMENDS A VOTE APPROVING COOPERS & LYBRAND L.L.P. AS THE COMPANY'S AUDITORS. STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The chart below sets forth, as of September 2, 1997, information to the best of the Company's knowledge with respect to the persons who beneficially owned in excess of five percent of the Company's Common Stock; the total number of shares of the Company's Common Stock beneficially owned by each Director and named Executive Officer; and the total number of shares of the Company's Common Stock beneficially owned by the Directors and Executive Officers of the Company, as a group.
AMOUNT APPROXIMATE NAME OF BENEFICIALLY PERCENTAGE BENEFICIAL OWNER OWNED(1) OF CLASS(1) - ------------------------------------------------------------------- ----------- --------------- Ryback Management Corp.(2)......................................... 704,500 8.8% Heartland Advisors, Inc.(3)........................................ 696,900 8.7% Brinson Partners, Inc.(4).......................................... 604,200 7.6% Wisconsin State Investment Board(5)................................ 506,100 6.3% Dimensional Fund Advisors(6)....................................... 490,100 6.1% FMR Corp........................................................... 423,700 5.3% Philip E. Rollhaus, Jr.(7)......................................... 523,961 6.4% Leslie J. Jezuit................................................... 104,000 1.2% James H. DeVries(7)................................................ 223,556 2.8% Myron R. Shain..................................................... 65,030 * George D. Ebersole................................................. 97,757 1.2% William G. Fowler(8)............................................... 159,034 2.0% Lawrence C. McQuade................................................ 43,500 * Robert D. van Roijen, Jr........................................... 32,500 * Directors and Executive Officers as a group (10 persons including those individuals named above)(7)(8).............................. 1,318,989 16.4%
- ------------------------ * Less than one percent (1%). (1) The shares reported in the above table include shares of Common Stock which can be acquired within 60 days of September 2, 1997, through the exercise of options ("Option Shares") as follows: Mr. Rollhaus - 209,060 shares; Mr. Jezuit - 80,000 shares; Mr. DeVries - 72,210 shares; Mr. Shain - 7,765 shares; Mr. Ebersole - 34,710 shares; Mr. Fowler - 73,500 shares; Mr. McQuade - 41,500 shares; Mr. van Roijen - 26,500 shares; and Directors and Executive Officers as a group - 591,040 shares. Each individual's Option Shares are also included in the number of shares of the Company issued and outstanding for purposes of calculating the percentage ownership of each individual in accordance with the rules and regulations of the Exchange Act. Certain of these persons also have options not exercisable within 60 days of September 2, 1997, by which they can acquire the following additional shares of Common Stock: Mr. Rollhaus - 25,000 shares; Mr. Jezuit - 24,445 shares; Mr. Ebersole - 24 10,000 shares; and Directors and Executive Officers as a group - 78,000 shares. These shares are not included in the above table or in the percentage ownership calculations. (2) Based upon information set forth in a Schedule 13F filing for the period ending March 30, 1997. Shares held by Lindner Growth Fund, a registered investment company, comprise the figure set forth for Ryback Management Corporation. The address for Ryback Management Corporation is 7711 Carondelet Avenue, Box 16900, St. Louis, Missouri 63105. (3) Based upon information set forth in a Schedule 13F filing for the period ending June 30, 1997. Shares held in Heartland Value Fund, a series of Heartland Group, Inc., are included in the figures set forth for Heartland Advisors, Inc. The address of Heartland Advisors, Inc. is 790 North Milwaukee Street, Milwaukee, Wisconsin 53202. (4) Based upon information set forth in a Schedule 13G filing dated February 12, 1997. Shares owned by Brinson Trust Company, Brinson Holdings, Inc., SBC Holding (USA), Inc. and Swiss Bank Corporation are included in the figures set forth for Brinson Partners, Inc. The address for Brinson Partners, Inc. is 209 South LaSalle, Chicago, Illinois 60604-1295. (5) Based on information set forth in a Schedule 13G filing dated January 21, 1997. The address for the Wisconsin State Investment Board is P.O. Box 7842, Madison, Wisconsin 53707. (6) Based upon information set forth in a Schedule 13G filing dated February 5, 1997. Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment advisor, is deemed to have beneficial ownership of 490,100 shares of Quixote Corporation stock as of December 31, 1996, all of which shares are held in portfolios of DFA Investment Dimensions Group Inc., a registered open-end investment company, or in series of the DFA Investment Trust Company, a Delaware business trust, or the DFA Group Trust and DFA Participation Group Trust, investment vehicles for qualified employee benefit plans, all of which Dimensional Fund Advisors Inc. serves as investment manager. Dimensional disclaims beneficial ownership of all such shares. The address for Dimensional is 1299 Ocean Avenue, Santa Monica, California 90401. (7) Messrs. Rollhaus and DeVries may be deemed to be the beneficial owner of 1,000 and 5,492 shares of Common Stock, respectively, owned by their family members. These shares are not included in the above table. Messrs. Rollhaus and DeVries disclaim beneficial ownership of these shares. (8) Mr. Fowler has a beneficial interest in 890 shares of Common Stock held by his retirement plan. These shares are not included in the above table. MISCELLANEOUS STOCKHOLDER PROPOSALS FOR THE ANNUAL MEETING TO BE HELD IN 1998 Under the rules and regulations of the Securities and Exchange Commission, proposals of stockholders intended to be presented at the Annual Meeting to be held in 1998 must be received by the Company on or before May 15, 1998, to be considered for inclusion in the Company's proxy statement relative to that meeting. Such proposals should be in writing and sent to Ms. Joan R. Riley, Secretary--Quixote Corporation, One East Wacker Drive, Chicago, IL 60601. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 Section 16(a) of the Securities Exchange Act of 1934 requires the Company's Directors and Executive Officers, and persons who own more than ten percent of a registered class of the Company's equity securities, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Executive Officers, Directors and greater than ten percent shareholders are 25 required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. Based solely on review of the copies of such reports furnished to the Company and written representations that no other reports were required during fiscal year 1997, the Company believes that all Section 16(a) filing requirements applicable to the Company's Officers and Directors and ten percent shareholders were complied with by such persons. AVAILABILITY OF ANNUAL REPORT ON FORM 10-K The Company will be pleased to make its Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, available without charge to interested parties. Written requests for the report should be directed to Ms. Joan R. Riley, Secretary--Quixote Corporation, One East Wacker Drive, Chicago, IL 60601. 26 ANNEX A ARTICLE TENTH A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, as the same exists or hereafter may be amended, or (iv) for any transaction from which the director derived an improper personal benefit. If the General Corporation Law of the State of Delaware hereafter is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended General Corporation Law of the State of Delaware. Any repeal or modification of this Article by the stockholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such repeal or modification. 27 SKU# 0524-PS-97 QUIXOTE CORPORATION ANNUAL MEETING OF STOCKHOLDERS THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoint(s) Philip E. Rollhaus, Jr. and Joan R. Riley as proxies with full power of substitution and hereby directs them to vote the stock of the undersigned at the Annual Meeting of Stockholders of Quixote Corporation to be held in the Assembly Room at The Northern Trust Company, 50 South LaSalle Street, Chicago, Illinois, Wednesday, November 19, 1997, at 10:00 a.m. Central Standard Time, and at any adjournments thereof, as indicated on the proposals set forth on the reverse side of this Proxy. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, IT WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS AND "FOR" PROPOSALS 2, 3, 4 and 5. Discretionary authority is conferred by the Proxy to vote on all matters, other than those specified on the reverse side, which may properly come before the meeting or any adjournment thereof. PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. QUIXOTE THIS IS YOUR PROXY. YOUR VOTE IS IMPORTANT. /x/ Please mark votes as in this example. 1. Election of Directors NOMINEES: James H. DeVries, Lawrence C. McQuade and Leslie J. Jezuit FOR WITHHELD / / / / / /___________________________________ For all nominees except as noted above FOR AGAINST ABSTAIN 2. Approving the amendment of the 1993 Long-Term Stock Ownership / / / / / / Incentive Plan. 3. Approving the amendment of the 1991 Director Stock Option Plan. / / / / / / 4. Approving the amendment of the Certificate of Incorporation. / / / / / / 5. Approving the selection of Coopers & Lybrand, L.L.P. as independent / / / / / / auditors of the Company. 6. Transaction of such other business as may properly come before the meeting and any adjournments thereof. Mark Here For / / Mark Here If You / / Address Change Plan To Attend And Note At Left The Meeting Please date and sign as name is imprinted hereon, including designation as executor, trustee, etc. if applicable. A corporation must sign in its name by the president or other authorized officers. All co-owners must sign. Signature:_______________ Date:_______ Signature:_______________ Date:________ 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.D1 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 -----END PRIVACY-ENHANCED MESSAGE-----