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                       KEY EMPLOYEE SEVERANCE AGREEMENT


         THIS AGREEMENT is made and entered into as of the 17th day of
February, 1989, by and between QUIXOTE CORPORATION, a Delaware corporation
(hereinafter referred to as "the Company"), and DANIEL P. GOREY, of Chicago,
Illinois, (hereinafter referred to as the "Executive").

                                    RECITALS:

          WHEREAS, the Executive is an elected officer of Company, and, by
reason of his age, experience and management record, is an attractive
candidate for recruitment by other business entities seeking highly qualified
management personnel; and,

          WHEREAS, the Executive is satisfied with his current position and
future opportunities with the Company under the current corporate management
but, in view of the increasing incidence of corporate takeovers and resultant
changes in corporate management, feels compelled to consider seriously
alternative opportunities outside the Company while he is at the optimum age
for any such change unless the Company is willing to provide adequate
protection to the Executive; and,

          WHEREAS, the Board of Directors of the Company ("the Board")
recognizes that the Executive's contribution to the growth and success of the
Company has been, and is expected to continue to be, substantial and desires
to assure the Executive of fair 


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treatment if that relationship is terminated after a change in control of the 
Company; and,

          WHEREAS, the Company desires to provide such assurance by providing
to the Executive a lump sum payment if he is terminated after a change in
control of the Company;

          NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements of the parties herein contained, the
parties hereto do hereby agree as follows:

          1.      NO GUARANTY OR OBLIGATION OF EMPLOYMENT.  The Executive
shall have no rights under this Agreement unless and until there is a "change
in control" of the Company as defined in Section 4 hereof.  Nothing in this
Agreement shall:  (a) obligate the Executive to remain employed with the
Company, (b) confer upon the Executive any right to continue in the employ of
the Company or any of its subsidiaries, or (c) interfere with or restrict in
any way the rights of the Company, which are hereby expressly reserved, to
discharge the Executive at any time prior to the date of a change in control
of the Company (as defined below) for any reason whatsoever, with or without
cause.

          2.     TERM OF AGREEMENT.   The term of this Agreement shall
commence on the date hereof and shall continue in effect through February 17,
1991 ("Expiration Date"); provided, however, that commencing on February 17,
1990, and each February 17 thereafter, the term of this Agreement shall
automatically be 

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extended for one additional year, to a new Expiration Date, unless, not later 
than the August 17 that shall occur approximately eighteen (18) months 
preceding the Expiration Date, or any new Expiration Date, the President of 
the Company, with the approval of its Chairman of the Board and Chief 
Executive Officer, shall have given notice that the Company does not wish to 
extend this Agreement; and provided, further, that if a change in control of 
the Company, as defined below, shall have occurred during the original or 
extended term of this Agreement, the Expiration Date of this Agreement shall 
be a date not earlier than the date twenty-four (24) months after the date on 
which such change in control occurred.

           3.      TERMINATION FOLLOWING CHANGE IN CONTROL.  (a)  If any of 
the events described in Section 4 hereof constituting a change in control of 
the Company shall have occurred during the original or extended term of this 
Agreement, and subsequent to such change in control of the Company, the 
Executive's employment with the Company is terminated during such term, the 
Executive shall receive the benefits provided in Section 5 hereof, provided, 
however, that the Executive shall not be entitled to such benefits if such 
termination is (i) by the Company upon the death of the Executive or the 
Executive's Disability, as defined in subsection (b) below, (ii) by the 
Company for Cause as defined in subsection (c) hereof, or (iii) by the 
Executive, other than for Good Reason, 

                                      -3-

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as defined in subsection (d) hereof. The Executive shall not be entitled to 
any of the payments provided hereunder if his employment is terminated for 
any reason prior to the date on which a change in control of the Company, as 
defined below, shall have occurred.

             (b)   DEFINITION OF "DISABILITY".  For purposes of this 
agreement, an Executive's "Disability" shall occur if the Executive is absent 
from his duties as an employee of Company on a full time basis for six (6) 
consecutive months following a change in control of the Company (as 
hereinafter defined), and if he qualifies for long-term disability under the 
Company's long-term disability insurance plan.

              (c)   DEFINITION OF "CAUSE".  For purposes of this Agreement, 
Company shall have "Cause" to terminate the Executive's employment upon (i) 
the willful failure by the Executive to substantially perform his duties, 
other than such failure resulting from the Executive's incapacity due to 
physical or mental illness, or (ii) the willful engaging by the Executive in 
gross misconduct materially and demonstrably injurious to the Company.  For 
the purpose of this subsection (c), no act, or the failure to act, on the 
Executive's part shall be considered "willful" unless done, or omitted to be 
done, by him not in good faith and without reasonable belief that his action 
or omission was in the best interest of the Company.  Notwithstanding the 
foregoing, the Executive shall not be 

                                        -4-

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deemed to have been terminated for Cause under subsections (i) and (ii) above 
unless and until there shall have been delivered to the Executive a copy of a 
resolution, duly adopted by the affirmative vote of not less than two-thirds 
(2/3) of the entire membership of the Company's Board of Directors at a 
meeting of the Board called and held for that purpose (after reasonable 
notice to the Executive and an opportunity for him, together with his 
counsel, to be heard before the Board), finding that in the good faith 
opinion of the Board, the Executive was guilty of conduct set forth above in 
clause (i) or (ii) of the first sentence of this subsection (c) and 
specifying the particulars thereto in detail.              

     (d)     GOOD REASON.  For purposes of this Agreement, "Good Reason" 
shall mean any one of the following occurrences, but only if they occur after 
a change in control of the Company:

     (i)     the Executive is assigned any duties which are inconsistent with 
his position as Controller of the Company (the "Position"); or,

     (ii)    the Executive is removed from, or the Executive is not 
reelected or reappointed to, the Position, except in connection with 
termination of the Executive's employment for Cause; or


    (iii)    the Executive's annual compensation is reduced below the 
Executive's total compensation as reported to him on his Form W-2 for the 
preceding year; or,

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     (iv)    the Company fails to obtain the assumption as well as the 
agreement to perform this Agreement by any successor as contemplated in 
Section 8 hereof; or,

     (v)     any purported termination of the Executive's employment is not 
effected pursuant to a Notice of Termination satisfying the requirements of 
subsection (e) below (and, if applicable, subsection (c) above); and for  
purposes of this Agreement, no such purported termination shall be effective. 
The Executive may terminate his employment for Good Reason only within twelve 
(12) months of the action or condition which amounts to Good Reason, as 
defined hereinabove.

     (e)      NOTICE OF TERMINATION.  Any termination of the employment of 
the Executive by the Company after a change in control of the Company or by 
the Executive for Good Reason as defined in subsection (d) above shall be 
communicated by written Notice of Termination to the other party hereto.  For 
purposes of this Agreement, a "Notice of Termination" shall mean a notice 
which shall indicate the facts and circumstances which are claimed to provide 
a basis for termination of the Executive's employment. 

      (f)     DATE OF TERMINATION.  For purposes of this Agreement, "Date of 
Termination" shall mean (i) if the Executive's employment is terminated by 
the Executive for Good Reason, the date specified in the Notice of 
Termination, and (ii) if the Executive's employment is terminated after a 
change in control in the Company 

                                     -6-


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for any other reason, the date on which a Notice of Termination is delivered 
to the Executive provided that if within fifteen (15) days after any Notice 
of Termination is given, or, if later, prior to the Date of Termination (as 
determined without regard to this proviso), the party receiving such Notice 
of Termination notifies the other party that a dispute exists concerning the 
termination, and if the disputed termination occurs after a change in control 
of the Company, the Date of Termination shall be the date on which the 
dispute is finally determined, either by mutual written agreement of the 
parties, by a binding arbitration award, or by a final judgment, order or 
decree of a court of competent jurisdiction (which is not appealable or with 
respect to which the time for appeal therefrom has expired and no appeal has 
been perfected); provided further that the Date of Termination shall be 
extended by a notice of dispute only is such notice is given in good faith 
and the party giving such notice pursues the resolution of such dispute with 
reasonable diligence. Notwithstanding the pendency of any such dispute, if 
the disputed termination occurs after a change in control of the Company 
occurs, the Subsidiary will continue to pay the Executive his full 
compensation in effect when the notice giving rise to the dispute was given 
(including, but not limited to, base salary) and the Executive shall continue 
as a participant in all compensation, benefit and insurance plans of the 
Company in which the Executive was participating when the notice giving rise 

                                         -7-


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to the dispute was given, until the dispute is finally resolved in accordance 
with this subsection.  Amounts paid under this subsection are in addition to 
all other amounts due under this Agreement and shall not be offset against or 
reduce any other amounts due under this Agreement.

           4.      CHANGE IN CONTROL.  For purposes of this Agreement, a 
"change in control of the Company" shall mean a change in control of a nature 
that would be required to be reported in response to Item 6(e) of Schedule 
14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, 
as amended ("Exchange Act"); provided that, without limitation, such a change 
in control shall be deemed to have occurred if:

                   (a) any "person" (as such term is used in Section 13(d) 
and 14(d) of the Exchange Act) is, or becomes, the "beneficial owner" (as 
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 
securities of the Company representing twenty percent (20%) or more of the 
combined voting power of the Company's then outstanding securities; or,

                   (b) during any period of two consecutive years, 
individuals who at the beginning of such period constitute all members of the 
Board of Directors of the Company who are not employed by the Company (the 
"Outside Directors") shall cease for any reason to constitute at least a 
majority of the Outside Directors unless the election of each Outside 
Director, who was not 

                                  -8-


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an Outside Director at the beginning of the period, was approved by a vote of 
at least two-thirds (2/3) of the Directors then still in office who were 
Directors at the beginning of the period; or,              

                   (c) there shall be consummated (i) any consolidation or 
merger of the Company in which the Company is not the continuing or surviving 
corporation or pursuant to which shares of the Company's Common Stock would 
be converted into cash, securities or other property, other than a merger of 
the Company in which the holders of the Company's Common Stock immediately 
prior to the merger have the same proportionate ownership of common stock of 
the surviving corporation immediately after the merger, or (ii) any sale, 
lease, exchange or other transfer (in one transaction or a series of related 
transactions) of all, or substantially all, of the assets of the Company; or, 
                 

                   (d) the stockholders of the Company approve a plan or 
proposal for the liquidation or dissolution of the Company.

           5.      COMPENSATION UPON TERMINATION AFTER A CHANGE IN CONTROL. 
If, following a change in control of the Company during the term of this 
Agreement, the Executive's employment is terminated for any reason other than 
those described in subsections (i), (ii) or (iii) of Section 3(a) above, then 
the following provisions shall apply: 

                  (a)   Company shall continue to pay to the Executive 
his full Base Salary through the Date of Termination at the rate in 

                                  -9-


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effect at the time Notice of Termination is given (but only to the extent 
such amount is not payable pursuant to Section 3(f) hereof) and, in lieu of 
any further salary payments to the Executive for periods subsequent to the 
Date of Termination, the Company shall pay as liquidated damages to the 
Executive on the fifth day following the Date of Termination, a lump sum 
amount equal to two hundred percent (200%) of the sum of the Executive's 
annual base salary (at the higher of the rates in effect on the date Notice 
of Termination is given, or on the date on which a change in control of the 
Company occurs) plus the average of the bonus payments made to the Executive 
for the (2) full fiscal years preceding the fiscal year in which the Notice 
of Termination is given.  Any amount payable pursuant to the preceding 
sentence shall be reduced by the present value of any other payment or 
payments made to, or on behalf of, the Employee which would constitute a 
"parachute payment" within the meaning of that term as defined in Section 
280G of the Internal Revenue Code of 1986, as amended ("Code").

                   (b)      The Company shall maintain in full force and 
effect at its expense for a period of one (1) year after the Date of 
Termination all group insurance plans in which the Executive was entitled to 
participate immediately prior to the Date of Termination provided that the 
Executive's continued participation is possible under the terms of such 
plans, failing which the 

                                    -10-

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Company shall arrange to provide the Executive with 
alternative benefits substantially similar to those provided under such plans.

           6.      MITIGATION OF DAMAGES.  The Executive shall not be 
required to mitigate the amount of any payment provided for in Section 5 by 
seeking other employment or otherwise, nor shall the amount of any payment 
provided for in Section 5 be reduced by any compensation earned by the 
Executive as the result of employment by another employer after the Date of 
Termination, or otherwise.

           7.      LEGAL FEES.  The Company shall pay, or reimburse the 
Executive for, all legal fees and expenses incurred by the Executive as a 
result of any termination of the Executive after a change in control of the 
Company (including all such fees and expenses, if any, incurred contesting or 
disputing in good faith any such termination or in seeking to obtain or 
enforce any right or benefit provided by this Agreement).

           8.      SUCCESSORS; BINDING AGREEMENT.  (a) The 
Company will require any successor (whether direct or indirect, by purchase, 
merger, consolidation or otherwise) to all, or substantially all, of the 
business and/or assets of the Company, by agreement in form and substance 
satisfactory to the Executive, to expressly assume and agree to perform this 
Agreement in the same manner and to the same extent that the Company would be 
required to perform it if no such succession has taken place.  Failure of the 
Company to obtain such agreement prior to the effectiveness of any 

                                   -11-

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such succession shall be a breach of this Agreement and shall entitle the 
Executive to compensation from the Company in the same amount and on the same 
terms as he would be entitled to hereunder if he terminated his employment 
for Good Reason, except for purposes of implementing the foregoing, the date 
on which any such succession becomes effective shall be deemed the Date of 
Termination.  As used in this Agreement, "Company" shall mean the Company as 
hereinbefore defined and any successor to the business and/or assets as of 
the Company which executes and delivers the agreement provided for in this 
Section 8, or which otherwise becomes bound by all the terms and provisions 
of this Agreement by operation of law.

                   (b)     This Agreement and all rights of the Executive 
hereunder shall inure to the benefit of, and be enforceable by the 
Executive's personal or legal representatives, executors, administrators, 
successors, heirs, distributees, devisees and legatees.  If the Executive 
should die after any amounts shall become payable to him hereunder, all such 
amounts, unless otherwise provided for herein, shall be paid in accordance 
with the terms of this Agreement to the Executive's devisee, legatee or other 
designee or, if there be no such devisee, legatee or other designee, to the 
Executive's estate.

           9.      ARBITRATION.  Any dispute or controversy arising under or 
in connection with this Agreement shall be settled 

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exclusively by arbitration in Chicago, Illinois in accordance with the rules 
of the American Arbitration Association then in effect.  Judgment may be 
entered on the arbitrator's award in any court having jurisdiction; provided, 
however, that the Executive shall be entitled to seek specific performance of 
his right to be paid until the Date of Termination during the pendency of any 
dispute or controversy arising under or in connection with this Agreement.

           10.      NOTICE.  For the purposes of this Agreement, notices and 
all other communications provided for in the Agreement shall be in writing 
and shall be deemed to have been duly given when mailed by United States 
registered mail, return receipt requested, postage prepaid, addressed as 
follows: 

            If, to the Executive: 

            Daniel P. Gorey
            4529 North Campbell
            Chicago, Illinois  60625

            If, to the Company:

            President
            Quixote Corporation
            1 East Wacker Drive
            Suite 3000
            Chicago, Illinois  60601


or to such other address as either party may have furnished to the other in
writing at the address provided above, except that notices of change of
address shall be effective only upon receipt.

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          11.      MISCELLANEOUS.  This Agreement constitutes the entire Key
Employee Severance Agreement between the Executive and the Company and
supersedes any prior severance agreement.  No provisions of this Agreement may
be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing and is signed by the Executive and by an
authorized officer of the Company.  No waiver by either party hereto at any
time of any breach by the other party hereto of, or of compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not set forth expressly in
this Agreement.  The validity, interpretation, construction and performance of
this Agreement shall be governed by the substantive laws of the State of
Illinois.  All reference to sections of the Exchange Act or the Code also
shall be deemed to refer to any successor provisions of such sections.

          12.      VALIDITY.  The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.

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          13.      COUNTERPARTS.  This Agreement may be executed in one or 
more counterparts, each of which shall be deemed to be an original. Executed 
as of the 17th day of February, 1989 in 3 counterpart originals.

                              QUIXOTE CORPORATION


                              By: /s/ P.E. ROLLHAUS
                                  --------------------------
                              Its: PRESIDENT
Attest


By: /s/ JAMES H. DEVRIES
   ----------------------------
Its: SECRETARY

                               EXECUTIVE

                               /s/ DANIEL P. GOREY
                               ---------------------------





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