-----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, AoqL3LKL/FYOwquTz/6USsRHNJxDj/OKmbkWr5CyOkd+dXKrJIl5IM2mhwgsBvN6 A4J57eeb1amFKeGfTjRPLw== /in/edgar/work/0000912057-00-042821/0000912057-00-042821.txt : 20000929 0000912057-00-042821.hdr.sgml : 20000929 ACCESSION NUMBER: 0000912057-00-042821 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000927 FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUIXOTE CORP CENTRAL INDEX KEY: 0000032870 STANDARD INDUSTRIAL CLASSIFICATION: [3444 ] IRS NUMBER: 362675371 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-08123 FILM NUMBER: 730028 BUSINESS ADDRESS: STREET 1: ONE E WACKER DR STREET 2: STE 3000 CITY: CHICAGO STATE: IL ZIP: 60601 BUSINESS PHONE: 3124676755 MAIL ADDRESS: STREET 1: ONE EAST WACKER DRIVE CITY: CHICAGO STATE: IL ZIP: 60601 FORMER COMPANY: FORMER CONFORMED NAME: ENERGY ABSORPTION SYSTEMS INC DATE OF NAME CHANGE: 19800815 10-K 1 a2025984z10-k.txt 10-K FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) For the fiscal year ended June 30, 2000 ------------- OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period to ------- -------- Commission file number 0-7903 ------ Quixote Corporation --------------------------- (Exact name of registrant as specified in its charter) DELAWARE 36-2675371 ----------------------------- ---------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) ONE EAST WACKER DRIVE, CHICAGO, ILLINOIS 60601 ---------------------------------------- ---------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: (312) 467-6755 -------------- Securities Registered Pursuant to Section 12(g) of the Act: Common Stock ($.01-2/3 Par Value) --------------------------------- (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K ( ). State the aggregate market value of the voting stock held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within 60 days prior to the date of filing. $108,774,800 as of September 1, 2000 ------------------------------------ DOCUMENTS INCORPORATED BY REFERENCE The Registrant's Definitive Proxy Statement for the Annual Meeting of Stockholders to be held on November 15, 2000 which will be filed with the Commission on or about October 4, 2000 is incorporated by reference at Part III. 1 TABLE OF CONTENTS
PART I PAGE ---- Item 1. Business...................................................... 3-6 Item 2. Properties.................................................... 7 Item 3. Legal Proceedings............................................. 8 Item 4. Submission of Matters to a Vote of Security Holders........... 8 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters........................................... 9 Item 6. Selected Financial Data....................................... 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........................... 10-12 Item 8. Financial Statements and Supplementary Data................... 13-26 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........................... 27 PART III Item 10. Directors and Executive Officers of the Registrant............ 27 Item 11. Executive Compensation........................................ 28 Item 12. Security Ownership of Certain Beneficial Owners and Management................................................ 28 Item 13. Certain Relationships and Related Transactions................ 28 PART IV Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K................................................... 29-31 SIGNATURES................................................................ 32
2 PART I THE COMPANY Quixote Corporation was incorporated under the laws of the State of Delaware in 1969 originally as Energy Absorption Systems, Inc. In June, 1980, Energy Absorption Systems, Inc. changed its name to Quixote Corporation. Unless otherwise indicated herein, the terms "Quixote" and the "Company" refer to Quixote Corporation and its subsidiaries. ITEM 1. BUSINESS Quixote Corporation and its subsidiaries develop, manufacture and market energy-absorbing highway crash cushions and other highway safety products for the protection of motorists and highway workers to both domestic and international markets. As of June 30, 2000, Quixote Corporation and its subsidiaries employed approximately 582 people. DESCRIPTION OF BUSINESS The Company's business is highway and transportation safety, concentrating on safety problems and designing products to provide solutions for the highways. The Company provides solutions for improving safety on the roads through: minimizing the severity of crashes that occur and preventing crashes from occurring by directing or providing information. The Company's products are sold primarily by a single sales force to similar customers in the highway construction and safety business. In the category of reducing the severity of crashes, the Company's patented highway crash cushions were first conceived and developed in 1969 in response to the high number of fatalities and serious injuries suffered by occupants of errant vehicles in collisions with roadside hazards, such as bridge abutments, overpass piers, overhead sign supports, lane dividers, traffic islands and toll booths. Since that time, various types of highway crash cushions have been installed in front of thousands of life-threatening roadside hazards. The Federal Highway Administration (FHWA) endorses the installation of highway crash cushions as an effective safety program. The Company develops, manufactures and markets lines of patented highway crash cushion systems and other barriers which absorb and dissipate the force of impact in collisions between vehicles and fixed roadside objects or slow moving vehicles. The product lines utilize the principles of momentum transfer and kinetic energy to safely decelerate errant vehicles. Energy absorption or energy dissipation is accomplished by using different combinations of water, aluminum, steel, urethane foam systems, cardboard, plastic structures, elastometric cylinders and sand. The Company also manufactures and sells products that prevent crashes and help control the flow of traffic by directing or guiding. The Company manufactures and markets a line of flexible sign and guide post systems (delineators) and a glare screen system. The guide posts are extruded from polyethylene and are used to delineate a travel way, channel vehicles or mark the location of an object. The post features a patented, in-ground anchor system that permits inexpensive repair and replacement techniques. The glare screen system, also made from polyethylene, is installed on top of median barriers to eliminate the distraction of lights from oncoming vehicles on roads where the inside lanes are adjacent to the median barrier. To expand the Company's business within the highway and transportation safety industry, the Company acquired two companies that manufacture intelligent transportation safety products which provide information to prevent crashes from occurring, in fiscal 1999 and 1998. Highway Information Systems, Inc. (HIS), acquired in April 1998, manufactures and markets highway advisory radio systems that help control the flow of traffic by informing motorists of accidents and traffic delays. The Company acquired Nu-Metrics, Inc. a leading innovator and manufacturer of electronic wireless measuring and sensing devices in December 1998. Since it was founded in 1970, Nu-Metrics has developed innovative products that employ technology to gather and use information to relieve traffic congestion. It was the first company to market a self-contained, wireless, magnetic traffic counter/classifier. The Company's expanded highway and transportation safety products include the Groundhog-Registered Trademark- line of permanent traffic monitors, which gathers information on the volume, speed and class of vehicles as well as road surface conditions and transmits this data using the spread spectrum wireless method (RF) to a receiver unit. The data is then relayed on a real-time basis to a base computer or control center for monitoring. The Hi-Star-Registered Trademark- is a portable traffic counter/classifier. The Nitestar-Registered Trademark- is an in-vehicle device that can accurately measure the distance between any two fixed points on the highway. The Company also manufactures and markets remote traffic and weather information networks (RTWIN). Using a tower equipped with weather instruments and special detectors mounted in the road, RTWIN 3 products can detect freezing conditions and provide valuable data to dispatch salt trucks or automatically activate anti-icing systems. The Company is also a leading manufacturer of highway advisory radio (HAR) systems which broadcast traffic information using an AM radio frequency. The Company's two principal HAR products are: a stationary system, the Hiway MaxTM, and a mobile system, the Solar Max-TM-. The Hiway Max is intended to be used near long-term construction sites, public arenas, or other frequently congested traffic areas. The Solar Max is easily transported and is intended for short-term or emergency uses and allows the transmission of information without an external power source. Both systems use AM radio frequencies to communicate messages to motorists about traffic, road conditions and weather. The messages may be pre-recorded or updated on a real-time basis through a phone line or Local Area Network with reception up to six miles from the unit. Products can be further broken down into permanent and construction zone applications and, as such, are sold to those markets. Most of the products for permanent and construction zone applications are approved as acceptable highway hardware according to procedures in the National Cooperative Highway Research Program number 230 or 350 which provide various test levels depending on the application. This approval is gained after a formal submission to the FHWA which makes the products eligible for federal funds for highway projects. The Company provides product education, selection and application assistance. The Company, in some cases, performs site preparation and installation for its products. These services are generally performed by the Company's distributor/contractor network. COMPETITION AND MARKETING The Company's products are sold in all 50 U.S. states. Regional managers supervise 42 domestic distributors and make direct sales in areas not covered by distributors. Although the federal government provides matching funds for the purchase of highway safety products made by state and local governmental agencies, it is not a direct purchaser of the Company's domestic products. The Company sells its products principally to either distributors or to contractors (on behalf of state and local governments). For certain products, the Company sells using catalogs and inside sales personnel. Many international governments are now beginning to recognize the need for crash cushions and the Company's other highway safety products as a method of reducing traffic fatalities. The Company's products are sold internationally through a network of 46 distributors who make sales to municipal and national governments and contractors who are responding to bids from their respective governments. The Company experiences competition in specific crash cushion product lines, particularly in the sand barrel, QuadGuard, REACT 350 and TMA lines. The Company competes in the U.S. market for crash cushions with Syro, Inc., a subsidiary of Trinity Industries, Inc., (NYSE TRN), with TrafFix Devices, Inc. and with other smaller regional companies. No other company presently markets as broad a line of highway crash cushion systems designed to shield as large a variety of fixed roadside hazards as the Company. A number of other companies manufacture flexible sign and guide post systems. There are several companies that manufacture and sell highway advisory radio systems. The Company's traffic counters and sensors compete with many different technologies including inductive loop detectors, microwave and infra red sensors and machine vision (video) that each offer certain advantages. The Company believes it competes effectively through advanced product development and patent protection, strong distribution, product quality and price. GOVERNMENT POLICIES The domestic market for highway and transportation safety products is directly affected by federal, state and local governmental policies. A large portion of the Company's sales is ultimately financed by funds provided to the states by the federal government. Historically, these funds have covered 75% to 90% of the cost of highway safety projects on roads constructed or maintained with federal assistance. Legislation called the Transportation Equity Act for the 21st Century (TEA 21) was passed in May of 1998 and provides federal funding of approximately $218 billion over a six-year period, an increase of more than 40% over previous spending levels. This legislation also includes a guaranteed amount of funding for highway safety programs. The states must set aside 10% of the federal funds received each year under TEA 21 for safety construction activities such as hazard elimination. In order for highway devices to be eligible for federal funding, such devices must be approved by the FHWA. The Company is obligated to seek such approval for improvements or upgrades to such devices and for any new devices. Internationally, funding and government policies vary by country in regard to highway and transportation safety. In most cases, additional testing of the Company's products may be required in order to obtain certification. 4 BACKLOG As of June 30, 2000, 1999 and 1998, the Company had a backlog of unfilled orders for highway safety devices of $10,568,000, $11,069,000 and $12,204,000, respectively. The Company can usually fill an order anywhere from two days to 8 weeks of receipt depending on the type of product. RESEARCH AND DEVELOPMENT; PATENTS Many of the Company's products have patented features and the Company conducts its own research, development and testing of new products before introducing them to the marketplace. The expenditures for research and development activities were $1,614,000, $1,544,000 and $1,570,000, for the years 2000, 1999 and 1998, respectively. The Company develops new products by working with federal and state highway officials to determine highway traffic safety needs, and then designs products to satisfy those needs. The Company is also active in promoting cooperation among state highway agencies, contractors and engineers to encourage comprehensive repair and maintenance of roadside crash attenuating systems. In addition to developing new products within the impact technology area, the Company is seeking to develop or to acquire new products which can be sold through its existing distribution networks to its existing customers. The Company owns a number of U.S. and foreign patents covering its major highway safety products. It actively seeks patent and trademark protection for new developments. RAW MATERIALS The principal raw materials used in the production of highway safety devices are plastic and plastic resins, steel, aluminum and electronic components. These raw materials are purchased from various suppliers and have been readily available throughout the last year. The Company believes that adequate supplies of these materials will continue to be available. MAJOR CUSTOMERS No single customer of the Company represents a significant portion of total revenues. SEASONALITY The Company's sales are seasonal. The domestic highway maintenance and construction season tends to reach its peak in the second and third calendar quarters. As a result, the Company's sales and earnings in these quarters are the strongest with weaker quarters occurring in the first and fourth calendar quarters. FOREIGN AND DOMESTIC OPERATIONS AND REVENUES The Company's operations consist of one industry segment engaged in the manufacture and sale of highway safety products. The Company's business is conducted principally in the United States, with sales outside of the United States as follows: $9,820,000 in 2000, $6,316,000 in 1999 and $4,510,000 in 1998. OTHER INVESTMENT IN TRANSPORTATION MANAGEMENT TECHNOLOGIES, L.L.C. (TMT) JOINT VENTURE During fiscal 1999, the Company entered into a joint venture agreement to market pavement inspection and management systems and other high technology products and services in the United States. The TMT joint venture is composed of the Company, G.I.E. Technologies Ltd., based in Montreal, Canada, and eight independent distributors of the Company's highway products. The Company has invested $1,111,000 in TMT, of which $750,000 was paid in 1999 and $361,000 in 2000, for a 19% interest in the joint venture. This investment is being accounted for under the equity method of accounting which resulted in charges of $316,000 and $54,000 for the years ended June 30, 2000 and 1999, respectively. 5 DISCONTINUED OPERATIONS In March 1997, the Company sold substantially all of the assets and transferred significant operating liabilities of Disc Manufacturing, Inc. (DMI) to Cinram, Ltd. for $80,283,000 in cash. The transaction excluded DMI's Huntsville, Alabama land and building as well as certain DMI litigation. DMI was one of the largest independent manufacturers of compact discs and CD-Roms in the United States. During 1998, the Company recorded additional losses from discontinued operations of $6,138,000, or $0.76 per diluted share, which was net of income tax benefits of $3,162,000. The losses were recorded to provide for current and anticipated costs associated principally with the Company's legal contingencies related to DMI. In March 1999, the Company assigned all of its rights to certain real property and a building located in Huntsville, Alabama to Cinram, Ltd. upon Cinram, Ltd.'s exercise of its option to purchase for the pre-agreed purchase price of $6,947,000, less certain adjustments of approximately $238,000. Also in March 1999, the Company recorded a gain of $240,000, or $.03 per diluted share, due to the reversal of certain accruals resulting from the favorable outcome of some legal proceedings. 6 ITEM 2. PROPERTIES
Owned or Location Available Space Purpose Leased - -------------------------- --------------- ------------------ -------- One East Wacker Drive 19,000 sq. ft. Executive Offices Leased Chicago, Illinois 250 Bamberg Drive 160,000 sq. ft. Manufacture of highway Owned Pell City, Alabama safety devices 3617 Cincinnati Avenue 22,000 sq. ft. Warehouse and research Owned Rocklin, California and development facility for highway safety devices 3300 N. Kenmore Street 81,000 sq. ft. Sale and manufacture of Owned South Bend, Indiana highway safety devices and other plastic products 739 College Drive 28,000 sq. ft. Storage facility for Owned South Bend, Indiana highway safety devices 23785 Cabot Boulevard 2,300 sq. ft. Sales office Leased Hayward, California 4021 Stirrup Creek Drive 12,500 sq. ft. Sale and manufacture of Leased Durham, North Carolina highway advisory radio equipment Route 119 University Drive 26,000 sq. ft. Sale and manufacture of Owned Uniontown, Pennsylvania traffic sensing and distance measuring devices 200 Corporate Pointe 19,800 sq. ft. Sublet Leased Culver City, California
Note: Present facilities are believed to be adequate to support the Company's current and anticipated requirements. 7 ITEM 3. LEGAL PROCEEDINGS A. ERNEST CHICO v. THE STATE OF INDIANA, ENERGY ABSORPTION SYSTEMS, INC. AND HOOSIER COMPANY, Lake Superior Court for the State of Indiana, Cause No. 45DO2-9605-CT-391. The Company settled this case in September 2000 for a nominal amount. B. DISC MANUFACTURING, INC. v. CD TITLES, INC.; DISC MANUFACTURING, INC. v. PALOMAR MEDICAL TECHNOLOGIES, INC., Consolidated Action No. 9705328-B, Superior Court of the Commonwealth of Massachusetts. This is an action brought by Disc Manufacturing, Inc. to recover approximately $680,000 for goods and services sold to CD Titles, of which $400,000 was guaranteed by Palomar Medical Technologies. CD Titles answered the complaint, asserting a counterclaim for conversion of certain inventory valued by CD Titles at $1.3 million which has been dismissed. Discovery has proceeded, but is presently stayed in accordance with an automatic stay that was entered upon an involuntary petition in bankruptcy filed against CD Titles in July 1998 by DMI and other creditors under Chapter 7 of the Bankruptcy Code. CD Title's motion to dismiss the involuntary petition has been denied and a Chapter 7 trustee has been appointed to proceed with the bankruptcy. C. ODIN SYSTEMS INTERNATIONAL, INC. v. ENERGY ABSORPTION SYSTEMS, INC., No. CV200-082, U.S. District Court for the Southern District of Georgia. The parties to this action entered into an exclusive license agreement in 1997, whereby Energy Absorption Systems, Inc. obtained the rights to an anti-icing system from Odin Systems International. Disputes arose between the parties which were the subject of an arbitration proceeding. In August 2000, the arbitrator awarded Energy $2.1 million, primarily for breach of the license agreement, which Odin is currently contesting and therefore collection is uncertain. This complaint, filed in June 2000, asserts claims which were not considered in the arbitration, including defamation, theft of trade secrets, tortious interference with business relations, unfair trade practices and breach of the license agreement. Energy has moved to dismiss certain counts of the complaint and has answered others, asserting numerous defenses including fraud in the inducement and estoppel. The Company is involved in other legal actions, believes it has defenses for all claims, and is vigorously defending the actions. In the opinion of management, based on the advice of legal counsel, liabilities, if any, arising from the Company's legal actions should not have a material effect on the Company's results of operations or financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the fourth quarter of fiscal 2000. 8 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock is quoted on The Nasdaq Stock Market-Registered Trademark- under the symbol QUIX. Set forth are the daily high and low last sales prices for the Company's common stock for the periods indicated, as reported by the Nasdaq.
Three Months Ending 9/30 12/31 3/31 6/30 ---- ----- ---- ---- FISCAL 2000: High ............... $ 15-1/2 $ 16-1/8 $ 15-1/4 $ 15-1/2 Low ................ 12-1/4 13-1/2 10-1/2 11 FISCAL 1999: High ............... $ 15-1/2 $ 13-3/4 $ 13-1/4 $ 13-7/8 Low ................ 12-3/8 11-3/8 11-5/16 11-7/16
The current quoted price of the stock is listed daily in THE WALL STREET JOURNAL in the Nasdaq National Market System section. As of August 7, 2000, there were 1,367 shareholders of record. DIVIDEND POLICY During 2000, the Company declared semiannual cash dividends of fourteen cents per share and fifteen cents per share. During 1999, the Company declared semiannual cash dividends of fourteen cents per share, each. ITEM 6. SELECTED FINANCIAL DATA
For the years ended June 30, Dollar amounts in thousands, except share data 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- Operating Results: Net sales ................................... $83,770 $71,987 $55,988 $45,037 $46,750 Gross profit ................................ 41,111 33,633 25,543 22,249 24,291 Selling and administrative expenses ......... 24,208 19,606 15,420 14,264 15,059 Research and development expenses ........... 1,614 1,544 1,570 2,209 1,536 Other income (expense) ...................... (904) (665) 199 (2,112) (488) Earnings from continuing operations ......... 8,919 7,562 6,147 2,907 4,390 Net earnings (loss) ......................... 8,919 7,802 9 (3,831) (9,892) Cash dividends per common share ............. .29 .28 .26 .25 .24 Per Share Data: Basic EPS: Earnings from continuing operations ......... $ 1.13 $ .95 $ .77 $ .36 $ .56 Net earnings (loss) ......................... $ 1.13 $ .98 $ .00 $ (.48) $ (1.26) Weighted average common and common equivalent shares outstanding ....................... 7,868,554 7,986,094 7,943,653 7,966,700 7,875,585 Diluted EPS: Earnings from continuing operations ......... $ 1.10 $ .92 $ .76 $ .36 $ .52 Net earnings (loss) ......................... $ 1.10 $ .95 $ .00 $ (.48) $ (1.26) Weighted average common and common equivalent shares outstanding ....................... 8,124,623 8,227,775 8,088,354 8,008,893 8,951,562 Financial Position: Total assets ................................ $73,264 $71,774 $59,065 $55,220 $118,888 Working capital ............................. 22,127 18,579 15,146 20,639 4,055 Property, plant and equipment, net .......... 15,001 15,599 13,482 12,903 13,113 Long-term debt, net ......................... 15,596 11,901 7,677 58,000 Shareholders' equity ........................ 43,116 45,982 38,886 41,655 47,619 Book value per common share ................. 5.84 5.70 4.94 5.24 5.99
NOTE: OPERATING RESULTS AND FINANCIAL POSITION FOR ALL PERIODS PRESENTED REFLECT THE LEGAL TECHNOLOGIES, INC. AND DISC MANUFACTURING, INC. SEGMENTS AS DISCONTINUED OPERATIONS. 9 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 2000 COMPARED TO 1999 The Company's sales increased 16% to $83,770,000 in 2000 from $71,987,000 in 1999 due to solid internal sales growth as well as growth from one acquisition the Company completed during 1999. Internal sales increased 13% primarily due to domestic and international demand for the Company's lines of permanent crash cushion and truck-mounted attenuator (TMA) products. The crash cushion and delineation product lines increased 12% for the year to $73,757,000 particularly due to strong unit sales of the newly introduced Safe-Stop-TM- TMA, the REACT 350-Registered Trademark- crash cushion and the QuadGuard-Registered Trademark- family of crash cushion products. Sales of the Energite-Registered Trademark- barrel product line, parts, highway delineators and the Triton Barrier-Registered Trademark- also increased during 2000. These increases in sales were offset somewhat by declining sales of the Universal Module-Registered Trademark- barrels and custom-molded products during the year. International sales increased 56% to $9,820,000 in 2000 from $6,316,000 in 1999 and now comprise 12% of total sales. Nu-Metrics, Inc., acquired in December 1998, contributed $7,477,000 in sales of its advanced sensing products for 2000 as compared to $3,677,000 in sales for the seven months as part of the Company in 1999. Nu-Metrics, Inc. is a leading manufacturer of electronic measuring and sensing devices for highway safety and traffic monitoring. Sales of highway advisory radio systems manufactured by Highway Information Systems, Inc. (HIS) were $2,536,000 in 2000, an increase of 3% from $2,473,000 in 1999. The gross profit margin for 2000 increased to 49.1% from 46.7% in 1999. This was due primarily to increased sales of higher margin advanced sensing products and the QuadGuard-Registered Trademark- family of crash cushion products. Volume efficiencies associated with the increased level of sales and sales price increases also contributed to the increase in the gross profit margin for 2000. Somewhat offsetting the overall increase in gross margin was a change in sales mix due to increased sales of the lower margin Safe-Stop-TM- TMA and the REACT 350-Registered Trademark- crash cushion. Selling and administrative expenses for 2000 increased 23% to $24,208,000 from $19,606,000 in 1999. This was due principally to the higher level of sales and the December 1998 acquisition of Nu-Metrics, Inc., which added $1,152,000 in selling and administrative expenses compared to 1999. Selling and administrative expenses for 2000 also increased due to increased sales and marketing expenses related to our international sales efforts, increased acquisition and development efforts as well as increased health insurance and employee benefit expenses. Also contributing to the increase was the increase in the equity loss on the investment in the joint venture, Transportation Management Technologies, L.L.C. (TMT) to $316,000 in 2000 compared to $54,000 in 1999. Research and development expenses for 2000 increased 5% to $1,614,000 from $1,544,000 in 1999. During 2000, the Company made expenditures for the development of products relating to the Safe-Stop-TM- TMA, for European qualifying tests of certain QuadGuard-Registered Trademark- crash cushion products as well as for the development of three new products. These new products are the FreezeFree-TM- system, a manual or computer-controlled anti-icing system; the Impact Monitoring System (IMS), which combines advanced sensing devices and wireless technology with our crash cushion products; and a new broadband wireless in-ground sensor for non-U.S. applications. The Company continued with its development and testing of a reflective pavement marker for warm weather climates and a snowplowable pavement marker as well as other developmental projects. Operating profit increased 22% to $15,289,000 for 2000 from $12,483,000 in 1999. Interest income in 2000 was $31,000 as compared to $91,000 in 1999. Interest income declined as a result of a decline in the Company's invested cash balance. Interest expense decreased to $932,000 in 2000 from $1,029,000 in 1999. The decrease in interest expense is related to the higher level of average long-term debt outstanding during 1999 in connection with the acquisition of Nu-Metrics, Inc. in December 1998. The Company's effective income tax rate for 2000 was 38% compared to an effective income tax rate of 36% in 1999 due to the greater realization of certain tax benefits during 1999. The Company believes its effective income tax rate for fiscal year 2001 will be approximately 38%. Earnings from continuing operations increased 18% to $8,919,000, or $1.10 per diluted share, from $7,562,000, or $.92 per diluted share, in 1999. Net earnings for 2000 increased 14% to $8,919,000, or $1.10 per diluted share, compared with net earnings of $7,802,000, or $.95 per diluted share, in 1999. Net earnings in 1999 included a gain from discontinued operations of $240,000, or $.03 per diluted share, due to the reversal of certain accruals resulting from the favorable outcome of some legal proceedings. 10 In 1998, the Financial Accounting Standards Board (FASB) issued FAS No. 133, Accounting for Derivative Instruments and Hedging Activities. In June 1999, FASB issued FAS No. 137, which deferred the effective date of FAS No. 133. Accordingly, FAS No. 133 is effective for all fiscal quarters beginning after June 15, 2000 (July 1, 2000 for the Company). FAS No. 133 requires that all changes in derivatives be recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. The Company anticipates that due to its limited use of derivative instruments, the adoption of FAS No. 133 will not have a significant effect on the Company's results of operations or its financial position. 1999 COMPARED TO 1998 The Company's sales for 1999 increased 29% to $71,987,000 from $55,988,000 in 1998, due to both internal sales growth as well as growth from three acquisitions the Company completed during 1998 and 1999. Internal sales increased 16% resulting from demand for the Company's newer crash cushion products. Sales of the Company's permanent line of crash cushion products increased 33% due to strong unit sales of the QuadGuard-Registered Trademark- family of crash cushions including the newer wide and low maintenance versions of this product line. The Company also experienced sales increases in its TMA product line, including the Alpha 100k TMA. Parts sales and sales of highway delineators also increased during 1999. These sales increases were offset somewhat by declining sales of the Energite-Registered Trademark- barrel, the Triton Barrier-Registered Trademark- and custom-molded product sales during 1999. Sales of crash cushion products manufactured by Roadway Safety Service, Inc., acquired in October 1997, increased $2,606,000 to $7,160,000 for 1999. Sales of highway advisory radio systems manufactured by HIS, acquired in April 1998, increased $1,832,000 to $2,473,000 for 1999. Nu-Metrics, Inc., acquired in December 1998, contributed $3,677,000 in sales of its advanced sensing products for the seven month period as part of the Company in 1999. The gross profit margin increased to 46.7% in 1999 from 45.6% in 1998. This was due principally to the acquisition of Nu-Metrics as the gross margin on its advanced sensing products is higher than the Company's average gross margin. Volume efficiencies associated with the increased level of sales, sales price increases and lower vendor costs also contributed to the increase in the gross profit margin for 1999. Also contributing slightly to the gross margin increase was a favorable change in sales mix due to increased sales of the higher margin QuadGuard-Registered Trademark- family of crash cushions. Selling and administrative expenses in 1999 increased 27% to $19,606,000 from $15,420,000 in 1998. This was due principally to the acquisitions of HIS and Nu-Metrics which added a combined net increase of $2,144,000 in selling and administrative expenses. The remainder of the increase was due primarily to the higher level of sales in 1999 and the result of increased salaries, consulting and investor relations expenses. Research and development expenses in 1999 decreased slightly to $1,544,000 compared to $1,570,000 in 1998. During 1999, the Company incurred costs in the development of the QuadGuard-Registered Trademark- Elite, a restorable crash cushion, and the Safe-Stop-TM- TMA. The Company also incurred development costs in connection with its testing of a wider version of the Company's REACT 350-Registered Trademark- crash cushion as well as the testing of several reflective pavement markers and other developmental projects. Operating profit increased 46% to $12,483,000 for 1999 from $8,553,000 in 1998. Interest income in 1999 decreased to $91,000 compared to $540,000 in 1998. Interest income declined as a result of a decline in the Company's invested cash in 1999. Interest expense in 1999 was $1,029,000 compared to $357,000 in 1998. Interest expense for 1999 relates both to seller financed debt in connection with the acquisition of Roadway Safety Service, Inc. as well as bank debt incurred in connection with the acquisitions of HIS and Nu-Metrics, Inc. The Company's effective income tax rate for 1999 was 36% compared to an effective income tax rate of 30% in 1998 due to the greater realization of certain tax attributes along with the settlement of certain tax contingencies during 1999. Earnings from continuing operations increased 23% to $7,562,000, or $.92 per diluted share, from $6,147,000, or $.76 per diluted shares, in 1998. Net earnings for 1999 increased to $7,802,000, or $.95 per diluted share, compared with net earnings of $9,000, or $.00 per diluted share, in 1998. Net earnings in 1999 included a gain from discontinued operations of $240,000, or $.03 per diluted share, due to the reversal of certain accruals resulting from the favorable outcome of some legal proceedings. In March 1999, DMI, a discontinued operation, assigned all of its rights to certain real property and a building located in Huntsville, Alabama to Cinram, Ltd. upon Cinram, Ltd.'s exercise of its option to purchase for the pre-agreed purchase price of $6,947,000, less certain adjustments of approximately $238,000. 11 In December 1998, the Company acquired Nu-Metrics, Inc., a Uniontown, Pennsylvania-based developer and manufacturer of traffic sensing and distance measuring devices. This transaction was accounted for as a purchase and was effective as of December 1, 1998. The purchase price was $13,701,000 which was paid in cash. When acquired, Nu-Metrics had long-term debt of approximately $981,000. Goodwill recorded in the transaction of approximately $12,733,000 is being amortized over a twenty year life. In October 1998, the Company entered into a joint venture agreement to market pavement inspection and management systems and other high technology products and services in the United States. The TMT joint venture is composed of the Company, G.I.E. Technologies, Inc., based in Montreal, Canada, and eight independent distributors of the Company's highway products. The Company has invested $1,111,000 in TMT, of which $750,000 was paid in 1999 and $361,000 in 2000, for a 19% interest in the joint venture. This investment is being accounted for under the equity method of accounting. LIQUIDITY AND CAPITAL RESOURCES The Company had cash and cash equivalents of $1,524,000 and access to additional funds of $27,700,000 under its bank arrangements as of June 30, 2000. Continuing operating activities were a source of cash for the Company for 2000 providing $8,552,000. Discontinued operations, however, used cash of $149,000 primarily for lease commitments. This resulted in net cash provided from operating activities of $8,403,000. Investing activities used cash of $1,845,000 during 2000 including $1,368,000 for the purchase of equipment and $361,000 for the Company's investment in TMT. Financing activities used cash of $7,187,000 during 2000. The payment of the Company's semi-annual cash dividend used cash of $2,249,000. In addition, the Company used cash of $697,000 for the payment of notes payable due in connection with the acquisitions of Roadway Safety Service, Inc. and Nu-Metrics, Inc. and paid $10,450,000 to purchase 778,000 shares of its own common stock for the treasury. The Company borrowed $11,600,000 on its revolving credit facility offset by payments of $7,300,000 and had an increase in bank overdrafts of $1,006,000. In addition, the Company received cash of $903,000 for the exercise of common stock options. For fiscal 2001, the Company anticipates needing less than $3,000,000 in cash for capital expenditures. The Company may also need additional cash as it considers acquiring businesses that complement its existing operations. Also, the Company will require additional investments in working capital to maintain growth. The Company may also need additional funds to repurchase its own common stock from time to time. These expenditures will be financed either through the Company's invested cash, cash generated from its operations or from borrowings available under the Company's revolving credit facility. The Company believes its existing cash, cash generated from operations and funds available under its existing credit facility are sufficient for all planned operating and capital requirements. FORWARD LOOKING STATEMENTS Various statements made within the Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report constitute "forward looking statements" for purposes of the Securities and Exchange Commission's "safe harbor" provisions under the Private Securities Litigation Reform Act of 1995 and Rule 3b-6 under the Securities Exchange Act of 1934, as amended. Investors are cautioned that all forward looking statements involve risks and uncertainties, including those detailed in the Company's filings with the Securities and Exchange Commission. There can be no assurance that actual results will not differ from the Company's expectations. Factors which could cause materially different results include, among others, uncertainties related to the introduction of the Company's products and services; the outlook for products and markets of the TMT joint venture and its funding requirements; the successful completion and integration of acquisitions; continued funding from federal highway legislation; and competitive and general economic conditions. 12 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT ACCOUNTANTS TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF QUIXOTE CORPORATION: In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Quixote Corporation and its subsidiaries at June 30, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2000 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Chicago, Illinois August 7, 2000 13 QUIXOTE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
For each of the three years ended June 30, Dollar amounts in thousands, except share data 2000 1999 1998 ------------ ------------ ------------ Net sales......................................................... $ 83,770 $ 71,987 $ 55,988 Cost of sales..................................................... 42,659 38,354 30,445 ------------ ------------ ------------ Gross profit...................................................... 41,111 33,633 25,543 Operating expenses: Selling and administrative...................................... 24,208 19,606 15,420 Research and development........................................ 1,614 1,544 1,570 ------------ ------------ ------------ 25,822 21,150 16,990 ------------ ------------ ------------ Operating profit.................................................. 15,289 12,483 8,553 Other income (expense): Interest income................................................. 31 91 540 Interest expense................................................ (932) (1,029) (357) Other........................................................... (3) 273 16 ------------ ------------ ------------ (904) (665) 199 ------------ ------------ ------------ Earnings from continuing operations before provision for income taxes............................... 14,385 11,818 8,752 Provision for income taxes........................................ 5,466 4,256 2, 605 ------------ ------------ ------------ Earnings from continuing operations............................... 8,919 7,562 6,147 Discontinued operations: Gain (loss) on disposal, net of income taxes................... 240 (6,138) ------------ ------------ ------------ Net earnings...................................................... $ 8,919 $ 7,802 $ 9 ------------ ------------ ------------ Basic earnings per share: Earnings from continuing operations............................ $ 1.13 $ .95 $ .77 ------------ ------------ ------------ Net earnings................................................... $ 1.13 $ .98 $ .00 ------------ ------------ ------------ Weighted average common and common equivalent shares outstanding................................................ 7,868,554 7,986,094 7,943,653 ------------ ------------ ------------ Diluted earnings per share: Earnings from continuing operations............................ $ 1.10 $ .92 $ .76 ------------ ------------ ------------ Net earnings................................................... $ 1.10 $ .95 $ .00 ------------ ------------ ------------ Weighted average common and common equivalent shares outstanding................................................ 8,124,623 8,227,775 8,088,354 ------------ ------------ ------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. 14 QUIXOTE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
As of June 30, Dollar amounts in thousands, except share data 2000 1999 --------- --------- ASSETS Current assets: Cash and cash equivalents............................................................. $ 1,524 $ 2,153 Accounts receivable, net of allowance for doubtful accounts of $955 in 2000 and $480 in 1999........................................... 20,210 17,078 Inventories, net...................................................................... 10,072 8,537 Deferred income tax assets............................................................ 2,254 2,491 Other current assets.................................................................. 259 538 --------- --------- Total current assets................................................................ 34,319 30,797 Property, plant and equipment at cost: Land.................................................................................. 1,369 1,369 Buildings and improvements............................................................ 10,972 10,710 Machinery and equipment............................................................... 11,301 10,748 Furniture and fixtures................................................................ 3,653 3,414 Leasehold improvements................................................................ 635 553 --------- --------- 27,930 26,794 Less: accumulated depreciation..................................................... (12,929) (11,195) --------- --------- 15,001 15,599 Intangible assets, net.................................................................. 22,626 24,038 Other assets............................................................................ 1,318 1,340 --------- --------- $ 73,264 $ 71,774 --------- --------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt..................................................... $ 630 $ 722 Accounts payable...................................................................... 2,613 3,300 Dividends payable..................................................................... 1,117 1,128 Income taxes payable.................................................................. 727 691 Accrued expenses: Payroll and commissions............................................................. 3,267 1,923 Other............................................................................... 2,640 2,770 Liabilities of discontinued operations................................................ 1,198 1,684 --------- --------- Total current liabilities........................................................... 12,192 12,218 Long-term debt, net of current portion.................................................. 15,596 11,901 Deferred income tax liabilities......................................................... 1,799 1,449 Liabilities of discontinued operations ................................................. 561 224 Commitments and contingent liabilities.................................................. Shareholders' equity: Preferred stock, no par value; authorized 100,000 shares; none issued Common stock, par value $.01-2/3; authorized 15,000,000 shares; issued 9,199,194 shares - 2000 and issued 9,104,166 shares - 1999..................... 153 151 Capital in excess of par value of stock................................................. 33,830 32,929 Retained earnings....................................................................... 27,565 20,884 Treasury stock, at cost, 1,810,420 shares - 2000 and 1,032,420 shares - 1999 ........... (18,432) (7,982) --------- --------- Total shareholders' equity............................................................ 43,116 45,982 --------- --------- $ 73,264 $ 71,774 --------- ---------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. 15 QUIXOTE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the three years ended June 30, 2000 Capital in Common Stock Excess of ------------ Par Value Dollar amounts in thousands, except share data Shares Dollars of Stock --------- ---------- ---------- BALANCES, JUNE 30, 1997 ........................................... 8,753,333 $ 146 $ 30,269 Exercise of options and grant of awards ........................... 137,783 2 904 Net earnings - 1998 ............................................... Declaration of semi-annual cash dividends ($.13 per share) ........ Issuance of shares pursuant to the stock retirement plan .......... 17,824 223 Purchase of shares at $7.75 to $9.25 per share .................... --------- ---------- ---------- BALANCES, JUNE 30, 1998 ........................................... 8,908,940 148 31,396 Exercise of options and grant of awards ........................... 184,432 3 1,400 Net earnings - 1999 ............................................... Declaration of semi-annual cash dividends ($.14 per share) ........ Issuance of shares pursuant to the stock retirement plan .......... 10,794 133 --------- ---------- ---------- BALANCES, JUNE 30, 1999 ........................................... 9,104,166 151 32,929 Exercise of options ............................................... 84,234 2 744 Net earnings - 2000 ............................................... Declaration of semi-annual cash dividends ($.14 and $.15 per share) Issuance of shares pursuant to the stock retirement plan .......... 10,794 157 Purchase of shares at $12.00 to $15.50 per share .................. --------- ---------- ---------- BALANCES, JUNE 30, 2000 ........................................... 9,199,194 $ 153 $ 33,830 --------- ---------- ---------- For the three years ended June 30, 2000 Treasury Stock Retained ------------------------ Dollar amounts in thousands, except share data Earnings Shares Dollars --------- ---------- ---------- BALANCES, JUNE 30, 1997 ........................................... $ 17,368 807,435 $ (6,128) Exercise of options and grant of awards ........................... Net earnings - 1998 ............................................... 9 Declaration of semi-annual cash dividends ($.13 per share) ........ (2,053) Issuance of shares pursuant to the stock retirement plan .......... Purchase of shares at $7.75 to $9.25 per share .................... 224,985 (1,854) --------- ---------- ---------- BALANCES, JUNE 30, 1998 ........................................... 15,324 1,032,420 (7,982) Exercise of options and grant of awards ........................... Net earnings - 1999 ............................................... 7,802 Declaration of semi-annual cash dividends ($.14 per share) ........ (2,242) Issuance of shares pursuant to the stock retirement plan .......... --------- ---------- ---------- BALANCES, JUNE 30, 1999 ........................................... 20,884 1,032,420 (7,982) Exercise of options ............................................... Net earnings - 2000 ............................................... 8,919 Declaration of semi-annual cash dividends ($.14 and $.15 per share) (2,238) Issuance of shares pursuant to the stock retirement plan .......... Purchase of shares at $12.00 to $15.50 per share .................. 778,000 (10,450) --------- ---------- ---------- BALANCES, JUNE 30, 2000 ........................................... $ 27,565 1,810,420 $ (18,432) --------- ---------- ----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. 16 QUIXOTE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
For each of the three years ended June 30, Dollar amounts in thousands 2000 1999 1998 -------- -------- -------- OPERATING ACTIVITIES: Earnings from continuing operations ................................... $ 8,919 $ 7,562 $ 6,147 Discontinued operations Earnings (loss) on disposal, net of income taxes ...................... 240 (6,138) -------- -------- -------- Net earnings .......................................................... 8,919 7,802 9 ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET CASH PROVIDED BY (USED IN) CONTINUING OPERATIONS: Discontinued operations ............................................... (240) 6,138 Depreciation .......................................................... 1,966 1,773 1,302 Amortization .......................................................... 1,868 1,652 1,034 Deferred income taxes ................................................. 521 89 429 Provisions for losses on accounts receivable .......................... 530 (70) Loss on investment in TMT joint venture ............................... 316 54 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable ................................................. (3,662) (2,375) (4,737) Inventories ......................................................... (1,565) (1,909) (1,216) Refundable income taxes ............................................. 1,132 197 Other current assets ................................................ 279 (188) (84) Accounts payable and accrued expenses ............................... (656) 1,202 (718) Income taxes payable ................................................ 36 691 -------- -------- -------- Net cash provided by operating activities of continuing operations ...... 8,552 9,613 2,354 Net cash provided by (used in) discontinued operations .................. (149) 3,384 (6,849) -------- -------- -------- Net cash provided by (used in) operating activities ..................... 8,403 12,997 (4,495) -------- -------- -------- INVESTING ACTIVITIES: Purchase of property, plant and equipment ............................. (1,368) (2,335) (1,436) Cash paid for acquired businesses ..................................... (13,701) (7,622) Investment in TMT joint venture ....................................... (361) (764) Other ................................................................. (116) (47) (502) -------- -------- -------- Net cash used in investing activities ................................... (1,845) (16,847) (9,560) -------- -------- -------- FINANCING ACTIVITIES: Payments on notes payable ............................................. (697) (1,032) (962) Payments on revolving credit agreement ................................ (7,300) (20,000) (2,300) Proceeds from revolving credit agreement .............................. 11,600 24,500 5,800 Increase in bank overdrafts ........................................... 1,006 Payment of semi-annual cash dividend .................................. (2,249) (2,135) (2,071) Proceeds from exercise of common stock options ........................ 903 743 906 Repurchase of common stock for treasury ............................... (10,450) (1,854) -------- -------- -------- Net cash provided by (used in) financing activities ..................... (7,187) 2,076 (481) -------- -------- -------- Net change in cash and cash equivalents ................................. (629) (1,774) (14,536) Cash and cash equivalents at beginning of year .......................... 2,153 3,927 18,463 -------- -------- -------- Cash and cash equivalents at end of year ................................ $ 1,524 $ 2,153 $ 3,927 -------- -------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. 17 QUIXOTE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF BUSINESS Quixote Corporation and its subsidiaries (the Company) develop, manufacture and market, to both domestic and international markets, energy-absorbing highway crash cushions and other highway safety products for the protection of motorists and highway workers. 2. ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS Cash in excess of operating requirements is invested in income-producing investments generally having initial maturities of three months or less. These investments are stated at cost, which approximates market value. The Company considers these short-term instruments to be cash equivalents. CONSOLIDATION The consolidated financial statements include the accounts of Quixote Corporation and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. EARNINGS PER SHARE Basic earnings per share (EPS) is computed by dividing net earnings available to holders of common stock by the weighted average number of shares of common stock outstanding. Diluted EPS is computed assuming the exercising of all stock options that are profitable to the recipients. Under this assumption, the weighted average number of shares is increased accordingly. FINANCIAL INSTRUMENTS The fair value of cash and cash equivalents approximate the carrying value of these assets due to the short-term maturity of these instruments. The fair value of the Company's long-term debt is estimated to approximate the carrying value based upon borrowing rates currently available to the Company for borrowings with similar terms and maturity. INCOME TAXES The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. In addition, the amount of any future tax benefits are reduced by a valuation allowance to the extent such benefits are not expected to be fully realized. INVENTORIES Inventories are valued at the lower of cost (first-in, first-out method) or market. LONG-LIVED ASSETS Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the Company assesses the possibility of obsolescence, demand, new technology, competition, and other pertinent economic factors and trends that may have an impact on the value or remaining lives of these assets. Long-lived assets include such items as goodwill, patents, product rights and equity method investments. Goodwill and patents are amortized on a straight-line basis over lives of 4 to 20 years. Product rights are amortized over the life of the agreement. 18 MANAGEMENT ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. Management's estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. PROPERTY, PLANT AND EQUIPMENT The Company capitalizes expenditures for major renewals and betterments and charges current earnings with the cost of maintenance and repairs. Provisions for depreciation and amortization have been computed on the straight-line method based on the expected useful lives of the assets as indicated below: Buildings and improvements 10 to 40 years Machinery and equipment 3 to 12 years Furniture and fixtures 3 to 10 years Leasehold improvements 5 to 10 years
The cost and accumulated depreciation and amortization relating to assets retired or otherwise disposed of are eliminated from the respective accounts at the time of retirement or other disposition with the gain or loss credited or charged to earnings. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In 1998, the Financial Accounting Standards Board (FASB) issued Financial Accounting Standard (FAS) No. 133, Accounting for Derivative Instruments and Hedging Activities. In June 1999, FASB issued FAS No. 137, which deferred the effective date of FAS No. 133. Accordingly, FAS No. 133 is effective for all fiscal quarters beginning after June 15, 2000 (July 1, 2000 for the Company). FAS No. 133 requires that all changes in derivatives be recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. The Company anticipates that due to its limited use of derivative instruments, the adoption of FAS No. 133 will not have a significant effect on the Company's results of operations or its financial position. RECLASSIFICATIONS Certain prior year balances have been reclassified to conform to current year presentations. REVENUE RECOGNITION Substantially all revenues are recognized when finished products are shipped to unaffiliated customers or services have been rendered, with appropriate provision for uncollectible accounts. STOCK-BASED COMPENSATION The Company follows the provisions of FAS No. 123, Accounting for Stock-Based Compensation, which encourages entities to adopt a fair value based method of accounting for stock-based compensation plans in place of the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB No. 25), for all arrangements under which employees receive shares of stock or other equity instruments of the employer. As allowed by FAS No. 123, the Company applies the provisions of APB No. 25 in accounting for its stock-based employee compensation arrangements, and discloses the pro forma net earnings and earnings per share information in its footnotes as if the fair value method had been applied. The Company recognizes compensation cost for stock-based compensation arrangements equal to the difference between the quoted market price of the stock option at the date of grant and the price to be paid by the employee upon exercise in accordance with the provisions of APB No. 25. Based upon the terms of the Company's current stock option plans, the stock price on the date of grant and price paid upon exercise are the same, thus no compensation charge is required to be recognized. 19 3. ACQUISITIONS In December 1998, the Company acquired the stock of Nu-Metrics, Inc., a Uniontown, Pennsylvania-based developer and manufacturer of traffic sensing and distance measuring devices. This transaction was accounted for as a purchase and was effective as of December 1, 1998. The purchase price was $13,701,000 which was paid in cash. When acquired, Nu-Metrics had long-term debt of approximately $981,000. Goodwill recorded in the transaction of approximately $12,733,000 is being amortized over a twenty year life. In October 1998, the Company entered into a joint venture agreement to market pavement inspection and management systems and other high technology products and services in the United States. The joint venture, known as Transportation Management Technologies, L.L.C. (TMT), is composed of the Company, G.I.E. Technologies, Inc., based in Montreal, Canada, and eight independent distributors of the Company's highway products. The Company has invested $1,111,000 in TMT, of which $750,000 was paid in 1999 and $361,000 in 2000, for a 19% interest in the joint venture. This investment is being accounted for under the equity method of accounting. In April 1998, the Company acquired the assets and assumed certain liabilities of Highway Information Systems, Inc., a division of Digital Recorders, Inc., for $2,800,000 in cash. The acquisition was accounted for as a purchase and was effective as of April 1, 1998. Goodwill of approximately $1,700,000 is being amortized over a twenty year life. In October 1997, the Company acquired certain assets and assumed certain contracts from Roadway Safety Service, Inc. This transaction was accounted for as a purchase and was effective as of October 1, 1997. The purchase price was $10,258,000, of which $4,822,000 was paid in cash at closing and other payments, the present value of which was $5,436,000, will be paid over 10 years using a discount rate of 8.5%. Goodwill of approximately $9,300,000 is being amortized over a twenty year life. 4. DISPOSITIONS AND DISCONTINUED OPERATIONS In March 1997, the Company sold substantially all of the assets and transferred significant operating liabilities of Disc Manufacturing, Inc. (DMI) to Cinram Ltd. The transaction excluded DMI's Huntsville, Alabama land and building as well as certain litigation related to DMI. During 1998, the Company recorded losses from discontinued operations of $6,138,000, or $0.76 per diluted share, which was net of an income tax benefit of $3,162,000. The losses were recorded to provide for current and anticipated costs associated principally with the Company's legal contingencies related to DMI. In March 1999, the Company assigned all of its rights to certain real property and a building located in Huntsville, Alabama to Cinram, Ltd. upon Cinram, Ltd.'s exercise of its option to purchase for the pre-agreed purchase price of $6,947,000, less certain adjustments of approximately $238,000. Also in March 1999, the Company recorded a gain of $240,000, or $.03 per diluted share, which was net of an income tax provision of $160,000, due to the reversal of certain accruals resulting from the favorable outcome of some legal proceedings. The following assets and (liabilities) relate to discontinued operations at June 30:
Dollar amounts in thousands 2000 1999 ------- ------- Deferred income tax assets.......................... $ 1,123 $ 1,603 Other assets ....................................... 300 Accrued legal ...................................... (401) (500) Lease obligations .................................. (1,313) (1,700) Other accruals ..................................... (1,168) (1,611) ------- ------- Net liabilities of discontinued operations.......... $(1,759) $(1,908) ------- -------
These assets and liabilities are valued based upon management's estimates, utilizing currently available information as of the balance sheet date. It is reasonably possible, however, that these estimates could change materially. 20 5. INVENTORIES Inventories consist of the following at June 30:
Dollar amounts in thousands 2000 1999 -------- -------- Finished goods.................................... $ 5,736 $ 3,941 Work-in-process .................................. 1,868 1,527 Raw materials .................................... 2,468 3,069 -------- -------- $ 10,072 $ 8,537 -------- --------
6. INTANGIBLE ASSETS Intangible assets consist of the following at June 30:
Dollar amounts in thousands 2000 1999 -------- -------- Goodwill ......................................... $ 26,138 $ 26,013 Patents and other intangibles..................... 1,193 1,178 Accumulated amortization ......................... (4,705) (3,153) -------- -------- $ 22,626 $ 24,038 -------- --------
7. LONG-TERM DEBT Long-term debt consists of the following at June 30:
Dollar amounts in thousands 2000 1999 -------- -------- Revolving credit note due October 31, 2002, interest at variable rates ............... $ 12,300 $ 8,000 Notes payable, interest imputed at 8.5% payable quarterly through 2007 ................. 3,416 4,085 Other ............................................ 510 538 -------- -------- Total long-term debt ............................. 16,226 12,623 Less current portion ........................... 630 722 -------- -------- Long-term debt, net .............................. $ 15,596 $ 11,901 -------- --------
The Company has a three-year unsecured revolving credit agreement with three banks. The agreement provides for a $40 million credit facility and contains both fixed and floating interest rate options, at the prime rate or lower, and contains affirmative and negative covenants including requirements that the Company maintain certain financial ratios and be profitable each year. The agreement may be renewed one additional year on each anniversary date upon mutual consent of the Company and the banks. At any time during the three years, the Company may elect to convert the loan to a four year term with equal quarterly principal payments due throughout the term to amortize the loan in full. The notes payable were entered into in connection with the acquisition of Roadway Safety Service, Inc. and are payable to several former owners and employees. The notes are payable quarterly over a five or ten year period. The aggregate amount of maturities of long-term debt for the four years subsequent to 2001 assuming renewal of the revolving credit note is as follows: $706,000 in 2002, $461,000 in 2003, $403,000 in 2004 and $435,000 in 2005. 8. STOCK OPTIONS AND STOCK TRANSACTIONS The Company has stock option plans for directors and employees, providing for grants of options as may be determined by the Compensation Committee of the Board of Directors. Options under the Long-Term Stock Ownership Incentive Plan (Incentive Plan) and the Director Stock Option Plan (Director Plan) are to be granted at no less than 100% of the current market price at the date of the grant. Options vest equally over not less than a two year period and have a term of five years under the Incentive Plan and ten years under the Director Plan. No charges are made to earnings in connection with the option plans. 21 Information with respect to stock option activity under the Company's plans is as follows:
Number of Option Price Weighted Average Common Shares per Share Exercise Price ------------- ------------ ---------------- July 1, 1997 .......... 872,274 $ 5.38 to $21.00 $ 9.19 Granted ............... 308,445 8.00 to 12.15 8.44 Exercised ............. (78,000) 5.88 to 6.88 6.27 Cancelled or expired... (115,424) 10.50 to 12.88 11.98 --------- June 30, 1998 ......... 987,295 5.38 to 21.00 9.88 Granted ............... 270,000 12.19 to 12.27 12.20 Exercised ............. (207,351) 5.38 to 10.50 7.65 Cancelled or expired (29,666) 8.00 to 8.95 8.36 --------- June 30, 1999 ......... 1,020,278 6.88 to 21.00 10.99 --------- Granted ............... 475,000 13.32 to 14.91 13.47 Exercised ............. (116,733) 8.00 to 12.63 9.32 Cancelled or expired (12,333) 12.15 to 12.19 12.18 --------- June 30, 2000 ......... 1,366,212 $ 6.88 to $21.00 $11.98 ---------
Options outstanding at June 30, 2000 are exercisable as follows: 709,050 currently, 253,184 in 2001, 237,326 in 2002 and 166,652 thereafter. The weighted average price of options currently exercisable is $10.95. As of June 30, 2000, the Company has 1,681,594 common shares reserved for its option and award plans. The following is the composition of the June 30, 2000 stock option balance:
Weighted Weighted average average exercise Options having a per remaining price per Number of share exercise price of: life share shares - ------------------------ ---------- --------- --------- $6.88 to $ 9.00 3.11 years $ 8.31 378,546 10.00 to 14.91 4.76 years 12.90 927,666 21.00 4.15 years 21.00 60,000 --------- $6.88 to $21.00 4.28 years $11.98 1,366,212 ---------
Had compensation cost for the Company's stock option plans been determined based on the fair value method for awards in 2000, 1999 and 1998 consistent with the provisions of FAS No. 123, the Company's net earnings (loss) and net earnings (loss) per diluted share would have been changed to the pro forma amounts indicated below: Dollar amounts in thousands, except per share data
2000 1999 1998 ---- ---- ---- Net earnings (loss),................. $ 8,202 $ 7,048 $ (598) Net earnings (loss) per diluted share 1.01 .86 (.08)
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
2000 1999 1998 ---- ---- ---- Risk free interest rate.............. 5.9%-6.6% 4.8%-5.1% 5.5%-6.5% Expected dividend yield.............. 2.08% 2.51% 3.04% Weighted-average expected volatility. 38% 47% 48% Weighted-average expected life....... 5.2 years 5.1 years 5.3 years
22 9. SHAREHOLDER RIGHTS PLAN The Company has a Shareholder Rights Plan (the Plan) which was established to deter coercive takeover tactics and to prevent an acquirer from gaining control of the Company without offering a fair price to all of the Company's stockholders. The Plan calls for stockholders of record as of July 14, 1998 to receive a dividend distribution of one right for each outstanding share of the Company's common stock. Each share issued after that date is also granted a right. Each right entitles the holder, upon the occurrence of certain events, to purchase a unit consisting of one one-thousandth of a share of Series A Junior Participating Preferred Stock, no par value, for $40 per unit. In addition, if an acquiring person becomes the beneficial owner of more than 15% of the Company's outstanding common stock, each right will entitle the holder (other than such acquiring person) to receive, upon exercise, common stock of the Company having a value equal to two times the exercise price of the right or $40. If after an acquiring person becomes the beneficial holder of more than 15% of the Company's outstanding common stock and then the Company is acquired in a merger or other business combination in which the Company would not be the surviving corporation or 50% or more of the Company's assets or earning power is sold, each holder shall have the right to receive, upon exercise, common stock of the acquiring corporation having a value equal to two times the exercise price of the right or $40. The Company may redeem the rights, for $.01 per right, under certain circumstances. 10. RETIREMENT PLANS The Company's Long-Term Stock Ownership Incentive Plan contains a provision for a retirement stock award program for certain key executives of the Company. The award consists of shares of the Company's common stock and cash ending with the fiscal year in which the executive attains his or her 62nd birthday. In order to receive each year's stock award, the executive must remain employed with the Company through the end of the fiscal year, unless excused by reason of death or other involuntary termination. Participants are also required to retain the shares awarded for as long as they are employed by the Company or until age 65. The size of each participant's annual award is determined under accepted actuarial principles to provide a retirement income based upon a percentage of the executive's projected compensation and length of service at retirement, but only if the Company's stock price appreciates at a sustained target rate. The Plan resulted in a charge to earnings of $284,000 in 2000, $306,000 in 1999 and $403,000 in 1998. The Company has an incentive savings plan covering substantially all employees of the Company. The plan allows qualified employees to make tax deferred contributions pursuant to Internal Revenue Code Section 401(k). The Company contributes a matching contribution based upon participants' compensation which is invested directly in the common stock of the Company. Additional discretionary company contributions may be made at the option of the Company's Board of Directors. The expense for the plan was $500,000 in 2000, $376,000 in 1999 and $269,000 in 1998. 11. INCOME TAXES The income tax provision (benefit) for continuing and discontinued operations consist of the following:
Dollar amounts in thousands 2000 1999 1998 ------- ------- ------- Current: Federal and international .... $ 3,834 $ 1,674 $ 1,786 State ........................ 631 389 390 ------- ------- ------- 4,465 2,063 2,176 ------- ------- ------- Deferred: Federal and international .... 1,094 1,403 360 State ........................ (93) 790 69 ------- ------- ------- 1,001 2,193 429 ------- ------- ------- Income tax provision for continuing operations ..... 5,466 4,256 2,605 Income tax provision (benefit) discontinued operations .... 160 (3,162) ------- ------- ------- Total income tax provision (benefit) .................. $ 5,466 $ 4,416 $ (557) ------- ------- -------
23 The components of the net deferred tax asset (liability) are as follows:
Dollar amounts in thousands 2000 1999 ------- ------- Deferred tax assets: Accounts receivable allowance ........... $ 382 $ 192 Inventory valuation ..................... 418 317 Compensated absences and medical claims.. 112 100 Tax over book basis in affiliates ....... 951 1,394 Other liabilities and reserves .......... 1,121 892 Net operating loss carryforwards ........ 459 230 Various tax credit carryforwards ........ 12 802 Provisions for discontinued operations... 1,123 1,603 Valuation allowance ..................... (1,053) (1,253) ------- ------- 3,525 4,277 Deferred tax liabilities: Book over tax basis of capital assets.... (1,798) (1,632) ------- ------- Net deferred tax asset .................. $ 1,727 $ 2,645 ------- -------
The valuation allowance relates principally to deferred tax assets that the Company estimates may not be realizable, including portions of tax over book basis in affiliates, net operating loss (NOL) carryforwards, capital loss carryforwards, and tax credit carryforwards. The decrease in the valuation allowance is due principally to the utilization of capital loss carryforwards. Based on management's assessment, it is more likely than not that the net deferred tax assets will be realized through future taxable earnings or implementation of tax planning strategies. At June 30, 2000, certain subsidiaries of the Company have approximately $8,824,000 of state net operating loss carryforwards for tax purposes. Certain limitations on utilization are present and realization of a significant portion of the carryforwards is uncertain. These carryforwards expire in years from 2001 through 2015. The net deferred tax asset (liability) consists of the following at June 30:
Dollar amounts in thousands 2000 1999 ------- ------- Continuing operations: Current deferred tax asset ......... $ 2,254 $ 2,491 Noncurrent deferred tax asset ...... 149 Noncurrent deferred tax liability... (1,799) (1,449) ------- ------- Total ......................... 604 1,042 ------- ------- Discontinued operations: Current deferred tax asset ......... 578 1,016 Noncurrent deferred tax asset ...... 545 587 ------- ------- Total ......................... 1,123 1,603 ------- ------- Total net deferred tax asset ............ $ 1,727 $ 2,645 ------- -------
The income tax provision differed from the taxes calculated at the statutory federal tax rate as follows:
Dollar amounts in thousands 2000 1999 1998 ------- ------- ------- Taxes at statutory rate ................. $ 4,914 $ 4,036 $ 2,975 State income taxes ...................... 354 778 303 Utilization of NOL carryforwards (1,260) Other ................................... 198 702 (673) ------- ------- ------- Income tax provision for continuing operations: ................ $ 5,466 $ 4,256 $ 2,605 ------- ------- -------
24 12. EARNINGS PER SHARE The computation of basic and diluted earnings per share is as follows:
Dollar amounts in thousands, except per share data 2000 1999 1998 --------- --------- --------- Net earnings per share of common stock: Basic .............................. $ 1.13 $ .98 $ .00 --------- --------- --------- Diluted ............................ $ 1.10 $ .95 $ .00 --------- --------- --------- NUMERATOR: Net earnings available to common shareholders... $ 8,919 $ 7,802 $ 9 --------- --------- --------- DENOMINATOR: Weighted average shares outstanding-basic.................... 7,868,554 7,986,094 7,943,653 Effect of dilutive securities- common stock options................ 256,069 241,681 144,701 --------- --------- --------- Weighted average shares outstanding-diluted................. 8,124,623 8,227,775 8,088,354 --------- --------- ---------
There were outstanding options to purchase common stock at prices that exceeded the average market price for the income statement period. These options have been excluded from the computation of diluted earnings per share and are as follows:
2000 1999 1998 --------- --------- --------- Average exercise price per share....... $ 19.21 $ 16.55 $ 14.04 Number of shares....................... 85,000 135,000 288,850
13. COMMITMENTS AND CONTINGENT LIABILITIES Aggregate rental expense under operating leases, principally for office and manufacturing facilities used in continuing operations, was $531,000 in 2000, $528,000 in 1999 and $477,000 in 1998. These operating leases include options for renewal. Annual minimum future rentals for lease commitments related to continuing operations range from approximately $628,000 in 2001 to $90,000 in 2005, an aggregate of $2,140,000 through 2005. The Company has agreements with certain executives which are designed to retain the services of key employees and to provide for continuity of management in the event of an actual or threatened change in control of the Company. Upon occurrence of a triggering event after a change in control, as defined, the Company would be liable for payment of benefits under these agreements. The Company is subject to legal actions of a routine manner and common to its businesses. The Company records loss contingencies where appropriate within the guidelines established by Statement of FAS No. 5, Accounting for Contingencies. In the opinion of management, based on the advice of legal counsel, the amount of liability, if any, arising from legal actions should not have a material effect on the Company's results of operations or financial condition. 14. SUPPLEMENTAL CASH FLOW STATEMENT DISCLOSURES Cash paid for interest was $929,000 in 2000, $974,000 in 1999 and $300,000 in 1998. Cash paid for income taxes was $4,250,000 in 2000 and $143,000 in 1999. The Company received refunds from income taxes of $1,388,000 in 1998. The Company declared dividends that were payable at year end of $1,117,000 in 2000, $1,128,000 in 1999 and $1,021,000 in 1998. In connection with the purchase of Nu-Metrics, Inc., the Company assumed long-term debt of $981,000 in 1999. 25 15. INDUSTRY SEGMENT INFORMATION During 1999, the Company adopted FAS No. 131, Disclosures about Segments of an Enterprise and Related Information about Capital Structure. This accounting pronouncement requires that a public business enterprise report financial and descriptive information about its reportable operating segments. Generally, financial information is required to be reported on the same basis that is used internally for evaluating segment performance and deciding how to allocate resources to segments. The Company's operations consist of one industry segment engaged in the manufacture and sale of highway safety products. Substantially all the sales of highway safety products are to distributors and contractors which then provide product and services to federal, state and local governmental units. The Company's business is conducted principally in the United States, with sales outside of the United States as follows: $9,820,000 in 2000, $6,316,000 in 1999 and $4,510,000 in 1998. 16. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized unaudited quarterly financial data for years 2000 and 1999 follows:
Dollar amounts in thousands, except per share data Three months ended 2000 9/30 12/31 3/31 6/30 ------------ ------------ ------------ ------------ Net sales .................................. $ 19,303 $ 16,228 $ 20,053 $ 28,186 Gross profit ............................... 9,273 7,167 9,744 14,927 Net earnings ............................... 1,912 1,072 1,484 4,451 Basic earnings per share ................... .24 .13 .19 .59 Diluted earnings per share.................. .23 .13 .18 .58 Dollar amounts in thousands, except per share data Three months ended 1999 9/30 12/31 3/31 6/30 ------------ ------------ ------------ ------------ Net sales .................................. $ 16,063 $ 14,802 $ 18,347 $ 22,775 Gross profit ............................... 7,236 6,327 8,249 11,821 Earnings from continuing operations ........ 1,642 918 1,133 3,869 Net earnings ............................... 1,642 918 1,373 3,869 Basic earnings per share: Continuing operations ..................... .21 .11 .14 .48 Net earnings .............................. .21 .11 .17 .48 Diluted earnings per share: Continuing operations ..................... .20 .11 .14 .47 Net earnings .............................. .20 .11 .17 .47
26 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Some of the information required in response to this item regarding Directors of the Registrant is set forth on pages 2 through 4 and page 21 of the Registrant's Definitive Proxy Statement for the Annual Meeting of Stockholders to be held on November 15, 2000 to be filed with the Commission on or about October 4, 2000 and is incorporated herein by reference. The executive officers of the Company, their ages and offices held by each during fiscal 2000 are as follows: Philip E. Rollhaus, Jr. 65 Chairman & Director - Quixote Corporation; Chairman - Energy Absorption Systems, Inc. Leslie J. Jezuit 54 President, Chief Executive Officer & Director - Quixote Corporation and Energy Absorption Systems, Inc.; Vice Chairman - Energy Absorption Systems, Inc. Daniel P. Gorey 49 Chief Financial Officer, Vice President & Treasurer - Quixote Corporation; Vice President & Treasurer - Energy Absorption Systems, Inc. Joan R. Riley 47 Vice President, General Counsel & Secretary - Quixote Corporation; Secretary - Energy Absorption Systems, Inc.
Mr. Rollhaus has been the Chairman and a Director of the Company since its formation in July 1969. Mr. Rollhaus also served since 1969 as Chief Executive Officer of the Company until his retirement from that position on September 30, 1999. In connection therewith, the Company entered into an employment agreement with Mr. Rollhaus extending his employment until June 30, 2000. Effective July 1, 2000, the agreement was extended to June 30, 2001. Mr. Jezuit joined the Company as President and Chief Operating Officer of Quixote Corporation in 1996. Prior to that time, Mr. Jezuit served as President and Chief Operating Officer of Robert Shaw Controls Company. Effective October 1, 1999 Mr. Jezuit assumed the position of Chief Executive Officer. Mr. Gorey joined the Company as Manager of Corporate Accounting in July 1985. He was made Controller of the Company in 1987, elected Vice President in 1994, and was elected Chief Financial Officer and Treasurer in November 1996. Ms. Riley joined the Company as Assistant General Counsel and Assistant Secretary in 1991, was elected General Counsel and Secretary in 1997 and a Vice President in 1999. There is no family relationship between any of the officers described above. None of the officers described above are party or otherwise involved in any legal proceedings adverse to the Company or its subsidiaries. 27 ITEM 11. EXECUTIVE COMPENSATION The information required in response to this item is set forth under the caption "Remuneration of Directors and Executive Officers" of the Registrant's Definitive Proxy Statement for the Annual Meeting of Stockholders to be held on November 15, 2000 to be filed with the Commission on or about October 4, 2000 and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required in response to this item is set forth under the caption "Stock Ownership of Certain Beneficial Owners" of the Registrant's Definitive Proxy Statement for the Annual Meeting of Stockholders to be held on November 15, 2000 to be filed with the Commission on or about October 4, 2000 and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required in response to this item is set forth under the caption "Certain Transactions and Business Relationships" of the Registrant's Definitive Proxy Statement for the Annual Meeting of Stockholders to be held on November 15, 2000 to be filed with the Commission on or about October 4, 2000 and is incorporated herein by reference. 28 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
ITEM PAGE NUMBER IN NUMBER THIS REPORT - ------ ----------- (a).1. FINANCIAL STATEMENTS Report of Independent Accountants 13 Consolidated Statements of Operations for the years ended June 30, 2000, 1999 and 1998 14 Consolidated Balance Sheets as of June 30, 2000 and 1999 15 Consolidated Statements of Shareholders' Equity for the years ended June 30, 2000, 1999 and 1998 16 Consolidated Statements of Cash Flows for the years ended June 30, 2000, 1999 and 1998 17 Notes to Consolidated Financial Statements 18-26 (a).2. FINANCIAL STATEMENT SCHEDULE The financial statement schedule listed under Item 14(d) is filed as part of this annual report. All other schedules have been omitted because the required information is included in the consolidated financial statements or notes thereto or because they are not applicable or not required. (a).3. The exhibits listed under Item 14(c) are filed as part of this annual report. (b). REPORTS ON FORM 8-K None. (c). EXHIBITS *Management contract or compensatory plan or agreement 3.(a) Restated Certificate of Incorporation dated February 4, 1998 filed as Exhibit 3(a) to the Company's Form 10-Q Report for the quarter ended December 31, 1997, File No. 0-7903, and incorporated herein by reference; Certificate of Designation, Preferences and Rights of Series B Junior Participating Preferred Stock dated July 24, 1998, filed as Exhibit 1 to the Company's Form 8-A Registration Statement dated July 23, 1998, File No. 001-08123, and incorporated herein by reference. (b) Amended and Restated By-Laws of the Company as amended through February 24, 2000, filed as Exhibit 3(b) to the Company's Form 10-Q Report for the quarter ended March 31, 2000, File No. 0-7903, and incorporated herein by reference. 29 4.(a) Rights Agreement dated as of July 24, 1998, between the Company and BankBoston, N.A, as Rights Agent, filed as Exhibit 1 to the Company's Form 8-A Registration Statement dated July 23, 1998, File No. 001-08123, and incorporated herein by reference. 10.(a) Amended and Restated Loan Agreement ("Loan Agreement") dated as of June 30, 1997 among Quixote Corporation and certain subsidiaries ("Quixote"), The Northern Trust Company ("Northern"), LaSalle National Bank ("LaSalle"), and American National Bank and Trust Company ("American")and Amended and Restated Revolving Credit Notes dated June 30, 1997 from the Company and certain of its subsidiaries to the Northern, LaSalle and American, filed as Exhibit 10(a) to the Company's Form 10-Q Report for the quarter ended September 30, 1997, File No. 0-7903, and incorporated herein by reference; First Amendment to the Loan Agreement dated May 31, 1998, filed as Exhibit 10(a) to the Company's Form 10-K Report for the fiscal year ended June 30, 1999, File No. 0-7903, and incorporated herein by reference; Second Amendment and Waiver to Loan Agreement and Restated Revolving Credit Notes dated as of March 15, 1999, filed as Exhibit 10(a) to the Company's Form 10-Q Report for the quarter ended March 31, 1999, File No. 0-7903, and incorporated herein by reference; Third Amendment and Waiver to Amended and Restated Loan Agreement and Amended and Restated Revolving Credit Notes all dated as of May 17, 2000, filed herewith. (b)* 1991 Director Stock Option Plan, as amended through August 16, 2000, filed herewith. (c)* 1993 Long-Term Stock Ownership Incentive Plan, as amended through August 16, 2000, filed herewith; Retirement Award Agreement dated as of June 30, 1997 between the Company and Daniel P. Gorey, filed as Exhibit 10(d) to the Company's Form 10-K Report for the fiscal year ended June 30, 1997, File No. 0-7903, and incorporated herein by reference; Retirement Award Agreement dated as of February 19, 1998 between the Company and Leslie J. Jezuit filed as Exhibit 10(a) to the Company's Form 10-Q Report for the quarter ended March 31, 1998 and incorporated herein by reference; Retirement Award Agreement dated as of February 19, 1998 between the Company and Joan R. Riley, filed as Exhibit 10(d) to the Company's Form 10-K Report for the fiscal year ended June 30, 1998, File No. 0-7903, and incorporated herein by reference. (d) Lease Agreement between the Company and United Insurance Company of America ("Company Lease") dated July 2, 1993, filed as Exhibit 10(j) to the Company's Form 10-K Report for the fiscal year ended June 30, 1993, File No. 0-7903, and incorporated herein by reference; Lease Amendment to Company Lease dated as of May 17, 1994, filed as Exhibit 10(h) to the Company's Form 10-K Report for the fiscal year ended June 30, 1994, File No. 0-7903, and incorporated herein by reference; Second Amendment to Company Lease dated January 30, 1995 and Third Amendment to Company Lease dated December 15, 1995, filed as Exhibits 10(b) and 10(c) to the Company's Form 10-Q Report for the quarter ended December 31, 1995, File No. 0-7903, and incorporated herein by reference; Fourth Amendment to Company Lease dated as of September 18, 1996 filed as Exhibit 10(b) to the Company's Form 10-Q Report for the quarter ended December 31, 1996 and incorporated herein by reference; Office Lease between Amberjack, Ltd. and Litigation Sciences, Inc. dated July 2, 1990, filed as Exhibit 10(a) to the Company's Form 10-Q Report for the quarter ended December 31, 1993, File No. 0-7903 and incorporated herein by reference; First Amendment to Office Lease between Amberjack Ltd. and Stenograph Corporation dated as of June 23, 1994, filed as Exhibit 10(h) to the Company's Form 10-K Report for the fiscal year ended June 30, 1994, File No. 0-7903, and incorporated herein by reference; Lease Agreement between TBC Place Partners, LLC and Highway Information Systems, Inc. dated August 9, 1999, filed as Exhibit 10(d) to the Company's Form 10-K Report for the fiscal year ended June 30, 1999, File No. 0-7903, and incorporated herein by reference. (e)* Executive Employment Agreement ("Employment Agreement") effective as of October 1, 1999 between the Company and Philip E. Rollhaus, Jr., filed as Exhibit 10(c)to the Company's Form 10-K Report for the fiscal year ended June 30, 1999, File No. 0-7903, and incorporated herein by reference; Amendment No.1 to Executive Employment Agreement effective as of July 1, 2000 between the Company and Philip E. Rollhaus, Jr. filed herewith; Letter Agreement dated December 15, 1995 between the Company and Leslie J. Jezuit, filed as Exhibit 10(d) to the Company's Form 10-Q Report for the quarter ended December 31, 1995, File No. 0-7903, and incorporated herein by reference; Change of Control Agreements dated December 1,1997 by and between the Company and each of Philip E. Rollhaus, Jr., Leslie J. Jezuit and Daniel P. Gorey, filed as Exhibit 10(f) to the Company's Form 10-Q Report for the quarter ended December 31, 1997, File No. 0-7903, and incorporated herein by reference; Change of Control Agreement dated December 1, 1997 between the Company and Joan R. Riley, filed as Exhibit 10(f) to the Company's 10-K Report for the fiscal year ended June 30, 1998, File No. 0-7903, and incorporated herein by reference. (f) Summary Plan Description for the Incentive Savings Plan of the Company Amended to Reflect Provisions Effective January 1, 2000, filed herewith. 30 (g) Asset Purchase Agreement made October 10, 1997, and effective October 1, 1997, by and between Quixote Corporation, TranSafe Corporation, Roadway Safety Service, Inc., Momentum Management, Inc., and Fitch Barrier Corporation; Exclusive License Agreement made October 10, 1997, and effective October 1, 1997, by and between Robert A. Mileti, Roadway Safety Systems, Inc., Quixote Corporation and TranSafe Corporation; Consulting Agreement made October 10, 1997, and effective October 1, 1997, by and between TranSafe Corporation and E. Scott Walter; Consulting Agreement made October 10, 1997, and effective October 1, 1997, by and between Quixote Corporation, Energy Absorption Systems, Inc., Roadway Safety Systems, Inc. and Robert A. Mileti, all filed as Exhibits 2.1, 2.2, 2.3 and 2.4 to the Company's Form 8-K Report dated October 10, 1997, File No. 0-7903, and incorporated herein by reference. (h) Partial Assignment of Lease and Equity in Project dated March 26, 1999 by and between Disc Manufacturing Inc. (n/k/a Quixote Laser Corporation), Cinram, Inc. and the Industrial Development Board of the City of Huntsville, and Termination of Sublease dated March 26, 1999 by and between Disc Manufacturing, Inc. (n/k/a Quixote Laser Corporation) and Cinram, Inc., filed as Exhibit 10(b) to the Company's Form 10-Q Report for the quarter ended March 31, 1999, File No. 0-7903, and incorporated herein by reference. 21. Subsidiaries of the Company 23. Consent of PricewaterhouseCoopers LLP as Independent Certified Public Accountants 27. Financial Data Schedule
(d) SCHEDULES: II - Valuation and Qualifying Accounts and Reserves 31 SIGNATURES Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunder duly authorized QUIXOTE CORPORATION (Registrant) Dated: September 27, 2000 By: /s/ Leslie J. Jezuit ------------------ ----------------------------------------- Leslie J. Jezuit, Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------- ----- ---- /s/ Philip E. Rollhaus, Jr. - --------------------------- Chairman and Director September 27, 2000 Philip E. Rollhaus, Jr. /s/ Leslie J. Jezuit - --------------------------- President and Director September 27, 2000 Leslie J. Jezuit (Chief Executive Officer) /s/ Daniel P. Gorey - --------------------------- Chief Financial Officer, Vice September 27, 2000 Daniel P. Gorey President and Treasurer (Chief Accounting and Financial Officer) /s/ Joan R. Riley Vice President, General Counsel September 27, 2000 - --------------------------- and Secretary Joan R. Riley /s/ James H. DeVries - --------------------------- Director September 27, 2000 James H. DeVries /s/ William G. Fowler - --------------------------- Director September 27, 2000 William G. Fowler /s/ Lawrence C. McQuade - --------------------------- Director September 27, 2000 Lawrence C. McQuade /s/ Robert D. van Roijen, Jr. - --------------------------- Director September 27, 2000 Robert D. van Roijen, Jr.
32 QUIXOTE CORPORATION & SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES For the years ended June 30, 2000, 1999 and 1998
Column A Column B Column C(b) Column D(a) Column E - -------- -------- ----------- ----------- -------- Additions Balance at Charged to Balance at Beginning of Costs and End of Description Period Expenses Deductions Period - ----------- ------------ ----------- ----------- ---------- Allowance for Doubtful Accounts: Year ended June 30, 2000 $ 480,000 $ 530,000 $ 55,000 $ 955,000 ========= ========= ========= ========= Year ended June 30, 1999 $ 565,000 $ (70,000) $ 15,000 $ 480,000 ========= ========= ========= ========= Year ended June 30, 1998 $ 165,000 $ 405,000 $ 5,000 $ 565,000 ========= ========= ========= =========
NOTES: (a) Column D represents accounts written off as uncollectible, net of collections on accounts previously written off. (b) Column C additions for 1998 include $400,000 related to the acquisition of Highway Information Systems. 33 EXHIBIT INDEX
EXHIBIT NUMBER EXHIBITS -------------- -------------------------------------------------------- 10(a) THIRD AMENDMENT AND WAIVER TO AMENDED AND RESTATED LOAN AGREEMENT AND AMENDED AND RESTATED REVOLVING CREDIT NOTES OF QUIXOTE CORPORATION. 10(b) QUIXOTE CORPORATION 1991 DIRECTOR STOCK OPTION PLAN AS AMENDED AUGUST 16, 2000. 10(c) QUIXOTE CORPORATION 1993 LONG-TERM STOCK OWNERSHIP INCENTIVE PLAN AS AMENDED AUGUST 16, 2000. 10(e) AMENDMENT NO. 1 TO EXECUTIVE EMPLOYMENT AGREEMENT EFFECTIVE AS OF JULY 1, 2000 BETWEEN QUIXOTE CORPORATION AND PHILIP E. ROLLHAUS, JR. 10(f) SUMMARY PLAN DESCRIPTION FOR INCENTIVE SAVINGS PLAN AMENDED JANUARY 1, 2000. 21 SUBSIDIARIES OF THE COMPANY. 23 CONSENT OF INDEPENDENT ACCOUNTANTS. 27 FINANCIAL DATA SCHEDULE
34 EX-10.(A) 2 a2025984zex-10_a.txt EXHIBIT 10(A) EXHIBIT 10(a) EXECUTION COPY THIRD AMENDMENT AND WAIVER TO AMENDED AND RESTATED LOAN AGREEMENT THIS THIRD AMENDMENT AND WAIVER TO AMENDED AND RESTATED LOAN AGREEMENT (this "THIRD AMENDMENT"), dated as of May 17, 2000, is among QUIXOTE CORPORATION, a Delaware corporation ("QUIXOTE"), ENERGY ABSORPTION SYSTEMS, INC., a Delaware corporation (f/k/a Quixote Laser Corporation and successor by merger to Energy Absorption Systems, Inc., a Delaware corporation and Roadway Safety Service, Inc., a Delaware corporation) ("EAS"), QUIXOTE TRANSPORTATION SAFETY, INC., a Delaware corporation (f/k/a TranSafe Corporation) ("TRANSPORTATION"), SPIN-CAST PLASTICS, INC., an Indiana corporation ("SPIN-CAST"), E-TECH TESTING SERVICES, INC., a Delaware corporation ("E-TECH"), SAFE-HIT CORPORATION, a Nevada corporation ("SAFE-HIT"), HIGHWAY INFORMATION SYSTEMS, INC., a Delaware corporation ("HIS"), NU-METRICS, INC., a Pennsylvania corporation ("NU-METRICS"), ENERGY ABSORPTION SYSTEMS PTY LIMITED, an Australian corporation ("EAS AUSTRALIA"), ENERGY ABSORPTION SYSTEMS (EUROPE), INC., a Delaware corporation ("EAS EUROPE"), TRANSAFE CORPORATION, a Delaware corporation ("TranSafe") certain lenders signatory hereto ("LENDERS"), and THE NORTHERN TRUST COMPANY, an Illinois banking corporation, as agent for the Lenders hereunder ("AGENT"). Quixote, EAS, Transportation, Spin-Cast, E-Tech, Safe-Hit, HIS, Nu-Metrics, EAS Australia, EAS Europe and TranSafe are individually and collectively referred to herein as "BORROWER." This Third Amendment shall amend that certain Amended and Restated Loan Agreement dated as of June 30, 1997 among the Borrower, the Lenders and the Agent, as previously amended by that certain First Amendment to Revolving Credit Agreement dated as of May 31, 1998 and that certain Second Amendment and Waiver to Amended and Restated Loan Agreement dated as of March 15, 1999 (as amended, restated, modified or supplemented, the "LOAN AGREEMENT"). WITNESSETH: WHEREAS, the Borrower, the Lenders and the Agent are parties or, pursuant to the terms of this Third Amendment, will become parties to the Loan Agreement; WHEREAS, on April 4, 2000, TranSafe Corporation, a Delaware corporation and a Borrower hereunder, changed its name to Quixote Transportation Safety, Inc., a Delaware corporation; WHEREAS, on March 22, 2000, a new entity named TranSafe Corporation was incorporated as a Delaware corporation and is herein referred to as "TranSafe"; WHEREAS, EAS Australia, EAS Europe and TranSafe are wholly-owned Subsidiaries of Quixote and Quixote desires to make each a Borrower under the Loan Agreement; WHEREAS, Energy Absorption Systems, Inc. (f/k/a Quixote Steno Corporation and successor by merger to Energy Absorption Systems, Inc. and Litigation Communications, Inc.) which was a Borrower under the Loan Agreement, merged with and into Quixote Laser Corporation (f/k/a Disc Manufacturing, Inc.), which was also a Borrower under the Loan Agreement, effective on December 31, 1999 and pursuant to that certain Agreement and Plan of Merger dated December 10, 1999. Pursuant to such Agreement and Plan of Merger, Quixote Laser Corporation, a Delaware corporation, was the surviving corporation and changed its name to Energy Absorption Systems, Inc. effective as of the date of the merger. WHEREAS, effective on March 31, 2000, Roadway Safety Service, Inc., a Delaware corporation, which was a Borrower hereunder, was merged with and into EAS with EAS as the surviving corporation pursuant to that certain Agreement and Plan of Merger dated as of March 21, 2000; WHEREAS, the Borrower has, among other amendments, requested an extension of one year on the maturity dates for the Revolving Credit Loans, the Conversion Date, and the Term Loans, and the Lenders and the Agent have agreed to amend the Loan Agreement in this and other respects as set forth herein; NOW, THEREFORE, the parties hereto hereby agree as follows: 1. AMENDMENTS TO THE LOAN AGREEMENT. 1.1 TERMS USED. Terms used but not otherwise defined herein are used with the same meanings as provided therefor in the Loan Agreement. 1.2 SECTION 1. SECTION 1 of the Loan Agreement is hereby amended as of the date hereof by: (a) deleting the references to the dates "October 31, 2001" and "October 31, 2005" in the definition of "Commitment Termination Date" and replacing them with the dates "October 31, 2002" and "October 31, 2006" respectively; (b) deleting the reference to the date "November 1, 2001" in the definition of "Conversion Date" and replacing it with the date "November 1, 2002"; and (c) deleting the definition of "Funded Debt" in its entirety and replacing it with the following in place thereof: ""Funded Debt" shall mean, with respect to any Person, all Indebtedness of such Person which by the terms of the agreement governing, or instrument evidencing, such Indebtedness matures more than one year from, or is directly or indirectly renewable or extendible at the option of the debtor under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of more than one year from, the date of creation thereof, including current maturities of long-term debt, revolving credit and short-term debt extendible beyond one year at the option of the debtor and, in respect of Borrower, including the Revolving Credit Loan, the Term Loan, the aggregate drawn amount of all outstanding Letters of Credit and Capital Lease Obligations. With respect to Borrower, "Funded Debt" shall also include, to the extent such Indebtedness is not -2- included above, the aggregate amount of all letters of credit issued by Borrower pursuant to clause (xi) of Section 7.3(a) and Guaranteed Indebtedness incurred by Borrower pursuant to Section 7.7." (d) inserting the following definition in alphabetical order therein: ""Adjusted Consolidated Net Worth" shall mean the sum of (a) Consolidated Net Worth plus (b) the lesser of (i) the amount of total consideration paid by the Borrower to acquire the Borrower's common stock after June 30, 2000 and retired or held by the Borrower as treasury stock under GAAP accounting or (ii) $3,200,000." 1.3 SECTION 6.3(a). SECTION 6.3(a) of the Loan Agreement is hereby amended by deleting such section in its entirety and replacing it with the following: "(a) at all times an Adjusted Consolidated Net Worth (which shall be certified by Quixote at the end of each Fiscal Year) equal to or greater than (i) $36,500,000, PLUS, (ii) 50% of Quixote's positive Consolidated Net Income for the 2001 Fiscal Year and each Fiscal Year thereafter." 1.4 SECTION 7.2. SECTION 7.2 of the Loan Agreement is hereby amended by deleting the last sentence thereto in its entirety and replacing it with the following: "Notwithstanding the foregoing, Borrower may (i) make investments in Subsidiaries (whether in the form of contributions to capital or otherwise) in excess of the amounts, if any, in effect on the initial Closing Date if and to the extent that such investments in Subsidiaries which are not Borrowers do not exceed $1,000,000 with respect to any one such Subsidiary or $3,000,000 in the aggregate with respect to all such Subsidiaries, and (ii) make cash investments in, or make or accrue loans or advances of money to any Person which is not a Borrower or Subsidiary if and to the extent that such investments, loans or advances do not exceed $2,000,000 with respect to any one such Person or $4,000,000 in the aggregate with respect to all such Persons; PROVIDED, HOWEVER, that Borrower shall only be entitled to make any such investment, loan or advance if prior to and after giving effect to such investment, loan or advance no Default or Event of Default shall have occurred and be continuing." 1.5 SECTION 7.3. SECTION 7.3(a) of the Loan Agreement is hereby amended by deleting clause (iv) thereof in its entirety and replacing it with "(iv) Guaranteed Indebtedness permitted under Section 7.7 hereof,". 1.6 SECTION 7.7. SECTION 7.7 of the Loan Agreement is hereby amended by adding the following at the end thereof: "Notwithstanding the foregoing, Quixote may guarantee a maximum of $1,000,000 of Indebtedness incurred by Transportation Management Technologies, L.L.C, a Delaware limited liability company, so long as the -3- obligations under any such guaranty are not secured by any Lien upon property owned by Borrower or any of its Subsidiaries." 1.7 SECTION 7.14. SECTION 7.14 of the Loan Agreement is hereby amended by deleting the reference to "1,000,000 shares of Stock" therein and replacing it with "1,500,000 shares of Stock." 1.8 DEFINITION OF "BORROWER". The parties hereto hereby agree that EAS Australia, EAS Europe and TranSafe will henceforth each individually be a "Borrower" under the Loan Agreement and, together with Quixote, EAS, Transportation, Spin-Cast, E-Tech,Safe-Hit, HIS and Nu-Metrics shall collectively henceforth be the "Borrower" under the terms of the Loan Agreement. The definition of "Borrower" set forth in the preamble to the Loan Agreement is hereby amended to mean the entities, individually and collectively, set forth in this SECTION 1.8. 1.9 EXHIBITS. EXHIBITS A, B, C and E to the Loan Agreement are deleted in their entirety and EXHIBITS A, B, C and E attached hereto are substituted in lieu thereof. 1.10 SCHEDULE 1. SCHEDULE 1 is attached hereto and made a part hereof and a part of the Loan Agreement. The Borrower has included the information set forth in SCHEDULE 1 in order to amend and supplement the information provided by the Borrower on the Closing Date in the various schedules to the Loan Agreement and in order to make the information contained therein accurate and complete as of the date hereof. 2. WAIVER. The Agent and the Required Lenders hereby waive any Default or Event of Default under SECTION 7.2 of the Loan Agreement arising out of the failure of Transportation to comply with the restrictions on investments not to exceed $1,000,000 imposed by such section in connection with its investment in Transportation Management Technologies, L.L.C., a Delaware limited liability company ("TMT"), pursuant to the terms of that certain Limited Liability Company Operating Agreement of TMT dated as of October 1, 1998. The waiver by the Agent and the Required Lenders as described above shall not operate as a consent or waiver of (i) any other right, power or remedy of the Agent or the Lenders under the Loan Documents, or (ii) any other Default or Event of Default under the Loan Agreement. Such waiver is only applicable and shall only be effective in the specific instance and for the specific purpose for which made or given. 3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby remakes, as at the date of execution hereof, all of the representations and warranties set forth in SECTION 4 of the Loan Agreement as amended hereby and as amended and supplemented by SCHEDULE 1 hereto, and additionally represents and warrants that: (a) the borrowings under the Loan Agreement as amended hereby, the execution and delivery by the Borrower of this Third Amendment and the performance by the Borrower of its obligations under this Third Amendment and the Loan Agreement as amended hereby are within the Borrower's corporate powers, have been authorized by all necessary corporate action, have received all necessary governmental approval (if any shall be required) and do not and will not contravene or conflict with any provision of law or of the charter or by-laws of the Borrower or any subsidiary or of any agreement binding upon the Borrower or any subsidiary; (b) no -4- Default or Event of Default under the Loan Agreement as amended hereby has occurred and is continuing on the date of execution hereof; and (c) the information provided herein and in SCHEDULE 1 hereto with respect to EAS Australia, EAS Europe and TranSafe, with respect to the mergers involving EAS and with respect to all other matters contained herein and therein, is true and complete in all respects and fully and completely amends and supplements all of the schedules provided by the Borrower pursuant to the Loan Agreement as necessary to make the information contained in such schedules accurate and complete as of the date hereof. 4. CONDITIONS OF EFFECTIVENESS. The effectiveness of this Third Amendment is subject to the conditions precedent that the Agent shall have received all of the following, in form and substance satisfactory to the Agent and its counsel, at the expense of the Borrower, and, as appropriate, dated as of the date hereof and in such number of signed counterparts as the Agent may request: (a) THIRD AMENDMENT. This Third Amendment; (b) RESOLUTIONS/INCUMBENCY. A certificate from the Secretary or Assistant Secretary of each Borrower certifying (i) the name(s) of the officer or officers of the Borrower authorized to sign this Third Amendment and the other documents provided for in this Third Amendment, together with a sample of the true signature of each such officer (the Agent may conclusively rely on each such certificate until formally advised by a like certificate of any changes therein), (ii) true and correct copies of any resolutions of the Board of Directors of each Borrower authorizing or ratifying the execution, delivery and performance of this Third Amendment, the Loan Agreement as amended hereby, the Amended and Restated Revolving Credit Notes and other documents provided for in this Third Amendment, (iii) for each of the certificates of Quixote, Spin-Cast, E-Tech, Safe-Hit, HIS and Nu-Metrics (A) there has been no change in the Certificate of Incorporation for such Borrower since June 30, 1997 or March 15, 1999, as applicable, and such Certificate of Incorporation is in full force and effect as of the date hereof and no steps have been taken by the directors or stockholders of such Borrower to effect or authorize any amendment or modification thereto and (B) true and correct copies of the Bylaws of each such entity; and (iv) for the certificates of each of EAS, EAS Australia, EAS Europe, Transportation and TranSafe, respectively, true and correct copies of (A) the Certificate of Incorporation, or equivalent charter document for EAS Australia, of each such entity, and all amendments thereto, as certified by the Secretary of State of the state of incorporation, or other appropriate Australian governmental authority, for each entity, and (B) the Bylaws, or equivalent document for EAS Australia, of each such entity; (c) NO DEFAULT - REPRESENTATIONS ACCURATE. A certificate of each Borrower, dated the date hereof, that (i) no Default or Event of Default has occurred and is continuing and (ii) all representations and warranties contained in the Loan Agreement as further amended hereby and as amended and supplemented by the information set forth in SCHEDULE 1 attached hereto, are true and complete as of the date hereof; -5- (d) AMENDED AND RESTATED REVOLVING CREDIT NOTES. An original Amended and Restated Revolving Credit Note dated as of the date hereof in the form of EXHIBIT B attached hereto in favor of each Lender and executed by each Borrower as replacements for the Amended and Restated Revolving Credit Notes executed and delivered on March 15, 1999 pursuant to SECTION 2.1(b) of the Loan Agreement; (e) RETURN AND CANCELLATION OF EXISTING REVOLVING CREDIT NOTES. The Amended and Restated Revolving Credit Notes executed and delivered on March 15, 1999 for cancellation and return to the Borrower; (f) DOCUMENTS RELATING TO MERGERS AND REORGANIZATION. Copies of (i) the Certificate of Merger certified by the Secretary of State of Delaware, the Agreement and Plan of Merger and other appropriate documents as required by the Agent relating to the December 31, 1999 merger involving EAS, and (ii) the Certificate of Merger certified by the Secretary of State of Delaware, the Agreement and Plan of Merger and other appropriate documents as required by the Agent relating to the March 31, 2000 merger involving Roadway Safety Service, Inc.. (g) GOOD STANDING CERTIFICATES. Good Standing Certificates for each of EAS Europe and TranSafe from the Secretaries of State of each state in which they are qualified to do business and an equivalent certificate from an appropriate governmental authority in Australia for EAS Australia; (h) LEGAL OPINION. The opinion of Joan R. Riley, General Counsel of Borrower, addressed to the Lenders and the Agent in the form of EXHIBIT D attached hereto and made a part hereof; (i) ACCOUNTANT'S LETTER. A letter to PricewaterhouseCoopers, L.L.P., the independent accountants for Borrower, in form and substance satisfactory to Agent, executed by the Borrower; and (j) MISCELLANEOUS. Such other documents as the Agent may request. 5. MISCELLANEOUS. 5.1 COUNTERPARTS. This Third Amendment may be executed by the parties on any number of separate counterparts and by each party on separate counterparts; each counterpart shall be deemed an original instrument; and all of the counterparts taken together shall be deemed to constitute one and the same instrument. 5.2 EXHIBITS AND SCHEDULES. All exhibits and schedules attached hereto are made a part hereof and incorporated herein as though fully set forth herein. 5.3 SUCCESSORS AND ASSIGNS. This Third Amendment and the Loan Agreement as amended hereby shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Agent and their respective successors and assigns. -6- 5.4 CAPTIONS. Captions in this Third Amendment are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. 5.5 FEES. The Borrower agrees to pay or reimburse the Agent for all reasonable costs and expenses of preparing and seeking advice in regard to this Third Amendment and any document or instrument executed in connection herewith and therewith (including legal fees and reasonable time charges of attorneys who may be employees of the Agent, whether in or out of court, in original or appellate proceedings or in bankruptcy). 5.6 CONSTRUCTION. THIS THIRD AMENDMENT, THE LOAN AGREEMENT AS AMENDED HEREBY AND ANY DOCUMENT OR INSTRUMENT EXECUTED IN CONNECTION HEREWITH OR THEREWITH SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. AGENT, EACH LENDER AND BORROWER AGREE TO SUBMIT TO PERSONAL JURISDICTION AND TO WAIVE ANY OBJECTION AS TO VENUE IN THE COUNTY OF COOK, STATE OF ILLINOIS. BORROWER AGREES NOTHING HEREIN SHALL PRECLUDE AGENT, ANY LENDER OR BORROWER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION. 5.7 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTON, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS THIRD AMENDMENT, ANY OF THE OTHER LOAN DOCUMENTS OR ANY OF THE OTHER AGREEMENTS. 5.8 AMENDMENT TO LOAN AGREEMENT. This Third Amendment shall be deemed to be an amendment to the Loan Agreement. All references to the Loan Agreement in any other document or instrument shall be deemed to refer to the Loan Agreement as amended hereby. As hereby amended, the Loan Agreement is hereby ratified and confirmed in each and every respect. [signature page to follow] -7- IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be executed by their duly authorized officers as of the day and year first written above. THE NORTHERN TRUST COMPANY, as Agent and as Lender By: /s/ Daniel A. Toll ---------------------------- Name: Daniel A. Toll Title: Vice President LASALLE BANK NATIONAL ASSOCIATION, as Lender By: /s/ Stephanie Patterson ---------------------------- Name: Stephanie Patterson Title: Assistant Vice President AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, as Lender By: /s/ Stacey J. Huels ---------------------------- Name: Stacey J. Huels Title: First Vice President -8- QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey ---------------------------------- --------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title(s): Vice President and Treasurer Title(s): Vice President and Treasurer HIGHWAY INFORMATION NU-METRICS, INC. SYSTEMS, INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey ---------------------------------- ---------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title(s): Vice President and Treasurer Title(s): Vice President and Treasurer E-TECH TESTING SERVICES, INC. SPIN-CAST PLASTICS, INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey ---------------------------------- ---------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title(s): Vice President and Treasurer Title(s): Vice President and Treasurer ENERGY ABSORPTION SYSTEMS SAFE-HIT CORPORATION (EUROPE), INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey ---------------------------------- ---------------------------------- Name: Daniel P. Gorey Title(s): Name: Daniel P. Gorey Vice President and Treasurer Title(s): Vice President and Treasurer QUIXOTE TRANSPORTATION ENERGY ABSORPTION SYSTEMS SAFETY, INC. PTY LIMITED By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey ---------------------------------- ---------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title(s): Vice President and Treasurer Title(s): Vice President and Treasurer TRANSAFE CORPORATION By: /s/ Daniel P. Gorey ---------------------------------- Name: Daniel P. Gorey Title(s): Vice President and Treasurer
-9- AMENDED AND RESTATED REVOLVING CREDIT NOTE (American National Bank and Trust Company of Chicago) $13,333,000 Chicago, Illinois May 17, 2000 FOR VALUE RECEIVED, the undersigned, QUIXOTE CORPORATION, ENERGY ABSORPTION SYSTEMS, INC. (f/k/a Quixote Laser Corporation and successor by merger to Energy Absorption Systems, Inc. and Roadway Safety Service, Inc.), TRANSAFE CORPORATION, SPIN-CAST PLASTICS, INC., E-TECH TESTING SERVICES, INC., SAFE-HIT CORPORATION, HIGHWAY INFORMATION SYSTEMS, INC., NU-METRICS, INC., ENERGY ABSORPTION SYSTEMS PTY LIMITED, ENERGY ABSORPTION SYSTEMS (EUROPE), INC. AND QUIXOTE TRANSPORTATION SAFETY, INC. (f/k/a TranSafe Corporation) (each individually a "Borrower" and collectively, the "Borrowers") hereby JOINTLY AND SEVERALLY PROMISE TO PAY to the order of AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO ("Lender"), or its registered assigns, at 30 South Wacker Drive, Chicago, Illinois 60606, or at such other place as the holder of this Note may designate from time to time in writing, in lawful money of the United States of America and in immediately available funds, the principal amount of THIRTEEN MILLION THREE HUNDRED THIRTY-THREE THOUSAND DOLLARS ($13,333,000), or such lesser principal amount as may be outstanding pursuant to the Loan Agreement (as hereinafter defined) with respect to the Revolving Credit Loan, together with interest on the unpaid principal amount of this note outstanding from time to time. This Note is the Revolving Credit Note referred to in, and evidences certain indebtedness incurred under, the Amended and Restated Loan Agreement dated as of June 30, 1997 (herein as it may be amended, modified or supplemented from time to time, the "Loan Agreement"), among each Borrower, "Lenders" (as defined therein) and The Northern Trust Company, as agent for such Lenders, and is entitled to the benefit and security of the "Loan Documents" (as defined in the Loan Agreement) provided for therein, to which reference is hereby made for a statement of all of the terms and conditions under which the loan evidenced hereby is made. All capitalized terms herein, unless otherwise defined, shall have the meanings ascribed to them in the Loan Agreement. The principal amount of the indebtedness evidenced hereby shall be payable in the amounts and on the dates specified in the Loan Agreement. Interest thereon, less any taxes payable by withholding, shall be paid until such principal amount is paid in full at such interest rates and at such times as are specified in the Loan Agreement. If any payment on this Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. Upon and after the occurrence of an Event of Default, this Note shall or may, as provided in the Loan Agreement, and without demand, notice or legal process of any kind, become or be declared immediately due and payable. The right to receive principal of, and stated interest on, this Note may only be transferred through Borrower's book entry system. Demand, presentment, protest and notice of nonpayment and protest are hereby waived by Borrower. This Note shall be interpreted, governed by, and construed in accordance with the internal laws of the State of Illinois. THIS NOTE, ISSUED AND DELIVERED ON THE DATE HEREOF TO THE AGENT, ON BEHALF OF THE LENDERS, IS ISSUED IN REPLACEMENT AND SUBSTITUTION FOR, AND NOT IN PAYMENT OF THAT CERTAIN AMENDED AND RESTATED REVOLVING CREDIT NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $13,333,000 DATED MARCH 15, 1999 (WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN AMENDED AND RESTATED REVOLVING CREDIT NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $13,333,000 DATED JUNE 30, 1997 WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $21,666,666 DATED MARCH 31, 1996 WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $23,333,333 DATED NOVEMBER 10, 1995) AND NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO DEEM PAID OR FORGIVEN THE UNPAID PRINCIPAL AMOUNT OF, OR UNPAID ACCRUED INTEREST ON, SAID NOTE AT THE TIME OF ITS REPLACEMENT BY THIS NOTE. * * * 2 IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Revolving Credit Note to be executed by their duly authorized officers as of the day and year first written above.
QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey ------------------------------- ------------------------------ Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer ENERGY ABSORPTION SYSTEMS TRANSAFE CORPORATION (EUROPE), INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey ------------------------------- ------------------------------ Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer HIGHWAY INFORMATION SYSTEMS, INC. SPIN-CAST PLASTICS, INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey ------------------------------- ------------------------------ Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer NU-METRICS, INC. SAFE-HIT CORPORATION By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey ------------------------------- ------------------------------ Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer E-TECH TESTING SERVICES, INC. QUIXOTE TRANSPORTATION SAFETY, INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey ------------------------------- ------------------------------ Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer ENERGY ABSORPTION SYSTEMS PTY LIMITED By: /s/ Daniel P. Gorey ------------------------------- Name: Daniel P. Gorey Title(s): Vice President and Treasurer
AMENDED AND RESTATED REVOLVING CREDIT NOTE (The Northern Trust Company) $13,334,000 Chicago, Illinois May 17, 2000 FOR VALUE RECEIVED, the undersigned, QUIXOTE CORPORATION, ENERGY ABSORPTION SYSTEMS, INC. (f/k/a Quixote Laser Corporation and successor by merger to Energy Absorption Systems, Inc. and Roadway Safety Service, Inc.), TRANSAFE CORPORATION, SPIN-CAST PLASTICS, INC., E-TECH TESTING SERVICES, INC., SAFE-HIT CORPORATION, HIGHWAY INFORMATION SYSTEMS, INC., NU-METRICS, INC., ENERGY ABSORPTION SYSTEMS PTY LIMITED, ENERGY ABSORPTION SYSTEMS (EUROPE), INC. AND QUIXOTE TRANSPORTATION SAFETY, INC. (f/k/a TranSafe Corporation) (each individually a "Borrower" and collectively, the "Borrowers") hereby JOINTLY AND SEVERALLY PROMISE TO PAY to the order of THE NORTHERN TRUST COMPANY ("Lender"), or its registered assigns, at 50 South LaSalle Street, Chicago, Illinois 60675, or at such other place as the holder of this Note may designate from time to time in writing, in lawful money of the United States of America and in immediately available funds, the principal amount of THIRTEEN MILLION THREE HUNDRED THIRTY-FOUR THOUSAND DOLLARS ($13,334,000), or such lesser principal amount as may be outstanding pursuant to the Loan Agreement (as hereinafter defined) with respect to the Revolving Credit Loan, together with interest on the unpaid principal amount of this note outstanding from time to time. This Note is the Revolving Credit Note referred to in, and evidences certain indebtedness incurred under, the Amended and Restated Loan Agreement dated as of June 30, 1997 (herein as it may be amended, modified or supplemented from time to time, the "Loan Agreement"), among each Borrower, "Lenders" (as defined therein) and The Northern Trust Company, as agent for such Lenders, and is entitled to the benefit and security of the "Loan Documents" (as defined in the Loan Agreement) provided for therein, to which reference is hereby made for a statement of all of the terms and conditions under which the loan evidenced hereby is made. All capitalized terms herein, unless otherwise defined, shall have the meanings ascribed to them in the Loan Agreement. The principal amount of the indebtedness evidenced hereby shall be payable in the amounts and on the dates specified in the Loan Agreement. Interest thereon, less any taxes payable by withholding, shall be paid until such principal amount is paid in full at such interest rates and at such times as are specified in the Loan Agreement. If any payment on this Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. Upon and after the occurrence of an Event of Default, this Note shall or may, as provided in the Loan Agreement, and without demand, notice or legal process of any kind, become or be declared immediately due and payable. The right to receive principal of, and stated interest on, this Note may only be transferred through Borrower's book entry system. Demand, presentment, protest and notice of nonpayment and protest are hereby waived by Borrower. This Note shall be interpreted, governed by, and construed in accordance with the internal laws of the State of Illinois. THIS NOTE, ISSUED AND DELIVERED ON THE DATE HEREOF TO THE AGENT, ON BEHALF OF THE LENDERS, IS ISSUED IN REPLACEMENT AND SUBSTITUTION FOR, AND NOT IN PAYMENT OF THAT CERTAIN AMENDED AND RESTATED REVOLVING CREDIT NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $13,334,000 DATED MARCH 15, 1999 (WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN AMENDED AND RESTATED REVOLVING CREDIT NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $13,334,000 DATED JUNE 30, 1997 WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $21,666,668 DATED MARCH 31, 1996 WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $23,333,334 DATED NOVEMBER 10, 1995) AND NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO DEEM PAID OR FORGIVEN THE UNPAID PRINCIPAL AMOUNT OF, OR UNPAID ACCRUED INTEREST ON, SAID NOTE AT THE TIME OF ITS REPLACEMENT BY THIS NOTE. * * * 2 IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Revolving Credit Note to be executed by their duly authorized officers as of the day and year first written above.
QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey ------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer ENERGY ABSORPTION SYSTEMS (EUROPE), INC. TRANSAFE CORPORATION By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey ------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer HIGHWAY INFORMATION SYSTEMS, INC. SPIN-CAST PLASTICS, INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey ------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer NU-METRICS, INC. SAFE-HIT CORPORATION By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey ------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer E-TECH TESTING SERVICES, INC. QUIXOTE TRANSPORTATION SAFETY, INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey ------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer ENERGY ABSORPTION SYSTEMS PTY LIMITED By: /s/ Daniel P. Gorey ------------------------------- Name: Daniel P. Gorey Title(s): Vice President and Treasurer
AMENDED AND RESTATED REVOLVING CREDIT NOTE (LaSalle Bank National Association) $13,333,000 Chicago, Illinois May 17, 2000 FOR VALUE RECEIVED, the undersigned, QUIXOTE CORPORATION, ENERGY ABSORPTION SYSTEMS, INC. (f/k/a Quixote Laser Corporation and successor by merger to Energy Absorption Systems, Inc. and Roadway Safety Service, Inc.), TRANSAFE CORPORATION, SPIN-CAST PLASTICS, INC., E-TECH TESTING SERVICES, INC., SAFE-HIT CORPORATION, HIGHWAY INFORMATION SYSTEMS, INC., NU-METRICS, INC., ENERGY ABSORPTION SYSTEMS PTY LIMITED, ENERGY ABSORPTION SYSTEMS (EUROPE), INC. AND QUIXOTE TRANSPORTATION SAFETY, INC. (f/k/a TranSafe Corporation) (each individually a "Borrower" and collectively, the "Borrowers") hereby JOINTLY AND SEVERALLY PROMISE TO PAY to the order of LASALLE BANK NATIONAL ASSOCIATION ("Lender"), or its registered assigns, at 120 South LaSalle Street, Chicago, Illinois 60603, or at such other place as the holder of this Note may designate from time to time in writing, in lawful money of the United States of America and in immediately available funds, the principal amount of THIRTEEN MILLION THREE HUNDRED THIRTY-THREE THOUSAND DOLLARS ($13,333,000), or such lesser principal amount as may be outstanding pursuant to the Loan Agreement (as hereinafter defined) with respect to the Revolving Credit Loan, together with interest on the unpaid principal amount of this note outstanding from time to time. This Note is the Revolving Credit Note referred to in, and evidences certain indebtedness incurred under, the Amended and Restated Loan Agreement dated as of June 30, 1997 (herein as it may be amended, modified or supplemented from time to time, the "Loan Agreement"), among each Borrower, "Lenders" (as defined therein) and The Northern Trust Company, as agent for such Lenders, and is entitled to the benefit and security of the "Loan Documents" (as defined in the Loan Agreement) provided for therein, to which reference is hereby made for a statement of all of the terms and conditions under which the loan evidenced hereby is made. All capitalized terms herein, unless otherwise defined, shall have the meanings ascribed to them in the Loan Agreement. The principal amount of the indebtedness evidenced hereby shall be payable in the amounts and on the dates specified in the Loan Agreement. Interest thereon, less any taxes payable by withholding, shall be paid until such principal amount is paid in full at such interest rates and at such times as are specified in the Loan Agreement. If any payment on this Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. Upon and after the occurrence of an Event of Default, this Note shall or may, as provided in the Loan Agreement, and without demand, notice or legal process of any kind, become or be declared immediately due and payable. The right to receive principal of, and stated interest on, this Note may only be transferred through Borrower's book entry system. Demand, presentment, protest and notice of nonpayment and protest are hereby waived by Borrower. This Note shall be interpreted, governed by, and construed in accordance with the internal laws of the State of Illinois. THIS NOTE, ISSUED AND DELIVERED ON THE DATE HEREOF TO THE AGENT, ON BEHALF OF THE LENDERS, IS ISSUED IN REPLACEMENT AND SUBSTITUTION FOR, AND NOT IN PAYMENT OF THAT CERTAIN AMENDED AND RESTATED REVOLVING CREDIT NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $13,333,000 DATED MARCH 15, 1999 (WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN AMENDED AND RESTATED REVOLVING CREDIT NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $13,333,000 DATED JUNE 30, 1997 WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $21,666,666 DATED MARCH 31, 1996 WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $23,333,333 DATED NOVEMBER 10, 1995) AND NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO DEEM PAID OR FORGIVEN THE UNPAID PRINCIPAL AMOUNT OF, OR UNPAID ACCRUED INTEREST ON, SAID NOTE AT THE TIME OF ITS REPLACEMENT BY THIS NOTE. * * * 2 IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Revolving Credit Note to be executed by their duly authorized officers as of the day and year first written above.
QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey -------------------------------- ------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer ENERGY ABSORPTION SYSTEMS TRANSAFE CORPORATION (EUROPE), INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey -------------------------------- ------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer HIGHWAY INFORMATION SYSTEMS, INC. SPIN-CAST PLASTICS, INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey -------------------------------- ------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer NU-METRICS, INC. SAFE-HIT CORPORATION By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey -------------------------------- ------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer E-TECH TESTING SERVICES, INC. QUIXOTE TRANSPORTATION SAFETY, INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey -------------------------------- ------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer ENERGY ABSORPTION SYSTEMS PTY LIMITED By: /s/ Daniel P. Gorey -------------------------------- Name: Daniel P. Gorey Title(s): Vice President and Treasurer
EX-10.(B) 3 a2025984zex-10_b.txt EXHIBIT 10(B) Exhibit 10(b) QUIXOTE CORPORATION 1991 DIRECTOR STOCK OPTION PLAN AMENDED AUGUST 16, 2000 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. 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 659,445 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 business day immediately preceding 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 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 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 2 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 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 3 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 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, 4 (3) there shall be consummated (A) any consolidation or merger of the Corporation in which the Corporation is not the continuing or surviving corporation or pursuant to which shares of the Corporation's Common Stock would be converted into cash, securities or other property, other than a merger of the Corporation in which the holders of the Corporation's Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Corporation or, (4) the stockholders of the Corporation approve a plan or proposal for the liquidation or dissolution of the Corporation. To the extent that the foregoing adjustments relate to stock or securities of the Corporation, such adjustments shall be made by the Committee, whose determination in that respect shall be final and binding and conclusive; provided that each option granted pursuant to this Plan which could qualify as an "incentive stock option" shall not be adjusted in a manner that causes the option to fail to continue as an "incentive stock option" within the meaning of Code Section 422A. Except as hereinbefore expressly provided in this Section 5(g), the optionee shall have no rights by reason of any subdivision or consolidation of shares of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any change of control, dissolution, liquidation, merger, or consolidation or spin-off of assets or stock of another corporation, and any issue of the Corporation of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to the option. The grant of an option pursuant to the Plan shall not affect in any way the right or power of the Corporation to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge, consolidate, dissolve, liquidate, sell, or transfer all or any part of its business or assets. (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, 5 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. 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 6 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. Date Plan was adopted by Board of Directors: August 19, 1991 Date Plan was approved by Stockholders: November 19, 1991 Date Plan was amended by Board of Directors: June 25, 1997 Date Plan was amended by Board of Directors: August 28, 1997 Date amended Plan was approved by Stockholders: November 19, 1997 Date Plan was amended by the Board of Directors: August 21, 1998 Date amended Plan was approved by Stockholders: November 18, 1998 Date Plan was amended by Board of Directors : September 10, 1999 Date amended Plan was approved by Stockholders: November 23, 1999 Date Plan was amended by Board of Director: August 16, 2000 7 EX-10.(C) 4 a2025984zex-10_c.txt EXHIBIT 10(C) Exhibit 10(c) QUIXOTE CORPORATION 1993 LONG-TERM STOCK OWNERSHIP INCENTIVE PLAN As Amended August 16, 2000 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 last reported sales price determined in the regular way or, in case no such reported sales takes place on such day, the average of the last reported bid and asked prices determined in the regular way, in either case on the principal national securities exchange on which the Stock is admitted to trading or listed, or if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices as reported by NASDAQ or other similar organization if NASDAQ is no longer reporting such information, or if not so available, the fair market price as determined by the Board. (i) "Disability" means, as relates to the exercise of an Incentive Stock Option after termination of employment, a disability within the meaning of Section 22(e)(3) of the Code, and for all other purposes, a mental or physical condition which, in the opinion of the Committee, renders a Grantee unable or incompetent to carry out the job responsibilities which such Grantee held or the tasks to which such Grantee was assigned at the time the disability was incurred, and which is expected to be permanent or for an indefinite duration exceeding one year. (j) "Effective Date" means June 30, 1993; provided that the Plan and any Retirement Awards granted prior to the 1993 annual meeting of the Company's stockholders are subject to approval of the Plan by the stockholders at such annual meeting. (k) "Grant Date" means the date on which the Committee grants the Award or such later date as specified in advance by the Committee; provided however, that references to the Grant Date of an option under this Plan shall, with respect to options granted under the 1991 Plan prior to stockholder approval of the Plan, refer to the date of grant of such option under the 1991 Plan. (l) "Grantee" means an individual who has been granted an Award. (m) "Including" or "includes" means "including, without limitation," or "includes, without limitation." (n) "1934 Act" means the Securities Exchange Act of 1934, as amended. References to a particular section of, or rule under, the 1934 Act shall include references to successor provisions. (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. 2 (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 Eight Hundred and Ninety-Five Thousand (1,895,000) shares of Stock are hereby made available and reserved for delivery on account of Awards and the exercise of Awards, with One Million Five Hundred and Forty-Five Thousand (1,545,000) shares of Stock being made available and reserved for delivery on account of options and Three Hundred Fifty Thousand (350,000) shares of stock being made available and reserved for delivery on account of Retirement Stock Awards. The limitations established by the preceding sentences shall be subject to adjustment as provided in Section 18 of the Plan. Such shares may be treasury shares, newly issued shares, or shares purchased on the open market (including private purchases) in accordance with applicable securities laws, or any combination of the foregoing, as may be determined from time to time by the Board or the Committee. (b) To the extent an Award shall expire or terminate for any reason without having been exercised in full (including a cancellation and re-grant of an option), or shall be forfeited, without, in either case, the Grantee having enjoyed any of the benefits of Stock ownership (other than voting rights or dividends that are also forfeited), the shares of Stock (including Retirement Stock) associated with such Award shall become available for other Awards. (c) For purposes of this Section 3, (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 3 the aggregate number of shares of Stock available for granting Retirement Stock Awards under the Plan; and (ii) the shares of Stock underlying outstanding options (without respect to any vesting schedule) shall be counted while the Award is outstanding against the aggregate number of shares of Stock available for granting Awards under the Plan; and (iii) in the event of a stock-for-stock exercise of an option, the gross number of shares of Stock subject to the option exercised, not the net number of shares actually issued upon exercise shall be counted against the aggregate number of shares of Stock available for granting Awards under the Plan. 4. ADMINISTRATION (a) Subject to Section 4(b), the Plan shall be administered by a committee ("Committee") which shall consist of not less than three persons who are Directors of the Company and who are not employees of the Company. Membership on the Committee shall be subject to such other limitations as the Board deems appropriate to permit transactions in Stock pursuant to the Plan to be exempt from liability under Section 16(b) of the 1934 Act pursuant to Rule 16b-3 thereunder. Unless the Board adopts a resolution naming other individuals to serve on the Committee, the Committee shall consist of all Directors of the Company who are not employees of the Company. The Board may from time to time remove members from, or add members to the Committee. Vacancies on the Committee, however caused, shall be filled by the Board. The Committee shall select one of its members as Chairman, and shall hold meetings at such times and places as it may determine. A majority of the Committee at which a quorum is present, or acts approved in writing by all of the members of the Committee, shall be the valid acts of the Committee. No member of the Committee shall be eligible to receive any grant of any Awards under this Plan. (b) The Committee, unless otherwise determined by the Board, shall have full and final authority, in its discretion, but subject to the express provisions of the Plan, as follows: (i) to grant Awards; (ii) to determine (A) when Awards may be granted, and (B) whether or not specific Awards shall be identified with other specific Awards, and if so, whether they shall be exercisable cumulatively with or alternatively to such other specific Awards; (iii) to interpret the Plan and to make all determinations necessary or advisable for the administration of the Plan; (iv) to prescribe, amend, and rescind rules and regulations relating to the Plan, including rules with respect to the exercisability and non-forfeitability of Awards upon the termination of employment of a Grantee; (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 4 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 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; (viii) subject to Section 6(c), to extend the time during which any Award or group of Awards may be exercised; (ix) 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 (x) to impose such additional conditions, restrictions, and limitations upon the grant, exercise or retention of Awards as the Committee may, before or concurrently with the grant thereof, deem appropriate, including requiring simultaneous exercise of related identified Awards, and limiting the percentage of Awards which may from time to time be exercised by a Grantee. The determination of the Committee on all matters relating to the Plan or any Award Agreement shall be conclusive and final. No member of the Committee or the Board shall be liable for any action or determination made in good faith with respect to the Plan or any Award. (c) The Board may, in its discretion, reserve to itself or delegate to another committee of the Board, any or all of the authority and responsibility of the Committee with respect to Awards to Grantees who are not Section 16 Grantees at the time any such delegated authority or responsibility is exercised. Such other committee may consist of two or more Directors who may, but need not be, officers or employees of the Company or of any of its Subsidiaries. To the extent that the Board has reserved to itself or delegated to such other committee the authority and responsibility of the Committee, all references to the Committee in the Plan shall be to the Board or such other committee. 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 5 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 business day immediately preceding the Grant Date. (c) Any option granted under this Plan may be considered a Incentive Stock Option to the extent that it: (i) shall only be granted to individuals who are employed by the Company or any of its Subsidiaries on the Grant Date; (ii) shall not be granted to a 10% Owner unless the Option Price is at least 110% of the Current Market Price of the Stock subject to such option on the Grant Date and shall be exercisable for a period of not more than five (5) years from the Grant Date; (iii) except as provided in (ii) above, shall be exercisable for a period of not more than 10 years from the Grant Date, and shall be subject to earlier termination as provided herein or in the applicable Award Agreement; (iv) shall not have an aggregate fair market value (determined for each Incentive Stock Option at its Grant Date) of Stock with respect to which Incentive Stock Options are exercisable for the first time by such Grantee during any calendar year (under the Plan and any other employee stock option plan of the Grantee's employer or any parent or Subsidiary thereof determined in accordance with the provisions of Section 422 of the Code), which exceeds $100,000; and (v) shall require the Grantee to notify the Company of any disposition of any Stock issued pursuant to the exercise of the Incentive 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 6 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)(vii) and such terms and conditions as the Committee may impose, each option shall be exercisable in one or more installments. Each option shall be exercised by delivery to the Company of written notice of intent to purchase a specific number of shares of Stock subject to the option. The Option Price of any shares of Stock as to which an option shall be exercised shall be paid in full at the time of the exercise. Payment may, at the election of the Grantee, be made in any one or any combination of the following: (i) United States dollars in cash or by check; (ii) Stock held by the Grantee for at least 6 months prior to exercise of the option, valued at its Current Market Price on the date of written notice of optionee's election to exercise the option; or (iii) with the approval of the Committee, shares of Retirement Stock held by the Grantee for at least 6 months prior to exercise of the option, valued at the Current Market Price of a share of Stock on the date of exercise. (g) Except as expressly provided in this Plan or the Award Agreement, no option may be exercised prior to twelve months from its Grant Date. Subject to the right of cumulation provided in the next sentence of this Section 6(g), each option shall be exercisable to the extent provided for in the Award Agreement as determined by the Committee in its discretion. To the extent not exercised, installments shall accumulate and be exercisable, in whole or in part, in any subsequent period, prior to the expiration of the term described in the Award Agreement, provided that no option may be exercised more than ten years from its Grant Date. Notwithstanding the preceding sentence, in the event that the optionee is a 10% Owner (determined on the Grant Date) of the Company, no option intended to qualify as an Incentive Stock Option may be exercised more than five years from the date it is granted. During the lifetime of the optionee, the option shall be exercisable only by him and shall not be assignable or transferable by him and no other person shall acquire any rights therein. (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 7 or absence for military or governmental service, or any other reason, shall constitute termination of employment, for the purposes of the Plan, shall be determined by the Committee, which determination shall be final and conclusive. (i) (i) In the event an optionee terminates his employment with the Company or any Subsidiary because of a Disability, the Disabled optionee or a lawfully appointed custodian thereof may exercise an option granted pursuant to this Plan for a period of twelve months from the date of termination of employment to the extent his right to exercise such option had not expired pursuant to Section 6(g) of this Plan and had not previously been exercised at the date of such termination. (ii) If the employment of an optionee with the Company or any Subsidiary is terminated by reason of the optionee's Retirement and the optionee has been in the employ of either the Company or a Subsidiary continuously from the date such option was granted until such Retirement (except for leaves of absence approved in writing by the President of the Company or the President of the Subsidiary for which the optionee works), the entire unexercised portion of such option may be exercised by the optionee at any time or times in whole or in part during the three-month period after such retirement to the extent that such three-month period is included in the remainder of such option's term. (j) If the optionee shall die while in the employ of the Company or any Subsidiary and shall not have fully exercised the option, the unexercised portion of an option may be exercised at any time within one year after the optionee's death by the executors or administrators of the optionee or by any person or persons who shall have acquired the option directly from the optionee by bequest or inheritance, subject to the condition that no option shall be exercisable after the expiration of ten years from its Grant Date (five years for an optionee under an Incentive Stock Option who is a 10% Owner on the Grant Date). No option shall be transferable by the optionee otherwise than by will or the laws of descent and distribution. 7. TERMS AND CONDITIONS OF RETIREMENT AWARDS 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 8 the delivery of the shares and in any event no later than 10 days after the Grant Date for such shares. In the discretion of the Committee and to the extent permitted by law, payment may also be made in accordance with Section 11. (c) Each Retirement Award Agreement shall state the number of shares of Stock and the amount of cash to which it pertains. (d) The Retirement Award Agreement shall provide for an aggregate Award of Retirement Stock which the Company will agree to issue and deliver to the Grantee. Such Retirement Stock Award will be issued and delivered to the Grantee in equal annual installments commencing with the Grant Date and continuing over a period of years to be determined by the Committee and set forth in the Retirement Award Agreement, subject to the requirement that the Grantee be employed by the Company or any Subsidiary on the last day of the fiscal year in which Retirement Stock is issued and delivered; provided however, the Retirement Award Agreement may include a provision which excepts from this requirement the Grantee's death, disability or other involuntary termination of employment (excluding for cause) which occurs during the same fiscal year. Unless otherwise provided in the Agreement, the Retirement Award Agreement will have an initial term of five (5) years. In its discretion, the Committee may provide that the term of a Retirement Award Agreement be automatically extended for additional one-year periods until the Company gives the Grantee notice of its intention not to extend the Agreement at the end of its then-current term. (e) The Grantee may not sell, transfer, pledge, hypothecate, or otherwise transfer any shares of Retirement Stock he or she receives under the Plan during any period in which he or she is employed by the Company or any Subsidiary; provided, however, that following the earlier of (i) termination of the employment of the Grantee with the Company or any Subsidiary or (ii) the Grantee's attainment of normal retirement age (whether or not Grantee actually retires), all such restrictions with respect to Retirement Stock which has been issued and delivered to such Grantee prior to such time shall terminate. Notwithstanding the above, no Grantee may sell, transfer, pledge, hypothecate any shares of Retirement Stock he or she receives during the six months immediately following the later of Grant Date or the date the Plan is approved by the Company's stockholders unless the Grantee dies before the 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 9 Stock being issued in such year on the date of such issuance (unless the Committee approves an adjustment to that formula). (g) The Retirement Award shall be issued and delivered to the Grantee in accordance with the terms set forth in the Retirement Award Agreement; provided, however, that the Company shall have no obligation to issue or deliver any Retirement Award under a Retirement Award Agreement to any Grantee following (i) the termination of his employment with the Company or its Subsidiaries or (ii) any breach of the Grantee's obligations under the Retirement Award Agreement. (h) Any other provision of the Plan or the Retirement Award Agreement to the contrary notwithstanding, the Committee may at any time remove or limit any restrictions, if it determines that conditions, including but not limited to, changes in the economy, changes in competitive conditions, changes in laws or government regulations, changes in generally accepted accounting principles, changes in the Company's accounting policies, acquisitions or dispositions, or the occurrence of other unusual, unforseen, or extraordinary events, so warrant. (i) Notwithstanding the fact that the Company delivers notice of its intention not to extend the term of a Retirement Award Agreement at the end of its then current term (if such Agreement provides for such a notice), the Company shall remain obligated to issue and deliver all scheduled annual Retirement Awards in accordance with the Retirement Award Agreement. 8. NOTIFICATION UNDER CODE SECTION 83(b) The Committee may, on the Grant Date or any later date, prohibit a Grantee from making the election described in this Section 8. If the Committee has not prohibited such Grantee from making such election, and the Grantee, in connection with the exercise of any option or the grant of Retirement Stock, makes the election permitted under Section 83(b) of the Code (i.e., an election to include in such Grantee's gross income in the year of transfer the amounts specified in Section 83(b) of the Code), such Grantee shall notify the Company of such election within 10 days of filing notice of the election with the Internal Revenue Service, in addition to any filing and 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 10 in Section 8 is made, then the person making such disqualifying disposition or election shall remit to the Company an amount sufficient to satisfy all federal, state, and local withholding taxes thereby incurred; provided that, in lieu of or in addition to the foregoing, the Company shall have the right to withhold such sums from compensation otherwise due to the Grantee or from any shares of Stock due to the Grantee under the Plan. 10. LOANS With the approval of the Committee, the Grantee may borrow from the Company all or any portion of the funds needed to pay the Option Price or to pay for Retirement Stock on such terms and conditions as the Committee deems appropriate, provided that (i) the interest rate for any such loan by the Company shall not be less than the "applicable federal rate" (as defined by Code Section 1274(d)(1)(A)) in effect on the date of such loan or any other rate as necessary to avoid the imputation of interest under the Code or other applicable law, (ii) proceeds of the loan are used solely to pay either the exercise price of an option or to pay for Retirement Stock granted pursuant to this Plan, and (iii) the Grantee executes a promissory note and such other documents as the Committee deems appropriate to evidence the Grantee's indebtedness to the Company, and pledges the Stock received in exchange for such borrowed funds as Collateral for such loan. 11. SECURITIES LAW MATTERS (a) If the Committee deems it necessary to comply with the Securities Act of 1933, Committee may require a written investment intent representation by the Grantee and may require that a restrictive legend be affixed to certificates for shares of Stock. (b) If, based upon the opinion of counsel for the Company, the Committee determines that the exercise or non-forfeitability of, or delivery of benefits pursuant to, any Award would violate any applicable provision of (i) federal or state securities laws or (ii) the listing requirements of any national securities exchange on which are listed any of the Company's equity securities, then the Committee may postpone any such exercise, non-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 11 that any person acquires a right to receive payments from the Company or any Subsidiary pursuant to an Award, such right shall be no greater than the right of an unsecured general creditor of the Company or any Subsidiary. The Board shall cause the Company to reserve shares of Stock from its authorized but unissued shares for the purpose of making available shares of Stock to fund the Awards. 13. NO EMPLOYMENT RIGHTS Neither the establishment of the Plan, nor the granting of any Award nor the execution of an Award Agreement shall be construed to (a) give any Grantee the right to remain employed by the Company or any of its Subsidiaries or to any benefits not specifically provided by the Plan or an Award Agreement, or (b) in any manner modify the right of the Company or any of its Subsidiaries to modify, amend, or terminate any of its employee benefit plans. Further, the Company or Subsidiary may at any time dismiss a Grantee from employment, free from any liability, or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement. 14. RIGHTS AS A STOCKHOLDER A Grantee shall not, by reason of any Award have any right as a stockholder of the Company with respect to the shares of Stock which may be deliverable in the future upon exercise of such Award, or otherwise as provided in an Award Agreement, until Stock has been actually issued and delivered to the Grantee. Shares of Retirement Stock issued and delivered to a Grantee in accordance with the Retirement Award Agreement shall confer on the Grantee all rights of a stockholder of the Company, except as otherwise provided in the Plan or the specific Retirement Award Agreement. 15. NATURE OF PAYMENTS Any and all grants, payments of cash, or deliveries of shares of Stock hereunder shall constitute special incentive payments to the Grantee and shall not be taken into account in computing the amount of salary or compensation of 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. 12 17. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION (a) Subject to any required action by the Stockholders, the Committee shall make such adjustment, as it shall deem equitable, to any or all of: (i) the aggregate numbers of shares of Stock available under Sections 3(a) and 3(b); (ii) the number of shares of Stock subject to an option or shares of Retirement Stock covered by an Award; (iii) the Option Price; (iv) the Retirement Cash Award; (v) any other terms or provisions of any outstanding grants of options or Retirement Awards: to reflect a stock dividend, stock split, reverse stock split, share combination, recapitalization, merger, consolidation, acquisition of property or shares, separation, asset spin-off, reorganization, stock rights offering, liquidation or similar event, of or by the Company, or, if deemed appropriate, the Committee may make provisions for a cash payment to the holder of an outstanding Award; provided, however, if the Company shall be the surviving corporation in any merger or consolidation, each outstanding option or Award Agreement shall pertain to and apply to the securities to which a holder of the number of shares of Stock subject to the option or Award Agreement would have been entitled; and provided further, upon a dissolution or liquidation of the Company, or a merger or consolidation in which the Company is not the surviving corporation, or a change in control of the Company, as defined in subsection (b) below, each optionee shall have the right to exercise his option in whole or in part notwithstanding the provisions of Section 6(g) 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 13 the Outside Directors, unless the election of each Outside Director, who was not an Outside Director at the beginning of such period, was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period; or, (iii) there shall be consummated (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, or, (iv) the stockholders of the Company approve a plan or proposal for the liquidation or dissolution of the Company. (c) In the event of a change in the Stock of the Company as presently constituted, which is limited to a change of all of its authorized shares with par value into the same number of shares with a different par value or without par value, the shares resulting from any such change shall be deemed to be the Stock within the meaning of the Plan. (d) Except as hereinbefore expressly provided in this Section 18, the Grantee shall have no rights by reason of any subdivision or consolidation of shares of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any change of control, dissolution, liquidation, merger, or consolidation or spin-off of assets or stock of another corporation, and any issue of the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Stock subject to Awards. 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. 14 Except as provided in this Section 19, the Board shall, from time to time, revise, modify, or amend the Plan, in part or in total, without approval of the stockholders, as may be necessary to satisfy the requirements of the Code and any amendments or revisions thereof, such that certain stock options which are granted under the Plan may qualify as Incentive Stock Options, and to satisfy all other applicable laws and regulations. 19. TERMINATION OF THE PLAN The Plan shall terminate on the tenth (10th) anniversary of the Effective Date or at such earlier time as the Board may determine. Any termination, whether in whole or in part, shall not affect any Award then outstanding under the Plan. 20. OTHER COMPENSATION PLANS Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases. 21. NO ILLEGAL TRANSACTIONS The Plan and all Awards granted pursuant to it are subject to all laws and regulations of any governmental authority which may be applicable thereto; and notwithstanding any provision of the Plan or any Award, Grantees shall not be entitled to exercise Awards or receive the benefits thereof and the Company shall not be obligated to deliver any Stock or pay any benefits to a Grantee if such exercise, delivery, receipt or payment of benefits would constitute a violation by the Grantee or the Company of any provision of any such law or regulation. 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 15 to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid. 25. INDEMNIFICATION Each person who is or at any time serves as a member of the Board or the Committee shall be indemnified and held harmless by the Company against and from: (i) any loss, cost, liability or expense, including attorneys' fees actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit, or proceeding to which such person may be a party or in which such person may be involved by reason of any action or failure to act under the Plan; and (ii) any and all amounts paid by such person in satisfaction of judgment in any such action, suit or proceeding relating to the Plan. Each person covered by this indemnification provision shall give the Company an opportunity, at its own expense, to handle and defend the same before such person undertakes to handle and defend it on such person's own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the By-Laws of the Company, as a matter of law, or otherwise, or any power that the Company may have to indemnify such person or hold such person harmless. 26. RELIANCE ON REPORTS Each member of the Board and the Committee shall be fully justified in relying or acting in good faith upon any report made by the independent public accountants of, or counsel for, the Company and upon any other information furnished in connection with the Plan. In no event shall any person who is or shall have been a member of the Board or the Committee be liable for any 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 16 Date Plan was amended by Board of Directors: June 25, 1997 Date Plan was amended by Board of Directors: August 28, 1997 Date amended Plan was approved by Stockholders: November 19, 1997 Date Plan was amended by Board of Directors: August 21, 1998 Date amended Plan was approved by stockholders: November 18, 1998 Date Plan was amended by Board of Directors: September 10, 1999 Date amended Plan was approved by stockholders: November 23, 1999. Date Plan was amended by Board of Directors: August 16, 2000 Date amended Plan was approved by stockholders: 17 EX-10.(E) 5 a2025984zex-10_e.txt EXHIBIT 10(E) Exhibit 10(e) AMENDMENT NO. 1 TO EXECUTIVE EMPLOYMENT AGREEMENT This Amendment No. 1 to Executive Employment Agreement, effective as of July 1, 2000, is made between QUIXOTE CORPORATION, a Delaware Corporation, (hereinafter referred to as "the Company") and Philip E. Rollhaus, Jr. of Chicago, Illinois, (hereinafter referred to as "the Executive.") RECITALS WHEREAS, the Company and the Executive are parties to an Executive Employment Agreement effective as of October 1, 1999 ("Agreement") which by its terms expires at the close of business on June 30, 2000. WHEREAS, the Company and the Executive wish to extend the term of the Agreement and codify certain other agreements between them. NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the parties, the Company and the Executive hereby agree as follows: 1. The term of the Agreement shall be extended to June 30, 2001. 2. The Company hereby transfers to the Executive, or his designee, all right, title and interest in the Company-owned BMW automobile currently utilized by the Executive and identified as VIN No. WBAGJ 8321 WDM 17522. The Company and the Executive will cooperate to execute and deliver any other documents necessary to convey the right, title and interest to this automobile. The parties agree that the Company will have no other obligation to the Executive with respect to an automobile as provided in Section 3(d) of the Agreement. 3. (a) The Executive hereby waives, releases and discharges the Company, any subsidiaries, affiliates, agents, officers, directors and employees of the Company, and all of their predecessors and successors (together, "the Company Parties"), from any and all claims, demands, damages, and causes of action of every kind and nature, whether known or unknown, or suspected or unsuspected, which the Executive has, may have, or may have had arising out of or in any way related to the Executive's employment by the Company, its subsidiaries or affiliates from the beginning of time to the effective date hereof. This release specifically includes, but is not limited to, any and all claims, demands, damages, and causes of action: (1) Arising under or based on the Equal Pay Act of 1963, Title VII of the Civil Rights Act of 1964, the Civil Rights Acts of 1866 and 1871 (42 U.S.C. Section 1981), the Americans with Disabilities Act of 1990, the Family and Medical Leave Act of 2 1993, the Fair Labor Standards Act of 1938, the Employee Retirement Income Security Act of 1974 (excepting claims for vested benefits, if any, to which the Executive is legally entitled thereunder), the Illinois Constitution, or any other federal, state, county or local law, statute, ordinance, decision, order, policy or regulation prohibiting employment discrimination or otherwise creating rights or claims for employees, including but not limited to, any and all claims alleging breach of public policy, the implied obligation of good faith and fair dealing, or any implied, oral or written contract, handbook, manual, policy statement or employment practice, or alleging misrepresentation, defamation, interference with contractual relations, intentional or negligent infliction of emotional distress, invasion of privacy, false imprisonment, negligence or wrongful discharge; and (2) Arising under or based on the Age Discrimination in Employment Act of 1967 (ADEA), as amended by the Older Workers Benefit Protection Act (OWBPA), and alleging a violation thereof based on any action or failure to act by the Company Parties, or any of them, at any time prior to the effective date hereof. (b) The Executive waives his right to any recovery, compensation, or other legal, equitable or injunctive relief (including, but not limited to, compensatory damages, punitive damages, back pay, front pay, attorneys' fees and reinstatement to employment), from any claims, demands or causes of action brought by or on behalf of him in connection with any matter whatsoever, including but not limited to, claims arising under the Age Discrimination in Employment Act. 3 (c) This Section 3 is a general release, as well as a specific release, of all claims, demands, damages, and causes of action referred to above. No reference herein to any specific claim is intended to limit the scope of this release. This release shall be effective, without limitation, as a full and final bar to all claims, demands, damages and causes of action of every kind and nature whatsoever which the Executive has against the Company Parties, whether or not known to the Executive. (d) The Executive acknowledges that he has been advised of his right to consult with an attorney or other representative of his choice prior to signing this Amendment No. 1 to Executive Employment Agreement and understands that he has a period of twenty-one (21) days within which to consider the Amendment No. 1 to Executive Employment Agreement. This twenty-one (21) day period begins to run from JUNE 1, 2000, which Executive acknowledges is the date on which he received a copy of this Amendment No. 1 to Executive Employment Agreement. (e) The Executive understands that he has the right to revoke this release at anytime within seven (7) days after he signs it and that the release shall not become effective or enforceable until this revocation period has expired without revocation. (f) The provisions of this release are fully severable. Therefore, if any provision of this release is for any reason determined to be invalid or unenforceable, 4 such invalidity or unenforceability will not affect the validity or enforceability of the remaining provisions. 4. Except as set forth herein, the Agreement shall remain in effect as written. 5. The effective date of this Amendment No. 1 to the Executive Employment Agreement is July 1, 2000. This Amendment No. 1 to the Executive Employment Agreement is executed as of this 1st day of June, 2000. QUIXOTE CORPORATION By: /s/ Leslie J. Jezuit /s/ Philip E. Rollhaus, Jr. ---------------------- ---------------------------------- Its: CEO and President Philip E. Rollhaus, Jr. 5 EX-10.(F) 6 a2025984zex-10_f.txt EXHIBIT 10(F) Exhibit 10(f) JANUARY 1, 2000 SUMMARY PLAN DESCRIPTION FOR QUIXOTE CORPORATION INCENTIVE SAVINGS PLAN This is only a summary intended to familiarize you with the major provisions of the Plan. You should read this summary closely. If you have any questions and before you make any important decisions based on your understanding of the Plan from this summary, you should contact the Plan administrator at the address shown on the last page of this summary. JANUARY 1, 2000 BENEFITS HIGHLIGHTS FOR QUIXOTE CORPORATION INCENTIVE SAVINGS PLAN INTRODUCTION The Quixote Corporation Incentive Savings Plan helps you provide for your retirement security by making it simple and convenient for you to contribute to your retirement savings regularly. To encourage you to save, the Plan permits your Employer to match a portion of what you contribute at the rate set forth in the Plan. The Plan also permits your Employer to make contributions to the Plan to provide you with additional savings. Because the Plan is qualified by the Internal Revenue Service, special tax exclusions allow you to save more dollars for your retirement. Effective January 1, 1999, the Nu-Metrics 401(k) Plan merged into and became a part of the Plan. This booklet describes the Plan in operation effective January 1, 2000. Your savings are held for you in your personal Plan account until they are distributed as provided under the Plan. HOW YOU SAVE - - You can contribute from two to 18 percent of your pay as Tax-Deferred Contributions. - - For every $1.00 you contribute as Tax-Deferred Contributions while you are an eligible employee (up to seven percent of your pay), your Employer will contribute on your behalf $.70 as matching Employer Contributions. Your Employer may also make additional "true-up" matching Employer Contributions each year in an amount that provides the maximum amount of matching Employer Contributions. - - For each year that you are an eligible employee, your Employer may make contributions based on your pay as profit-sharing Employer Contributions. - - For each year that you are an eligible employee, your Employer may make contributions on your behalf based on your pay as qualified non-elective Employer Contributions. - - Dollars you save as Tax-Deferred Contributions are not currently included as part of your Federal taxable income. Taxes are also deferred on investment earnings in your personal Plan account and any Employer Contributions. You therefore pay no Federal income taxes on your Plan savings until they are distributed to you. If you are a Highly Compensated Employee, your Employer will make no qualified non-elective Employer Contributions on your behalf for the year. To find out if you are a Highly Compensated Employee, check your Summary Plan Description. WHO IS COVERED You are an employee covered by the Plan if you are employed in any capacity on a salaried or hourly basis by Quixote Corporation or any Related Company that adopts the Plan with the consent of Quixote Corporation, unless you are a union employee to whom coverage has not been extended. If you are a covered employee, you may begin to make contributions under the Plan if you are at least 21 years old and at least 90 calendar days have expired from your date of hire. INVESTMENT OF YOUR PERSONAL PLAN ACCOUNT You direct how your personal Plan account is invested, except that the Sponsor directs the investment of Employer Contributions. You may direct the investment of your personal Plan account by selecting among specified Investment Funds that are made available to you. VESTING OF YOUR PERSONAL PLAN ACCOUNT You will always be 100 percent vested in the value of your personal Plan account resulting from your contributions and any Employer Contributions. Of course, even if you are 100 percent vested in the value of your personal Plan account, the amount in your account may vary depending on investment gains and losses. LOANS You may receive a loan from your personal Plan account in accordance with the Plan loan procedures. DISTRIBUTION OF BENEFITS You may receive distribution of your vested personal Plan account when any of the following happens: - - You retire from employment after you reach your Normal Retirement Date, which is age 65. - - You die. - - Your employment terminates. - - You reach age 70 1/2 while you are still employed. If distribution is made from your personal Plan account before you reach age 59 1/2 for any reason other than your death or termination of your employment after you reach age 55, the distribution may be subject to an additional 10 percent excise tax. FURTHER PLAN INFORMATION This Benefits Highlights is an introduction to some of the Plan's basic features. It is not a full description of your benefits under the Plan or any restrictions applicable to your benefits under the Plan. To determine your rights to any particular benefits under the Plan, you should refer to the more detailed information concerning the Plan contained in the Summary Plan Description and in the Plan documents themselves. TABLE OF CONTENTS INTRODUCTION 1 CONTRIBUTIONS......................................................1 YOUR PLAN ACCOUNT..................................................1 FORMAL PLAN TERMS FOUND IN PLAN DOCUMENT...........................2 SPONSOR HAS DISCRETION TO INTERPRET PLAN...........................2 SPECIAL DEFINITIONS 3 SERVICE CREDITING 6 ELIGIBILITY SERVICE................................................6 CREDITING OF ELIGIBILITY SERVICE...................................6 CHANGE IN SERVICE CREDITING........................................6 ELIGIBILITY 7 HOW TO MAKE AN ELECTION............................................7 TRANSFERS OF EMPLOYMENT............................................7 REEMPLOYMENT.......................................................7 TAX-DEFERRED CONTRIBUTIONS 9 AMOUNT OF TAX-DEFERRED CONTRIBUTIONS...............................9 CHANGE IN AMOUNT OF TAX-DEFERRED CONTRIBUTIONS.....................9 SUSPENSION OF TAX-DEFERRED CONTRIBUTIONS...........................9 RESUMPTION OF TAX-DEFERRED CONTRIBUTIONS..........................10 VESTED INTEREST IN TAX-DEFERRED CONTRIBUTIONS.....................10 ROLLOVER CONTRIBUTIONS 11 ROLLOVER CONTRIBUTIONS............................................11 VESTED INTEREST IN ROLLOVER CONTRIBUTIONS.........................11 EMPLOYER CONTRIBUTIONS 12 AMOUNT OF MATCHING CONTRIBUTIONS..................................12 AMOUNT OF QUALIFIED NON-ELECTIVE EMPLOYER CONTRIBUTIONS...........12 AMOUNT OF PROFIT-SHARING CONTRIBUTIONS............................12 ELIGIBILITY TO PARTICIPATE IN EMPLOYER CONTRIBUTIONS..............12 ANNUAL SERVICE REQUIREMENT........................................13 REEMPLOYMENT......................................................13 VESTED INTEREST IN EMPLOYER CONTRIBUTIONS.........................13 LIMITATIONS ON CONTRIBUTIONS 14 (v) WHERE PLAN CONTRIBUTIONS ARE INVESTED 15 404(c) PROTECTION.................................................15 MAKING INVESTMENT ELECTIONS 16 INVESTMENT ELECTIONS..............................................16 FAILURE TO DIRECT INVESTMENTS.....................................16 CHANGE OF INVESTMENT ELECTIONS....................................16 ELECTION TO TRANSFER BETWEEN INVESTMENT FUNDS.....................16 ANSWERLINE-Registered Trademark- 1-800 SERVICE....................17 ANSWERNET-Registered Trademark- - INTERNET SERVICE................17 LOANS FROM YOUR PLAN ACCOUNT 18 INTERNAL REVENUE CODE RULES.......................................18 COLLATERAL FOR LOAN...............................................18 DEFAULT ON A LOAN.................................................19 ADDITIONAL PLAN LOAN RULES........................................19 IN-SERVICE WITHDRAWALS 20 WITHDRAWAL OF EMPLOYER CONTRIBUTIONS..............................20 WITHDRAWAL OF TAX-DEFERRED CONTRIBUTIONS..........................20 OVERALL CONDITIONS AND LIMITATIONS ON WITHDRAWALS.................20 DISTRIBUTION OF YOUR PLAN ACCOUNT 21 TIMING OF DISTRIBUTION............................................21 APPLICATION FOR DISTRIBUTION......................................21 SUSPENSION OF DISTRIBUTION........................................21 DISTRIBUTION TO YOU...............................................21 DISTRIBUTION TO YOUR BENEFICIARY..................................21 CASH OUTS OF PLAN ACCOUNTS AND CONSENT TO DISTRIBUTION............22 DIRECT ROLLOVER REQUIREMENTS......................................22 REQUIRED DISTRIBUTIONS............................................22 FORM OF PAYMENT 23 NORMAL FORM OF PAYMENT............................................23 OPTIONAL FORM OF PAYMENT..........................................23 FORM OF PAYMENT TO YOUR BENEFICIARY...............................23 EFFECT OF REEMPLOYMENT ON FORM OF PAYMENT ELECTION................23 OVERRIDING CASH OUT PROVISION.....................................24 YOUR BENEFICIARY UNDER THE PLAN 25 BENEFICIARY IF YOU ARE MARRIED....................................25 EFFECT OF MARRIAGE ON PRIOR BENEFICIARY DESIGNATION...............25 BENEFICIARY WHERE THERE IS NO DESIGNATED BENEFICIARY..............25 (vi) SPOUSAL CONSENT TO BENEFICIARY DESIGNATION........................25 CLAIMS FOR BENEFITS 26 AMENDMENT AND TERMINATION OF THE PLAN 27 PLAN AMENDMENT....................................................27 PLAN TERMINATION..................................................27 MISCELLANEOUS INFORMATION 28 PLAN BOOKLET DOES NOT CREATE EMPLOYMENT CONTRACT..................28 NO GUARANTEES REGARDING INVESTMENT PERFORMANCE....................28 IF CIRCUMSTANCES REQUIRE THE DELAY OF A WITHDRAWAL................28 TRANSFERS FROM THE GUARANTEED INCOME FUND MAY BE LIMITED..........28 PAYMENT OF ADMINISTRATIVE EXPENSES................................28 QUALIFIED DOMESTIC RELATIONS ORDERS...............................29 RETURN OF CONTRIBUTIONS TO YOUR EMPLOYER..........................29 TOP-HEAVY PROVISIONS 30 MORE THINGS YOU SHOULD KNOW 31 YOUR RIGHTS UNDER THE PLAN 32 ADDITIONAL INFORMATION 34 PLAN ADMINISTRATOR................................................34 AGENT FOR SERVICE OF LEGAL PROCESS................................34 SPONSOR...........................................................34 EMPLOYER IDENTIFICATION NUMBER....................................34 PLAN NUMBER.......................................................34 TRUSTEE...........................................................34
(vii) SPONSOR HAS DISCRETION TO INTERPRET PLAN The SPONSOR has discretionary authority to interpret and construe the provisions of the Plan, to determine your eligibility for benefits under the Plan, and to resolve any disputes that arise under the Plan. The SPONSOR may delegate this authority as provided under the Plan. INTRODUCTION The Quixote Corporation Incentive Savings Plan helps you build financial security for your retirement by providing you an opportunity to save for your retirement while simultaneously reducing your Federal income tax liability (and in some States, your State income tax liability as well). Effective January 1, 1999, the Nu-Metrics 401(k) Plan merged into and became a part of the Plan. This booklet describes the Plan as in effect on January 1, 2000 and updates and replaces any prior summary plan descriptions of the Plan. Some Plan provisions may be different for employees whose employment terminated before January 1, 2000. CONTRIBUTIONS You may contribute a portion of your COMPENSATION to the Plan on a before-tax basis. These contributions are called TAX-DEFERRED CONTRIBUTIONS. This reduces the amount of your taxable income for the year under the Federal income tax rules. Your TAX-DEFERRED CONTRIBUTIONS remain invested in the Plan until they are distributed under the terms of the Plan. Your TAX-DEFERRED CONTRIBUTIONS, and any earnings on your TAX-DEFERRED CONTRIBUTIONS, are not taxable under Federal income tax rules until they are distributed to you from the Plan. In addition to your contributions, the Plan permits your EMPLOYER to make contributions to the Plan on your behalf. These contributions are called EMPLOYER CONTRIBUTIONS. Like your TAX-DEFERRED CONTRIBUTIONS, these EMPLOYER CONTRIBUTIONS, and the earnings on them, are not taxable to you until they are distributed to you from the Plan. Finally, you may elect to roll over qualified cash distributions from another plan or a rollover IRA into the Plan. These contributions are called ROLLOVER CONTRIBUTIONS. Like your TAX-DEFERRED CONTRIBUTIONS, these ROLLOVER CONTRIBUTIONS, and the earnings on them, are not taxable to you until they are distributed to you from the Plan. YOUR PLAN ACCOUNT You have your own account under the Plan to hold all contributions you make to the Plan and any contributions your EMPLOYER makes to the Plan on your behalf. Your Plan account also holds any investment earnings on those contributions. Your Plan account keeps track of your share of the assets held in the Plan. FORMAL PLAN TERMS FOUND IN PLAN DOCUMENT This booklet describes in easy-to-understand terms the principal features of the Plan as in effect on January 1, 2000. Some technical details and legal expressions contained in the formal Plan documents have been omitted. The formal Plan documents govern in administering and interpreting the rights of participants and their beneficiaries. SPONSOR HAS DISCRETION TO INTERPRET PLAN The SPONSOR has discretionary authority to interpret and construe the provisions of the Plan, to determine your eligibility for benefits under the Plan, and to resolve any disputes that arise under the Plan. The SPONSOR may delegate this authority as provided under the Plan. 2 SPECIAL DEFINITIONS To help you better understand how the Plan works, the following Plan terms have the special meanings given in SPECIAL DEFINITIONS when they are used in this booklet. When you see a capitalized term in bold-face print and are not certain what it means, you can refer back to SPECIAL DEFINITIONS for the meaning. In addition to these "SPECIAL DEFINITIONS" which are used throughout the booklet, you may see some TERMS that are also in bold-face print, but that are not capitalized. These TERMS have special meanings that are given in the particular section of the booklet where the TERM is used. - - The "ADMINISTRATOR" is responsible for the day-to-day administration of the Plan such as collecting elections from EMPLOYEES. The ADMINISTRATOR is Quixote Corporation, One East Wacker Drive, Chicago, IL 60601; (312) 467-6755. - - The "ANSWERLINE-Registered Trademark-" is the 1-800-253-2287 service from Connecticut General where, among other services, participants can model loans, transfer between Investment Funds, and change the investment election for future contributions. - - "ANSWERNET-Registered Trademark-" is CIGNA's Internet service where, among other services, participants have access to view a 90-day account history, transfer between investments, check performance and project their investments. You can access ANSWERNET-Registered Trademark- through CIGNA's Internet site at https://answernet.retire.cigna.com. - - Your "BENEFICIARY" means the person (or persons) entitled to receive distribution of your Plan account if you die before your Plan account has been fully distributed to you. - - Your "COMPENSATION" means the compensation from your EMPLOYER that is taken into account in determining the amount of contributions that you can make to the Plan or that your EMPLOYER can make to the Plan on your behalf. COMPENSATION means the wages, salaries, fees for professional services, and all other amounts paid to you for personal services rendered to your EMPLOYER in the course of employment covered under the Plan that would be considered compensation for purposes of Section 415 of the Internal Revenue Code and any such amounts that would be paid to you but for your election to defer such amounts under the Plan or under any other 401(k) or Section 125 plan maintained by your EMPLOYER or a RELATED COMPANY. Generally, COMPENSATION that you earn before you become eligible to participate in the Plan is not included in determining the amount of contributions that you can make to the Plan. Tax rules limit the amount of COMPENSATION that may be taken into account under the Plan each year. For 2000, the maximum amount is $170,000 (this amount may be adjusted in future years). 3 - - A "CONTRIBUTION PERIOD" is the period for which EMPLOYER CONTRIBUTIONS will be made to the Plan. The CONTRIBUTION PERIOD for regular MATCHING CONTRIBUTIONS is each month. The CONTRIBUTION PERIOD for QUALIFIED NON-ELECTIVE CONTRIBUTIONS, true up MATCHING CONTRIBUTIONS and PROFIT-SHARING CONTRIBUTIONS is each PLAN YEAR. - - Your "ELIGIBILITY SERVICE" means the service credited to you that is used for determining whether you are eligible to participate in the Plan by making TAX-DEFERRED CONTRIBUTIONS to the Plan or by sharing in EMPLOYER CONTRIBUTIONS. - - You are an "EMPLOYEE" covered by the Plan if you are employed by your EMPLOYER on a salaried or hourly basis in any capacity. If you are covered by a collective bargaining agreement that does not provide for your coverage under the Plan, you are not an EMPLOYEE. - - Your "EMPLOYER" means Quixote Corporation or any RELATED COMPANY that adopts the Plan with the consent of Quixote Corporation, including Energy Absorption Systems, Safe Hit Corporation, Spin-Cast Plastics, Highway Information Systems, Roadway Safety Services, and Nu-Metrics. - - An "EMPLOYER CONTRIBUTION" means any contribution that your EMPLOYER makes to the Plan on your behalf. - - An "ENROLLMENT DATE" means the date on which you are eligible to begin participation in the Plan by making TAX-DEFERRED CONTRIBUTIONS or by sharing in EMPLOYER CONTRIBUTIONS. An ENROLLMENT DATE occurs on the first day of each PLAN YEAR quarter. - - A "HIGHLY COMPENSATED EMPLOYEE" means an employee who is highly compensated in accordance with specific IRS rules. Generally, you may be a HIGHLY COMPENSATED EMPLOYEE under the IRS rules if you are paid more than $85,000 (as adjusted by the federal government) during the preceding Plan Year and, if the Employer so elects, you are in the top-paid group of employees, or you own five percent of an EMPLOYER. If you are concerned that you may be a HIGHLY COMPENSATED EMPLOYEE, you should consult the ADMINISTRATOR. - - An "INVESTMENT FUND" is a separate fund in which your Plan account or part of your Plan account may be invested. - - A "MATCHING CONTRIBUTION" means any EMPLOYER CONTRIBUTION your EMPLOYER makes to the Plan on your behalf because of your TAX-DEFERRED CONTRIBUTIONS. - - Your "NORMAL RETIREMENT DATE" means the date you reach age 65. - - A "PLAN YEAR" means the period beginning July 1, 1984 and ending December 31, 1984 and each 12-consecutive-month period ending December 31 thereafter. 4 - - A "PREDECESSOR EMPLOYER" means any predecessor organization of an Employer provided that the Employer maintains a Plan of such predecessor organization. - - A "PROFIT-SHARING CONTRIBUTION" means any EMPLOYER CONTRIBUTION made to the Plan by your EMPLOYER as described in detail in EMPLOYER CONTRIBUTIONS. - - A "QUALIFIED NON-ELECTIVE CONTRIBUTION" means any EMPLOYER CONTRIBUTION made to the Plan by your EMPLOYER as described in detail under the AMOUNT OF QUALIFIED NON-ELECTIVE CONTRIBUTIONS section in EMPLOYER CONTRIBUTIONS. - - A "RELATED COMPANY" means any company or business that is considered to be related to an EMPLOYER under Internal Revenue Code rules. - - A "ROLLOVER CONTRIBUTION" means any qualified cash contribution that you elect to roll over to the Plan from another retirement plan or from a rollover IRA. - - Your "SEVERANCE DATE" means the date your employment terminates or you are absent from work (without terminating employment) for one year. - - The "SPONSOR" of the Plan is Quixote Corporation or its successor. - - A "TAX-DEFERRED CONTRIBUTION" means any contribution that you elect to make to the Plan on a before-tax basis. - - The "TRUSTEE" holds the Plan assets for the benefit of covered EMPLOYEES, and may be a bank, an insurance company, or a group of individuals chosen by the SPONSOR. - - A "VALUATION DATE" means a date on which the trust is valued and Plan accounts are adjusted to reflect investment earnings or losses. A VALUATION DATE under the Plan is the date or dates designated by the SPONSOR. 5 SERVICE CREDITING ELIGIBILITY SERVICE ELIGIBILITY SERVICE is used to determine whether you may participate in the Plan by making TAX-DEFERRED CONTRIBUTIONS or by sharing in EMPLOYER CONTRIBUTIONS. CREDITING OF ELIGIBILITY SERVICE You are credited with ELIGIBILITY SERVICE from your hire (or rehire) date until your SEVERANCE DATE. If your employment terminates but you are rehired within 12 months of your SEVERANCE DATE, you are credited with ELIGIBILITY SERVICE for the period that you were absent from work. CHANGE IN SERVICE CREDITING If there is a change in the way ELIGIBILITY SERVICE is credited under the Plan, special rules apply to assure that the change does not affect the way service is credited to you for the transition period to your disadvantage. In some cases, application of these rules may result in a person being credited with two years of ELIGIBILITY SERVICE for the same period, but it will never result in a person being credited with fewer years of ELIGIBILITY SERVICE than if service crediting under the Plan had not changed. 6 ELIGIBILITY If you are an EMPLOYEE and you were eligible to and had elected to make TAX-DEFERRED CONTRIBUTIONS to the Plan immediately prior to January 1, 2000, contributions will continue to be made to the Plan on your behalf in accordance with your election on and after January 1, 2000. Otherwise, if you are an EMPLOYEE, you may elect to make TAX-DEFERRED CONTRIBUTIONS beginning on the ENROLLMENT DATE that coincides with or immediately follows the date you both reach age 21 and either 90 calendar days have expired since your hire date. In addition, if you become an EMPLOYEE as the result of the merger of another plan into the Plan, or because your EMPLOYER acquired or merged with a business or company, you may elect to make TAX-DEFERRED CONTRIBUTIONS as of such merger date or the date you became an EMPLOYEE following the acquisition. If you do not elect to make TAX-DEFERRED CONTRIBUTIONS beginning on the first ENROLLMENT DATE that you are eligible to make an election, you may elect to make TAX-DEFERRED CONTRIBUTIONS beginning on any subsequent ENROLLMENT DATE. HOW TO MAKE AN ELECTION To elect to make TAX-DEFERRED CONTRIBUTIONS, you must file your election with the ADMINISTRATOR at least such number of days before the ENROLLMENT DATE on which your election is to become effective as the ADMINISTRATOR prescribes. TRANSFERS OF EMPLOYMENT If you are transferred from other employment with your EMPLOYER or a RELATED COMPANY to employment as an EMPLOYEE, you may elect to make TAX-DEFERRED CONTRIBUTIONS beginning on your transfer date if you met the age and service requirements above on an ENROLLMENT DATE coinciding with or precdeing your transfer date. Otherwise, you may elect to make TAX-DEFERRED CONTRIBUTIONS beginning on the first ENROLLMENT DATE coinciding with or immediately following the date you meet the age and service requirements above. REEMPLOYMENT If your employment terminates and you are later reemployed as an EMPLOYEE, you may elect to make TAX-DEFERRED CONTRIBUTIONS beginning on your reemployment date if you were eligible to elect to make TAX-DEFERRED CONTRIBUTIONS at the time you terminated employment. Otherwise, you may elect to make TAX-DEFERRED CONTRIBUTIONS beginning on the first ENROLLMENT DATE 7 coinciding with or immediately following the date you meet the age and service requirements above. 8 TAX-DEFERRED CONTRIBUTIONS Your election to make TAX-DEFERRED CONTRIBUTIONS to the Plan authorizes your EMPLOYER to reduce the amount of your COMPENSATION by a specified amount and to contribute that amount to the Plan. Your COMPENSATION will be reduced and your TAX-DEFERRED CONTRIBUTIONS commenced in accordance with your election beginning with the first payment of COMPENSATION made to you on or after the date your election is effective. Your election to make TAX-DEFERRED CONTRIBUTIONS will also include your election as to the investment of those contributions. Investment elections are discussed in further detail in WHERE PLAN CONTRIBUTIONS ARE INVESTED and MAKING INVESTMENT ELECTIONS. AMOUNT OF TAX-DEFERRED CONTRIBUTIONS The amount you authorize your EMPLOYER to withhold from your COMPENSATION as a TAX-DEFERRED CONTRIBUTION may be a percentage of your COMPENSATION (in whole percentage points) of not less than two percent nor more than 18 percent. CHANGE IN AMOUNT OF TAX-DEFERRED CONTRIBUTIONS You may change the amount you authorize your EMPLOYER to withhold from your future COMPENSATION on January 1, April 1, July 1 and October 1 of each PLAN YEAR. To change the amount of your TAX-DEFERRED CONTRIBUTION, you must file a new election with the ADMINISTRATOR at least such number of days before the date the change is to take effect as the ADMINISTRATOR prescribes. SUSPENSION OF TAX-DEFERRED CONTRIBUTIONS You may withdraw your authorization for your EMPLOYER to withhold amounts from your future COMPENSATION and suspend your TAX-DEFERRED CONTRIBUTIONS at any time. To suspend your TAX-DEFERRED CONTRIBUTIONS, you must contact your local ADMINISTRATOR at least such number of days before the date the suspension is to take effect as the ADMINISTRATOR prescribes. The suspension will take effect for COMPENSATION paid to you after the required notice period is over. If you suspend your TAX-DEFERRED CONTRIBUTIONS, the suspension will remain in effect until you elect to resume making TAX-DEFERRED CONTRIBUTIONS again. 9 RESUMPTION OF TAX-DEFERRED CONTRIBUTIONS If you suspend your TAX-DEFERRED CONTRIBUTIONS, you may elect to resume making TAX-DEFERRED CONTRIBUTIONS on January 1, April 1, July 1 and October 1 of each PLAN YEAR. To resume TAX-DEFERRED CONTRIBUTIONS you must file a new election with the ADMINISTRATOR at least such number of days before the date TAX-DEFERRED CONTRIBUTIONS are to resume as the ADMINISTRATOR prescribes. VESTED INTEREST IN TAX-DEFERRED CONTRIBUTIONS You are always 100 percent vested in the value of the TAX-DEFERRED CONTRIBUTIONS in your Plan account. 10 ROLLOVER CONTRIBUTIONS ROLLOVER CONTRIBUTIONS If you are an EMPLOYEE, you may elect to roll over qualified distributions from another plan or a rollover IRA into the Plan. Internal Revenue Code rules govern whether a distribution from another plan or an IRA qualifies for roll over into the Plan. The ADMINISTRATOR may require you to provide information to show that the distribution you want to roll over qualifies under the Internal Revenue Code rules. If the distribution qualifies, you may roll it over into the Plan within 60 days of the date you received it. Your ROLLOVER CONTRIBUTION will become subject to all the terms and conditions of the Plan and will only be distributable to you under the terms of the Plan. VESTED INTEREST IN ROLLOVER CONTRIBUTIONS You are always 100 percent vested in the value of the ROLLOVER CONTRIBUTIONS (including any investment gains or losses on them) in your Plan account. 11 EMPLOYER CONTRIBUTIONS In addition to your TAX-DEFERRED CONTRIBUTIONS, the Plan permits your EMPLOYER to make EMPLOYER CONTRIBUTIONS to the Plan on your behalf. You are not taxed on any EMPLOYER CONTRIBUTIONS that may be made on your behalf until distribution is made to you. AMOUNT OF MATCHING CONTRIBUTIONS Your EMPLOYER will make a MATCHING CONTRIBUTION for each CONTRIBUTION PERIOD on your behalf equal to 70 percent of your eligible TAX-DEFERRED CONTRIBUTIONS. Eligible TAX-DEFERRED CONTRIBUTIONS are your TAX-DEFERRED CONTRIBUTIONS for the CONTRIBUTION PERIOD up to seven percent of your COMPENSATION for the CONTRIBUTION PERIOD. Your EMPLOYER may, in its discretion, make an additional true-up MATCHING CONTRIBUTION on your behalf at the end of the PLAN YEAR equal to a percentage, determined by your EMPLOYER, of your TAX-DEFERRED CONTRIBUTIONS. The true up MATCHING CONTRIBUTIONS provide the maximum MATCHING CONTRIBUTION on an annual basis. AMOUNT OF QUALIFIED NON-ELECTIVE EMPLOYER CONTRIBUTIONS Your EMPLOYER, in its discretion, may make a QUALIFIED NON-ELECTIVE CONTRIBUTION for a CONTRIBUTION PERIOD on your behalf equal to a percentage, determined by your EMPLOYER, of your COMPENSATION for the CONTRIBUTION PERIOD. Your EMPLOYER will NOT make a QUALIFIED NON-ELECTIVE CONTRIBUTION on your behalf for a CONTRIBUTION PERIOD if you are a HIGHLY COMPENSATED EMPLOYEE for that CONTRIBUTION PERIOD. AMOUNT OF PROFIT-SHARING CONTRIBUTIONS Your EMPLOYER, in its discretion, may make a PROFIT-SHARING CONTRIBUTION for a CONTRIBUTION PERIOD on your behalf equal to a percentage, determined by your EMPLOYER, of your COMPENSATION for the CONTRIBUTION PERIOD. ELIGIBILITY TO PARTICIPATE IN EMPLOYER CONTRIBUTIONS You are eligible to begin participating in EMPLOYER CONTRIBUTIONS under the Plan on the same day that you are eligible to begin making TAX-DEFERRED CONTRIBUTIONS to the Plan. 12 ANNUAL SERVICE REQUIREMENT If you have met the eligibility requirements to begin participating in EMPLOYER CONTRIBUTIONS, you will share in the allocation of PROFIT-SHARING CONTRIBUTIONS for a particular CONTRIBUTION PERIOD only if you also are employed by an EMPLOYER on the last day of the CONTRIBUTION PERIOD. However, you will share in the allocation of PROFIT-SHARING CONTRIBUTIONS for a particular CONTRIBUTION PERIOD even if you are not employed by an EMPLOYER on the last day of the CONTRIBUTION PERIOD because you retired at or after your NORMAL RETIREMENT DATE, or because you died or became permanently and totally disabled. You are permanently and totally disabled if the ADMINISTRATOR determines, on the basis of an acceptable physician's certificate, that you are permanently disabled such that you can no longer continue in the service of your Employer. REEMPLOYMENT If your employment terminates and you are later reemployed as an EMPLOYEE, you will be eligible to begin participating in EMPLOYER CONTRIBUTIONS on your reemployment date if you were eligible to participate in EMPLOYER CONTRIBUTIONS at the time you terminated employment. Otherwise, you will be able to begin participating in EMPLOYER CONTRIBUTIONS on the same day that you are first eligible to make TAX-DEFERRED CONTRIBUTIONS to the Plan. VESTED INTEREST IN EMPLOYER CONTRIBUTIONS You are always 100 percent vested in the value of the EMPLOYER CONTRIBUTIONS in your Plan account. 13 LIMITATIONS ON CONTRIBUTIONS Federal law limits the maximum amount of TAX-DEFERRED CONTRIBUTIONS that you can make to the Plan each calendar year. For 2000, the maximum amount is $10,500 (this amount may be adjusted upward each year). If the ADMINISTRATOR determines that the amount you authorize your EMPLOYER to withhold from your COMPENSATION would exceed the maximum amount permitted for the year, the ADMINISTRATOR will adjust the amount withheld so that it does not exceed the maximum. If you are a HIGHLY COMPENSATED EMPLOYEE, Federal law also limits the amount of TAX-DEFERRED CONTRIBUTIONS that you can make to the Plan and the amount of MATCHING CONTRIBUTIONS that your EMPLOYER can make to the Plan on your behalf. If the ADMINISTRATOR determines that contributions for HIGHLY COMPENSATED EMPLOYEES would exceed the amount that may be contributed to the Plan, it may adjust the amount of TAX-DEFERRED CONTRIBUTIONS, AFTER-TAX CONTRIBUTIONS, and MATCHING CONTRIBUTIONS that would otherwise be made for HIGHLY COMPENSATED EMPLOYEES. In addition, contributions to the Plan are subject to other maximum limitations under the Internal Revenue Code and other applicable law. Amounts that would exceed those limits will be distributed or forfeited as provided under the Plan. 14 WHERE PLAN CONTRIBUTIONS ARE INVESTED You direct how your TAX-DEFERRED CONTRIBUTIONS and ROLLOVER CONTRIBUTIONS are invested. All other contributions to the Plan are invested by the TRUSTEE as directed by the SPONSOR. You may direct that contributions be invested in any of the INVESTMENT FUNDS made available to you under the Plan. Upon request, the ADMINISTRATOR will provide you with additional information on the different INVESTMENT FUNDS available. New INVESTMENT FUNDS may be added and existing INVESTMENT FUNDS changed. The ADMINISTRATOR will update the description of the available INVESTMENT FUNDS to reflect any changes. 404(c) PROTECTION Because you direct how contributions to your Plan account are invested, the SPONSOR, who would otherwise be responsible under Federal rules for directing investments, is relieved of this responsibility with respect to those contributions. Therefore, it is no longer liable under the law for any losses to your Plan account that are the direct and necessary result of your investment directions. It is still responsible, however, for being sure that you have diverse investment opportunities and sufficient opportunity to direct the investment of your Plan account. 15 MAKING INVESTMENT ELECTIONS INVESTMENT ELECTIONS At least such number of days as the ADMINISTRATOR prescribes before the effective date of your participation in the Plan, you must file an investment election with the ADMINISTRATOR directing how contributions to your Plan account are to be invested. Your investment election must specify the percentage of the contributions to your Plan account that is to be invested among the INVESTMENT FUNDS. FAILURE TO DIRECT INVESTMENTS If you do not direct how contributions to your Plan account are to be invested, the contributions will be invested among the INVESTMENT FUNDS selected by the ADMINISTRATOR. CHANGE OF INVESTMENT ELECTIONS You may change how contributions to your Plan account are invested on any day of the PLAN YEAR. To perform this transaction, you may call ANSWERLINE-Registered Trademark-, use ANSWERNET-Registered Trademark-, or contact the ADMINISTRATOR. ELECTION TO TRANSFER BETWEEN INVESTMENT FUNDS You may transfer any amount held in your Plan account from one INVESTMENT FUND to another INVESTMENT FUND. You must specify the amount that is to be transferred. To perform this transaction, you may call ANSWERLINE-Registered Trademark- or contact the ADMINISTRATOR. Direct transfers may not be made between one of the guaranteed long term vehicles (Guaranteed Income Fund) and any fund deemed to be a competing fund, such as a bond fund, without first going through an equity vehicle for at least 90 days. A transfer may be made effective as of any day of the PLAN YEAR. 16 ANSWERLINE-Registered Trademark- 1-800 SERVICE The ANSWERLINE-Registered Trademark- Service is a state-of-the-art system that allows you to access information about your account using a touch-tone telephone. To access ANSWERLINE-Registered Trademark-, call 1-800-253-2287. ANSWERLINE-Registered Trademark- enables you to perform certain transactions, investment transfers, and investment changes in accordance with the terms of your Plan. You should contact the ADMINISTRATOR for materials that describe the features and options that are available. ANSWERLINE-Registered Trademark- is normally available 24 hours a day, seven days a week, except during a brief period of approximately 20 minutes each morning between the hours of 3:30 a.m. and 7:00 a.m., eastern time. ANSWERNET-Registered Trademark- - INTERNET SERVICE CIGNA's ANSWERNET-Registered Trademark- allows Internet access to your retirement account using your personal computer. ANSWERNET-Registered Trademark- is available 24 hours a day, seven days a week. You can access ANSWERNET-Registered Trademark- through CIGNA's Internet site at https://answernet.retire.cigna.com. 17 LOANS FROM YOUR PLAN ACCOUNT You may apply for a loan from your Plan account, by calling ANSWERLINE-Registered Trademark-, while you are employed by your EMPLOYER. No loans shall be made from Employer Contributions. The ADMINISTRATOR will provide you with a copy of the rules governing Plan loans. Any Plan loan made to you will be treated as a separate investment of the assets held in your Plan account. INTERNAL REVENUE CODE RULES Specific Internal Revenue Code rules govern loans from tax-qualified plans. Any Plan loan must meet the minimum requirements set forth in the IRS rules. The loan guidelines provided by the ADMINISTRATOR may, however, set forth more stringent requirements than the IRS minimum. In that case, any Plan loan must meet the more stringent requirements set forth in the loan guidelines. The interest rate charged on a Plan loan must be a reasonable rate similar to the rate charged for a loan made under similar circumstances by persons in the business of lending money. The amount of any Plan loan, when added to the outstanding balance of all other loans made to you from the Plan or any other plan maintained by your EMPLOYER or a RELATED COMPANY, may not exceed specified limits. The term of any Plan loan may not exceed five years, unless it is used to purchase your principal residence. If you are using the loan to purchase your principal residence, your ADMINISTRATOR may allow a longer repayment period of up to ten years. Any Plan loan must be repaid in substantially equal installments through payroll deductions over the term of the loan. Payments must be made not less frequently than quarterly. COLLATERAL FOR LOAN If you receive a Plan loan, a portion of your Plan account equal to the loan amount will be used as collateral for the loan. If a Plan loan is still outstanding at the time distribution of your Plan account is to be made, the amount distributed to you will be reduced by the amount of your Plan account that is held as collateral for the loan, but only to the extent necessary to repay the loan. If you terminate employment with an outstanding loan, the loan will become immediately due and payable and your Plan account will be reduced by the amount of the outstanding loan balance. 18 DEFAULT ON A LOAN You will not receive a Plan loan unless you agree that your Plan account may be charged for unpaid principal and interest if you default on the loan. A Plan loan may be declared by the ADMINISTRATOR to be in default if you fail to make required payments on the loan within 90 days of the due date or there is an outstanding balance on the last scheduled repayment date. If a loan is declared to be in default, the entire unpaid balance of the loan, together with accrued interest, is immediately due and payable. If the balance and interest is not then paid, your Plan account will be charged with the amount of the balance and interest at the earliest date that distribution may be made to you without affecting the tax qualification of the Plan. ADDITIONAL PLAN LOAN RULES The minimum amount of any Plan loan that you may receive is $1,000. You may not have more than one outstanding Plan loan at any time. You may pre-pay the balance of any Plan loan before its due date without incurring a penalty. If your employment terminates, the outstanding balance of any Plan loan made to you shall be immediately due and owing unless you elect to roll over your outstanding loan balance to another qualified plan that accepts such rollovers. 19 IN-SERVICE WITHDRAWALS Under certain circumstances, you may make a cash withdrawal from your Plan account while you are still employed by your EMPLOYER. WITHDRAWAL OF PRIOR NU-METRICS EMPLOYER CONTRIBUTIONS If you have reached age 65, you may withdraw the value of your prior Nu-Metrics EMPLOYER CONTRIBUTIONS in your Plan account that is attributable to assets transferred to the Plan in connection with the merger of the Nu-Metrics 401(k) Plan. Any withdrawal of EMPLOYER CONTRIBUTIONS that you make is subject to the overall conditions and limitations on withdrawals listed below. WITHDRAWAL OF PRIOR TAX-DEFERRED NU-METRICS CONTRIBUTIONS If you have reached age 59 1/2, you may withdraw the value of your prior Nu-Metrics TAX-DEFERRED CONTRIBUTIONS in your Plan account that is attributable to assets transferred to the Plan in connection with the merger of the Nu-Metrics 401(k) Plan. Any withdrawal of TAX-DEFERRED CONTRIBUTIONS that you make is subject to the overall conditions and limitations on withdrawals listed below. OVERALL CONDITIONS AND LIMITATIONS ON WITHDRAWALS You may make a withdrawal from your Plan account effective as of the date or dates prescribed by the ADMINISTRATOR. 20 DISTRIBUTION OF YOUR PLAN ACCOUNT TIMING OF DISTRIBUTION If your employment terminates with your EMPLOYER (and all RELATED COMPANIES), the Plan permits distribution of your Plan account. Distribution may be made as soon as reasonably practicable following the date your employment terminates. APPLICATION FOR DISTRIBUTION Unless your Plan account is CASHED OUT as provided below, distribution of your Plan account will not be made until your NORMAL RETIREMENT DATE unless you have filed an application for distribution with the ADMINISTRATOR. You must pay for all fees and expenses to maintain your vested interest in the Plan. These expenses will be withdrawn directly from your account. SUSPENSION OF DISTRIBUTION If you are reemployed by your EMPLOYER (or a RELATED COMPANY) before distribution of the full value of your Plan account has been made, distribution of your Plan account will be suspended until your reemployment terminates. DISTRIBUTION TO YOU If distribution of your Plan account is to be made to you in a single-sum payment, the full value of your Plan account will be distributed to you when you receive the single-sum payment. DISTRIBUTION TO YOUR BENEFICIARY If you die before distribution of the full value of your Plan account has been made to you, distribution of your Plan account will be made to your BENEFICIARY as soon as reasonably practicable following the date your BENEFICIARY files an application for distribution with the ADMINISTRATOR. 21 CASH OUTS OF PLAN ACCOUNTS AND CONSENT TO DISTRIBUTION If the value of your Plan account is $3,500 or less, your Plan account will be "CASHED OUT" by distributing your Plan account in a single-sum payment as soon as reasonably practicable following the date your employment terminates. Your Plan account will be CASHED OUT even if you do not consent to the distribution. If the value of your Plan account is more than $3,500, distribution of your Plan account cannot be made before your NORMAL RETIREMENT DATE without your written consent. DIRECT ROLLOVER REQUIREMENTS If the distribution of your Plan account is eligible for rollover into an Individual Retirement Account (or "IRA") or other eligible retirement plan, you can elect to have the distribution transferred directly into the Individual Retirement Account or other eligible retirement plan. If you do not elect to have a distribution eligible for rollover directly transferred into an Individual Retirement Account or other eligible retirement plan, a 20 percent mandatory Federal income tax withholding applies to the distribution. If a distribution of your Plan account to your Beneficiary is eligible for rollover, the rollover election and mandatory tax withholding apply to the distribution. REQUIRED DISTRIBUTIONS Distribution of your Plan account must be made no later than the April 1 following the close of the calendar year in which you reach age 70 1/2, regardless of whether your employment has terminated at that time or whether you have filed an application for distribution with the ADMINISTRATOR. Special rules apply if you reached age 70 1/2 before January 1, 1988. 22 FORM OF PAYMENT NORMAL FORM OF PAYMENT Unless you elect the optional form of payment described below, distribution of your Plan account will be made to you in a single-sum payment. OPTIONAL FORM OF PAYMENT You may elect to have distribution of the portion of your Plan account that is attributable to assets transferred to the Plan in connection with the merger of the Nu-Metrics 401(k) Plan made in the optional form of payment provided under the Plan. The optional form of payment for prior Nu-Metrics contributions available under the Plan is a series of installment payments. You specify the period over which installment payments will be paid. Under Federal law, however, the maximum period over which installment payments may be paid cannot exceed your life expectancy or the joint life expectancies of you and your BENEFICIARY. For purposes of determining the maximum payment period, your life expectancy, and the life expectancy of your BENEFICIARY, if applicable, will be calculated only once, at the time installment payments begin. Installment payments will be paid in reasonably equal payments, except as necessary to reflect increases or decreases in the value of your Plan account. FORM OF PAYMENT TO YOUR BENEFICIARY If you die before any distribution of your Plan account is made, distribution of your Plan account will be made to your BENEFICIARY in a single-sum payment or in a series of installment payments, whichever your BENEFICIARY selects. If you die after distribution of your Plan account has begun in a series of installment payments, but before distribution of the full value of your Plan account is made, installment payments will continue to your BENEFICIARY after your death. EFFECT OF REEMPLOYMENT ON FORM OF PAYMENT ELECTION If you are reemployed by your EMPLOYER (or a RELATED COMPANY) before distribution of the full value of your Plan account is made, any form of payment election that you made will be ineffective with respect to your Plan account. 23 OVERRIDING CASH OUT PROVISION If the value of your Plan account is $3,500 or less, your Plan account will be "CASHED OUT" by distributing your Plan account to you in a single-sum payment. Your Plan account will be CASHED OUT even if you have elected a form of payment other than a single-sum payment. 24 YOUR BENEFICIARY UNDER THE PLAN You may designate a BENEFICIARY on the form provided by the ADMINISTRATOR to receive distribution of your Plan account if you die. Unless you marry (or remarry), your BENEFICIARY will not change until you file a new designation of BENEFICIARY form with the ADMINISTRATOR designating a different BENEFICIARY. BENEFICIARY IF YOU ARE MARRIED If you are married, your BENEFICIARY under the Plan is your spouse. You may designate a non-spouse BENEFICIARY on the form provided by the ADMINISTRATOR with your spouse's written consent. EFFECT OF MARRIAGE ON PRIOR BENEFICIARY DESIGNATION If you designate a non-spouse BENEFICIARY and then get married, your prior BENEFICIARY designation will be ineffective. BENEFICIARY WHERE THERE IS NO DESIGNATED BENEFICIARY If you die without designating a BENEFICIARY or if no BENEFICIARY survives you, your BENEFICIARY will be your surviving spouse or, if you have no surviving spouse, your surviving children in equal shares, or if you have no surviving children, your estate. SPOUSAL CONSENT TO BENEFICIARY DESIGNATION If you designate a BENEFICIARY other than your spouse, your spouse must sign a written consent to your designation of a BENEFICIARY. Your spouse's written consent must specifically acknowledge the non-spouse BENEFICIARY you have designated and must be witnessed by a Plan representative or a notary public. Instead of specifically acknowledging your designated, non-spouse BENEFICIARY, your spouse's consent may be a general consent that permits you to change your designation of BENEFICIARY without further spousal consent. Your spouse's written consent will not be required if your spouse cannot be located, you have a court order stating that you are legally separated from your spouse, or you have a court order stating that your spouse has abandoned you. 25 CLAIMS FOR BENEFITS Your application for benefits under the Plan should be sent to the ADMINISTRATOR. If you disagree with a decision made by the ADMINISTRATOR regarding a claim under the Plan, you have the right to ask the ADMINISTRATOR for a review of its decision. You should contact the ADMINISTRATOR at its business address or at its business phone number within 60 days of the date on which you receive notice of denial of the claim. A request for review must contain the following information: (a) the date you received notice of denial of your claim and the date your request for review is filed; (b) the specific part of the claim you want reviewed; (c) a statement setting forth the basis upon which you think the decision should be reversed; and (d) any written material that you think is pertinent to your claim and that you want the ADMINISTRATOR to examine. Unless additional time is required, the ADMINISTRATOR will review the denial of your claim and notify you in writing of its decision, within 60 days of the filing of your request. 26 AMENDMENT AND TERMINATION OF THE PLAN PLAN AMENDMENT The SPONSOR reserves the right to amend the Plan, either prospectively or retroactively. PLAN TERMINATION The SPONSOR reserves the right to terminate the Plan at any time. In addition, an EMPLOYER may withdraw from the Plan at any time. If an EMPLOYER withdraws from the Plan, the EMPLOYER will determine whether the withdrawal should be treated as a termination of the Plan with respect to its EMPLOYEES. If the Plan is terminated, distribution of your Plan account will be made as permitted under Federal law. 27 MISCELLANEOUS INFORMATION PLAN BOOKLET DOES NOT CREATE EMPLOYMENT CONTRACT The only purpose of this booklet is to provide you with information about the benefits available under the Plan. The benefits described are not conditions of employment. Nor is the booklet intended to create an employment contract between you and your EMPLOYER. Nothing in this booklet should be construed as a limitation on your or your EMPLOYER'S right to terminate your employment at any time, with or without cause. NO GUARANTEES REGARDING INVESTMENT PERFORMANCE Neither the SPONSOR, your EMPLOYER, nor the ADMINISTRATOR guarantees any particular investment gain or appreciation on your Plan account nor guarantees your Plan account against investment losses or depreciation. IF CIRCUMSTANCES REQUIRE THE DELAY OF A WITHDRAWAL All withdrawals may be delayed by Connecticut General Life Insurance Company under certain circumstances. A description of these situations may be obtained from your ADMINISTRATOR. Regardless of the circumstances, there will be no delay in payment in cases of death, retirement, termination of employment, or total and permanent disability. TRANSFERS FROM THE GUARANTEED INCOME FUND MAY BE LIMITED Under certain circumstances the amount transferred from the Guaranteed Income Fund to other investment funds may be limited by Connecticut General Life Insurance Company. Please see your ADMINISTRATOR for further information on transferring funds from the Guaranteed Income Fund. PAYMENT OF ADMINISTRATIVE EXPENSES Generally, the expenses of administering the Plan are paid from Plan assets, unless your EMPLOYER elects to make the payment. In addition, your particular Plan account may be charged for the cost of administrative expenses that are attributable directly to your Plan account, unless your EMPLOYER elects to make the payment. 28 QUALIFIED DOMESTIC RELATIONS ORDERS Generally, Federal law prohibits payment of your Plan account to someone other than you, unless you have died. An exception to this rule is made for QUALIFIED DOMESTIC RELATIONS ORDERS. A QUALIFIED DOMESTIC RELATIONS ORDER may require that a portion of your Plan account be paid to someone other than you or your BENEFICIARY. "QUALIFIED DOMESTIC RELATIONS ORDERS" are court judgments, decrees, etc. that pertain to child support, alimony, or marital property and that meet specific legal requirements. The ADMINISTRATOR has procedures for determining whether a court judgment or decree meets the specific legal requirements to be a QUALIFIED DOMESTIC RELATIONS ORDER. RETURN OF CONTRIBUTIONS TO YOUR EMPLOYER If your EMPLOYER makes a contribution to the Plan on your behalf by mistake or if your EMPLOYER cannot deduct a contribution made to the Plan on its tax return, that contribution will be returned to your EMPLOYER in accordance with Federal law. 29 TOP-HEAVY PROVISIONS Federal law requires that the Plan contain certain provisions that become effective only if the Plan becomes TOP-HEAVY. The Plan will become "TOP-HEAVY" if the aggregate value of Plan accounts for certain officers and shareholders is 60 percent or more of the value of all assets held under the Plan. If the Plan becomes TOP-HEAVY, specific minimum vesting and minimum benefits provisions become effective. If the Plan becomes TOP-HEAVY, the ADMINISTRATOR will notify you and give you additional details regarding these provisions. 30 MORE THINGS YOU SHOULD KNOW Your EMPLOYER makes contributions to the Plan solely for your benefit. All the assets of the Plan are held for the exclusive benefit of participants and their beneficiaries. The Plan is qualified under the Internal Revenue Code as a profit-sharing plan. EMPLOYER CONTRIBUTIONS to the Plan can only be made out of EMPLOYER current or accumulated net earnings. If your EMPLOYER has no current or accumulated net earnings for a PLAN YEAR, no EMPLOYER CONTRIBUTIONS to the Plan can be made for that PLAN YEAR. Even though the Plan generally provides for distribution after termination of your employment, under certain circumstances which involve a termination of employment with your EMPLOYER because of a sale of the business in which you work, if you continue working for the successor employer you may not be eligible for distribution of your Plan account until your employment terminates with the successor employer and any companies related to it. Because the Plan assets are held in individual accounts and are never less than the total benefits payable to participants, no insurance of benefits by the Pension Benefit Guaranty Corporation under Title IV of the Employee Retirement Income Security Act of 1974 ("ERISA") is necessary or available. The Plan is subject, however, to the applicable provisions of Title I of ERISA (protection of employee benefit rights) and Title II of ERISA (amendments to the Internal Revenue Code relating to retirement plans). 31 YOUR RIGHTS UNDER THE PLAN The Plan is covered by ERISA, which was designed to protect employees' rights under benefit plans. As a participant of the Plan, you should know as much as possible about your Plan benefits. You are entitled to: - - Examine, without charge, at the Plan administrator's office and at other specified locations, copies of all Plan documents and other Plan information filed by the Plan administrator with the U.S. Department of Labor, such as annual reports and Plan descriptions. - - Obtain copies of all Plan documents and other Plan information, upon written request addressed to the Plan administrator and for which the Plan administrator may make a reasonable charge. - - Receive from the Plan administrator at no charge a summary of the Plan's annual financial report. - - Obtain a statement once a year, upon written request addressed to the Plan administrator, of your accrued benefits under the Plan. - - Obtain information as to whether a particular employer has adopted the Plan and, if so, the employer's address, upon written request addressed to the Plan administrator. - - Receive a written explanation with respect to any denied benefit claim regarding the reasons for the denial and the steps you must take in order to have the denial reviewed and reconsidered. ERISA imposes duties upon the people who are responsible for the operation of the Plan. Such people are called "fiduciaries" and have a duty to act prudently and in the best interest of participants and their beneficiaries. No one, including your EMPLOYER, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a Plan benefit or exercising your rights under ERISA. There are steps you can take to enforce your rights under ERISA. Although the ADMINISTRATOR carefully administers the Plan, if for some reason you believe that you have been improperly denied a benefit or that your rights under ERISA have been violated, you have a right to file suit in state or Federal court. If you believe a Plan fiduciary has misused Plan funds, or if documents you have requested are not furnished within 30 days (barring circumstances beyond the Plan administrator's control), you have the right to file suit in Federal court or request assistance from the U.S. Department of Labor. A court may award you certain penalties (up to $110.00 per day) if the Plan administrator refused to provide documents you requested, until you receive the 32 documents. If you disagree with the ADMINISTRATOR'S decision (or lack thereof) concerning the qualified status of a domestic relations order, you may file suit in Federal court. Service of legal process may be made upon the agent designated at the end of this booklet. The SPONSOR does not believe that filing suit will ever be necessary, but should you feel that it is, the law protects you from being fired or otherwise discriminated against to prevent you from enforcing your rights under ERISA. After deciding your case, the court may also decide whether the losing party should pay court costs and the legal fees and expenses of the winning party. If you are successful, the court may order the party you have sued to pay these costs and fees for you. However, if you lose, the court may order you to pay these costs and fees for the party you sued, for example, if the court finds your claim to be frivolous. If you have any questions, you should contact the Plan administrator at the address indicated at the end of this booklet. If you have any questions about this statement of your rights under ERISA, you may contact the nearest Office of the Pension and Welfare Benefits Administration, U.S. Department of Labor, listed in your telephone directory or contact the Division of Technical Assistance and Inquiries, Pension and Welfare Benefits Administration, U.S. Department of Labor, 200 Constitution Avenue, N.W., Washington, DC 20210. 33 ADDITIONAL INFORMATION PLAN ADMINISTRATOR The Plan administrator (which may or may not also be the ADMINISTRATOR) is: Quixote Corporation, One East Wacker Drive, Chicago, IL 60601; (312) 467-6755. AGENT FOR SERVICE OF LEGAL PROCESS Legal process may be served on: Quixote Corporation, One East Wacker Drive, Chicago, IL 60601; (312) 467-6755. Legal process may also be served on the TRUSTEE at its address listed below. SPONSOR The SPONSOR is: Quixote Corporation, One East Wacker Drive, Chicago, IL 60601; (312) 467-6755. EMPLOYER IDENTIFICATION NUMBER The SPONSOR'S Employer identification number for purposes of helping to identify the Plan is: 36-2675371. PLAN NUMBER The Plan number for purposes of helping to identify the Plan is: 001. TRUSTEE The TRUSTEE is: CG Trust Company, an Illinois Company, 525 West Monroe St., Suite 1900, Chicago, IL 60661-3629. 34 EX-21 7 a2025984zex-21.txt EXHIBIT 21 EXHIBIT 21 QUIXOTE CORPORATION & SUBSIDIARIES SUBSIDIARIES OF THE COMPANY as of June 30, 2000
Jurisdiction Under Which QUIXOTE CORPORATION (PARENT) Organized - ---------------------------- ------------- Quixote Transportation Safety, Inc. Delaware TranSafe Corporation Delaware Nu-Metrics, Inc. Delaware Highway Information Systems, Inc. Delaware TIS, Inc. North Carolina Energy Absorption Systems, Inc. Delaware E-Tech Testing Services, Inc. Delaware Safe-Hit Corporation Nevada Spin-Cast Plastics, Inc. Indiana Energy Absorption Systems (Europe), Inc. Delaware Quixote Transportation Systems (Asia Pacific)Pty Limited Australia Quixote Transportation Systems (Europe), Inc. Delaware Quixote Research Corporation Delaware Quixote Foreign Sales Corporation U.S. Virgin Islands
Quixote Transportation Safety, Inc., Quixote Research Corporation and Quixote Foreign Sales Corporation are wholly-owned by Quixote Corporation. TranSafe Corporation and Energy Absorption Systems, Inc. are wholly-owned by Quixote Transportation Safety, Inc. All subsidiaries listed under TranSafe Corporation, Highway Information Systems, Inc. and Energy Absorption Systems, Inc. are wholly-owned by those corporations. EX-23 8 a2025984zex-23.txt EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 2-76697, 33-1805, 33-22289, 33-50248, 33-74488, 333-62933, 333-81955, and 333-32872) of Quixote Corporation and the Registration Statements on Form S-3 (Nos. 2-96502 and 33-14873) of Quixote Corporation of our report dated August 7, 2000 relating to the financial statements and financial statement schedule, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP Chicago, Illinois September 27, 2000 EX-27 9 a2025984zex-27.txt EXHIBIT 27
5 0000032870 QUIXOTE CORPORATION YEAR JUN-30-2000 JUL-01-1999 JUN-30-2000 1,524,000 0 21,165,000 955,000 10,072,000 34,319,000 27,930,000 12,929,000 73,264,000 12,192,000 15,596,000 0 0 153,000 42,963,000 73,264,000 83,770,000 83,770,000 42,659,000 42,659,000 25,822,000 0 932,000 14,385,000 5,466,000 8,919,000 0 0 0 8,919,000 1.13 1.10
-----END PRIVACY-ENHANCED MESSAGE-----