-----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, L2ZX8911PTpLc3Lp1/MCftqjlKmAf5ZrYHjc2ImxE7h7+E87+wjNcl0Pd8bcGLVS w6Ejvbq9Vt2inhR71wl/ag== 0001047469-99-019620.txt : 19990513 0001047469-99-019620.hdr.sgml : 19990513 ACCESSION NUMBER: 0001047469-99-019620 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUIXOTE CORP CENTRAL INDEX KEY: 0000032870 STANDARD INDUSTRIAL CLASSIFICATION: PHONOGRAPH RECORDS & PRERECORDED AUDIO TAPES & DISKS [3652] IRS NUMBER: 362675371 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08123 FILM NUMBER: 99618018 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-Q 1 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ------------------------------------------------------- [x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended March 31, 1999 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ------------ To ------------ ----------------------------------------- Commission file number 0-7903 I.R.S. Employer Identification Number 36-2675371 QUIXOTE CORPORATION (a Delaware Corporation) One East Wacker Drive Chicago, Illinois 60601 Telephone: (312) 467-6755 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES XX NO ---- ---- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 8,039,501 shares of the Company's Common Stock ($.01-2/3 par value) were outstanding as of March 31, 1999. 1 PART I FINANCIAL INFORMATION QUIXOTE CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Operations (Unaudited)
Nine Months Ended March 31, ---------------------------- 1999 1998 ---- ---- Net sales .................................. $ 49,212,000 $ 37,273,000 Cost of sales .............................. 27,400,000 21,135,000 ------------ ------------ Gross profit ............................... 21,812,000 16,138,000 Operating expenses: Selling & administrative ................. 14,327,000 10,959,000 Research & development ................... 1,186,000 1,119,000 ------------ ------------ 15,513,000 12,078,000 Operating profit ........................... 6,299,000 4,060,000 Other income (expense): Interest income .......................... 76,000 484,000 Interest expense ......................... (723,000) (203,000) Other .................................... 29,000 16,000 ------------ ------------ (618,000) 297,000 ------------ ------------ Earnings from continuing operations before income taxes ............................. 5,681,000 4,357,000 Provision for income taxes ................. 1,988,000 1,307,000 ------------ ------------ Earnings from continuing operations ........ 3,693,000 3,050,000 ------------ ------------ Earnings (loss) from discontinued operations (net of income taxes)..................... 240,000 (1,980,000) ------------ ------------ Net earnings ............................... $ 3,933,000 $ 1,070,000 ------------ ------------ Per share data - basic: Earnings from continuing operations ...... $ .46 $ .38 Earnings (loss) from discontinued operations.............................. .03 (.25) ------------ ------------ Net earnings ............................. $ .49 $ .13 ------------ ------------
See Notes to Consolidated Condensed Financial Statements. 2 QUIXOTE CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Operations-Continued (Unaudited)
Nine Months Ended March 31, ---------------------------- 1999 1998 ---- ---- Per share data - diluted: Earnings from continuing operations ........... $ .45 $ .38 Earnings (loss) from discontinued operations .. .03 (.25) ---------- ---------- Net earnings .................................. $ .48 $ .13 ---------- ---------- Shares used to compute earnings per share: Basic ........................................ 7,962,584 7,971,514 ---------- --------- Diluted ...................................... 8,216,341 8,065,789 ---------- ---------
See Notes to Consolidated Condensed Financial Statements. 3 QUIXOTE CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Operations (Unaudited)
Three Months Ended March 31, ------------------------------- 1999 1998 ---- ---- Net sales .................................. $18,347,000 $12,821,000 Cost of sales .............................. 10,098,000 7,436,000 ------------ ----------- Gross profit ............................... 8,249,000 5,385,000 Operating expenses: Selling & administrative ................. 5,746,000 3,824,000 Research & development ................... 456,000 389,000 ------------ ----------- 6,202,000 4,213,000 Operating profit ........................... 2,047,000 1,172,000 Other income (expense): Interest income .......................... 10,000 84,000 Interest expense ......................... (343,000) (100,000) Other .................................... 29,000 15,000 ------------ ----------- (304,000) (1,000) ------------ ----------- Earnings from continuing operations before income taxes ..................... 1,743,000 1,171,000 Provision for income taxes ................ 610,000 351,000 ------------ ----------- Earnings from continuing operations ....... 1,133,000 820,000 ------------ ----------- Earnings from discontinued operations (net of income taxes).................... 240,000 ------------ ----------- Net earnings .............................. $ 1,373,000 $ 820,000 ------------ ----------- Per share data - basic: Earnings from continuing operations $ .14 $ .10 Earnings from discontinued operations .03 ------------ ----------- Net earnings............................. $ .17 $ .10 ------------ -----------
See Notes to Consolidated Condensed Financial Statements. 4 QUIXOTE CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Operations-Continued (Unaudited)
Three Months Ended March 31, ------------------------------- 1999 1998 ---- ---- Per share data - diluted: Earnings from continuing operations .......... $ .14 $ .10 Earnings from discontinued operations ........ .03 ----------- ------------ Net earnings ...... .......................... $ .17 $ .10 ----------- ------------ Shares used to compute earnings per share: Basic ........................................ 8,018,193 7,904,556 ----------- ----------- Diluted ...................................... 8,238,973 7,998,831 ----------- -----------
See Notes to Consolidated Condensed Financial Statements. 5 QUIXOTE CORPORATION AND SUBSIDIARIES Consolidated Condensed Balance Sheets
March 31, June 30, ---------------------------- ASSETS 1999 1998 - -------------------------------------------------------------------------------- (Unaudited) Current assets: Cash and cash equivalents ...................... $ 1,340,000 $ 3,927,000 Accounts receivable, net of allowances for doubtful accounts of $475,000 at March 31 and $565,000 at June 30 ............. 15,593,000 13,976,000 Refundable income taxes ........................ 1,132,000 Inventories: Raw materials ................................ 4,726,000 3,046,000 Work in process .............................. 1,220,000 696,000 Finished goods ............................... 3,186,000 2,084,000 ---------- ---------- 9,132,000 5,826,000 ---------- ---------- Deferred income tax assets ..................... 2,077,000 1,642,000 Assets of discontinued operations............... 1,181,000 Other current assets ........................... 481,000 350,000 ---------- ---------- Total current assets ........................... 29,804,000 26,853,000 ---------- ---------- Property, plant and equipment, at cost ........... 26,375,000 23,236,000 Less accumulated depreciation .................... (10,777,000) (9,754,000) ---------- ---------- 15,598,000 13,482,000 ---------- ---------- Intangible assets................................. 24,231,000 12,553,000 Other assets ..................................... 1,229,000 987,000 Assets of discontinued operations ................ 5,190,000 ---------- ---------- $ 70,862,000 $ 59,065,000 ========== ==========
See Notes to Consolidated Condensed Financial Statements. 6 QUIXOTE CORPORATION AND SUBSIDIARIES Consolidated Condensed Balance Sheets
March 31, June 30, --------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998 - ---------------------------------------------------------------------------------- (Unaudited) Current liabilities: Current portion of long-term debt ................ $ 550,000 $ 497,000 Accounts payable ................................. 1,872,000 1,681,000 Dividends payable ................................ 1,021,000 Accrued expenses ................................. 6,103,000 3,894,000 Income taxes payable.............................. 2,410,000 Liabilities of discontinued operations ........... 4,614,000 ---------- ---------- Total current liabilities ........................ 10,935,000 11,707,000 ---------- ---------- Deferred income tax liabilities .................... 795,000 795,000 Long-term debt, net of current portion.............. 14,908,000 7,677,000 Liabilities of discontinued operations.............. 1,247,000 Shareholders' equity: Common stock ..................................... 151,000 148,000 Capital in excess of par value of stock .......... 32,665,000 31,396,000 Retained earnings ................................ 18,143,000 15,324,000 Treasury stock, at cost .......................... (7,982,000) (7,982,000) ---------- ---------- Total shareholders' equity ....................... 42,977,000 38,886,000 ---------- ---------- $70,862,000 $59,065,000 =========== ===========
See Notes to Consolidated Condensed Financial Statements. 7 QUIXOTE CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (Unaudited)
Nine Months Ended March 31, ----------------------------- 1999 1998 ---- ---- Cash from operating activities: Earnings from continuing operations............... $ 3,693,000 $ 3,050,000 Adjustments to reconcile earnings from continuing operations to net cash provided by operating activities: Depreciation .................................... 1,320,000 1,140,000 Amortization..................................... 1,210,000 595,000 Provision for losses on accounts receivable...... (94,000) 4,000 Changes in operating assets and liabilities (net of the effect of acquisitions): Accounts receivable .......................... (865,000) (279,000) Refundable income taxes ...................... 1,132,000 1,329,000 Inventories and other current assets.......... (2,635,000) (914,000) Accounts payable and accrued expenses ......... 1,051,000 (1,409,000) Income taxes payable ........................ 2,410,000 196,000 ---------- ---------- Net cash provided by operating activities of continuing operations........................... 7,222,000 3,712,000 Net cash provided by (used in) discontinued operations ..................................... 1,542,000 (6,712,000) ---------- ---------- Net cash provided by (used in) operating activities....................................... 8,764,000 (3,000,000) ---------- ---------- Investing activities: Cash paid for acquired business (net of cash on books)........................................ (13,701,000) (4,822,000) Purchase of property, plant and equipment ...... (1,881,000) (1,114,000) Investment in Transportation Management Technologies, LLC............................. (500,000) Other .......................................... (49,000) (457,000) ---------- ---------- Net cash used in investing activities............. (16,131,000) (6,393,000) ----------- ---------- Financing activities: Borrowing on revolving line of credit............ 7,100,000 Payments on notes payable ...................... (797,000) (729,000) Payment of semi-annual cash dividend ........... (2,135,000) (2,070,000) Proceeds from exercise of common stock options . 612,000 245,000 Repurchase of common stock for the treasury .... (1,855,000) ---------- ---------- Net cash provided by (used in) financing activities ..................................... 4,780,000 (4,409,000) ---------- ---------- Decrease in cash and cash equivalents............. (2,587,000) (13,802,000) Cash and cash equivalents at beginning of period.. 3,927,000 18,463,000 --------- ---------- Cash and cash equivalents at end of period ....... $ 1,340,000 $ 4,661,000 --------- ----------
Note: During the nine months ended March 31, 1999, the Company had net cash refunds of $1,554,000 for income taxes and paid $742,000 for interest. During the same period in the prior year, the Company had net cash refunds of $217,000 for income taxes and paid $203,000 for interest. See Notes to Consolidated Condensed Financial Statements. 8 QUIXOTE CORPORATION AND SUBSIDIARIES Notes to Consolidated Condensed Financial Statements (Unaudited) 1. The accompanying unaudited consolidated condensed financial statements present information in accordance with generally accepted accounting principles for interim financial information and applicable rules of Regulation S-X. Accordingly, they do not include all information or footnotes required by generally accepted accounting principles for complete financial statements. Management believes the financial statements include all normal recurring adjustments necessary for a fair presentation. Operating results for the three and nine months ended March 31, 1999 do not necessarily reflect the results that may be expected for the full year. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended June 30, 1998. 2. The computation of basic and diluted earnings per share, as prescribed by FASB 128, is as follows:
Three Months Ended Nine Months Ended March 31, March 31, 1999 1998 1999 1998 ---- ---- ---- ---- Net earnings per share of common stock: Basic ...................... $ .17 $ .10 $ .49 $ .13 Diluted .................... $ .17 $ .10 $ .48 $ .13 Numerator: - ---------- Net earnings available to common shareholders-basic and diluted: ................. $ 1,373,000 $ 820,000 $3,933,000 $1,070,000 ========== ========== ========= ========= Denominator: - ------------ Weighted average shares outstanding-basic: ........... 8,018,193 7,904,556 7,962,584 7,971,514 Effect of dilutive securities options ...................... 220,780 94,275 253,757 94,275 ---------- ---------- --------- --------- Weighted average shares outstanding-diluted .......... 8,238,973 7,998,831 8,216,341 8,065,789 ========== ========== ========= =========
9 QUIXOTE CORPORATION AND SUBSIDIARIES Notes to Consolidated Condensed Financial Statements (Unaudited), continued 3. During the second quarter, the Company settled certain litigation involving its formerly owned subsidiary, Disc Manufacturing, Inc. (DMI), which it sold in April 1997. The litigation, initiated in 1995, includes a lawsuit brought by Discovision Associates against DMI for infringement of certain patents related to optical disc technology as well as a lawsuit brought by DMI against Discovision Associates, Pioneer Electronic Corporation, Pioneer Electronics (USA) Inc. and Pioneer Electronics Capital Inc. for violations of the antitrust laws and acts of unfair competition. The settlement involves a payment previously accrued in the financial statements and, therefore, there will be no additional charge to the Company's earnings related to this matter. In a separate patent infringement lawsuit brought against DMI by Thomson S.A., the U.S. Court of Appeals, on January 25, 1999, affirmed the District Court's decision to sustain the jury verdict in favor of DMI. 4. On December 9, 1998, the Company and its wholly-owned subsidiary, TranSafe Corporation, acquired Nu-Metrics, Inc., a Uniontown, Pennsylvania based developer and manufacturer of traffic sensing and distance measuring devices. This transaction was accounted for as a purchase and was effective as of December 1, 1998. The purchase price was $13,701,000 which was paid in cash. When acquired, Nu-Metrics had long-term debt of approximately $981,000. Goodwill recorded in the transaction of approximately $12,500,000 will be amortized over a 20 year life. The following unaudited proforma summary presents the consolidated results of operations as if the acquisition of Nu-Metrics had occurred at the beginning of the period presented below:
Nine Months Ended March 31, ------------------------------- 1999 1998 ---- ---- Net sales ...................................... $ 51,509,000 $ 41,550,000 ------------ ---------- Net earnings.................................... $ 3,666,000 $ 1,126,000 ------------ ---------- Net earnings per diluted share.................. $ .45 $ .14 ------------ ----------
5. During the second quarter the Company and its wholly-owned subsidiary, TranSafe Corporation, entered into a joint venture agreement to market pavement inspection and management systems and other high technology products and services in the United States. The joint venture is with G.I.E. Technologies, Inc., based in Montreal, Canada, and eight independent distributors of the Company's highway products. TranSafe is required to invest up to $1,000,000 in $250,000 quarterly installments for an 18% interest in Transportation Management Technologies, L.L.C., the company formed to market the products and services. This investment is being accounted for under the equity method of accounting. 6. On March 26, 1999, DMI assigned all of its rights to certain real property and a building, located in Huntsville, Alabama to Cinram, Inc. upon Cinram's exercise of its option to purchase for the pre-agreed purchase price of $6,947,000, less approximately $238,000 for roof repairs agreed to by both parties. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CURRENT YEAR-TO-DATE VERSUS PRIOR YEAR-TO-DATE - ---------------------------------------------- The Company's sales for the first nine months of fiscal 1999 increased 32% to $49,212,000 from $37,273,000 for the first nine months of fiscal 1998 due to both internal sales growth as well as growth from three acquisitions the Company completed during fiscal 1998 and 1999. Internal sales increased 18% resulting from demand for Energy Absorption System, Inc.'s newer crash cushion products. Energy Absorption's permanent line of crash cushion products increased 36% due to strong sales of the QuadGuard -Registered Trademark- family of crash cushions including the newer wide and low maintenance versions of this product line. The Company also experienced sales increases in its truck-mounted attenuator (TMA) product line, including the Alpha 100k TMA -TM-. Parts sales and sales of Safe-Hit Corporation's highway delineators also increased during the period. Roadway Safety Service, Inc., acquired in October 1997, increased sales $2,317,000 to $4,917,000 for the nine month period. Highway Information Systems, Inc., acquired April 1, 1998, contributed sales of $1,696,000 for the period. Nu-Metrics, Inc., acquired December 1, 1998, contributed sales of $1,801,000 for the four month period as part of the Company. Nu-Metrics is a leading manufacturer of electronic measuring and sensing devices for highway safety and traffic monitoring. Somewhat offsetting these sales increases, sales of the Energite-Registered Trademark- barrel product line and Triton Barrier-Registered Trademark- declined during the period. Spin-Cast Plastics, Inc.'s custom molded products also declined during the period. The gross profit margin in the first nine months of the current year increased to 44.3% from 43.3% in the same period last year. Energy Absorption and its subsidiaries had an increase in gross profit margin due principally to efficiencies related to the increase in sales. Roadway Safety Service also had an increase in its gross margin for the nine month period due to both lower vendor costs as well as the increase in sales volume. Highway Information Systems and Nu-Metrics, acquisitions not part of the Company in last year's nine month period, contributed to the increase in gross margin as their gross margins are higher than the Company's historical gross profit margin. Selling and administrative expenses in the first nine months of the current year increased 31% to $14,327,000 from $10,959,000 in the first nine months last year. This was due principally to the fiscal 1998 and 1999 acquisitions of Roadway Safety Service, Highway Information Systems and Nu-Metrics which added a combined $1,756,000 in selling and administrative expenses for the nine month period. Corporate level administrative expenses increased $867,000 due principally to increased salaries and benefits, investor relations and professional services expenses. Energy Absorption and its subsidiaries had a $745,000 increase in selling and administrative expenses which was due to their increased level of sales. Research and development expenses in the first nine months of the current year increased slightly to $1,186,000 compared to $1,119,000 in the same period last year. During the current year, the Company continued with its testing of a wider version of the Company's REACT 350-Registered Trademark- crash cushion as well as a snowplowable reflective road marker and other developmental crash cushion products. Interest income in the first nine months of the current year was $76,000 compared to $484,000 in the same period last year. Interest income declined as a result of a decline in the Company's cash as it has been deployed for the acquisition of several business's during the past year. Interest expense in the first nine months of the current year was $723,000 compared to $203,000 in the same period last year. Current period interest expense relates to seller financing in connection with the acquisition of Roadway Safety Service and bank debt incurred in connection with the acquisitions of Highway Information Systems and Nu-Metrics. The Company's effective income tax rate for the first nine months of the current year was 35% compared to an effective income tax rate of 30% in the same period last year due to last year's realization of certain tax benefits along with the settlement of certain tax contingencies. The Company believes its effective income tax rate for the current year will be approximately 35%. 11 CURRENT YEAR QUARTER VERSUS PRIOR YEAR QUARTER - ---------------------------------------------- The Company's sales for the third quarter of fiscal 1999 increased 43% to $18,347,000 from $12,821,000 in the third quarter of fiscal 1998 due to both internal sales growth as well as growth from acquisitions the Company completed during fiscal 1998 and 1999. Internal sales increased 29% resulting from demand for Energy Absorption's newer crash cushion products. Energy Absorption's permanent line of crash cushion products increased principally due to strong unit sales of the QuadGuard family of crash cushions including the newer wide and low maintenance versions of this product line. The Company also experienced sales increases in its TMA and Energite barrel product line. Parts sales and sales of Safe-Hit's highway delineators also increased during the quarter. Highway Information Systems contributed sales of $440,000 for the quarter. Nu-Metrics contributed sales of $1,314,000 for the quarter. Roadway Safety Service's sales for the current quarter increased 39% to $1,753,000 from $1,261,000 in the same quarter last year. Somewhat offsetting these sales increases, sales of the Triton Barrier-Registered Trademark- declined during the quarter. Spin-Cast Plastics' custom molded products also declined during the quarter. The gross profit margin in the third quarter of fiscal 1999 increased to 45.0% from 42.0% in the third quarter last year. Energy Absorption Systems and its subsidiaries had an increase in its gross profit margin due principally to efficiencies related to the increase in sales. Roadway Safety Service also had an increase in its gross margin for the quarter due to both lower vendor costs as well as the increase in sales volume. Highway Information Systems and Nu-Metrics, acquisitions not part of the Company in last year's third quarter, contributed to the increase in gross margin as their gross margins are higher than the Company's historical gross profit margin. Selling and administrative expenses in the third quarter of the current year increased 50% to $5,746,000 from $3,824,000 in the third quarter last year. This was due principally to the acquisitions of Highway Information Systems and Nu-Metrics which added a combined increase of $786,000 in selling and administrative expenses. Energy Absorption and its subsidiaries had a $468,000 increase in selling and administrative expenses which was due principally to the increased level of sales. Roadway Safety Service had increased selling and administrative expenses of $66,000 also due to increased sales. Corporate level administrative expenses increased $602,000 due principally to increased salaries and benefits, investor relations and professional services expenses. Research and development expenses in the third quarter of the current year increased 17% to $456,000 from $389,000 in the same quarter last year. During the current quarter, the Company continued with the development and testing of advanced new crash cushion products as well as a snowplowable road marker and other developmental projects. Interest income in the third quarter of the current year was $10,000 compared to $84,000 in the third quarter last year. Interest income declined as a result of a decline in the Company's cash as it has been deployed through the Company's acquisitions. Interest expense in the third quarter of the current year was $343,000 compared to $100,000 in the third quarter last year resulting from additional bank debt incurred in connection with the acquisitions of Highway Information Systems and Nu-Metrics. LIQUIDITY AND CAPITAL RESOURCES - --------------------------------------------------------- The Company had cash and cash equivalents of $1,340,000 and access to additional funds of $29,400,000 under its bank arrangements as of March 31, 1999. Continuing operating activities were a source of cash for the Company for the first nine months of fiscal 1999 providing $7,222,000. Discontinued operations were also a source of cash generating $1,542,000 as a result of the sale of a building for $6,709,000 related to a business previously sold. Cash was used by discontinued operations for payments for a legal settlement related to the Company's dispute with the Recording Industry Association of America and for legal expenses and lease commitments. This resulted in net cash provided by all operating activities of $8,764,000. Investing activities used cash of $16,131,000 during the current nine month period of which $13,701,000 was used for the purchase of Nu-Metrics. In addition, the Company used cash of $1,881,000 for the purchase of equipment and used additional 12 cash of $500,000 for an equity investment in Transportation Management Technologies, L.L.C. as discussed in the notes to the financial statements. Financing activities provided cash of $4,780,000 during the current nine month period. The Company received cash of $7,100,000 from borrowings under its revolving credit facility to fund, in part, the purchase of Nu-Metrics. The payment of the Company's semi-annual cash dividend used cash of $2,135,000. The Company also used cash of $797,000 for the payment of notes due in connection with the acquisition of Roadway Safety Service and for payments on long-term debt at Nu-Metrics. Offsetting these cash payments somewhat, the Company received cash of $612,000 for the exercise of common stock options. For fiscal 1999, the Company anticipates needing less than $2,500,000 in cash for capital expenditures. The Company may also need additional cash as it considers acquiring businesses that complement its existing operations. Also, the Company will require additional investments in working capital to maintain growth. In addition, the Company may also need funds to repurchase its own stock from time to time. These expenditures will be financed either through the Company's invested cash, cash generated from its operations, or from borrowings available under the Company's revolving credit facility. The Company believes its existing cash, cash generated from operations and funds available under its existing credit facility, are sufficient for all planned operating and capital requirements. YEAR 2000 ISSUE - --------------------- During the current year, the Company continued making an assessment of its Year 2000 (Y2K) issues relative to its own information technology and non-information technology as well as assessing the state of Y2K readiness of its vendors and customers. The Company's Y2K task force, consisting of senior management, continued to assess the Company's state of readiness and to implement an action plan to correct Y2K deficiencies. The Company determined that its principal software programs for financial, order entry and manufacturing planning were not Y2K compliant and has upgraded these programs to more advanced versions that are Y2K compliant. The Company has begun assessing the state of Y2K readiness for Nu-Metrics, Inc., its recent acquisition, during the Company's third fiscal quarter. In addition, the Company continued to evaluate the impact of the Y2K issue on its non-information technology systems, such as manufacturing machinery, equipment, computer-aided design and test equipment as well as products with date sensitive software and embedded microprocessors. The Company completed the assessment phase of its non-information technology systems during its second fiscal quarter and has begun taking remedial action in the Company's third fiscal quarter. The Company has initiated communications with significant suppliers, customers and other relevant third parties to identify and minimize disruptions to the Company's operations related to Y2K issues. However, there can be no certainty that the systems and products of other companies on which the Company relies will not have a material adverse effect on the Company's operations. In addition, much of the Company's revenues are derived from various federal and state agencies which may not be Y2K compliant. The Company expects to complete this assessment phase during fiscal 1999. The Company anticipates completing substantially all of its Y2K projects during fiscal 1999. In the event the Company falls short of these milestones, additional internal resources will be focused on completing these projects or developing contingency plans. The estimated cost to correct the Company's Y2K deficiencies is approximately $300,000. This estimate includes $200,000 in costs to upgrade its information technology systems with the balance of the estimate for any changes or modifications needed for non-information technology systems. The Company estimates it has spent approximately $250,000 to date. While the Company believes that its non-information technology and vendor and customer issues are of a lower risk, until the Company's assessment of these risks is complete there can be no assurance that these issues will not have a material effect on the Company's operations. All estimates of Y2K related costs are based on numerous assumptions and there is no certainty that estimates will be achieved and actual costs could be materially greater than anticipated. In the event the Company is unable to take corrective measures related to its Y2K issues, the Company's ultimate contingency plan is to outsource critical computer applications where feasible, and in addition, create manual systems until such 13 corrective measures are taken. Please refer to the Company's disclosure in its Form 10-K for the period ended June 30, 1998 for additional information. FORWARD LOOKING STATEMENTS - -------------------------- Various statements made within the Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Quarterly Report on Form 10-Q constitute "forward looking statements" for purposes of the Securities and Exchange Commission's "safe harbor" provisions under the Private Securities Litigation Reform Act of 1995 and Rule 3b-6 under the Securities Exchange Act of 1934, as amended. Investors are cautioned that all forward looking statements involve risks and uncertainties, including those detailed in the Company's filings with the Securities and Exchange Commission. There can be no assurance that actual results will not differ from the Company's expectations. Factors which could cause materially different results include, among others, uncertainties related to the introduction of the Company's products and services; the successful completion and integration of acquisitions; any adverse effects due to the Y2K issue; and competitive and general economic conditions. 14 PART II OTHER INFORMATION ITEM 1. Legal Proceedings - -------------------------- 1. Thomson S.A. v. Time Warner et al., Case No. 94-83, U.S. District Court for the District of Delaware. On April 26, 1999, Thomson S.A. filed with the U.S. Supreme Court a petition for a Writ of Certiorari. No decision to hear this case has been made by the Supreme Court as of this time. See the Company's Form 10-K for the period ended June 30, 1998, Item 3, for additional information about this litigation. 2. Repetitive Stress Injury Litigation. The Company has agreed to settle for a nominal amount ten of the remaining eleven repetitive stress injury cases and has been advised that the remaining case will be dismissed. See the Company's Form 10-K for the period ended June 30, 1998, Item 3, for additional information. ITEM 2. Changes in Securities ------------------------------ None. ITEM 3. Default upon Senior securities --------------------------------------- None. ITEM 4. Submission of Matters to a Vote of Security Holders ------------------------------------------------------------ None. ITEM 5. Other Information -------------------------- None. ITEM 6. Exhibits and reports on Form 8-K ----------------------------------------- (a) None (b) Exhibits 10 (a) Second Amendment and Waiver to Amended and Restated Loan Agreement dated as of March 15, 1999 among Quixote Corporation and certain subsidiaries, the Northern Trust Company, LaSalle National Bank and American National Bank and Trust Company, and Amended and Restated Revolving Credit Notes, filed herewith. 10 (b) Partial Assignment of Lease and Equity in Project dated March 26, 1999 by and between Disc Manufacturing Inc. (n/k/a Quixote Laser Corporation), Cinram, Inc. and the Industrial Development Board of the City of Huntsville, and Termination of Sublease dated March 26, 1999 by and between Disc Manufacturing, Inc. (n/k/a Quixote Laser Corporation) and Cinram, Inc., filed herewith. 15 SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 to be signed on its behalf by the undersigned thereunto duly authorized. QUIXOTE CORPORATION DATED: May 12, 1999 /s/ Daniel P. Gorey ------------ ------------------- DANIEL P. GOREY Chief Financial Officer Vice President and Treasurer (Chief Financial & Accounting Officer) 16 EX-10.A 2 EXHIBIT 10(A) SECOND AMENDMENT AND WAIVER TO AMENDED AND RESTATED LOAN AGREEMENT THIS SECOND AMENDMENT AND WAIVER TO AMENDED AND RESTATED LOAN AGREEMENT (this "Second Amendment"), dated as of March 15, 1999, is among QUIXOTE CORPORATION, a Delaware corporation ("Quixote"), ENERGY ABSORPTION SYSTEMS, INC., a Delaware corporation (f/k/a Quixote Steno Corporation and successor by merger to Energy Absorption Systems, Inc., a Delaware corporation and Litigation Communications, Inc. a Delaware corporation) ("EAS"), QUIXOTE LASER CORPORATION (f/k/a Disc Manufacturing, Inc.), a Delaware corporation ("DMI"), TRANSAFE CORPORATION, a Delaware corporation ("TranSafe"), SPIN-CAST PLASTICS, INC., an Indiana corporation ("Spin-Cast"), E-TECH TESTING SERVICES, INC., a Delaware corporation ("E-Tech"), ROADWAY SAFETY SERVICE, INC., a Delaware corporation ("Roadway"), SAFE-HIT CORPORATION, a Nevada corporation ("Safe-Hit"), HIGHWAY INFORMATION SYSTEMS, INC., a Delaware corporation ("HIS"), NU-METRICS, INC., a Pennsylvania corporation ("Nu-Metrics"), certain lenders signatory hereto ("Lenders"), and THE NORTHERN TRUST COMPANY, an Illinois banking corporation, as agent for the Lenders hereunder ("Agent"). Quixote, EAS, DMI, TranSafe, Spin-Cast, E-Tech, Roadway, Safe-Hit, HIS and Nu-Metrics are individually and collectively referred to herein as "Borrower." This Second Amendment shall amend that certain Amended and Restated Loan Agreement dated as of June 30, 1997 among the Borrower, the Lenders and the Agent, as previously amended by that certain First Amendment to Revolving Credit Agreement dated as of May 31, 1998 (as amended, restated, modified or supplemented, the "Loan Agreement"). WITNESSETH: WHEREAS, the Borrower, the Lenders and the Agent are parties or, pursuant to the terms of this Second Amendment, will become parties to the Loan Agreement; WHEREAS, on or about April 1, 1998, Quixote acquired 100% of the assets of HIS, and on or about December 10, 1998, Quixote acquired 100% of the outstanding capital stock of Nu-Metrics; WHEREAS, HIS and Nu-Metrics are wholly-owned Subsidiaries of Quixote and Quixote desires to make each a Borrower under the Loan Agreement; WHEREAS, Litigation Communications, Inc., a Delaware corporation and a Borrower under the Loan Agreement ("LCI"), merged into Quixote Steno Corporation, a Delaware corporation and also a Borrower under the Loan Agreement, on September 28, 1998 pursuant to the terms of that certain Agreement and Plan of Merger dated September 28, 1998 between Quixote Steno Corporation, LCI and other subsidiaries of Quixote Steno Corporation; WHEREAS, Energy Absorption Systems, Inc., a Delaware corporation and Borrower under the Loan Agreement merged into Quixote Steno Corporation on September 30, 1998 pursuant to the terms of that certain Agreement and Plan of Merger dated September 28, 1998 between such parties; WHEREAS, pursuant to such Agreement and Plan of Merger between Energy Absorption Systems, Inc. and Quixote Steno Corporation, Quixote Steno Corporation remained as the surviving corporation, changed its name to Energy Absorption Systems, Inc. and assumed all debts and obligations of the former Energy Absorption Systems, Inc. under such name, including all of its obligations as a Borrower under the Loan Agreement; WHEREAS, Legal Technologies, Inc., a Delaware corporation ("LTI") was a Borrower under the Loan Agreement but dissolved and ceased its corporate existence on October 5, 1998; WHEREAS, Quixote LSI Corporation (f/k/a Litigation Services, Inc.), a Delaware corporation ("LSI") was a Borrower under the Loan Agreement but dissolved and ceased its corporate existence on December 9, 1998; WHEREAS, the Borrower has requested that the Agent and the Lenders waive certain conditions set forth in Section 7.2 of the Loan Agreement, as more specifically described herein, related to TranSafe's agreement to invest an aggregate amount of $1,000,000 and acquire an 18.56% interest in Transportation Management Technologies, L.L.C., a Delaware limited liability company ("TMT") pursuant to the terms of that certain Limited Liability Company Operating Agreement of TMT dated as of October 1, 1998; and WHEREAS, the Borrower has, among other amendments, requested an extension of one year on the maturity dates for the Revolving Credit Loans, the Conversion Date, and the Term Loans, and the Lenders and the Agent have agreed to amend the Loan Agreement in this and other respects as set forth herein; NOW, THEREFORE, the parties hereto hereby agree as follows: 1. AMENDMENTS TO THE LOAN AGREEMENT. 1.1 Terms Used. Terms used but not otherwise defined herein are used with the same meanings as provided therefor in the Loan Agreement. 1.2 Section 1. Section 1 of the Loan Agreement is hereby amended as of the date hereof by: (a) deleting the definition of "Applicable Margin" in its entirety and replacing it with the following: "Applicable Margin" shall mean the percentage as set forth below then applicable to, respectively, the Revolving Credit Loan, the Term Loan and the Unused Revolving Credit Loan Charge as determined by using the following performance based grid after determining which of the pricing levels (being Pricing Level I through Pricing Level IV) specified thereon is then in effect:
Net Consolidated Pricing Level Pricing Level Pricing Level Pricing Level Funded Debt to I II III IV EBITDA < 1.50 x > /=1.50 > /=2.25 > /=3.0 Revolving Credit Loan 1.0 1.25 1.50 1.625 Term Loan 1.125 1.375 1.625 1.750 Unused Revolving Credit Loan Charge .15 .15 .25 .25
For the purposes of the foregoing, (a) prior to September 30, 1998, the Applicable Margin shall be determined in accordance with Pricing Level I, and (b) from and after such date, the Applicable Margin shall be determined at any time by reference to the Net Consolidated Funded Debt to EBITDA Ratio and any change in the Applicable Margin based on a change in such ratio during any Fiscal Quarter shall be effective for all purposes on the first day of the Fiscal Quarter following the last day of the Fiscal Quarter in which such change occurred as shown in a Compliance Certificate delivered to the Agent and the Lenders pursuant to Section 5.1(c), which Compliance Certificate shall set forth the information and make the certifications required in the form of Exhibit E, including without limitation the detailed computations of the compliance by the Borrower with the covenants contained in Section 6.3. Notwithstanding the foregoing, no reduction in the Applicable Margin shall be effective if a Default or Event of Default shall have occurred and be continuing. If the Borrower shall at any time fail to timely provide the Agent and the Lenders with a Compliance Certificate as required pursuant to Section 5.1, the next higher Pricing Level from that then in effect (but not higher than Pricing Level IV) shall apply until such Compliance Certificate is delivered."; (b) deleting the references to the dates "October 31, 2000" and "October 31, 2004" in the definition of "Commitment Termination Date" and replacing them with the dates "October 31, 2001" and "October 31, 2005" respectively; (c) deleting the reference to the date "November 1, 2000" in the definition of "Conversion Date" and replacing it with the date "November 1, 2001"; (d) deleting the definition of "EBITDA" in its entirety and replacing it with the following in place thereof: ""EBITDA" shall mean for any fiscal period (i) Consolidated Net Income plus (ii) to the extent deducted in determining Consolidated Net Income, Interest Expense and taxes (as stated in the consolidated statement of income for Quixote and its Subsidiaries) plus (iii) to the extent deducted in determining Consolidated Net Income, depreciation, amortization and other similar non-cash charges; provided, that in the event that Borrower has, directly or indirectly, by operation of law or otherwise, merged or consolidated with or into, or acquired all or substantially all of the assets or capital stock of, or otherwise combined with, any Person that is not an Affiliate of Borrower, EBITDA shall be adjusted to reflect such Person's pro forma historical or actual EBITDA, as the case may be, in a form acceptable to Agent; provided, that such Person's historical EBITDA may be adjusted solely to reflect owner's compensation."; and (e) deleting the definition of "Net Consolidated Funded Debt to EBITDA Ratio" in its entirety and replacing it with the following: ""Net Consolidated Funded Debt to EBITDA Ratio" shall mean, at any date of determination thereof, the ratio of (a) Consolidated Funded Debt less the aggregate amount of cash and cash equivalents described in Section 7.2(i), (ii), (iii), (iv) and (v) of the Borrower and its Subsidiaries in excess of $1,000,000 to (b) EBITDA." 1.3 Section 6.3. Section 6.3 of the Loan Agreement is hereby deleted in its entirety and replaced with the following: "6.3 Financial Covenants. Quixote and its Subsidiaries shall have, on a consolidated basis: (a) at all times a Consolidated Net Worth (which shall be certified by Quixote at the end of each Fiscal Year) equal to or greater than (i) $38,000,000, plus, (ii) 50% of Quixote's positive Consolidated Net Income for the 1998 Fiscal Year and each Fiscal Year thereafter; (b) at the end of each Fiscal Quarter, a Minimum Interest Coverage Ratio (which shall be certified by Quixote at the end of each Fiscal Quarter) of not less than 2.0 to 1.0; (c) at the end of each Fiscal Quarter, a Consolidated Funded Debt to Adjusted Capitalization Percentage (which shall be certified by Quixote at the end of each Fiscal Quarter) equal to or less than 50%; and (d) at the end of each of the following periods, a Net Consolidated Funded Debt to EBITDA Ratio (which shall be certified by Quixote at the end of such period): Maximum Funded Period Debt to EBITDA - ---------------------------------- -------------------------------- June 30, 1997 to December 31, 1997 less than or equal to 4.0 to 1.0 January 1, 1998 to December 31, 1998 less than or equal to 3.75 to 1.0 January 1, 1999 and thereafter less than or equal to 3.5 to 1.0." 1.4 Section 7.3. Section 7.3 of the Loan Agreement is hereby amended by (a) deleting the word "and" immediately preceding clause (xiii) thereof, and (b) deleting the "." at the end of Section 7.3 and replacing it with the following: "; (xiv) Indebtedness under (A) that certain Participating First Note in the principal amount of $366,000 dated June 16, 1995 by Nu-Metrics in favor of the Pennsylvania Industrial Development Authority ("PIDA"), (B) that certain Second Note in the principal amount of $94,000 dated June 16, 1995 by Nu-Metrics in favor of PIDA, (C) that certain promissory note in the principal amount of $75,000 dated August 21, 1995 by Nu-Metrics in favor of Fay-Penn Economic Development Council ("Fay-Penn") and (D) that certain loan agreement in the principal amount of $175,000 dated August 31, 1998 by Nu-Metrics in favor of Fay-Penn." 1.5 Definition of "Borrower". The parties hereto hereby agree that HIS and Nu-Metrics will henceforth each individually be a "Borrower" under the Loan Agreement and, together with Quixote, EAS, TranSafe, Spin-Cast, DMI, E-Tech, Roadway and Safe-Hit, shall collectively henceforth be the "Borrower" under the terms of the Loan Agreement. The definition of "Borrower" set forth in the preamble to the Loan Agreement is hereby amended to mean the entities, individually and collectively, set forth in this Section 1.5. 1.6 Exhibits. Exhibits A, B, C and E to the Loan Agreement are deleted in their entirety and Exhibits A, B, C and E attached hereto are substituted in lieu thereof. 1.7 Schedule 1. Schedule 1 is attached hereto and made a part hereof and a part of the Loan Agreement. The Borrower has included the information set forth in Schedule 1 in order to amend and supplement the information provided by the Borrower on the Closing Date in the various schedules to the Loan Agreement and in order to make the information contained therein accurate and complete as of the date hereof. 2. WAIVER. The Agent and the Required Lenders hereby waive any Default or Event of Default under Section 7.2 of the Loan Agreement arising out of the Borrower's failure to comply with the restrictions on investments imposed by such section and caused by that certain agreement by TranSafe to make an investment not to exceed $1,000,000 in the aggregate to acquire 18.56% of the limited liability company interests in TMT pursuant to the terms of that certain Limited Liability Company Operating Agreement of TMT dated as of October 1, 1998. The waiver by the Agent and the Required Lenders as described above shall not operate as a consent or waiver of (i) any other right, power or remedy of the Agent or the Lenders under the Loan Documents, or (ii) any other Default or Event of Default under the Loan Agreement. Such waiver is only applicable and shall only be effective in the specific instance and for the specific purpose for which made or given. 3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby remakes, as at the date of execution hereof, all of the representations and warranties set forth in Section 4 of the Loan Agreement as amended hereby and as amended and supplemented by Schedule 1 hereto, and additionally represents and warrants that: (a) the borrowings under the Loan Agreement as amended hereby, the execution and delivery by the Borrower of this Second Amendment and the performance by the Borrower of its obligations under this Second Amendment and the Loan Agreement as amended hereby are within the Borrower's corporate powers, have been authorized by all necessary corporate action, have received all necessary governmental approval (if any shall be required) and do not and will not contravene or conflict with any provision of law or of the charter or by-laws of the Borrower or any subsidiary or of any agreement binding upon the Borrower or any subsidiary; (b) no Default or Event of Default under the Loan Agreement as amended hereby has occurred and is continuing on the date of execution hereof; and (c) the information provided herein and in Schedule 1 hereto with respect to HIS and Nu-Metrics, with respect to the mergers involving EAS described in the Recitals hereto, with respect to the dissolution of LSI and LTI and with respect to all other matters contained herein and therein, is true and complete in all respects and fully and completely amends and supplements all of the schedules provided by the Borrower pursuant to the Loan Agreement as necessary to make the information contained in such schedules accurate and complete as of the date hereof. 4. CONDITIONS OF EFFECTIVENESS. The effectiveness of this Second Amendment is subject to the conditions precedent that the Agent shall have received all of the following, in form and substance satisfactory to the Agent and its counsel, at the expense of the Borrower, and, as appropriate, dated as of the date hereof and in such number of signed counterparts as the Agent may request: (a) Second Amendment. This Second Amendment; (b) Resolutions/Incumbency. A certificate from the Secretary or Assistant Secretary of each Borrower certifying (i) the name(s) of the officer or officers of the Borrower authorized to sign this Second Amendment and the other documents provided for in this Second Amendment, together with a sample of the true signature of each such officer (the Agent may conclusively rely on each such certificate until formally advised by a like certificate of any changes therein), (ii) true and correct copies of any resolutions of the Board of Directors of each Borrower authorizing or ratifying the execution, delivery and performance of this Second Amendment, the Loan Agreement as amended hereby, the Amended and Restated Revolving Credit Notes and other documents provided for in this Second Amendment, (iii) for the each of the certificates of TranSafe, E-Tech, Roadway and Safe-Hit, there has been no change in the Certificate of Incorporation or Bylaws for such Borrower since June 30, 1997 and such Certificate of Incorporation and Bylaws are in full force and effect as of the date hereof and no steps have been taken by the directors or stockholders of such Borrower to effect or authorize any amendment or modification thereto; and (iv) for the certificates of each of Quixote, Spin-Cast, EAS, HIS and Nu-Metrics, respectively, true and correct copies of (A) the Certificate of Incorporation of each of Quixote, Spin-Cast, EAS, HIS and Nu-Metrics, and all amendments thereto, as certified by the Secretary of State of the state of incorporation for each entity, and (B) the Bylaws of each of Quixote, Spin-Cast, EAS, HIS and Nu-Metrics; (c) No Default - Representations Accurate. A certificate of each Borrower, dated the date hereof, that (i) no Default or Event of Default has occurred and is continuing and (ii) all representations and warranties contained in the Loan Agreement as further amended hereby and as amended and supplemented by the information set forth in Schedule 1 attached hereto, are true and complete as of the date hereof; (d) Amended and Restated Revolving Credit Notes. An original Amended and Restated Revolving Credit Note dated as of the date hereof in the form of Exhibit B attached hereto in favor of each Lender and executed by each Borrower as replacements for the Revolving Credit Notes executed and delivered on the Closing Date pursuant to Section 2.1(b) of the Loan Agreement; (e) Return and Cancellation of Existing Revolving Credit Notes. The Revolving Credit Notes executed and delivered on the Closing Date for cancellation and return to the Borrower; (f) Lien Searches. UCC lien search reports of filings against HIS and Nu-Metrics and tax lien and judgment searches relating to HIS and Nu-Metrics for such jurisdictions as Agent deems appropriate; (g) Good Standing Certificates. Good Standing Certificates for each of HIS and Nu-Metrics from the Secretaries of State of each state in which they are qualified to do business; (h) Legal Opinion. The opinion of Joan R. Riley, General Counsel of Borrower, addressed to the Lenders and the Agent in the form of Exhibit D attached hereto and made a part hereof; (i) Documents Relating to Corporate Restructuring. Certificates of Dissolution, Certificates of Merger or other certificates, certified by the appropriate Secretaries of State in the jurisdictions where filed, and other appropriate documents as required by the Agent, relating to the merger agreements involving EAS and the dissolution of LSI and LTI; (j) Accountant's Letter. A letter to PricewaterhouseCoopers, L.L.P., the independent accountants for Borrower, in form and substance satisfactory to Agent, executed by the Borrower; and (k) Miscellaneous. Such other documents as the Agent may request. 5. MISCELLANEOUS. 5.1 Counterparts. This Second Amendment may be executed by the parties on any number of separate counterparts and by each party on separate counterparts; each counterpart shall be deemed an original instrument; and all of the counterparts taken together shall be deemed to constitute one and the same instrument. 5.2 Exhibits and Schedules. All exhibits and schedules attached hereto are made a part hereof and incorporated herein as though fully set forth herein. 5.3 Successors and Assigns. This Second Amendment and the Loan Agreement as amended hereby shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Agent and their respective successors and assigns. 5.4 Captions. Captions in this Second Amendment are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. 5.5 Fees. The Borrower agrees to pay or reimburse the Agent for all reasonable costs and expenses of preparing and seeking advice in regard to this Second Amendment and any document or instrument executed in connection herewith and therewith (including legal fees and reasonable time charges of attorneys who may be employees of the Agent, whether in or out of court, in original or appellate proceedings or in bankruptcy). 5.6 CONSTRUCTION. THIS SECOND AMENDMENT, THE LOAN AGREEMENT AS AMENDED HEREBY AND ANY DOCUMENT OR INSTRUMENT EXECUTED IN CONNECTION HEREWITH OR THEREWITH SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. AGENT, EACH LENDER AND BORROWER AGREE TO SUBMIT TO PERSONAL JURISDICTION AND TO WAIVE ANY OBJECTION AS TO VENUE IN THE COUNTY OF COOK, STATE OF ILLINOIS. BORROWER AGREES NOTHING HEREIN SHALL PRECLUDE AGENT, ANY LENDER OR BORROWER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION. 5.7 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTON, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS SECOND AMENDMENT, ANY OF THE OTHER LOAN DOCUMENTS OR ANY OF THE OTHER AGREEMENTS. 5.8 Amendment to Loan Agreement. This Second Amendment shall be deemed to be an amendment to the Loan Agreement. All references to the Loan Agreement in any other document or instrument shall be deemed to refer to the Loan Agreement as amended hereby. As hereby amended, the Loan Agreement is hereby ratified and confirmed in each and every respect. [signature page to follow] IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be executed by their duly authorized officers as of the day and year first written above. THE NORTHERN TRUST COMPANY, as Agent and as Lender By: /s/ Robert T. Jank ---------------------------------- Name: Robert T. Jank ------------------------------- Title: Senior Vice President ------------------------------- LASALLE NATIONAL BANK, as Lender By: /s/ Betty Latson ---------------------------------- Name: Betty Latson ------------------------------- Title: Senior Vice President ------------------------------- AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, as Lender By: /s/ Stacey J. Huels ---------------------------------- Name: Stacey J. Huels ------------------------------- Title: Vice President ------------------------------- QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey --------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title(s): Vice President and Treasurer Title(s): Vice President and Treasurer HIGHWAY INFORMATION SYSTEMS, NU-METRICS, INC. INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey --------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title(s): Vice President and Treasurer Title(s): Vice President and Treasurer ROADWAY SAFETY SERVICE, INC. TRANSAFE CORPORATION By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey --------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title(s): Vice President and Treasurer Title(s): Vice President and Treasurer E-TECH TESTING SERVICES, INC. SPIN-CAST PLASTICS, INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey --------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title(s): Vice President and Treasurer Title(s): Vice President and Treasurer QUIXOTE LASER CORPORATION SAFE-HIT CORPORATION (f/k/a Disc Manufacturing, Inc.) By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey --------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title(s): Vice President and Treasurer Title(s): Vice President and Treasurer AMENDED AND RESTATED REVOLVING CREDIT NOTE (The Northern Trust Company) $13,334,000 Chicago, Illinois March 15, 1999 FOR VALUE RECEIVED, the undersigned, QUIXOTE CORPORATION, ENERGY ABSORPTION SYSTEMS, INC. (f/k/a Quixote Steno Corporation and successor by merger to Energy Absorption Systems, Inc. and Litigation Communications, Inc.), QUIXOTE LASER CORPORATION (f/k/a Disc Manufacturing, Inc.), TRANSAFE CORPORATION, SPIN-CAST PLASTICS, INC., E-TECH TESTING SERVICES, INC., ROADWAY SAFETY SERVICE, INC., SAFE-HIT CORPORATION, HIGHWAY INFORMATION SYSTEMS, INC. and NU-METRICS, INC., (each individually a "Borrower" and collectively, the "Borrowers") hereby JOINTLY AND SEVERALLY PROMISE TO PAY to the order of THE NORTHERN TRUST COMPANY, an Illinois banking corporation ("Lender"), or its registered assigns, at 50 South LaSalle Street, Chicago, Illinois 60675, or at such other place as the holder of this Note may designate from time to time in writing, in lawful money of the United States of America and in immediately available funds, the principal amount of THIRTEEN MILLION THREE HUNDRED THIRTY-FOUR THOUSAND DOLLARS ($13,334,000), or such lesser principal amount as may be outstanding pursuant to the Loan Agreement (as hereinafter defined) with respect to the Revolving Credit Loan, together with interest on the unpaid principal amount of this note outstanding from time to time. This Note is the Revolving Credit Note referred to in, and evidences certain indebtedness incurred under, the Amended and Restated Loan Agreement dated as of June 30, 1997 (herein as it may be amended, modified or supplemented from time to time, the "Loan Agreement"), among each Borrower, "Lenders" (as defined therein) and The Northern Trust Company, as agent for such Lenders, and is entitled to the benefit and security of the "Loan Documents" (as defined in the Loan Agreement) provided for therein, to which reference is hereby made for a statement of all of the terms and conditions under which the loan evidenced hereby is made. All capitalized terms herein, unless otherwise defined, shall have the meanings ascribed to them in the Loan Agreement. The principal amount of the indebtedness evidenced hereby shall be payable in the amounts and on the dates specified in the Loan Agreement. Interest thereon, less any taxes payable by withholding, shall be paid until such principal amount is paid in full at such interest rates and at such times as are specified in the Loan Agreement. If any payment on this Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. Upon and after the occurrence of an Event of Default, this Note shall or may, as provided in the Loan Agreement, and without demand, notice or legal process of any kind, become or be declared immediately due and payable. The right to receive principal of, and stated interest on, this Note may only be transferred through Borrower's book entry system. Demand, presentment, protest and notice of nonpayment and protest are hereby waived by Borrower. This Note shall be interpreted, governed by, and construed in accordance with the internal laws of the State of Illinois. THIS NOTE, ISSUED AND DELIVERED ON THE DATE HEREOF TO THE AGENT, ON BEHALF OF THE LENDERS, IS ISSUED IN REPLACEMENT AND SUBSTITUTION FOR, AND NOT IN PAYMENT OF THAT CERTAIN AMENDED AND RESTATED REVOLVING CREDIT NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $13,334,000 DATED JUNE 30, 1997 (WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $21,666,668 DATED MARCH 31, 1996 WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $23,333,334 DATED NOVEMBER 10, 1995) AND NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO DEEM PAID OR FORGIVEN THE UNPAID PRINCIPAL AMOUNT OF, OR UNPAID ACCRUED INTEREST ON, SAID NOTE AT THE TIME OF ITS REPLACEMENT BY THIS NOTE. * * * IN WITNESS WHEREOF, the parties hereto have caused this Revolving Credit Note to be executed by their duly authorized officers as of the day and year first written above. QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey --------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer QUIXOTE LASER CORPORATION ROADWAY SAFETY SERVICE, INC. (f/k/a Disc Manufacturing, Inc.) By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey --------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer HIGHWAY INFORMATION SYSTEMS, TRANSAFE CORPORATION INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey --------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer NU-METRICS, INC. SPIN-CAST PLASTICS, INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey --------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer E-TECH TESTING SERVICES, INC. SAFE-HIT CORPORATION By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey --------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer AMENDED AND RESTATED REVOLVING CREDIT NOTE (LaSalle National Bank) $13,333,000 Chicago, Illinois March 15, 1999 FOR VALUE RECEIVED, the undersigned, QUIXOTE CORPORATION, ENERGY ABSORPTION SYSTEMS, INC. (f/k/a Quixote Steno Corporation and successor by merger to Energy Absorption System, Inc. and Litigation Communications, Inc.), QUIXOTE LASER CORPORATION (f/k/a Disc Manufacturing, Inc.), TRANSAFE CORPORATION, SPIN-CAST PLASTICS, INC., E-TECH TESTING SERVICES, INC., ROADWAY SAFETY SERVICE, INC., SAFE-HIT CORPORATION, HIGHWAY INFORMATION SYSTEMS, INC. and NU-METRICS, INC., (each individually a "Borrower" and collectively, the "Borrowers") hereby JOINTLY AND SEVERALLY PROMISE TO PAY to the order of LASALLE NATIONAL BANK, a national banking association ("Lender"), or its registered assigns, at 120 South LaSalle Street, Chicago, Illinois 60603, or at such other place as the holder of this Note may designate from time to time in writing, in lawful money of the United States of America and in immediately available funds, the principal amount of THIRTEEN MILLION THREE HUNDRED THIRTY-THREE THOUSAND DOLLARS ($13,333,000), or such lesser principal amount as may be outstanding pursuant to the Loan Agreement (as hereinafter defined) with respect to the Revolving Credit Loan, together with interest on the unpaid principal amount of this note outstanding from time to time. This Note is the Revolving Credit Note referred to in, and evidences certain indebtedness incurred under, the Amended and Restated Loan Agreement dated as of June 30, 1997 (herein as it may be amended, modified or supplemented from time to time, the "Loan Agreement"), among each Borrower, "Lenders" (as defined therein) and The Northern Trust Company, as agent for such Lenders, and is entitled to the benefit and security of the "Loan Documents" (as defined in the Loan Agreement) provided for therein, to which reference is hereby made for a statement of all of the terms and conditions under which the loan evidenced hereby is made. All capitalized terms herein, unless otherwise defined, shall have the meanings ascribed to them in the Loan Agreement. The principal amount of the indebtedness evidenced hereby shall be payable in the amounts and on the dates specified in the Loan Agreement. Interest thereon, less any taxes payable by withholding, shall be paid until such principal amount is paid in full at such interest rates and at such times as are specified in the Loan Agreement. If any payment on this Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. Upon and after the occurrence of an Event of Default, this Note shall or may, as provided in the Loan Agreement, and without demand, notice or legal process of any kind, become or be declared immediately due and payable. The right to receive principal of, and stated interest on, this Note may only be transferred through Borrower's book entry system. Demand, presentment, protest and notice of nonpayment and protest are hereby waived by Borrower. This Note shall be interpreted, governed by, and construed in accordance with the internal laws of the State of Illinois. THIS NOTE, ISSUED AND DELIVERED ON THE DATE HEREOF TO THE AGENT, ON BEHALF OF THE LENDERS, IS ISSUED IN REPLACEMENT AND SUBSTITUTION FOR, AND NOT IN PAYMENT OF THAT CERTAIN AMENDED AND RESTATED REVOLVING CREDIT NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $13,333,000 DATED JUNE 30, 1997 (WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $21,666,666 DATED MARCH 31, 1996 WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $23,333,333 DATED NOVEMBER 10, 1995) AND NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO DEEM PAID OR FORGIVEN THE UNPAID PRINCIPAL AMOUNT OF, OR UNPAID ACCRUED INTEREST ON, SAID NOTE AT THE TIME OF ITS REPLACEMENT BY THIS NOTE. * * * IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Revolving Credit Note to be executed by their duly authorized officers as of the day and year first written above. QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey --------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer QUIXOTE LASER CORPORATION ROADWAY SAFETY SERVICES, INC. (f/k/a Disc Manufacturing, Inc.) By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey --------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer HIGHWAY INFORMATION SYSTEMS, TRANSAFE CORPORATION INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey --------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer NU-METRICS, INC. SPIN-CAST PLASTICS, INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey --------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer E-TECH TESTING SERVICES, INC. SAFE-HIT CORPORATION By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey --------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer AMENDED AND RESTATED REVOLVING CREDIT NOTE (American National Bank and Trust Company of Chicago) $13,333,000 Chicago, Illinois March 15, 1999 FOR VALUE RECEIVED, the undersigned, QUIXOTE CORPORATION, ENERGY ABSORPTION SYSTEMS, INC. (f/k/a Quixote Steno Corporation and successor by merger to Energy Absorption Systems, Inc. and Litigation Communications, Inc.), QUIXOTE LASER CORPORATION (f/k/a Disc Manufacturing, Inc.), TRANSAFE CORPORATION, SPIN-CAST PLASTICS, INC., E-TECH TESTING SERVICES, INC., ROADWAY SAFETY SERVICE, INC., SAFE-HIT CORPORATION, HIGHWAY INFORMATION SYSTEMS, INC. and NU-METRICS, INC., (each individually a "Borrower" and collectively, the "Borrowers") hereby JOINTLY AND SEVERALLY PROMISE TO PAY to the order of AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO ("Lender"), or its registered assigns, at 30 South Wacker Drive, Chicago, Illinois 60606, or at such other place as the holder of this Note may designate from time to time in writing, in lawful money of the United States of America and in immediately available funds, the principal amount of THIRTEEN MILLION THREE HUNDRED THIRTY-THREE THOUSAND DOLLARS ($13,333,000), or such lesser principal amount as may be outstanding pursuant to the Loan Agreement (as hereinafter defined) with respect to the Revolving Credit Loan, together with interest on the unpaid principal amount of this note outstanding from time to time. This Note is the Revolving Credit Note referred to in, and evidences certain indebtedness incurred under, the Amended and Restated Loan Agreement dated as of June 30, 1997 (herein as it may be amended, modified or supplemented from time to time, the "Loan Agreement"), among each Borrower, "Lenders" (as defined therein) and The Northern Trust Company, as agent for such Lenders, and is entitled to the benefit and security of the "Loan Documents" (as defined in the Loan Agreement) provided for therein, to which reference is hereby made for a statement of all of the terms and conditions under which the loan evidenced hereby is made. All capitalized terms herein, unless otherwise defined, shall have the meanings ascribed to them in the Loan Agreement. The principal amount of the indebtedness evidenced hereby shall be payable in the amounts and on the dates specified in the Loan Agreement. Interest thereon, less any taxes payable by withholding, shall be paid until such principal amount is paid in full at such interest rates and at such times as are specified in the Loan Agreement. If any payment on this Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. Upon and after the occurrence of an Event of Default, this Note shall or may, as provided in the Loan Agreement, and without demand, notice or legal process of any kind, become or be declared immediately due and payable. The right to receive principal of, and stated interest on, this Note may only be transferred through Borrower's book entry system. Demand, presentment, protest and notice of nonpayment and protest are hereby waived by Borrower. This Note shall be interpreted, governed by, and construed in accordance with the internal laws of the State of Illinois. THIS NOTE, ISSUED AND DELIVERED ON THE DATE HEREOF TO THE AGENT, ON BEHALF OF THE LENDERS, IS ISSUED IN REPLACEMENT AND SUBSTITUTION FOR, AND NOT IN PAYMENT OF THAT CERTAIN AMENDED AND RESTATED REVOLVING CREDIT NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $13,333,000 DATED JUNE 30, 1997 (WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT NOTE IN THE ORIGINAL PRINCIPAL AMOUNT OF $21,666,666 DATED MARCH 31, 1996 WHICH IN TURN WAS ISSUED IN SUBSTITUTION AND REPLACEMENT OF THAT CERTAIN REVOLVING CREDIT NOTE IN THE PRINCIPAL AMOUNT OF $23,333,333 DATED NOVEMBER 10, 1995) AND NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO DEEM PAID OR FORGIVEN THE UNPAID PRINCIPAL AMOUNT OF, OR UNPAID ACCRUED INTEREST ON, SAID NOTE AT THE TIME OF ITS REPLACEMENT BY THIS NOTE. * * * IN WITNESS WHEREOF, the parties hereto have caused this Revolving Credit Note to be executed by their duly authorized officers as of the day and year first written above. QUIXOTE CORPORATION ENERGY ABSORPTION SYSTEMS, INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey --------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer QUIXOTE LASER CORPORATION ROADWAY SAFETY SERVICE, INC. (f/k/a Disc Manufacturing, Inc.) By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey --------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer HIGHWAY INFORMATION SYSTEMS, TRANSAFE CORPORATION INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey --------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer NU-METRICS, INC. SPIN-CAST PLASTICS, INC. By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey --------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer E-TECH TESTING SERVICES, INC. SAFE-HIT CORPORATION By: /s/ Daniel P. Gorey By: /s/ Daniel P. Gorey --------------------------------- -------------------------------- Name: Daniel P. Gorey Name: Daniel P. Gorey Title: Vice President and Treasurer Title: Vice President and Treasurer EX-10.B 3 EXHIBIT 10(B) PARTIAL ASSIGNMENT OF LEASE AND EQUITY IN PROJECT THIS ASSIGNMENT is made as of the 26th day of March, 1999 by and between DISC MANUFACTURING, INC. (n/k/a Quixote Laser Corporation), a Delaware corporation (the "Assignor"), and CINRAM, INC., a Delaware corporation, (the "Assignee") and THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF HUNTSVILLE, an Alabama public corporation (the "Board"). W I T N E S S E T H WHEREAS, the Board was organized pursuant to the provisions of Act No. 648 adopted at the 1949 Regular Session of the Legislature of the State of Alabama, approved September 19, 1949, as amended (said Act being codified as Code of Alabama (1975), Section 11-54-80 ET SEQ., and hereinafter referred to as the "Act"); and WHEREAS, the Board and the Assignor did enter into that certain Amended and Restated Lease Agreement dated as of September 1, 1987, and recorded in Deed Book 705, pages 207 ET SEQ. in the Office of the Judge of Probate of Madison County, Alabama (the "Original Lease"), as so amended by that certain Amendment to Lease Agreement dated as of October 12, 1990, and recorded in Deed Book 775, pages 1120 ET SEQ. in the Office of the Judge of Probate of Madison County, Alabama (the "First Amendment"), as further amended by that certain Series 1991 Amendment to Lease Agreement dated as of April 1, 1991, and recorded in Deed Book 775, page 1130 ET SEQ. in the office of the Judge of Probate of Madison County, Alabama (the "Second Amendment"), and as further amended by that certain Series 1993 Amendment to Lease Agreement dated as of March 1, 1993, and recorded in Deed Book 810, Page 191 ET SEQ. in the Office of the Judge of Probate of Madison County, Alabama (the "Third Amendment") (the Original Lease as so amended is hereto referred to as the "Lease"), under which the Board leased to the Assignor the Project as hereinafter defined. WHEREAS, the Board has heretofore executed and delivered to the Trustee thereunder (Regions Bank f/k/a First Alabama Bank, hereinafter referred to as the "Trustee"), that certain Mortgage and Trust Indenture dated as of September 1, 1987 (the "Original Indenture") recorded in Mortgage Book 1528, page 1089 ET SEQ. in the Office of the Judge of Probate of Madison County, Alabama, pursuant to which the Board issued its Industrial Development First Mortgage Revenue Bonds (Disc Manufacturing, Inc. Project) Series 1987, in the principal amount of $23,500,000 (the "Series 1987 Bonds") to finance the cost of acquiring land as more particularly described therein and constructing and equipping thereon an industrial facility (hereinafter referred to as the "Original Project"); and WHEREAS, to finance the cost of expanding the Original Project by acquiring additional equipment and personal property (the "Project Additions" and together with the Original Project is herein referred to as the "Project"), the Board has heretofore executed and delivered to the Trustee (i) that certain Supplemental Mortgage and Trust Indenture dated as of April 1, 1991 (the "Supplemental Indenture") recorded in Mortgage Book 1742, page 686, ET SEQ. in the Office of the Judge of Probate of Madison County, Alabama, pursuant to which the Board issued its Industrial Development First Mortgage Revenue Bonds (Disc Manufacturing Inc. Project) Series 1991, in the aggregate principal amount of $7,000,000 (the "Series 1991 Bonds") and (ii) that certain Second Supplemental Mortgage and Indenture of Trust (the "Second Supplemental Indenture") recorded in Mortgage Book 1895, Page 852, ET SEQ. in the Office of the Judge of Probate of Madison County, Alabama, pursuant to which the Board issued its First Mortgage Industrial Revenue Bond (Disc Manufacturing, Inc. Project) Series 1993 in the principal amount of $33,000,000 (the "Series 1993 Bonds") (the Original Indenture as amended and supplemented by the Supplemental Indenture and the Second Supplemental Indenture is herein referred to as the "Indenture"); and WHEREAS, pursuant to that certain Partial Assignment of Lease and Equity in Project dated March 27, 1997, between Assignor and Assignee (the "1997 Assignment"), Assignor assigned to Assignee Assignor's rights under the Lease to the equipment and other personal property listed on Exhibit "A" of the 1997 Assignment and made a part hereof by reference (the "Huntsville Equipment"), which equipment and personal property constitute a portion of the Project; and WHEREAS, in connection with the execution of the 1997 Assignment, the Series 1987 Bond, the Series 1991 Bonds and the Series 1993 Bonds were paid in full and the Trustee satisfied and released the Indenture as evidenced by that certain Full Release of Mortgage and Trust Indenture, dated March 26, 1997, and recorded in the Office of the Judge of Probate of Madison County, Alabama, in Mortgage Book 2266, at page 522 ET SEQ.; and WHEREAS, the Assignor desires to assign to Assignee all of Assignor's rights under the Lease to the real property located in Madison County, Alabama more particularly described on Exhibit "A" hereto and all improvements located thereon (said real property together with all improvements thereon is herein called the "Building"); NOW, THEREFORE, in consideration of the premises, the assumption of the Assignee of all of Assignor's obligations under the Lease arising after the date of this Assignment with respect to the Building, and $10.00 in hand paid by Assignee to Assignor, and other valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Board and Assignor and Assignee hereby agree as follows: 1. The Assignor does hereby assign to Assignee (a) All right, title and interest of Assignor under the Lease with respect to the Building and all right, title and interest of Assignor in and to the Building, including but not limited to the Assignor's option to purchase the Building after payment of the Bonds as provided in Section 11.2 of the Lease; and (b) the Assignor's right to any equity in the Building; all subject however to the reservation by Assignor for its benefit and the benefit of its successors and/or assigns of that certain easement and rights created and described in that certain Non-Exclusive Easement Agreement recorded in Deed Book 893 Page 88 in the Office of the Judge of Probate of Madison County, Alabama. 2. The Assignor hereby covenants and warrants that no event of default currently exists under the Lease (with respect to the Building) and no event has occurred which with the passage of time or the giving of notice would constitute an event of default under the Lease (with respect to the Building). The Assignee hereby covenants and warrants that it has not operated or used the Building in any manner that would cause an event of default to exist presently or to exist with the passage of time or the giving of notice. The Assignor further covenants and warrants that it has full power and authority to assign its interest in the Lease, that such interest is free and clear of all liens or encumbrances, and that no consent or approval is necessary for it to assign such interest other than the consent of the Board. 3. The Assignee hereby assumes any and all obligations of the Assignor under the Lease that relate to the Building and that arise after the date of this Assignment. The Board hereby releases the Assignor from any and all obligations under the Lease that relate to the Building and that arise after the date of this Assignment and the Board agrees to look solely to the Assignee to perform any such obligations and the Board agrees that the Board's remedy for any such default shall be solely a suit against Assignee for specific performance or for damages. 4. The Assignor, the Assignee and the Board hereby agree that if requested by the Assignee, the parties hereto shall execute such instruments as are necessary to remove the Building from the scope of the Lease and, at the direction of the Assignee the Board shall either (i) lease the Building to the Assignee on all the terms and conditions of the Lease, which are incorporated herein by reference; provided, however, with respect to said new lease the term Project as defined in the Lease shall mean the Building, or (ii) convey the Building to the Assignee in accordance with Section 11.2 of the Lease. 5. The Board and the Assignee agree that if on February 1, 2000 or on any February 1 thereafter the Assignee pays the Board the sum of $278,000 plus the sum of $39,000 multiplied by the number of twelve month periods that have elapsed since February 1, 2000 (the "Purchase Price Modification Payment"), then the Board and the Assignee shall modify Section 9(b) of the Second Amendment and Section 9(b) of the Third Amendment to delete the same in their entirety and substitute in lieu thereof an agreement that in addition to the $55,000 payment to be made pursuant to Section 11.2 of the Original Lease, the Assignee shall pay as the purchase price described in such Section 11.2 an amount equal to $1,000 multiplied by the number of full 12 month periods that have elapsed since April 1, 1991 and the date the Assignee exercises the purchase option contained in Section 11.2 of the Original Lease. In the event the Assignee makes the Purchase Price Modification Payment, the Board and the Assignee agree to execute, as soon as practicable, a modification of the Lease to effectuate the provisions of this paragraph 5. 6. The Primary Term of the Lease as outlined in Section 5.1 of the Lease shall not change from the original term thereof and shall continue until 11:59 p.m. on September 1, 2010 and the renewal term outlined in Section 11.4 of the Lease shall not change and shall remain for the period of September 1, 2010 until 11:59 p.m. on September 15, 2015. 7. The Board hereby consents to the Assignment of Assignor's interest in the Building to Assignee and hereby states that to its knowledge no default currently exists under the Lease, nor has any event occurred which with the passage of time or the giving of notice would constitute a default under the Lease. IN WITNESS THEREOF, the Assignor has caused this Assignment to be executed, attested, sealed and witnessed, all by the Assignor's duly authorized officers, this 22nd day of March, 1999, the Assignee has caused this Assignment to be executed, attested, sealed and witnessed, all by the Assignee's duly authorized officers, this 23rd day of March, 1999, and the Board has caused this Assignment to be executed, attested, sealed and witnessed, all by the Board's duly authorized officers, this 25th day of March, 1999, all effective as of March 26, 1999. DISC MANUFACTURING, INC. (n/k/a QUIXOTE LASER CORPORATION, as Assignor ATTEST: By: /s/ Joan R. Riley By: /s/ Daniel P. Gorey ------------------------- ------------------------------- Its: Secretary Its: Vice President & Treasurer ------------------------- ------------------------------- [Assignee has executed this Assignment on the following page 5] CINRAM INC., as Assignee By: /s/ David Rubenstein ------------------------------- Its: President ------------------------------- [The Board has executed this Assignment on the following page 6] THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF HUNTSVILLE ATTEST: By: By: /s/ W. F. Sanders ------------------------- ------------------------------- Its: Its: Vice Chairman ------------------------- ------------------------------- STATE OF ILLINOIS ) ) COOK COUNTY ) I, the undersigned, a Notary Public in and for said County in said State, hereby certify that Daniel P. Gorey, whose name as Vice President & Treasurer of DISC MANUFACTURING, INC. (n/k/a QUIXOTE LASER CORPORATION), a Delaware corporation, is signed to the foregoing instrument, and who is known to me, and known to me to be such officer, acknowledged before me on this day that, being informed of the contents of the within instrument, he, as such officer and will full authority, executed the same voluntarily for and as the act of the said corporation. Given under my hand and official seal of office, this the 22nd day of March, 1999. /s/ Wendy H. Cary -------------------------------------- Notary Public My Commission Expires: 3/29/00 STATE OF CALIFORNIA ) ) ORANGE COUNTY ) I, the undersigned, a Notary Public in and for said County in said State, hereby certify that David Rubenstein, whose name as President of CINRAM INC., a Delaware corporation, is signed to the foregoing instrument, and who is known to me, and known to me to be such officer, acknowledged before me on this day that, being informed of the contents of the within instrument, he, as such officer and will full authority, executed the same voluntarily for and as the act of the said corporation. Given under my hand and official seal of office, this the 23rd day of March, 1999. /s/ Katherine R. Falcenda --------------------------------- Notary Public My Commission Expires: 6/25/99 STATE OF ALABAMA ) ) MADISON COUNTY ) I, the undersigned, a Notary Public in and for said County in said State, hereby certify that W. F. Sanders, whose name as Vice Chairman of The Industrial Development Board of the City of Huntsville, an Alabama public corporation, is signed to the foregoing instrument, and who is known to me, and known to me to be such officer, acknowledged before me on this day that, being informed of the contents of the within instrument, he, as such officer and will full authority, executed the same voluntarily for and as the act of the said corporation. Given under my hand and official seal of office, this the 25th day of March, 1999. /s/ Johnnie F. Vann -------------------------------------- Notary Public My Commission Expires: 07/08/01 This Instrument prepared by: Johnnie F. Vann Sirote & Permutt, P.C. 200 Clinton Avenue AmSouth Center, Suite 1000 P. O. Box 18248 Huntsville, Alabama 35804 "EXHIBIT "A" All that part of Section 17, Township 3 South, Range 1 East in the City of Huntsville, Madison County, Alabama, particularly described as beginning at the point of intersection of the Southern right-of-way of Southern Railroad with the Western right-of-way of Moores Mill Road; said point is further described as being located South 00 degrees 19 minutes West 1561.48 feet and North 76 degrees 16 minutes West 25.70 feet from the Northeast corner of said Section 17; Thence from the true point of beginning along the Western right-of-way of Moores Mill Road South 00 degrees 19 minutes 00 seconds West 1157.00 feet to the PC of a curve to the right having a radius of 834.42 feet; Thence around the arc of said curve 377.32 feet, a chord bearing and distance of South 13 degrees 16 minutes 19 seconds West 374.12 feet; Thence continuing along the Western right-of-way of Moores Mill Road South 26 degrees 18 minutes 35 seconds West 936.79 feet; Thence continuing along the Western right-of-way of Moores Mill Road North 76 degrees 49 minutes West 9.81 feet; Thence continuing along the Western right-of-way of Moores Mill Road South 58 degrees 55 minutes 39 seconds West 165.06 feet to the Northern right-of-way of Highway 72 East; Thence along said right-of-way North 85 degrees 15 minutes 30 seconds West 1163.95 feet; Thence North 00 degrees 21 minutes 49 seconds East 2787.94 feet to the Southern right-of-way of Southern Railroad; Thence along said right-of-way South 76 degrees 15 minutes 50 seconds East 1853.67 feet to the true point of beginning containing 102.18 acres, more or less. TERMINATION OF SUBLEASE THIS TERMINATION is made as of the 26th day of March, 1999 by and between DISC MANUFACTURING, INC. (n/k/a Quixote Laser Corporation), a Delaware corporation ("DMI"), and CINRAM, INC., a Delaware corporation, ("Cinram"). W I T N E S S E T H WHEREAS, DMI subleased to Cinram and Cinram subleased from DMI certain real property located in Huntsville, Madison County, Alabama pursuant to that certain Sublease dated March 27, 1997 (the "Sublease") between DMI and Cinram for which a Memorandum of Lease was recorded March 27, 1997 in Deed Book 893, Page 93 in the Office of the Judge of Probate of Madison County, Alabama; and WHEREAS, the Sublease contained an option under which Cinram could purchase DMI's leasehold estate in the real estate described in the Sublease; and WHEREAS, Simultaneously, herewith, Cinram has purchased said leasehold estate from DMI; and WHEREAS, it is the desire of the parties hereto to terminate the Sublease. NOW THEREFORE, in consideration of the premises and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, DMI and Cinram agree that the Sublease is hereby terminated and of no further force and effect. IN WITNESS THEREOF, DMI has caused this Termination to be executed, attested, sealed and witnessed, all by DMI's duly authorized officers, this 22nd day of March, 1999, and Cinram has caused this Termination to be executed, attested, sealed and witnessed, all by Cinram's duly authorized officers, this 23rd day of March, 1999, all effective as of March 26, 1999. DISC MANUFACTURING, INC. (n/k/a QUIXOTE LASER CORPORATION ATTEST: By: /s/ Joan R. Riley By: /s/ Daniel P. Gorey -------------------------- ----------------------------- Its: Secretary Its: Vice President & Treasurer -------------------------- ----------------------------- [Cinram has executed this Termination on the following page 2] CINRAM INC. By: /s/ David Rubenstein ----------------------------- Its: President ----------------------------- STATE OF CALIFORNIA ) ) ORANGE COUNTY ) I, the undersigned, a Notary Public in and for said County in said State, hereby certify that David Rubenstein, whose name as PRESIDENT of CINRAM INC., a Delaware corporation, is signed to the foregoing instrument, and who is known to me, and known to me to be such officer, acknowledged before me on this day that, being informed of the contents of the within instrument, he, as such officer and will full authority, executed the same voluntarily for and as the act of the said corporation. Given under my hand and official seal of office, this the 23rd day of March, 1999. /s/ Katherine R. Falcenda ------------------------------------- Notary Public My Commission Expires: 6/25/99 STATE OF ILLINOIS ) ) COOK COUNTY ) I, the undersigned, a Notary Public in and for said County in said State, hereby certify that Daniel P. Gorey, whose name as Vice President & Treasurer of DISC MANUFACTURING, INC. (n/k/a QUIXOTE LASER CORPORATION), a Delaware corporation, is signed to the foregoing instrument, and who is known to me, and known to me to be such officer, acknowledged before me on this day that, being informed of the contents of the within instrument, he, as such officer and will full authority, executed the same voluntarily for and as the act of the said corporation. Given under my hand and official seal of office, this the 22nd day of March, 1999. /s/ Wendy C. Cary ----------------------------------- Notary Public My Commission Expires: 3/29/00 This Instrument prepared by: Johnnie F. Vann Sirote & Permutt, P.C. 200 Clinton Avenue AmSouth Center, Suite 1000 P. O. Box 18248 Huntsville, Alabama 35804 EX-27 4 EXHIBIT 27 FDS
5 1,000 9-MOS JUN-30-1999 JUL-01-1998 MAR-31-1999 1,340,000 0 16,068,000 475,000 9,132,000 29,804,000 26,375,000 10,777,000 70,862,000 10,935,000 14,908,000 0 0 151,000 42,826,000 70,862,000 49,212,000 49,212,000 27,400,000 27,400,000 15,513,000 0 723,000 5,681,000 1,988,000 3,693,000 240,000 0 0 3,933,000 .49 .48
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