Document:

Exhibit
10(a)

 

 

 

QUIXOTE CORPORATION

as
the Company

 

 

and

 

 

BUYERS,

as defined herein

 

 

SECURITIES PURCHASE AGREEMENT

 

 

Dated as of February 9,
2005

 

 

 

7% Convertible Senior
Subordinated Notes due 2025

 

 

 

SECURITIES
PURCHASE AGREEMENT

 

THIS
SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated
as of February 9, 2005, by and among Quixote Corporation, a Delaware
corporation (the “Company”), and the Buyers listed on the Schedule of
Buyers attached hereto as Exhibit A (individually, a “Buyer” and,
collectively, the “Buyers”).

 

THE
PARTIES TO THIS AGREEMENT enter into this Agreement on
the basis of the following facts, intentions and understandings:

 

A.                                    In
accordance with the terms and conditions of this Agreement, the Company has
agreed to issue and sell, and the Buyers have severally agreed to purchase in
the aggregate, Forty Million United States Dollars ($40,000,000) principal
amount of the Company’s 7% Convertible Senior Subordinated Notes due 2025 (such
Convertible Senior Notes, substantially in the form attached as Exhibit A
to the Indenture (as defined below), as such form of Note may be amended,
modified or supplemented from time to time in accordance with the terms
thereof, the “Notes”), which shall be convertible into shares of the common
stock, $0.012/3 par value per share (the “Common Stock”),
of the Company (as converted, the “Conversion Shares”). The Notes will be
issued pursuant to an Indenture, dated as of February 9, 2005 (the “Indenture”)
by and between the Company and LaSalle Bank National Association, as trustee
(the “Trustee”), substantially in the form attached hereto as Exhibit B.

 

B.                                    Contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement substantially in the
form attached hereto as Exhibit D (as the same may be amended,
modified or supplemented from time to time in accordance with the terms
thereof, the “Registration Rights Agreement”) pursuant to which the Company has
agreed to provide the Buyers with the benefit of certain registration rights
under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the “Securities Act”) and applicable state securities
laws, on the terms and subject to the conditions set forth therein.

 

NOW
THEREFORE, in consideration of the promises and the
mutual covenants contained herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company and
each of the Buyers hereby agree as follows:

 

SECTION 1.                            Purchase
and Sale of Notes.

 

(a)                                  Purchase
of Notes.  Subject to the
satisfaction (or waiver, to the extent permitted by applicable law) of the
conditions set forth in Sections 6 and 7 of this Agreement, the Company shall
issue and sell to each Buyer, and each Buyer severally and not jointly agrees
to purchase from the Company, the respective principal amount of Notes set
forth opposite such Buyer’s name on the Schedule of Buyers attached hereto
as Exhibit A (the “Closing”). 
The Company shall issue to each Buyer One Thousand United States Dollars
($1,000) principal amount of the Notes for each One Thousand United States
Dollars ($1,000) tendered by each such Buyer.

 

(b)                                 The
Closing.  The date and time of the
Closing (the “Closing Date”) shall be 10:00 a.m., Chicago, Illinois local time,
on February 9, 2005, subject to the satisfaction (or waiver, to the extent
permitted by applicable law) of the conditions set forth in Sections 6 and 7 of
this

 

 

Agreement.  The Closing shall occur on the Closing Date
at the offices of Holland & Knight LLP, 131 South Dearborn Street, 30th
Floor, Chicago, Illinois  60603.

 

(c)                                  Form
of Payment.  On the Closing Date, (i)
each Buyer shall pay the Company for the Notes to be issued and sold to such Buyer
on the Closing Date, by wire transfer of immediately available funds in
accordance with the Company’s written wire instructions attached hereto on Schedule A,
or through book-entry settlement procedures, as applicable, (ii) the Company
shall reimburse each Buyer for its reasonable expenses to the extent required
by Section 4(i) of this Agreement, and (iii) the Company shall issue to
each Buyer properly authenticated Notes (in the denominations of not less than
One Thousand United States Dollars ($1,000) as such Buyer shall reasonably
request) representing the principal amount of Notes which such Buyer is then
purchasing hereunder, duly executed on behalf of the Company and registered in
the name of such Buyer, provided, that Notes eligible for services through The
Depository Trust Company (“DTC”)
shall be issued, countersigned, registered and delivered in global certificate
form through the facilities at DTC in such names and denominations as each
Buyer shall specify.

 

SECTION 2.                            Buyer’s Representations and Warranties.  Each Buyer
represents and warrants to the Company with respect to only itself that as of
the date hereof:

 

(a)                                  Investment Purpose.  Such Buyer is acquiring the Notes for its own
account for investment only and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted from registration under the Securities Act;
provided, however, that by making the representations herein, such Buyer does
not agree to hold any of the Notes or the shares of Common Stock issued upon
conversion of the Notes, including any Additional Shares (as defined in the
Indenture) and shares of Common Stock issued in payment of the Company
Conversion Provisional Payment (as defined in the Indenture) (collectively, the
“Conversion Shares” and, together with the Notes, the “Securities”) for any
minimum or other specific term and reserves the right to dispose of the
Securities at any time; provided, further, that such disposition shall be in
accordance with or pursuant to a registration statement or an exemption under
the Securities Act.

 

(b)                                 Accredited Investor
and Qualified Institutional Buyer Status. 
Such Buyer is an “accredited investor” as that term is defined in Rule
501(a) of Regulation D under the Securities Act and a “qualified institutional
buyer” as that term is defined in Rule 144A(a) under the Securities Act as of
the date of this Agreement and was not organized for the specific purpose of
acquiring the Securities.

 

(c)                                  Reliance on
Exemptions.  Such Buyer understands
that the Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of the United States federal and
state securities laws and that the Company is relying upon the truth and
accuracy of, and such Buyer’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein
and in the applicable Note in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the Securities.

 

(d)                                 Information.  Such Buyer believes it (i) has been furnished
with or believes it has had full access to all of the information that it
considers necessary or appropriate for deciding

 

2

 

whether to purchase the Securities, including
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Securities which have been
requested by such Buyer, including a copy of the Confidential Private Placement
Memorandum, (ii) has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the Offering, (iii) can
bear the economic risk of a total loss of its investment in the Securities and
(iv) has such knowledge and experience in business and financial matters so as
to enable it to understand the risks of and form an investment decision with
respect to its investment in the Securities. Neither such inquiries nor any
other due diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall limit, modify, amend or affect the Company’s
representations and warranties contained in this Agreement or any other
Transaction Document and the Buyer’s right to rely thereon.

 

(e)                                  No
Governmental Review.  Such Buyer
understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.

 

(f)                                    Transfer or Resale.  Such Buyer understands that, except as provided
in the Registration Rights Agreement, the Securities have not been registered
under the Securities Act or any state securities laws, and may not be offered
for sale, sold, assigned or transferred without registration under the
Securities Act or an exemption therefrom and that, in the absence of an
effective registration statement under the Securities Act, such Securities may
only be sold under certain circumstances as set forth in the Securities
Act.  In that connection, such Buyer is
aware of Rule 144 under the Securities Act and the restrictions imposed
thereby.

 

(g)                                 Legends.

 

(1)                                  Such
Buyer understands that, until the expiration of the holding period applicable
to sales thereof under Rule 144(k) (or any successor provision), any
certificate evidencing such Notes (and all securities issued in exchange
therefor or in substitution thereof, other than Common Stock, if any, issued
upon conversion thereof), which shall bear the legend set forth in Section 2(g)(2) of this Agreement, if applicable) shall bear a legend
in substantially the following form:

 

THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION THEREFROM. 
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES.

 

3

 

The Company
may place the following legend on any Note, as appropriate, held by or
transferred to an “affiliate” (as defined in Rule 501(b) of Regulation D
under the Securities Act) of the Company:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON WHO
MAY BE DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR PURPOSES OF RULE 144
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND MAY BE SOLD ONLY IN COMPLIANCE WITH RULE 144, PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT.

 

The legends
set forth above shall be removed and the Company shall issue a new Note, as
appropriate, of like tenor and aggregate principal amount or number of shares,
as appropriate, and which shall not bear the restrictive legends required by
this Section 2(g)(1), (i) if such Notes are registered for resale under
the Securities Act and are transferred or sold pursuant to such registration,
(ii) if, in connection with a sale transaction, such holder provides the
Company with an opinion of counsel reasonably acceptable to the Company to the
effect that such sale, assignment or transfer of the Notes may be made without
registration under the Securities Act, or (iii) upon expiration of the
two-year period under Rule 144(k) of the Securities Act (or any successor rule)
if the holder of the Securities has not been an “affiliate” (as defined in Rule
501(b) of Regulation D under the Securities Act) during the preceding
three (3) months.

 

(2)                                  Such
Buyer understands that any stock certificate representing Conversion Shares
shall bear a legend in substantially the following form (unless (i) such
Conversion Shares have been transferred or sold pursuant to an effective
registration statement, (ii) such Conversion Shares, as appropriate, have been
transferred or sold pursuant to the exemption from registration provided by
Rule 144 under the Securities Act, (iii) such Conversion Shares, as
appropriate, may be transferred pursuant to Rule 144(k) under the Securities
Act, or (iv) unless otherwise agreed by the Company in writing with written
notice to the transfer agent):

 

THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”) OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION THEREFROM. 
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES.

 

The Company
may instruct the transfer agent to place the following legend on any
certificate evidencing shares of Common Stock held by or transferred to an “affiliate”
(as defined in Rule 501(b) of Regulation D under the Securities Act) of the
Company:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON WHO
MAY BE DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR

 

4

 

PURPOSES OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND MAY BE SOLD ONLY IN COMPLIANCE WITH RULE
144, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO A VALID EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.

 

The legends
set forth above shall be removed and the Company shall issue the relevant
Securities without such legends to the holder of the Securities upon which it
is stamped, (i) if such Securities are registered for resale under the
Securities Act and are transferred or sold pursuant to such registration, (ii)
if, in connection with a sale transaction, such holder provides the Company
with an opinion of counsel reasonably acceptable to the Company to the effect
that such sale, assignment or transfer of the Securities may be made without
registration under the Securities Act, or (iii) upon expiration of the
two-year period under Rule 144(k) of the Securities Act (or any successor rule)
if the holder of the Securities has not been an “affiliate” (as defined in Rule
501(b) of Regulation D under the Securities Act) during the preceding
three (3) months.

 

(3)                                  Such
Buyer understands that, in the event Rule 144(k) as promulgated under the
Securities Act (or any successor rule) is amended to change the two-year or
three-month periods under Rule 144(k) (or the corresponding periods under any
successor rule), (i) each reference in Sections 2(g)(1) and 2(g)(2) of this
Agreement to “two (2) years” or the “two-year period” and to “three (3) months”
shall be deemed for all purposes of this Agreement to be references to such
changed period or periods, and (ii) all corresponding references in the Notes
shall be deemed for all purposes to be references to the changed period or
periods, provided that such changes shall not become effective if they are
otherwise prohibited by, or would otherwise cause a violation of, the
then-applicable federal securities laws.

 

(h)                                 Authorization;
Enforcement; Validity.  This
Agreement and the Registration Rights Agreement have been duly and validly
authorized, executed and delivered on behalf of such Buyer and are valid and
binding agreements of such Buyer enforceable against such Buyer in accordance
with their terms, subject as to enforceability to general principles of equity
and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies.

 

(i)                                     Residency.  Such Buyer is a resident of that country or state
specified in its address on the Schedule of Buyers attached hereto as Exhibit A.

 

(j)                                     No Conflicts.  The execution and performance of this
Agreement and the Registration Rights Agreement do not conflict with any
agreement to which such Buyer is a party or is bound thereby, any court order
or judgment addressed to such Buyer, or the constituent documents of such Buyer,
except for those conflicts that would not, individually or in the aggregate,
have an adverse effect on the Buyer’s authority or ability to perform its
obligations under this Agreement or the Registration Rights Agreement.

 

(k)                                  Conversion
Limitation. (A) Subject to Buyer’s election on the signature pages hereto
to be governed by this Section 2(k)(A), each
Buyer hereby agrees that in no event will it convert,

 

5

 

and the Company will not honor any conversion
request presented to it that requests the conversion of, any of the Notes in
excess of the number of such Notes, upon the conversion of which (x) the number
of shares of Common Stock beneficially owned by such Buyer (other than the
shares which would otherwise be deemed beneficially owned except for being
subject to a limitation on conversion analogous to the limitation contained in
this Section 2(k)(A)) plus (y) the number of shares of Common Stock
issuable upon the conversion of such Notes, would be equal to or exceed 9.99%
of the number of shares of Common Stock then issued and outstanding (after
giving effect to such conversion), it being the intent of the Company and the
Buyers that no Buyer electing to be governed by this Section 2(k)(A) be
deemed at any time to have the power to vote or dispose of greater than 9.99%
of the number of shares of Common Stock issued and outstanding.  As used herein, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder (the “Exchange
Act”).  To the extent that the limitation
contained in this Section 2(k)(A) applies (and without limiting any rights
the Company may otherwise have), the Company may rely on the Buyer’s
determination of whether the Notes are convertible pursuant to the terms
hereof, the Company having no obligation whatsoever to verify or confirm the
accuracy of such determination, and the submission of the Conversion Notice (as
that term is defined in the Note) by the Buyer shall be deemed to be the Buyer’s
representation that the Notes specified therein are convertible or exercisable
pursuant to the terms hereof.  Nothing
contained herein shall be deemed to restrict the right of a Buyer to convert
the Notes at such time as the conversion thereof will not violate the
provisions of this Section 2(k)(A).  By written notice to the Company, the Buyer
may increase or decrease the maximum percentage stated in this paragraph to any
other percentage not in excess of 19.99% specified in such notice; provided
that (i) any such increase will not be effective until the sixty-first (61st)
day after such notice is delivered to the Company, and (ii) any such increase
or decrease will apply only to the Buyer and not to any other holder of Notes. Notwithstanding
anything to the contrary, this Section shall not apply to a Buyer unless
the Buyer has elected to be governed by this Section by so indicating on
the signature page.

 

(B) Subject to Buyer’s election on the
signature pages hereto to be governed by this Section 2(k)(B), each Buyer
hereby agrees that in no event will it convert, and the Company will not honor
any conversion request presented to it that requests the conversion of, any of
the Notes in excess of the number of such Notes, upon the conversion of which
(x) the number of shares of Common Stock beneficially owned by such Buyer (other
than the shares which would otherwise be deemed beneficially owned except for
being subject to a limitation on conversion analogous to the limitation
contained in this Section 2(k)(B)) plus (y) the number of shares of
Common Stock issuable upon the conversion of such Notes, would be equal to or
exceed 4.99% of the number of shares of Common Stock then issued and
outstanding (after giving effect to such conversion), it being the intent of
the Company and the Buyers that no Buyer electing to be governed by this Section 2(k)(B)
be deemed at any time to have the power to vote or dispose of greater than
4.99% of the number of shares of Common Stock issued and outstanding.  As used herein, beneficial ownership shall be
determined in accordance with Section 13(d) of the Exchange Act.  To the extent that the limitation contained
in this Section 2(k)(B) applies (and without
limiting any rights the Company may otherwise have), the Company may rely on
the Buyer’s determination of whether the Notes are convertible pursuant to the
terms hereof, the Company having no obligation whatsoever to verify or confirm
the accuracy of such determination, and the submission of the Conversion Notice
(as that term is defined in the Note)

 

6

 

by the Buyer
shall be deemed to be the Buyer’s representation that the Notes specified
therein are convertible or exercisable pursuant to the terms hereof.  Nothing contained herein shall be deemed to
restrict the right of a Buyer to convert the Notes at such time as the
conversion thereof will not violate the provisions of this Section 2(k)(B).  By written
notice to the Company, the Buyer may increase or decrease the maximum
percentage stated in this paragraph to any other percentage not in excess of 9.99%
specified in such notice; provided that (i) any such increase will not be
effective until the sixty-first (61st) day after such notice is
delivered to the Company, and (ii) any such increase or decrease will apply
only to the Buyer and not to any other holder of Notes. Notwithstanding
anything to the contrary, this Section shall not apply to a Buyer unless
the Buyer has elected to be governed by this Section by so indicating on
the signature page.

 

(l)                                     Additional
Acknowledgement.  Each Buyer
acknowledges that it has independently evaluated the merits of the transactions
contemplated by this Agreement, the Indenture, the Notes and the Registration
Rights Agreement, that it has independently determined to enter into the
transactions contemplated hereby and thereby, that it is not relying on any
advice from or evaluation by any other Buyer, and that it is not acting in
concert with any other Buyer in purchasing the Securities offered hereunder.  The Buyers have not taken any actions that
would cause such Buyers to be deemed as members of a “group” for purposes of Section 13(d)
of the Exchange Act, and the Company has no knowledge of any actions by the
Buyers that would be inconsistent with this representation.

 

The Buyer’s
representations and warranties made in this Section 2 are made solely for
the purpose of permitting the Company to make a determination that the offer
and sale of the Notes pursuant to this Agreement complies with applicable U.S.
federal and state securities laws and not for any other purpose.  Accordingly, the Company shall not rely on
such representations and warranties for any other purpose.

 

SECTION 3.                            Representations and Warranties of the Company.  The Company
represents and warrants to each of the Placement Agents and each of the Buyers
that as of the date hereof:

 

(a)                                  Organization
and Qualification.  The Company and
its Subsidiaries (as defined below) are corporations, partnerships or limited
liability companies duly organized and validly existing in good standing under
the laws of the jurisdiction in which they are incorporated or organized, and
have the requisite corporate, limited liability company or partnership power
and authorization to own their properties and to carry on their business as now
being conducted.  Copies of the Company’s
Certificate of Incorporation and Bylaws, and all amendments thereto, have been
filed as exhibits to the Company’s SEC Documents (as defined in Section 3(f)
of this Agreement), are in full effect and have not been modified.  Each of the Company and its Subsidiaries is
duly qualified as a foreign corporation, partnership or limited liability
company to do business and is in good standing in every jurisdiction in which
its ownership of property or the nature of the business conducted and proposed
to be conducted by it makes such qualification necessary, except to the extent
that the failure to be so qualified or be in good standing would not have a
Material Adverse Effect.  As used in this
Agreement, “Material Adverse Effect” means any material adverse effect on (i)
the business, properties, assets, operations, results of operations or
condition (financial or otherwise) or prospects of the Company and its
Subsidiaries, taken as a whole, (ii) the transactions contemplated hereby or by
the agreements and instruments to be

 

7

 

entered into in
connection herewith, or (iii) the authority or ability of the Company to
perform its obligations under the Transaction Documents (as defined below). “Subsidiary”
means any entity in which the Company, directly or indirectly, owns or controls
a majority of the ordinary voting power, capital stock or other equity or
similar interests.  The Company’s “Subsidiaries”
are set forth on Schedule 3(a), and the Company’s “Significant Subsidiaries”
are separately identified on that Schedule.

 

(b)                                 Authorization;
Enforcement; Validity.  The Company
has the requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Indenture, the Notes, the Registration
Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined in Section 5
of this Agreement) and each of the other agreements entered into by the parties
hereto in connection with the transactions contemplated by this Agreement (collectively,
the “Transaction Documents”), and to issue and sell the Securities in
accordance with the terms hereof and thereof. 
The execution and delivery of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated hereby and thereby,
including, without limitation, the issuance and repayment of the Notes, the
reservation for issuance and the issuance of the Conversion Shares issuable
upon conversion thereof and the registration for resale of the Registrable Securities
(as such term is defined in the Registration Rights Agreement), have been duly
authorized by the Company’s Board of Directors and no further consent or
authorization is required of the Company’s Board of Directors or
shareholders.  The Transaction Documents
have been duly executed and delivered by the Company.  The Transaction Documents constitute the
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, except (i) as rights to indemnification and
contribution may be limited by federal or state securities laws and policies
underlying such laws and (ii) as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and remedies.

 

(c)                                  Capitalization.  Except for any shares issuable upon exercise
of options issued pursuant to employee benefit plans disclosed in the Company’s
SEC Documents, the capitalization of the Company is as described in the Company’s
SEC Documents. All of the Company’s outstanding shares have been, or upon
issuance will be, validly issued and are fully paid and nonassessable and were
issued in accordance with applicable federal and state securities laws. The
Company’s Common Stock is registered pursuant to Section 12(g) of the
Exchange Act and is listed for trading on The NASDAQ National Market (the
“Principal Market”).  No shares of the
Company’s capital stock are subject to preemptive rights or any other similar
rights and there are no securities or instruments to which the Company is a
party containing anti-dilution or similar provisions that will be triggered by
the issuance of the Securities as described in this Agreement. Except for
rights created pursuant to the Transaction Documents and as set forth in the SEC
Documents, (i) no shares of the Company’s capital stock are subject to any
liens or encumbrances created by the Company; (ii) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of

 

8

 

capital stock of the Company or any of its
Subsidiaries (other than any such options, warrants, scrip, rights, calls,
commitments, securities, understandings and arrangement outstanding under plans
disclosed in the SEC Documents); (iii) there are no outstanding debt
securities, notes, credit agreements, credit facilities or other agreements,
documents or instruments evidencing indebtedness of the Company or any of its
Subsidiaries or by which the Company or any of its Subsidiaries is or may
become bound other than the senior credit facility under that certain Credit
Agreement dated as of May 16, 2003 among the Company, and the Northern
Trust Company, LaSalle National Bank, Harris Trust and Savings Bank and
National City Bank of Michigan/Illinois, as lenders (the “Senior Facility
Lenders”), together with the documents now or hereafter related thereto
(including without limitation, any guarantee agreements and any security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from
time to time, including any agreement extending the maturity of, refinancing,
replacing, increasing the amount of, or otherwise restructuring all or any
portion of the indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders (or other institutions)(the “Senior Facility”); (iv) there are
no amounts outstanding under, and there will be no amounts due upon termination
of, any credit agreement or credit facility other than the Senior Facility; (v)
there are no financing statements securing obligations in any amounts greater
than Fifty Thousand United States Dollars ($50,000), singly, or Two Hundred
Fifty Thousand United States Dollars ($250,000) in the aggregate, filed in
connection with the Company or any of its Subsidiaries other than in connection
with the Senior Facility; (vi) there are no agreements or arrangements under
which the Company or any of its Subsidiaries is obligated to register the sale
of any of its securities under the Securities Act; (vii) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries; (viii) the Company does not have any stock appreciation
rights or “phantom” stock plans or agreements or any similar plan or agreement;
(ix) the Company and its Subsidiaries have no liabilities or obligations
required to be disclosed in the SEC Documents but not so disclosed in the SEC
Documents, other than those incurred in the ordinary course of the Company’s or
its Subsidiaries’ respective businesses and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect on the Company
and its Subsidiaries taken as a whole; and (x) the Company does not have
outstanding stockholder purchase rights or “poison pill” or any similar
arrangement in effect giving any person or entity the right to purchase any
equity interest in the Company upon the occurrence of certain events.

 

(d)                                 Issuance
of Securities.  The Securities are
duly authorized and, upon issuance in accordance with the terms of the
applicable Transaction Documents, shall be (i) validly issued, fully paid
and non-assessable and (ii) free from all taxes, liens and charges with respect
to the issuance thereof, other than any liens or encumbrances created by or
imposed by the Buyers, and shall not be subject to preemptive rights or other
similar rights of shareholders of the Company. 
As of the Closing, at least 1,621,622 shares of Common Stock (subject to
adjustment pursuant to the Company’s covenant set forth in Section 4(e) of
this Agreement) will have been duly authorized and reserved for issuance upon
conversion of the Notes.  Upon conversion
or issuance in accordance with the terms of the Notes, the Conversion Shares
will be validly issued, fully paid and non-assessable and free from all taxes,
liens and charges with respect to the issue

 

9

 

thereof, other
than any liens or encumbrances created by or imposed by the Buyers, with the
holders being entitled to all rights accorded to a holder of Common Stock.  Subject to the accuracy of the
representations and warranties of each of the Buyers in this Agreement, the
issuance by the Company of the Securities is exempt from registration under the
Securities Act and applicable state securities laws.

 

(e)                                  No
Conflicts.  The execution, delivery
and performance of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Notes and the reservation
for issuance and issuance of the Conversion Shares) will not (i) result in a
violation of the Company’s Certificate of Incorporation or Bylaws; (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party, except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as could not reasonably result,
individually or in the aggregate, have a Material Adverse Effect; or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the Principal Market) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected. 
Neither the Company nor any of its Subsidiaries is in violation of any
material term of or in default under its Certificate of Incorporation, Bylaws
or their organizational charter or bylaws, respectively.  Neither the Company nor any of its
Subsidiaries is in violation of any term of or in default under any contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Company or its Subsidiaries,
except where such violations and defaults would not result, either individually
or in the aggregate, in a Material Adverse Effect.  The business of the Company and its
Subsidiaries is not being conducted in violation of any law, ordinance or regulation
of any governmental entity, except where such violations would not result,
either individually or in the aggregate, in a Material Adverse Effect.  Except as specifically contemplated by this
Agreement, as required under the Securities Act or as required by Blue Sky
filings (but only to the extent that such filings may be made after the
Closing), the Company is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency or any regulatory or self-regulatory agency or other person or entity in
order for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents. 
All consents, authorizations, orders, filings and registrations which
the Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof and copies of such
consents, authorizations, orders, filings and registrations have been delivered
to the Buyers.  The Company is not in
violation of the listing requirements of the Principal Market, and has no
actual knowledge of any facts which could reasonably lead to delisting or
suspension of the Common Stock by the Principal Market in the foreseeable
future.  The Company and its Subsidiaries are not in
violation of any covenants or other terms of its outstanding indebtedness for
borrowed money, which could reasonably be expected to have a Material Adverse
Effect.  The Company and its Subsidiaries
are currently unaware of any facts or circumstances which might give rise to
any of the foregoing events set forth in this paragraph.

 

10

 

(f)                                    SEC Documents; Financial Statements.  Since July 1, 2001, the Company has
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the Securities and Exchange Commission (the “Commission”)
pursuant to the reporting requirements of the Exchange Act (all of the
foregoing filed prior to or on the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the “SEC
Documents”).  As of the date of filing of
such SEC Documents, each such SEC Document, as it may have been subsequently
amended by filings made by the Company with the Commission prior to the date
hereof, complied in all material respects with the requirements of the Exchange
Act applicable to such SEC Document and did not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements therein, in light of the circumstances under which they are or
were made, not misleading.  As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and published rules and regulations of the Commission
with respect thereto.  Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied in the United States (“GAAP”), during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements), correspond to the books and records of the Company and
fairly present in all material respects the financial position of the Company
and its Subsidiaries as of the dates thereof and the results of operations and
cash flows for the periods then ended. 
Grant Thornton LLP are independent public
accountants as required by the Exchange Act. 
The Company is not aware of any issues raised by the Commission with
respect to any of the SEC Documents that have not been resolved in the ordinary
course of review.  No other written
information provided by or on behalf of the Company to the Buyers which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they are or were made, not misleading. 
The Company satisfies the requirements for use of Form S-3 for
registration of the resale of the Registrable Securities and does not have any
knowledge or reason to believe that it does not satisfy such requirements or
have any knowledge of any fact which would reasonably result in its not
satisfying such requirements.  The
Company is not required to file and will not be required to file, any
agreement, note, lease, mortgage, deed or other instrument entered into prior
to the date hereof and to which the Company is a party or by which the Company
is bound which has not been previously filed as an exhibit to its reports filed
with the Commission under the Exchange Act, except for those Transaction
Documents required to be filed upon execution and delivery, and the Fourth
Amendment to the Senior Facility.  Except
for the issuance of the Notes contemplated by this Agreement, no event,
liability, development or circumstance has occurred or exists, or is currently
contemplated to occur, with respect to the Company or its Subsidiaries or their
respective business, properties, prospects, operations or financial condition,
that would be required to be disclosed by the Company under applicable
securities laws and which has not been publicly disclosed.  The Company has no reason to believe that its
independent auditors will withhold their consent to the inclusion of their
audit opinion concerning the Company’s financial statements which shall be
included in the Registration Statement (as such term is defined in the
Registration Rights Agreement).

 

11

 

(g)                                 Absence
of Litigation.  Except as disclosed
in the section titled “Legal Proceedings” in the Company’s Annual Report
on Form 10-K for the fiscal year ended June 30, 2004, there is no action,
suit, proceeding, inquiry or investigation (“Material Litigation”) before or by
any court, public board, government agency, self-regulatory organization or
body pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened in writing against the Company or any of its Subsidiaries or any of
the Company’s or the Subsidiaries’ officers or directors in their capacities as
such that would have a Material Adverse Effect. 
The Company believes it has set aside on its books provisions reasonably
adequate for the payment of all judgments, damages, costs, and expenses arising
out of its pending Material Litigation and has appropriately accounted for such
reserves under GAAP.

 

(h)                                 No
Integrated Offering.  Neither the
Company, nor any of its affiliates, nor any person acting on its or their
behalf, has, directly or indirectly, made any offers or sales of any security
or solicited any offers to buy any security, under circumstances that would cause
this offering of the Securities to be integrated with prior offerings by the
Company for purposes of the Securities Act or any applicable shareholder
approval provisions, including, without limitation, under the rules and
regulations of any exchange or automated quotation system on which any of the
securities of the Company are listed or designated, nor will the Company or any
of its Subsidiaries take any action or steps that would cause the offering of
the Securities to be integrated with other offerings.

 

(i)                                     Intellectual Property Rights.  The Company and its Subsidiaries own,
possess, license or can acquire or make use of on reasonable terms, adequate
rights or licenses to use all trademarks, trade names, trade dress,
service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, technology licenses, approvals, governmental
authorizations, trade secrets, and other intellectual property rights
(collectively, “Intellectual Property”) necessary to conduct their respective
businesses as now conducted and as currently contemplated to be conducted by
them as described in the SEC Documents, except where the failure to currently
own or possess Intellectual Property would not have a Material Adverse Effect.  The Company and its Subsidiaries do not have
any knowledge of any infringement by the Company or its Subsidiaries of
Intellectual Property rights of others, or of any development of similar or
identical trade secrets or technical information by others that would have a
material adverse effect.  There is no
claim, action or proceeding being made by the Company or its Subsidiaries
regarding the Intellectual Property rights of the Company or its Subsidiaries
or to the Company’s knowledge, brought or currently threatened against the
Company or its Subsidiaries regarding the Intellectual Property rights of or
the use of any Intellectual Property by the Company or its Subsidiaries of any
third party that, if the subject of an unfavorable decision, ruling or finding,
would have a Material Adverse Effect.

 

(j)                                     Insurance.  The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as are commensurate with similarly situated
companies engaged in similar businesses as the Company and its Subsidiaries.

 

(k)                                  Regulatory Permits.  The Company and its Subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to conduct
their respective businesses as currently conducted

 

12

 

(the “Permits”), except where the failure to
possess such Permits would not have a Material Adverse Effect, and neither the
Company nor any of its Subsidiaries has received any written notice of
proceedings relating to the revocation or material modification of any such
Permit.

 

(l)                                     Tax Status. 
The Company and each of its Subsidiaries (i) has made or filed all
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject and all such tax returns
are accurate and complete in all material respects, (ii) has paid all taxes and
other governmental assessments and charges due with respect to the periods
covered by such returns, reports and declarations, except those being contested
in good faith and for which the Company has made appropriate reserves on its
books in accordance with GAAP, and (iii) has paid or set aside on its books
provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations
(referred to in clause (i) above) apply. 
Except as disclosed in the SEC Documents, there are no unpaid taxes or
assessments for tax deficiencies that are individually or in the aggregate
material in amount claimed to be due by the taxing authority of any
jurisdiction, and the Company knows of no basis for any such claim, and there
are no audits in progress with respect to any tax returns, no extension of time
is in force with respect to any date on which any tax return was or is to be
filed (except for extensions of federal and state tax returns due June 30,
2004 made in the ordinary course of business), and no waiver or agreement is in
force for the extension of time for the assessment or payment of any tax.  Except as disclosed in the SEC Documents, all
provisions for tax liabilities of the Company and each of its Subsidiaries have
been disclosed in the Company’s financial statements and made in accordance
with GAAP consistently applied, and all liabilities for taxes of the Company
and each of its Subsidiaries attributable to periods prior to or ending on the
Closing Date have been adequately disclosed in the Company’s financial
statements.

 

(m)                               Application
of Takeover Protections.  The Company
and its Board of Directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate of Incorporation, the laws of the
state of its incorporation or the laws of any other state which is applicable
to the Buyers as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company’s issuance of the Securities and the
Buyers’ ownership, voting or disposition of the Securities.

 

(n)                                 Foreign Corrupt
Practices.  Neither the Company nor
any of its Subsidiaries, nor, to the Company’s knowledge, any director,
officer, agent, employee or other person acting on behalf of the Company or any
Subsidiary has, in the course of his actions for, or on behalf of, the Company
or any Subsidiary used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; made
any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the United States Foreign Corrupt Practices Act of 1977, as
amended, or made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government official or
employee.

 

(o)                                 Confidential
Private Placement Memorandum. The information supplied by the Company for
inclusion or incorporation by reference in the Confidential Private Placement
Memorandum dated as of February 9, 2005 (the “Confidential Private Placement

 

13

 

Memorandum”) in connection with the Offering
does not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading.  If, at any time prior to the
Closing Date, any event with respect to the Company shall occur which is
required to be described in the Confidential Private Placement Memorandum, such
event shall be so described, and an appropriate amendment or supplement shall
be prepared by the Company.

 

(p)                                 Transactions With Affiliates. 
Other than the grant of
stock options granted pursuant to the Company’s employee benefit plans, none of
the officers, directors or employees of the Company is presently a party to any
transaction with the Company or any of its Subsidiaries (other than in
connection with the provision of services as employees, officers and
directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
such officer, director or employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner, such that the transaction would be required to be disclosed
pursuant to Item 404 of Regulation S-K promulgated under the Securities Act.

 

(q)                                 Brokers and Finders.  Except for fees payable to the Placement
Agents as placement agents, no brokers, finders or financial advisory fees or
commissions will be payable by the Company with respect to the transactions
contemplated by this Agreement.

 

(r)                                    Absence of Certain Changes.  Except as disclosed in the SEC Documents
available on the EDGAR system, since June 30, 2004, there has been no
change or development that has had or could reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.

 

(s)                                  No Material
Non-Public Information.  Except for
the issuance of the Securities and the transactions contemplated by this
Agreement and the Company’s intended use of the net proceeds from the sale of
the Notes (which such information shall be fully disclosed in the Current
Report on Form 8-K filed pursuant to Section 4(g)(1)
hereof), the Company has not provided the Buyers with, and the Confidential
Private Placement Memorandum does not contain, material non-public information.

 

(t)                                    Acknowledgment
Regarding Buyer’s Purchase of Securities. 
The Company acknowledges and agrees that each Buyer is acting solely in
the capacity of arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby and that no
Buyer is (i) an officer or director of the Company, (ii) an “affiliate” of the
Company (as defined in Rule 144) or (iii) to the knowledge of the Company, a “beneficial
owner” of more than 10% of the Common Stock (as defined for purposes of Rule
13d-3 of the Exchange Act).  The Company
further acknowledges that no Buyer is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and thereby, and
any advice given by a Buyer or any of its representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Buyer’s purchase

 

14

 

of the
Securities.  The Company further
represents to each Buyer that the Company’s decision to enter into the
Transaction Documents has been based solely on the independent evaluation by
the Company and its representatives.  The
Company acknowledges and agrees that no Buyer makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 2.

 

(u)                                 Dilutive Effect.  The Company understands and acknowledges that
the number of Conversion Shares issuable upon conversion of the Notes will
increase in certain circumstances.  The
Company further acknowledges that its obligation to issue Conversion Shares
upon conversion of the Notes in accordance with this Agreement, the Indenture
and the Notes is, in each case,
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other shareholders of the Company.

 

(v)                                 Insolvency.  The Company has not taken any steps to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings or any actual knowledge of any fact which
would reasonably lead a creditor to do so. 
The Company is not as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at each Closing, will not be Insolvent
(as defined below).  For purposes of this
Section 3(v), “Insolvent” means (i) the present fair saleable value of the
Company’s assets is less than the amount required to pay the Company’s total
debt, (ii) the Company is unable to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured, (iii) the Company intends to incur or believes that it
will incur debts that would be beyond its ability to pay as such debts mature
or (iv) the Company has unreasonably small capital with which to conduct the
business in which it is engaged as such business is now conducted and is
proposed to be conducted.

 

(w)                               Employee Relations.

 

(1)                                  Except
as disclosed in the SEC Documents, neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or employs any
member of a union.  The Company and its
Subsidiaries believe that their relations with their employees are good.  No executive officer of the Company (as
defined in Rule 501(f) of the Securities Act) has notified the Company that
such officer intends to leave the Company or otherwise terminate such officer’s
employment with the Company.  No
executive officer of the Company, to the knowledge of the Company, is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to any
liability with respect to any of the foregoing matters.

 

(2)                                  The
Company and its Subsidiaries are in compliance with all federal, state, local
and foreign laws and regulations respecting employment and employment
practices, terms and conditions of employment and wages and hours, except where
failure to be in compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.

 

15

 

(x)                                   Title.  The Company and its Subsidiaries have good
and marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except as provided in the SEC Documents or the Senior
Facility and except for such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of such
property by the Company and any of its Subsidiaries.  Any real property and facilities held under
lease by the Company and any of its Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
facilities by the Company and its Subsidiaries.

 

(y)                                 Environmental Laws.  The Company and its Subsidiaries (i) are in
compliance with any and all Environmental Laws (as hereinafter defined), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect. 
The term “Environmental Laws” means all federal, state, local or foreign
laws relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws relating to
emissions, discharges, releases or threatened releases of chemicals,
pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into
the environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees, demands or
demand letters, injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated or approved
thereunder.

 

(z)                                   Subsidiary Rights.  The Company or one of its Subsidiaries has
the unrestricted right to vote, and (subject to limitations imposed by
applicable law) to receive dividends and distributions on, all capital
securities of its Subsidiaries as owned by the Company or such Subsidiary.

 

(aa)                            Internal Accounting Controls.  The Company and each of its Subsidiaries maintain
a system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset and liability accountability, (iii) access to assets or
incurrence of liabilities is permitted only in accordance with management’s
general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities at
reasonable intervals and appropriate action is taken with respect to any
difference.

 

(bb)                          Sarbanes-Oxley Act. 
The Company is in compliance with any and all applicable requirements of
the Sarbanes-Oxley Act of 2002 that are effective with respect to the Company

 

16

 

as of the date hereof, and any and all applicable rules and regulations
promulgated by the SEC thereunder that are effective with respect to the
Company as of the date hereof, except where such noncompliance would not have,
individually or in the aggregate, a Material Adverse Effect.

 

SECTION 4.                            Covenants.

 

(a)                                  Obligations.
Each party shall use commercially reasonable efforts to timely satisfy each of
the conditions to be satisfied by it as provided in Sections 6 and 7 of this
Agreement.

 

(b)                                 Form
D and Blue Sky. The Company agrees to file timely a Form D with the
Commission with respect to the Securities as required under Regulation D and to
provide, upon request, a copy thereof to each Buyer.  The Company shall, on or before the Closing
Date, take such action as the Company shall reasonably determine is necessary
in order to obtain an exemption for, or to qualify the Securities for, sale to
the Buyers at the Closing pursuant to this Agreement under applicable
securities or “Blue Sky” laws of the states of the United States (or to obtain
an exemption from such qualification), in those jurisdictions identified by the
Buyers and shall provide evidence of any such action so taken to the Buyers on
or prior to the Closing Date. The Company shall make all timely filings and
reports relating to the offer and sale of the Securities required under
applicable securities or “Blue Sky” laws of the states of the United States
following the Closing Date.  The Company
shall pay all fees and expenses in connection with satisfying its obligations
under this Section 4(b).

 

(c)                                  Reporting Status.
With a view to making available to the Investors (as that term is defined in
the Registration Rights Agreement) the benefits of Rule 144 promulgated under
the Securities Act or any similar rule or regulation of the Commission that may
at any time permit the Investors to sell securities of the Company to the
public without registration (“Rule 144”), the Company shall:  (i) make and keep public information
available, as those terms are understood and defined in Rule 144; (2) file with
the Commission in a timely manner all reports and other documents required of
the Company under the Securities Act and the Exchange Act; and (3) furnish to
each Investor, so long as such Investor owns Registrable Securities (the “Reporting
Period”), promptly upon request, (A) a written statement by the Company, if
true, that it has complied with the applicable reporting requirements of Rule
144, the Securities Act and the Exchange Act, (B) a copy of the most recent
annual or quarterly report of the Company and copies of such other reports and
documents so filed by the Company, (C) the information required by Rule
144A(d)(4) (or any successor rule) under the Securities Act, and (D) such other
information as may be reasonably requested to permit the Investors to sell such
securities pursuant to Rule 144 without registration.

 

(d)                                 Use
of Proceeds.  The Company intends to
use the net proceeds from the sale of the Notes as described in the
Confidential Private Placement Memorandum.

 

(e)                                  Reservation of
Shares. The Company shall take all actions necessary to at all times have
authorized, and reserved for the purpose of issuance, no less than one hundred
five percent (105%) of the number of shares of Common Stock (the “Reservation
Amount”) needed to provide for the issuance of the Conversion Shares upon
conversion of all of the Notes without regard to any limitations on
conversions.

 

17

 

(f)                                    Listing. The
Company shall use its best efforts to promptly secure the listing of all of the
Conversion Shares upon each national securities exchange and automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and, shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Conversion
Shares from time to time issuable under the terms of the Transaction
Documents.  So long as any Securities are
outstanding, the Company shall maintain the Common Stock’s authorization for
quotation or listing on The New York Stock Exchange, Inc. (the “NYSE”), the
American Stock Exchange, Inc. (“AMEX”) or The Nasdaq National Market or
SmallCap Market (“NASDAQ”) (each, an “Eligible Market”).  A The Company shall pay all fees and expenses
in connection with satisfying its obligations under this Section 4(f).

 

(g)                                 Filing
of Form 8-K.  On or before 8:30 a.m.,
New York Time, on the Business Day following the Closing Date, the Company
shall issue a press release announcing the transactions contemplated
hereby.  The Company shall use reasonable
best efforts within one Business Day after the public announcement of the
transactions contemplated hereby to file (1) a Current Report on Form 8-K with
the Commission furnishing as an exhibit to such Current Report on Form 8-K the
press release announcing the signing of this Agreement after the issuance of
such press release, and (2) a Current Report on Form 8-K with the Commission
describing the terms of the transactions contemplated by the Transaction
Documents and including as exhibits to such Current Report on Form 8-K (i) this
Agreement and the Exhibits hereto, (ii) the form of Note, (iii) the
Registration Rights Agreement, and (iv) the form of Indenture, each in the
form required by the Exchange Act; provided, however, that the signature pages
and all references to the names of the Buyers shall be redacted from the
Transaction Documents filed as exhibits to such Current Report on Form 8-K and
in any press release filed in connection with the transactions contemplated
hereby.  “Business Day” means any day
other than Saturday, Sunday or other day on which commercial banks in the City
of New York are required by law to remain closed.

 

(h)                                 Stockholder
Approval. In the event that Stockholder Approval is required
pursuant to the rules of the Principal Market for the issuance of a number of
Conversion Shares greater in the aggregate than 19.99% of the number of shares
of Common Stock outstanding immediately prior to the Closing Date (the “19.99%
Rule”), the Company shall provide each stockholder entitled to vote at the next
meeting of stockholders of the Company, which meeting shall occur on or before
ninety (90) days from the date of such determination (the “Stockholders Meeting
Deadline”), a proxy statement, which has been previously reviewed by Piper
Jaffray, the Buyers and a counsel of their choice, soliciting each such
stockholder’s affirmative vote at such stockholder meeting for approval of the
Company’s issuance of all of the Securities as described in the Transaction
Documents in accordance with applicable law and the rules and regulations of
the Principal Market (such affirmative approval being referred to herein as the
“Stockholder Approval”), and the Company shall solicit its stockholders’
approval of such issuance of the Securities.

 

(i)                                     Expenses. Subject to Section 9(n) of this
Agreement, at the Closing, the Company shall reimburse the Buyers for the
Buyers’ reasonable, documented, out-of-pocket expenses incurred in connection
with the consummation of the transactions contemplated by this Agreement, up to
a maximum of $30,000 to Schulte
Roth & Zabel LLP, which amount shall be withheld by Kings Road Investments
Ltd. from the Purchase Price payable by such Buyer at the Closing as set forth
opposite such Buyer’s name on the Schedule of Buyers attached hereto as Exhibit A.

 

18

 

(j)                                     Additional Securities. For so long as any
Buyer beneficially owns any Securities, the Company shall not issue any other
securities that would cause a breach or default under the Notes.

 

(k)                                  Tax
Matters.  If the Company shall be
required to withhold or deduct any tax or other governmental charge from any
payment made hereunder or under any Note to any Buyer, then, subject to the
last sentence of this Section 4(k), the Company shall pay to such Buyer
such additional amounts as are necessary such that such Buyer actually receives
the amount such Buyer would have received if no such withholding or deduction
had been required.  If any Buyer is
organized under the laws of a jurisdiction other than the United States, any
State thereof or the District of Columbia (a “Non-United States Buyer”), such
Buyer shall deliver to the Company either (a) two (2) copies of either United
States Internal Revenue Service Form W-8BEN or Form W-8ECI, or (b) in the case
of a Non-United States Buyer claiming exemption from United States Federal
withholding tax under Section 871(h) or 881(c) of the Internal Revenue
Code of 1986, as amended, and the rules and regulations promulgated thereunder
(the “Code”) with respect to payments of “portfolio interest”, a certificate in
form and substance reasonably acceptable to the Company representing that such
Non-United States Buyer is not a bank for purposes of Section 881(c) of
the Code, is not a ten percent (10%) shareholder (within the meaning of Section 871(h)(3)(B)
of the Code) of the Company and is not a controlled foreign corporation related
to the Company (within the meaning of Section 864(d)(4) of the Code),
together with Internal Revenue Service Form W-8 or W-9, as applicable, in all
cases such forms and other documents being properly completed and duly executed
by such Non-United States Buyer claiming complete exemption from United States
Federal withholding tax on payments of interest by the Company (or accruals of
original issue discount) under the Notes. 
In addition, each Buyer that is not otherwise exempt from “back-up
withholding” shall deliver to the Company properly completed and duly executed
Internal Revenue Service Form W-8 or W-9 indicating that such Buyer is subject
to “back-up withholding” for United States Federal income tax purposes.  The forms and other documents required to be
delivered pursuant to the two preceding sentences shall be delivered within ten
(10) days after the Closing Date.  The
Company shall not be required to pay any additional amounts (x) to any
Non-United States Buyer in respect of United States Federal withholding tax or
(y) to any Buyer in respect of United States Federal “back-up withholding” tax
to the extent that the obligation to pay such additional amounts would not have
arisen but for a failure by such Non-United States Buyer or Buyer, as the case
may be, to comply with the provisions of this Section 4(k).

 

(l)                                     Violation of Laws. 
The business of the Company and its Subsidiaries shall not be
conducted in violation of any law, ordinance or regulation of any governmental
entity, except where such violations would not result, either individually or
in the aggregate, in a Material Adverse Effect.

 

(m)                               Limits on Additional
Issuances. The Company shall not, in any manner, until the later of (i) 180
days after the Closing or (ii) the date on which the Registration Statement
required to be filed pursuant to Section 2(a) of the Registration Rights
Agreement is declared effective by the Commission (the “Effective Date”), issue
or sell any Common Stock or rights, warrants or options to subscribe for or
purchase Common Stock or any security directly or indirectly convertible into
or exchangeable or exercisable for Common Stock (the “Equity Limitation”).  The Equity Limitation shall not apply (i) to
the issuance of Conversion Shares

 

19

 

pursuant to the Notes, (ii) to the issuance
of securities pursuant to the conversion or exchange of convertible or exchangeable
securities or the exercise of warrants or options, in each case outstanding on
the date hereof, provided such securities, warrants and options are not amended
after the date hereof, (iii) if holders representing a majority of the
outstanding principal amount of the Notes give their prior written consent to
such issuance or sale, (iv) if the issuance is pursuant to employee benefits
plans approved by the Company’s Board of Directors, (v) to the filing of a
Registration Statement on Form S-8, (vi) if the securities are issued for
consideration other than cash in connection with a bona fide business
acquisition by the Company whether by merger, consolidation, purchase of
assets, sale or exchange of stock or otherwise, or (vii) if the issuance is in
connection with a (A) commercial banking arrangement, (B) equipment financing,
(C) sponsored research, (D) collaboration, (E) technology licensing, (F)
development agreement or (G) other strategic partnership; provided, however,
that with respect to (C) through (G) hereof, the primary purpose of such
transaction is not to raise equity capital.

 

(n)                                 CUSIP Numbers.
The Company in issuing the Securities shall use “CUSIP” numbers (if then
generally in use), and shall use such “CUSIP” numbers in notices to holders as
a convenience to holders thereof; provided that any such notice may state that
no representation is made as to the correctness of such numbers either as
printed on the Securities or as contained in any notice to such holders and
that reliance may be placed only on other identification numbers printed on
such Securities, and any such Company action referenced in such notice
(including, without limitation, redemption or automatic conversion of Notes)
shall not be affected by any defect in or omission of such numbers.

 

(o)                                 Accounting Matters.
The Company shall use its reasonable best efforts to cause to be delivered to
the Buyers a letter in form and substance reasonably acceptable to the Buyers
and reasonably customary in scope and substance for comfort letters delivered
by independent public accountants in connection with offerings similar to the
Offering.

 

(p)                                 Nonpublic
Information.  The Company shall not,
and shall cause each of its Subsidiaries and its and each of their respective
officers, directors, employees and agents, not to, provide those Buyers listed
on Schedule 4(p) with any material, nonpublic information regarding the
Company or any of its Subsidiaries from and after the filing of the 8-Ks with
the SEC pursuant to Section 4(g) hereof without the express written
consent of such Buyers; provided, however that the foregoing shall not restrict
in any way the distribution of any information to any such Buyers by the
Company or its Subsidiaries and its and each of their respective officers,
directors, employees and agents (i) as reasonably required by the terms of the
Transaction Documents or (ii) in connection with any request by or on behalf of
the Company to waive, amend or modify any provision of the Transaction
Documents.

 

(q)                                 PORTAL Market.  The Company will use its best efforts to
permit the Notes to be designated securities eligible for trading in The Portal
Market in accordance with the rules and regulations adopted by the NASD
relating to trading in The Portal Market and to permit the Notes to be eligible
for clearance and settlement through the Depository Trust Company.

 

(r)                                    Independent
Nature of Buyers’ Obligations and Rights. 
The obligations of each Buyer under any Transaction Document are several
and not joint with the obligations of any other Buyer, and no Buyer shall be
responsible in any way for the performance of the obligations

 

20

 

of any other
Buyer under any Transaction Document. 
Nothing contained herein or in any other Transaction Document, and no
action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents and the Company has no
knowledge of any facts that would establish that the Buyers are acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. 
Each Buyer confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors.  Each Buyer shall
be entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of any other
Transaction Documents, and it shall not be necessary for any other Buyer to be
joined as an additional party in any proceeding for such purpose.

 

SECTION 5.                            Transfer
Agent Instructions.  The Company shall issue irrevocable instructions to
its transfer agent, and any subsequent transfer agent, to issue certificates or
credit shares to the applicable balance accounts at DTC, registered in the name
of each Buyer or their respective nominee(s), for the Conversion Shares in such
amounts as specified from time to time by a Buyer to the Company upon
conversion of the Notes and in accordance with their respective terms (the “Irrevocable
Transfer Agent Instructions”), substantially in the form attached hereto as Exhibit E.  Prior to transfer or sale pursuant to a
registration statement or Rule 144 under the Securities Act of the Conversion
Shares, all such certificates shall bear the restrictive legend specified in Section 2(g)
of this Agreement.  The Company
represents and warrants that no instruction inconsistent with the Irrevocable
Transfer Agent Instructions referred to in this Section 5 will be given by
the Company to its transfer agent and that the Securities shall be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Notes, the Indenture and the Registration
Rights Agreement.  Subject to the Indenture,
if a Buyer provides the Company with an opinion of counsel, in form reasonably
acceptable to the Company, to the effect that a sale, assignment or transfer of
the Securities has been made without registration under the Securities Act or
that the Securities can be sold pursuant to Rule 144(k) without any restriction
as to the number of securities acquired as of a particular date that can then
be immediately sold, and provides such representations that the Company shall
reasonably request confirming compliance with the requirements of Rule 144, the
Company shall permit the transfer, and, in the case of the Conversion Shares,
promptly instruct its transfer agent to issue one or more certificates, or
credit shares to one or more balance accounts at DTC, in such name and in such
denominations as specified by such Buyer and without any restrictive
legend.  The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Buyers by vitiating the intent and purpose of the transaction contemplated
hereby.  Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this Section 5
will be inadequate and agrees, in the event of a breach or threatened breach by
the Company of the provisions of this Section 5, that the Buyers shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and without any bond
or other security being required.

 

SECTION 6.                            Conditions to the Company’s Obligation to Close.  The
obligation of the Company to issue and sell the Notes to each respective Buyer
at the Closing is subject to the

 

21

 

satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company’s sole benefit
and may be waived by the Company at any time in its sole discretion by
providing such Buyer with prior written notice thereof:

 

(a)                                  Transaction
Documents.  Such Buyer shall have
executed each of the Transaction Documents to which it is a party and delivered
the same to the Company.

 

(b)                                 Payment of Purchase
Price. Such Buyer shall have delivered to the Company the purchase price
for the Notes being purchased by such Buyer at the Closing, by wire transfer of
immediately available funds pursuant to the wire instructions attached hereto
as Schedule A.

 

(c)                                  Representations
and Warranties; Covenants. The representations and warranties of such Buyer
shall be true, correct and complete in all material respects (except to the
extent that any of such representations and warranties is already qualified as
to materiality in Section 2 above, in which case such representations and
warranties shall be true, correct and complete without further qualification)
as of the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date
(which shall be true, correct and complete as of such date)), and such Buyer
shall have performed, satisfied and complied with in all material respects the
covenants, agreements and conditions required by the Transaction Documents to
be performed, satisfied or complied with by such Buyer at or prior to the
Closing Date.

 

SECTION 7.                            Conditions to Each Buyer’s Obligation to Purchase.  The several
obligations of each Buyer hereunder to purchase its Notes from the Company at
the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for each
Buyer’s sole benefit and may be waived by such Buyer at any time in its sole
discretion by providing the Company with prior written notice thereof:

 

(a)                                  Transaction
Documents. The Company shall have executed each of the Transaction
Documents and delivered the same to such Buyer. 
The Trustee shall have executed and delivered the Indenture to the
Company.

 

(b)                                 No Delisting of
Common Stock. The Common Stock (i) shall be designated for quotation or
listed on the Principal Market and (ii) shall not have been suspended by the
Commission or the Principal Market from trading on the Principal Market nor
shall suspension by the Commission or the Principal Market have been threatened
either (A) in writing by the Commission or the Principal Market or (B) by
falling below the minimum listing maintenance requirements of the Principal
Market.

 

(c)                                  Representations
and Warranties; Covenants.  The representations
and warranties of the Company shall be true, correct and complete in all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 of this
Agreement, in which case such representations and warranties shall be true,
correct and complete without further qualification) as of the date when made
and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date (which shall be
true, correct and complete as of such date)) and the Company shall have

 

22

 

performed,
satisfied and complied with in all material respects the covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. Such Buyer
shall have received a certificate, executed by the Chief Executive Officer or
Chief Financial Officer of the Company, dated as of the Closing Date, to the
foregoing effect.

 

(d)                                 Opinion of Counsel.
The Company shall have delivered to such Buyer the opinion of Holland &
Knight LLP, dated as of the Closing Date, in the form of Exhibit F
attached hereto.

 

(e)                                  Delivery of Notes.
The Company shall have executed and delivered to such Buyer the Notes (in such
denominations of not less than One Thousand United States Dollars ($1,000) as
such Buyer shall reasonably request) being purchased by such Buyer at the
Closing, provided, that Notes eligible for services through DTC shall be
issued, countersigned, registered and delivered in global certificate form
through the facilities at DTC in such names and denominations as each Buyer
shall specify.

 

(f)                                    Reservation of
Common Stock. As of the Closing Date, the Company shall have reserved out
of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Notes, the number of shares of Common Stock
equal to the Reservation Amount (as defined in Section 4(e) of this
Agreement).

 

(g)                                 Irrevocable
Transfer Agent Instructions. The Company shall have delivered the
Irrevocable Transfer Agent Instructions, in the form of Exhibit E
attached hereto, to the Company’s transfer agent.

 

(h)                                 Good Standing
Certificates. The Company shall have delivered to the Placement Agents (i)
a certificate evidencing the incorporation and good standing of the Company in
Delaware issued by the Secretary of State of the State of Delaware as of a
recent date; and (ii) a certificate of good standing (or appropriate
counterpart) from the appropriate governmental authority in each domestic
jurisdiction in which Significant Subsidiaries are incorporated or organized as
of a recent date.

 

(i)                                     Secretary’s
Certificate. The Company shall have delivered to such Buyer a secretary’s
certificate, dated as of the Closing Date, certifying as to (i) adoption
of the form of resolutions of the Board of Directors of the Company consistent
with Section 3(b) of this Agreement and in a form reasonably acceptable to
such Buyer, (ii) the Certificate of Incorporation and (iii) the Bylaws, each as
in effect at the Closing.

 

(j)                                     Filings;
Authorizations. The Company shall have made all filings under all
applicable federal and state securities laws necessary to consummate the
issuance of the Securities pursuant to this Agreement in compliance with such
laws, and shall have obtained all authorizations, approvals and permits
necessary to consummate the transactions contemplated by the Transaction
Documents and such authorizations, approvals and permits shall be effective as
of the Closing Date.

 

(k)                                  No Injunctions.  No temporary restraining order, preliminary
or permanent injunction or other order or decree, and no other legal restraint
or prohibition shall exist which prevents or arguably prevents the consummation
of the transactions contemplated by the Transaction

 

23

 

Documents, nor shall any proceeding have been
commenced or threatened with respect to the foregoing.

 

(l)                                     No Material
Adverse Effect.  Between the time of
execution of this Agreement and the Closing Date, (i) no Material Adverse
Effect shall occur or become known (whether or not arising in the ordinary
course of business) and (ii) no transaction which is material and unfavorable
to the Company shall have been entered into by the Company.

 

(m)                               Payment of Fees.
The Company shall have satisfied its obligations under Section 9(n) of
this Agreement.

 

(n)                                 Minimum Offering.  The Company shall have confirmed in writing
to the Buyers that it will be issuing at least an aggregate of $40,000,000 in principal
amount of Notes to the Buyers on the Closing Date.

 

(o)                                 Comfort Letter.
The Company’s independent public accountants, Grant Thorton LLP, shall have
delivered to the Buyers a letter in form and substance reasonably acceptable to
the Buyers and reasonably customary in scope and substance for comfort letters
delivered by independent public accountants in connection with offerings
similar to the Offering.

 

(p)                                 No Stop Orders.  No stop order or suspension of trading shall
have been imposed by the Principal Trading Market, the Commission or any other
governmental or regulatory body with respect to public trading in the Common
Stock.

 

SECTION 8.                            Indemnification.

 

 

(a)           Indemnification by the Company.  In consideration of each Buyer’s execution
and delivery of the Transaction Documents and acquiring the Securities
thereunder and the Placement Agents’ agreement to act as exclusive placement
agents and in addition to all of the Company’s other obligations under the
Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless each Placement Agent and each Buyer and each other holder of the
Securities and all of their shareholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
persons’ agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Indemnitees”) from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys’ fees and disbursements
(collectively, “Claims”), incurred by any Indemnitee as a result of, or arising
out of, or relating to (i) an untrue statement or alleged untrue statement of a
material fact contained in the Confidential Private Placement Memorandum, or in
any amendment or supplement thereto, or in any Blue Sky filings executed by the
Company or based on any information furnished in writing by the Company and
filed in any jurisdiction in order to qualify any or all of the Securities
under (or obtain exemption from) the securities laws thereof, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, or
(ii) any breach of any representation, warranty,

 

24

 

covenant
or agreement made by the Company in the Transaction Documents.  To the extent that the foregoing undertaking
by the Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the Claims
which is permissible under applicable law. Subject to Section 8(b) of this
Agreement, the Company shall reimburse the Indemnitees,
promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by them in connection with the
investigating or defending any such Claim.

 

(b)           Procedures for Indemnification.  Promptly after an Indemnitee has knowledge of
any Claim as to which such Indemnitee reasonably believes indemnity may be
sought or promptly after such Indemnitee receives notice of the commencement of
any action or proceeding (including any governmental action or proceeding)
involving a Claim, such Indemnitee shall, if a Claim in respect thereof is to
be made against the Company under this Section 8, deliver to the Company a
written notice of such Claim, and the Company shall have the right to
participate in, and, to the extent the Company so desires, to assume control of
the defense thereof with counsel mutually satisfactory to the Company and the
Indemnitee; provided, however, that an Indemnitee shall have the right to
retain its own counsel if, in the reasonable opinion of counsel retained by the
Company, the representation by such counsel of the Indemnitee and the Company
would be inappropriate due to actual or potential differing interests between
such Indemnitee and the Company; provided, further, that the Company shall not
be responsible for the reasonable fees and expense of more than one (1)
separate legal counsel for such Indemnitee. 
In the case of an Indemnitee, the legal counsel referred to in the
immediately preceding sentence shall be selected by the Buyers holding at least
a majority in interest of the Securities to which the Claim relates.  The Indemnitee shall cooperate fully with the
Company in connection with any negotiation or defense of any such action or
Claim by the Company and shall furnish to the Company all information
reasonably available to the Indemnitee which relates to such action or
Claim.  The Company shall keep the
Indemnitee fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. 
The Company shall not be liable for any settlement of any Claim effected without its prior written consent; provided,
however, that the Company shall not unreasonably withhold, delay or condition
its consent.  The Company shall not,
without the prior written consent of the Indemnitee, consent to entry of any
judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnitee of a full release from all liability in respect to
such Claim, action and proceeding.  The
failure to deliver written notice to the Company as provided in this Agreement
shall not relieve the Company of any liability to the Indemnitee under this
Section 8, except to the extent that the Company is materially prejudiced in
its ability to defend such action.

 

(c)           Survival of Representations and
Warranties; Indemnification Obligations. The representations and warranties
of the Buyers and the Company set forth herein and the obligations of the
Company under this Section 8 shall survive the transfer of the Securities by
the Indemnitees.

 

SECTION 9.                            Miscellaneous.

 

(a)                                  Governing Law;
Jurisdiction; Waiver of Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the

 

25

 

internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of New
York.  Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting
in The City of New York, Borough of Manhattan, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner
permitted by law.  If any provision of
this Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or enforceability
of the remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other
jurisdiction.  EACH OF THE PARTIES HERETO
WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO
THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS
TO THIS WAIVER.

 

(b)                                 Counterparts.  This Agreement may be executed in identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a
party, may be delivered to the other parties hereto by facsimile transmission
of a copy of this Agreement bearing the signature of the party so delivering
this Agreement.

 

(c)                                  Headings. The
headings of this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.

 

(d)                                 Entire Agreement.  This Agreement, the Registration Rights
Agreement, the Indenture and the Notes and the documents referenced herein and
therein constitute the entire agreement among the parties hereto with respect
to the subject matter hereof and thereof. 
There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein.  This Agreement, the Registration Rights
Agreement, the Indenture and the Notes supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.

 

(e)                                  Consents. All
consents and other determinations required to be made by Buyers pursuant to
this Agreement shall be made, unless otherwise specified in this Agreement, by
Buyers holding at least a majority of the Conversion Shares, determined as if
all of the Notes held by Buyers then outstanding have been converted into
Conversion Shares without regard to any limitations on conversion of the Notes;
provided that for theses purposes any Securities owned directly or indirectly
by the Company or any of its affiliates shall be deemed not to be outstanding.

 

26

 

(f)                                    Waivers.  No provision of this Agreement may be amended
or waived other than by an instrument in writing signed by the Company and
Buyers holding at least a majority of the Conversion Shares, determined as if
all of the Notes held by Buyers then outstanding have been converted into
Conversion Shares without regard to any limitations on the conversion of the
Notes; provided that for theses purposes any Securities owned directly or
indirectly by the Company or any of its affiliates shall be deemed not to be
outstanding.  Notwithstanding the
preceding sentence to the contrary: (i) no amendment or waiver of the
provisions of Section 1, Section 9(e) or Section 9(f) of this
Agreement shall be effective without the approval of the holders of all
outstanding Securities, (ii)  no
amendment or waiver of the provisions of Section 2, Section 7, Section 8,
Section 9(k), Section 9(l) or Section 9(m) of this Agreement
shall be effective with respect to any holder of Securities unless it is
approved by such holder, and (iii) no amendment shall be effective to the
extent that it applies to less than all of the holders of the Notes then
outstanding.  No consideration shall be
offered or paid to any holder of any Securities to amend or consent to a waiver
or modification of any provision of any of the Transaction Documents unless the
same consideration is offered on identical terms to all of the holders of such
Securities.  Notwithstanding anything
herein to the contrary, no amendment shall (i) extend the maturity of the
Notes, reduce the interest rate, extend the time for payment of interest
thereon, or reduce the principal amount thereof or premium, if any, thereon, or
reduce any amount payable on redemption or repurchase thereof or affect any
amounts due to any holder or (ii) reduce the aforesaid percentage of Notes, the
holders of which are required to consent to any such amendment, without the
consent of the holders of all Notes then outstanding.

 

(g)                                 Notices. Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed
to have been delivered:  (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile;
or (iii) one (1) Business Day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:

 

27

 

	
  If to the Company:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Quixote Corporation

  	
   

  
	
   

  	
  35 East Wacker Drive

  	
   

  
	
   

  	
  Chicago, Illinois 60601

  
	
   

  	
  Telephone:

  	
  (312) 467-6755

  
	
   

  	
  Facsimile:

  	
  (312) 467-0197

  
	
   

  	
  Attention:

  	
  Joan R. Riley, Vice President and

  
	
   

  	
   

  	
  General Counsel

  
	
   

  	
   

  
	
  with a copy to:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Holland & Knight, LLP

  	
   

  
	
   

  	
  131 South Dearborn

  	
   

  
	
   

  	
  30th Floor

  	
   

  
	
   

  	
  Chicago, Illinois 60565

  
	
   

  	
  Telephone:

  	
  (312) 715-5724

  
	
   

  	
  Facsimile:

  	
  (312) 578-6666

  
	
   

  	
  Attention:

  	
  Anne Hamblin Schiave, Esq.

  
	
   

  	
   

  
	
  If to the Placement Agents:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Piper Jaffray & Co.

  	
   

  
	
   

  	
  345 California Street, Suite 2100

  	
   

  
	
   

  	
  San Francisco, California 94104

  
	
   

  	
  Telephone:

  	
  (415) 277-1500

  
	
   

  	
  Facsimile:

  	
  (415) 984-5121

  
	
   

  	
  Attention:

  	
  Mr. Brendan Dyson

  
	
   

  	
   

  
	
   

  	
  Harris Nesbitt Corp.

  	
   

  
	
   

  	
  3 Times Square, 28th Floor

  	
   

  
	
   

  	
  New York, NY 10036

  
	
   

  	
  Telephone:

  	
  (212) 702-1726

  
	
   

  	
  Facsimile:

  	
  (212) 605-1683

  
	
   

  	
  Attention:

  	
    Mr. Louis Klevan

  
	
   

  	
   

  
	
  with a copy to:

  	
   

  
	
   

  	
   

  
	
   

  	
  Gibson, Dunn & Crutcher LLP

  	
   

  
	
   

  	
  1050 Connecticut Avenue NW

  	
   

  
	
   

  	
  Washington, DC 20036

  
	
   

  	
  Telephone:

  	
  (202) 955-8500

  
	
   

  	
  Facsimile:

  	
  (202) 467-0539

  
	
   

  	
  Attention:

  	
  Brian Lane, Esq.

  
				

 

28

 

	
   

  	
  If to a Buyer, to its address and facsimile number set forth on the
  Schedule of Buyers attached hereto as Exhibit A, with copies
  to such Buyer’s representatives as set forth on the Schedule of Buyers,

  
	
   

  
	
   

  	
  with a copy (for informational purposes) to:

  
	
   

  
	
   

  	
  Schulte Roth & Zabel LLP

  
	
   

  	
  919 Third Avenue

  
	
   

  	
  New York, NY 10022

  
	
   

  	
  Telephone: (212) 756-2000

  
	
   

  	
  Facsimile: (212) 593-5955

  
	
   

  	
  Attention: Kathleen Lee, Esq.

  
			

 

or at such other address and/or
facsimile number and/or to the attention of such other person as the recipient
party has specified by written notice given to each other party. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided by a
nationally recognized overnight delivery service shall be rebuttable evidence
of personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.

 

(h)                                 Further Assurances.
Each party shall do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.

 

(i)                                     Third-Party
Beneficiaries. This Agreement is intended for the benefit of the parties
hereto, their respective permitted successors and assigns, and, to the limited
extent provided in Section 8, the Indemnitees, and to the extent provided
for in Section 9(n), the Placement Agents, and is not for the benefit of,
nor may any provision hereof be enforced by, any other person.

 

(j)                                     Severability.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the validity or enforceability of any provision of this Agreement in any other
jurisdiction.

 

(k)                                  Successors and
Assigns. This Agreement shall be binding upon the parties and their
respective successors and assigns, including any subsequent holders of the
Securities and shall inure to the benefit of those persons and to the extent
provided in Section 9(i), the Indemnitees and the Placement Agents. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the holders of at least a majority of the
outstanding principal amount of the Notes including by merger or consolidation,
except pursuant to a Change of Control (as defined in the Notes) with respect
to which the Company is in compliance with the terms of the Notes.  Other than in connection with a sale pursuant
to the Registration Rights Agreement, a Buyer may assign some or all of its
rights and obligations

 

29

 

hereunder without the consent of the Company;
provided, however, that the transferee has agreed in writing to be bound by the
applicable provisions of this Agreement and provided, further, that such
assignment shall be in connection with a transfer of all or a portion of the
Notes held by such Buyer and subject to the terms and conditions of the Notes.

 

(l)                                     Publicity.
The Company and the Placement Agents shall have the right to approve before
issuance any press releases or any other public statements with respect to the
transactions contemplated by the Transaction Documents; provided, however, that
neither the Company nor the Placement Agents shall have the right to issue a
press release referring to a Buyer or its affiliates without such Buyer’s prior
written consent.  The Placement Agents
have the right to describe their services to the Company in connection with the
Offering and to reproduce the Company’s name and logo in the Placement Agents’
advertisements, marketing materials and equity research reports, if any, in the
form previously approved by the Company and subject to the prior approval of
the Company, which shall not be unreasonably withheld, such additional uses as
the Placement Agents may from time to time request.

 

(m)                               Termination. In
the event that the Closing shall not have occurred with respect to a Buyer on
or before five (5) Business Days from the date hereof due to the Company’s or
such Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7 of
this Agreement (and the nonbreaching party’s failure to waive such unsatisfied
conditions), the nonbreaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business on such
date without liability of any party to any other party, and the Company or the
Placement Agents, as the case may be, shall return any and all funds paid
hereunder to the applicable Buyer no later than the close of business on the
Business Day following such termination; provided, however, that if this
Agreement is terminated pursuant to this Section 9(m), the Company shall
remain obligated to reimburse any nonbreaching Buyer for the expenses described
in Section 4(i) of this Agreement.

 

(n)                                 Placement Agent.
The Company acknowledges that it has engaged Piper Jaffray & Co. and Harris
Nesbitt Corp. as placement agents (in such capacity, the “Placement Agents”)  in connection with the sale of the Notes and
that the compensation of such agents is as set forth on the Schedule of
Fees attached hereto as Exhibit C. The Company shall be responsible
for the payment of any placement agent’s fees, financial advisory fees, or
brokers’ commissions (other than for persons engaged by any Buyer or its
investment advisor) relating to or arising out of the transactions contemplated
hereby. The Company shall pay, and hold each Buyer harmless against, any
liability, loss or expense (including, without limitation, attorney’s fees and
out-of-pocket expenses) arising in connection with any such claim.

 

(o)                                 Remedies. Each
Buyer and each holder of the Securities shall have all rights and remedies set
forth in the Transaction Documents and all rights and remedies which such
holders have been granted at any time under any other agreement or contract and
all of the rights which such holders have under any law. Any person having any
rights under any provision of this Agreement shall be entitled to enforce such
rights to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law.

 

(p)                                 Payment Set Aside.
To the extent that the Company makes a payment or payments to any Buyer
hereunder or pursuant to any of the other Transaction Documents, or the Buyers

 

30

 

enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full
force and effect as if such payment had not been made or such enforcement or
setoff had not occurred.

 

(q)                                 Acknowledgement of
Subordination Provisions.  The Buyers
acknowledge that:

 

(i)             all Notes shall be issued subject to the
provisions of Article IV of the Indenture and, to the extent and in the
manner set forth in Article IV of the Indenture, and that the indebtedness
represented by the Notes and the payment of the principal amount, Conversion Price
(as defined in the Indenture), and interest thereon, Company Conversion
Provisional Payment (as defined in the Indenture), redemption price for Notes
called for redemption in accordance with Section 3.2 of the Indenture, the
Repurchase Price (as defined in the Indenture) with respect to Notes submitted
for repurchase in accordance with Section 16.1 of the Indenture,
liquidated damages, fees, expenses or any other amounts in respect of each and
all of the Notes are expressly subordinate and junior and subject in right of
payment to the prior payment in full in cash of all Senior Indebtedness (as
defined in the Indenture) of the Company now outstanding or hereinafter
incurred, including without limitation, indebtedness of the Company under the
Senior Facility; and

 

(ii)          No payment on account of principal of,
premium, if any, or interest on the Notes (including, but not limited to, the
redemption price for Notes called for redemption in accordance with Section 3.2
of the Indenture, the Repurchase Price (as defined in the Indenture) with
respect to Notes submitted for repurchase in accordance with Section 16.1
of the Indenture, the Conversion Price (as defined in the Indenture), the
Company Conversion Provisional Payment (as defined in the Indenture) and any other
payment payable with respect to the Notes pursuant to the provisions of the
Indenture) shall be made, and no Notes shall be redeemed or purchased directly
or indirectly by the Company (or any of its Subsidiaries), if at the time of
such payment or purchase or immediately after giving effect thereto, (A) a
default, whether matured or unmatured, in the payment of principal, premium, if
any, interest, rent or other obligations in respect of any Senior Indebtedness
occurs and is continuing (a “Payment Default”), unless and until such Payment
Default shall have been cured or waived or shall have ceased to exist or (B)
the Company shall have received notice (a “Payment Blockage Notice”) from the
holder or holders of Designated Senior Debt (as defined in the Indenture)  or their representative that there exists
under such Designated Senior Debt a default, whether a Payment Default or
nonpayment Default under the Senior Facility which shall not have been cured or
waived, permitting the holder or holders thereof to declare such Designated
Senior Debt due and payable, but only for the period (the “Payment Blockage
Period”) commencing on the date of receipt of the Payment Blockage Notice and
ending on the earlier of (a) the date such default shall have been cured or
waived, or (b) the 180th day immediately following the Company’s receipt of
such Payment Blockage Notice; provided that the Company, after the end of each
Payment Blockage Period, shall resume, except in the case of a Payment Default
or an acceleration by the holders of the

 

31

 

Designated Senior Debt, payments on and distributions in respect of the
Notes, including any past scheduled payments of the principal of (and premium,
if any) and interest on such Notes to which the holders of the Notes would have
been entitled but for the provisions of the Indenture as provided in the
Indenture.

 

32

 

IN WITNESS WHEREOF,
the parties have caused this Securities Purchase Agreement to be duly executed
as of the date first written above.

 

	
   

  	
  “COMPANY”

  
	
   

  	
   

  
	
   

  	
  QUIXOTE CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel P. Gorey

  	
   

  
	
   

  	
   

  	
  Daniel P. Gorey, Vice President

  
	
   

  	
   

  	
  Chief Financial Officer and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
  ACKNOWLEDGED AND AGREED:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  “PLACEMENT AGENTS”

  	
   

  
	
   

  	
   

  
	
  PIPER JAFFRAY & CO.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Eric E. Alt

  	
   

  	
   

  
	
   

  	
   Eric E. Alt, Managing Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  HARRIS NESBITT CORP.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Louis A. Klevan

  	
   

  	
   

  
	
   

  	
   Louis A. Klevan, Managing Director

  	
   

  
	
   

  	
   

  
	
  [Signatures
  of Buyers on Following Page]

  
							

 

 

[SIGNATURE PAGE TO SECURITIES
PURCHASE AGREEMENT]

 

	
   

  	
  “BUYER”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (print
  full legal name of Buyer)

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  (signature
  of authorized representative)

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Buyer hereby elects to be subject to
  Section 2(k)(A):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  (signature
  of authorized representative)

  
	
   

  	
   

  
	
   

  	
  OR

  
	
   

  	
   

  
	
   

  	
  Buyer hereby elects to be subject to
  Section 2(k)(B):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  (signature
  of authorized representative)

  
				

 

 

EXHIBIT
A

 

SCHEDULE OF
BUYERS

 

	
   

  	
   

  	
  Name
  of Buyer

  Contact Information for Buyer

  	
   

  	
  Principal
  Amount of Notes

  
	
  1.

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
   

  	
   

  	
   

  

 

 

EXHIBIT
B

 

FORM
OF INDENTURE

 

FILED
AS EXHIBIT 4(a) HERETO.

 

 

EXHIBIT
C

 

SCHEDULE OF
FEES

 

	
  Compensation:

  	
   

  	
  5.25% of the aggregate principal amount of
  Notes issued by the Company

  

 

 

EXHIBIT
D

 

FORM
OF REGISTRATION RIGHTS AGREEMENT

 

 

FILED AS EXHIBIT 4(c) HERETO.

 

 

EXHIBIT E

 

FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS

 

February 9,
2005

 

 

VIA FEDERAL EXPRESS

 

EquiServe Trust Company,
N.A.

 

 [address]

 

Attn:
[                     ]

 

Re:                               Reservation of Shares of Common Stock Pursuant to
Sale by Quixote Corporation of up to $40,000,000 in Aggregate Principal Amount
of  7% Convertible Senior Subordinated
Notes due 2025

 

Ladies
and Gentlemen:

 

Quixote
Corporation,
a Delaware corporation (the “Company”), has agreed to sell to the buyers listed
on Schedule A hereto (the “Buyers”), on the date hereof, Forty
Million Dollars ($40,000,000) in aggregate principal amount of 7% Convertible
Senior Subordinated Notes due 2025 (the “Notes”), convertible into shares of
the common stock, $0.012/3 par value per share (the “Common
Stock”) of the Company pursuant to that certain Securities Purchase Agreement
dated as of February 9, 2005, by and among the Company and each Buyer (the
“Securities Purchase Agreement”). 
Capitalized terms used herein without definition have the meanings
assigned to them in the Securities Purchase Agreement.

 

Pursuant to the terms of that certain
Agreement for Stock Transfer Service dated December 1, 1995 between the
undersigned and the First National Bank of Boston (as predecessor to Equiserve
Trust Company, N.A.), and in particular but not by way of limitation, Section 6.02
thereof, you are hereby instructed to:

 

Establish as of
the date of this letter a reserve of 1,621,622 shares of Common Stock for
issuance to holders of Notes upon conversion of their Notes (the “Conversion
Share Reserve”).  The Conversion Share
Reserve shall be adjusted to appropriately reflect the effect of any stock
split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Common Stock), reorganization,
recapitalization, reclassification, exchange or other like change with respect
to Common Stock occurring on or after the date hereof.

 

A registration statement on Form S-3 to
register the Common Stock issuable out of the Conversion Share Reserve (the “Registration
Statement”) will be filed with the Securities and Exchange Commission (the “Commission”)
on or before March 11, 2005.  We
will forward to you copies of the filing promptly after it is declared or
deemed effective by the Commission.

 

 

Until the Registration Statement is declared
effective by the Commission, the certificates evidencing the shares of Common
Stock issued out of the Conversion Share Reserve will bear the restrictive
legend set forth below:

 

THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”) OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION THEREFROM. 
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES.

 

Until the Registration Statement is declared
effective by the Commission, certificates evidencing shares of Common Stock
held by or transferred to an “affiliate” (as defined in Rule 501(b) of
Regulation D under the Securities Act) of the Company also will bear the
restrictive legend set forth below:

 

THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE HELD BY A PERSON WHO MAY BE DEEMED TO BE AN AFFILIATE OF THE
ISSUER FOR PURPOSES OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), AND MAY BE SOLD ONLY IN COMPLIANCE WITH RULE
144, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO A VALID EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.

 

Upon the
conversion of any Notes, the Company will deliver to you instructions to issue
a certificate or certificates evidencing the shares of Common Stock to be
issued out of the Conversion Share Reserve, and such instructions will indicate
whether such certificate or certificates shall bear any of the legends set
forth above.  In the event of any
transfer of shares of Common Stock issued out of the Conversion Share Reserve,
so long
as you have previously received (i) an opinion of the Company’s outside counsel
(which the Company shall direct be delivered to you by such outside counsel
upon the effectiveness of the Registration Statement covering the resales of
the Common Stock) stating that a Registration Statement covering the resales of
the Common Stock has been declared effective by the Commission under the
Securities Act (the “Opinion”), (ii) a certification from the clearing broker
for the Buyers as to the fact that the sale of the Common Stock was made in
compliance with the Plan of Distribution set forth in the Registration
Statement (the “Broker Certification”), (iii) a copy of the Registration
Statement and (iv) confirmation from the Company that sales are permitted under
the Registration Statement, the certificates representing the Common Stock sold
pursuant to the Registration Statement shall not bear any legend restricting
transfer of the Common Stock thereby and should not be subject to any
stop-transfer restriction.

 

We enclose the following additional
documents:

 

 

1.                                       A copy of the Securities Purchase
Agreement; and

 

2.                                       A capitalization table listing the
Buyers and their respective beneficial ownership interests in the shares of
Common Stock.

 

Please be advised that the Buyers have relied
upon this instruction letter as an inducement to enter into the Securities
Purchase Agreement and, accordingly, each of the Buyers is a third party
beneficiary to these instructions.

 

Please sign in the space provided below to
evidence your acceptance and acknowledgment of your responsibilities under this
letter.  Please call me at (312) 705-8410
if you require any further information. 
Thank you for your assistance.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  QUIXOTE
  CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
    Joan R. Riley, Vice President

  
	
   

  	
   

  
	
  Acknowledged and Agreed:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  EquiServe Trust Company,
  N.A.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Its:

  	
   

  
	
   

  	
   

  
	
  cc:  Mr. Eric
  Alt (w/o encl.)

  
	
   

  	
   

  
	
  Enclosures

  	
   

  
						

 

 

EXHIBIT F

 

FORM OF COMPANY COUNSEL OPINION

 

The Company is a corporation validly existing
in good standing under the laws of the State of Delaware, with all requisite
corporate power and authority to own, lease and operate its properties and
assets, to conduct its business as described in the Confidential Private
Placement Memorandum, and to enter into and perform its obligations under the
Transaction Documents.

 

The Subsidiaries are corporations validly
existing in good standing under the laws of their respective jurisdictions of
incorporation, with all requisite corporate power and authority to own, lease
and operate its properties and assets, to conduct their businesses as described
in the Confidential Private Placement Memorandum.

 

The execution, delivery and performance of
the Transaction Documents have been duly authorized by all necessary corporate
action on the part of the Company and the Transaction Documents have been duly
executed and delivered by the Company.

 

The Transaction Documents constitute the
legally valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except (i) as rights to indemnification and
contribution may be limited by federal or state securities laws and policies
underlying such laws and (ii) as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and remedies.

 

The execution and delivery by the Company of
the Transaction Documents do not, and the Company performance of its
obligations under the Transaction Documents will not, (i) violate the Company’s
Certificate of Incorporation or By-Laws, (ii) violate, breach or result in a
default under, any existing obligation of or restrictions on the Company under
any other agreement listed in an exhibit to the Company’s most recent annual
report on Form 10-K, any quarterly report on Form 10-Q filed since such annual
report or any current report on Form 8-K filed since such annual report, (iii)
breach or otherwise violate any existing obligation of or restriction on the
Company under any order, judgment or decree of any state or federal court or
governmental authority binding on the Company, and known to us, or (iv) to our
knowledge, violate any current Delaware or New York federal statute, rule or
regulation that we have recognized as applicable to the Company or to
transactions of the type contemplated by the Transaction Documents.

 

The Notes have been duly authorized by all
necessary corporate action on the part of the Company and, upon payment for and
delivery of the Notes in accordance with the Securities Purchase Agreement, to
our knowledge will be made and issued free of preemptive or similar rights.

 

The Conversion Shares have been duly
authorized and reserved for issuance upon conversion of the Notes by all
necessary corporate action on the part of the Company and, upon

 

 

conversion of the Notes and delivery of the
Conversion Shares in accordance with the Notes, the Conversion Shares will be
validly issued, fully paid and nonassessable and to our knowledge, free of
preemptive or similar rights.

 

No order, consent, permit or approval of any
Delaware, New York or federal governmental authority that we have recognized as
applicable and material to the Company or to the transactions of the type
contemplated by the Transaction Documents is required on the part of the
Company for the execution and delivery of, and performance of its obligations
under, the Transaction Documents except as may be required under applicable
state and federal securities laws and regulations applicable to the offer and
sale of the Securities and by federal and state securities laws with respect to
the Company’s obligations under the Registration Rights Agreement.

 

Assuming the accuracy of your representations
in Section 2 of the Securities Purchase Agreement, no registration under
the Securities Act, and no qualification of the Indenture under the Trust
Indenture Act, is required for the purchase and sale of the Notes in the manner
contemplated by the Securities Purchase Agreement and the Confidential Private
Placement Memorandum.  Assuming that the
exemption provided by Section 3(a)(9) of the Securities Act of 1933 would
be available, no registration under the Securities Act will be required for the
issuance of the Conversion Shares in the manner contemplated by the Notes,
respectively.

 

We do not know of any contract or other
document of a character required to be filed as an SEC Document which is not
filed as required.

 

The SEC Documents incorporated by reference
in the Confidential Private Placement Memorandum, on the respective dates they
were filed, appeared on their face to comply in all material respects with the
requirements as to form for reports on Form 10-K, Form 10-Q, Form 8-K and Schedule 14-A,
except that we express no opinion concerning the financial statements and other
financial or statistical information contained or incorporated by reference
therein or the exhibits thereto.

 

In the course of acting as counsel for the
Company in connection with the preparation by the Company of the Confidential
Private Placement Memorandum, we have participated in conferences with officers
and representatives of the Company, the independent accountants of the Company,
and representatives of the Placement Agents and their counsel, at which time
the contents of the Confidential Private Placement Memorandum and related
matters were discussed. Although we are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Confidential Private Placement Memorandum, based on such
participation, no facts have come to our attention that would lead us to
believe that the Confidential Private Placement Memorandum (except that we express
no view with respect to the financial statements, including the notes thereto,
and schedules or other financial data included therein or the exhibits
contained in the SEC Documents) as of the date thereof contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.

 

 

SCHEDULE 3(a)

 

Subsidiaries

 

Subsidiaries:

 

Quixote
Transportation Safety, Inc.

Quixote
Traffic Corporation

Quixote
Transportation Technologies, Inc.

TranSafe
Corporation

Nu-Metrics,
Inc.

Highway
Information Systems, Inc.

TIS,
Inc.

Surface
Systems, Inc.

Sensing
Systems, Ltd.

U.S
Traffic Corporation

Quixote
Transportation Safety Mexico S. de R.L. de C. V.

Energy
Absorption Systems, Inc.

E-Tech
Testing Services, Inc.

Spin-Cast
Plastics, Inc.

Energy
Absorption Systems (Europe), Inc.

Quixote
Transportation Safety (Asia Pacific) Pty Limited

Quixote
Transportation Safety (Asia Pacific), Inc.

Quixote
Transportation Safety (Europe), Inc.

Energy
Absorption Systems (AL) LLC

Peek
Traffic Corporation

Quixote
Foreign Sales Corporation

 

Significant Subsidiaries:

 

Quixote Transportation
Safety, Inc.

TranSafe Corporation

Energy Absorption Systems,
Inc.

Energy Absorption Systems
(AL) LLC

Surface Systems, Inc.

Nu-Metrics, Inc.

Highway Information
Systems, Inc.

U.S. Traffic Corporation

Peek Traffic Corporation

 

 

SCHEDULE A

 

Company Wire Instructions

 

Please send all wires to the Company as follows:

 

LaSalle
Bank National Association

ABA
#071000505

Trust
GL #2090067

Further
Credit Acct 403382.4

Attn:
Wayne M Evans x42442

 

 

SCHEDULE 4(p)

 

Buyers Electing Section 4(p) Treatment

 

 

	
  SECTION 1.

  	
   

  	
  Purchase and Sale of Notes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.

  	
   

  	
  Buyer’s Representations and Warranties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
   

  	
  Representations and Warranties of the
  Company

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
   

  	
  Covenants

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
   

  	
  Transfer Agent Instructions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.

  	
   

  	
  Conditions to the Company’s Obligation to
  Close

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 7.

  	
   

  	
  Conditions to Each Buyer’s Obligation to
  Purchase

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.

  	
   

  	
  Indemnification

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 9.

  	
   

  	
  Miscellaneous

  	
   

  

 

	
  SCHEDULES

  
	
   

  	
   

  	
   

  	
   

  
	
  Schedule 3(a)

  	
   

  	
  Subsidiaries

  	
   

  
	
  Schedule A

  	
   

  	
  Company Wire Instructions

  	
   

  
	
  Schedule 4(p)

  	
   

  	
  Buyers Electing Section 4(p) Treatment

  	
   

  

 

	
  EXHIBITS

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A

  	
   

  	
  Schedule of Buyers

  	
   

  
	
  Exhibit B

  	
   

  	
  Form of Indenture

  	
   

  
	
  Exhibit C

  	
   

  	
  Schedule of Fees

  	
   

  
	
  Exhibit D

  	
   

  	
  Form of Registration
  Rights Agreement

  	
   

  
	
  Exhibit E

  	
   

  	
  Form of Irrevocable
  Transfer Agent Instructions

  	
   

  
	
  Exhibit F

  	
   

  	
  Form of Company Counsel
  OpinionExhibit
10(b)

 

FOURTH
AMENDMENT TO CREDIT
AGREEMENT

AND REAFFIRMATION OF SUBSIDIARY GUARANTY

 

This FOURTH AMENDMENT TO CREDIT AGREEMENT AND  REAFFIRMATION OF SUBSIDIARY GUARANTY, dated
as of February 9, 2005, (the “Fourth Amendment”), entered into by and among
QUIXOTE CORPORATION, a Delaware corporation (the “Borrower”), each of the
LENDER INSTITUTIONS named as Lender on the signature pages hereof,
(individually each a “Lender” and collectively the “Lenders”), those
SIGNIFICANT DOMESTIC INCORPORATED SUBSIDIARIES, as Subsidiary Guarantors named
on the signature pages  hereof (each
being referred to herein as a “Guarantor” and collectively referred to herein
as the “Guarantors”), and THE NORTHERN TRUST COMPANY, as Administrative Agent
for itself and the other Lenders, (in such capacity, together with its
successors in such capacity, the “Administrative Agent”) whose address is 50
South LaSalle Street, Chicago, Illinois 60675.

 

R E C I T A L S:

 

A.                                   The Borrower and the Lenders entered into
that certain Credit Agreement, dated as of May 16, 2003, as amended by a First
Amendment, dated as of December 9, 2003; by a Second Amendment, dated as
of June 30, 2004; and by a Third Amendment, dated as of September 10,
2004 (collectively, the “Credit Agreement”), pursuant to which Credit Agreement
the Lenders have made, (i) Revolving Loans to the Borrower evidenced by certain
Revolving Notes, dated as of September 10, 2004, in the maximum aggregate
principal amount of Thirty Eight Million Dollars and 00/100 ($38,000,000), executed
by the Borrower and made payable pro rata to the order of the Lenders (the “Revolving
Notes”) and (ii) Term Loans to the Borrower evidenced by certain Term Notes,
dated as of May 16, 2003, in the aggregate original principal amount of Twenty
Million Dollars and 00/100 ($20,000,000), executed by the Borrower and made
payable pro rata to the order of the Lenders (the “Term Notes”).

 

B.                                     To comply with the “Indebtedness” negative
covenant set forth in Section 7.3(A) of the Credit Agreement, the Borrower
has informed the Administrative Agent and Lenders of, and requested that the Agent
and Lenders, by amendment to the Credit Agreement, permit Borrower’s issuance,
as of February 9, 2005 of Convertible Senior Subordinated Notes, due February 15,
2025 (the “New Subordinated Notes”).

 

C.                                     The Administrative Agent and Lenders are
willing to permit Borrower’s issuance of the New Subordinated Notes, provided
Borrower uses the proceeds from such issuance in accordance with the mandatory
prepayment terms set forth in Section 2.4(B)(ii) of
the Credit Agreement.

 

NOW THEREFORE, in consideration of the premises and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Borrower, the Guarantors, and the Lenders hereby agree
as follows:

 

 

A G R E E M E N T S:

 

1.                                       RECITALS.  The foregoing Recitals are
hereby made a part of this Fourth Amendment.

 

2.                                       DEFINITIONS.  Capitalized words and phrases
used herein without definition shall have the respective meanings ascribed to
such words and phrases in the Credit Agreement.

 

3.                                       AMENDMENTS TO THE CREDIT AGREEMENT.

 

3.1.                              Section 1.1 of the Credit Agreement.  Section 1.1
of the Credit Agreement is hereby amended by inserting new definitions of “Net
Costs,” “New Subordinated Debt,” “Offering Documents” and “Subordinated Debt” to
read as follows:

 

““Net Costs” shall mean any
and all underwriting, legal, accounting, filing, printing and directly related
costs incurred in connection with issuance of the New Subordinated Debt, which
costs shall be described in a closing statement prepared and delivered at such
Debt closing.

 

“New Subordinated Debt”
shall mean the indebtedness evidenced by Borrower’s Convertible Senior
Subordinated Notes, due February, 2025 issued pursuant to the terms of the Offering
Documents.

 

“Offering Documents” shall
mean the following:  (i) the Private
Placement Memorandum prepared by management of the Company and delivered to the
buyers of New Subordinated Debt, as defined therein, (ii) an Indenture between
Borrower, as Issuer, and LaSalle Bank National Association, as Trustee, (iii) a
Securities Purchase Agreement, between the Borrower and buyers of New
Subordinated Debt, (iv) a Registration Rights Agreement between the Borrower
and buyers of New Subordinated Debt, and (v) any and all related certificates
or legal opinions issued by Borrower in connection with the issuance of such
New Subordinated Debt, in each case in substantially the form provided to the Administrative
Agent for its review at the time of the Fourth Amendment.

 

“Subordinated Debt” shall
mean the (i) Subordinated Note and (ii) the New Subordinated Debt.”

 

3.2                                 Section 2 of the Loan Agreement.  Section 2.1
of the Loan Agreement is hereby amended by inserting at the end of the “provided,
however” clause in the first sentence thereof the following:

 

“or
shall the proceeds of any Revolving Loan made by the Lenders hereunder be used
to make any payment, (other than for accrued interest) redemption, repurchase,
retirement, defeasance or other acquisition for value of any Borrower
Subordinated Debt.”

 

2

 

3.3                                 Section 2 of the Loan Agreement.  Section 2.4(B)(ii)(z) is hereby amended and restated to read as follows:

 

“(z)                             an amount equal to 100% of the proceeds (after
deduction and payment of Net Costs) received from the incurrence of Indebtedness
(other than Indebtedness permitted to be incurred pursuant to Section 7.3(A)
of this Agreement, provided, in the case of the New Subordinated Debt permitted
under Section 7.3(A), the mandatory prepayment requirements in this subsection (z)
shall apply).”

 

3.4                                 Section 7 of the Credit Agreement.  Section 7
of the Credit Agreement is hereby amended as follows:

 

(i)                                     Section 7.3 of the Loan Agreement is
hereby amended to insert a new Section 7.3(A)(x)
to read as follows:

 

“(x)                             Indebtedness consisting of the New Subordinated
Debt provided that the proceeds of such New Subordinated Debt (after deduction
and payment of Net Costs) shall be applied in accordance with the mandatory
prepayment terms of Section 2.4(B)(ii) of this
Agreement.”

 

(ii)                                  Section 7.3(F) of the Credit Agreement
is hereby amended to insert the following at the end thereof:

 

“, provided Borrower shall not
make, without the prior written consent of the Required Lenders, any Restricted
Payment with the proceeds of any Revolving Loan relating to any Subordinated
Debt of Borrower (other than for accrued interest) as defined under subsection (iii)
of the definition of “Restricted Payment” in Section 1.1 of the Agreement.”

 

4.                                       REAFFIRMATION OF SUBSIDIARY GUARANTY.  Each
of the Guarantors hereby expressly (a) consents to the execution by the
Borrower and the Lenders of this Fourth Amendment, (b) acknowledges that the “Guaranteed
Obligations” (as defined in the Subsidiary Guaranty) includes all of the
obligations and liabilities owing from the Borrower to the Administrative Agent
and Lenders under and pursuant to the Credit Agreement, as amended from time to
time, including, but not limited to, the obligations of the Borrower to the Administrative
Agent and the Lenders  as evidenced by
the Revolving Loan Notes, as modified, extended and/or replaced from time to
time, and the Term Loan Notes, as modified, extended and/or replaced from time
to time, (c) reaffirms, assumes and binds itself in all respects to all of the
obligations, liabilities, duties, covenants, terms and conditions that are
contained in the Subsidiary Guaranty, (d) agrees that all such obligations and
liabilities under the Subsidiary Guaranty shall continue in full force and
effect and shall not be discharged, limited, impaired or affected in any manner
whatsoever, except as expressly provided in the Subsidiary Guaranty, (e)
represents and warrants that each of the representations and warranties made by
such Guarantor in any of the documents executed in connection with the Loans
remain true and correct as of the date hereof, in each case as amended by the
information provided in any report or notice

 

3

 

delivered
by the Borrower to the Administrative Agent pursuant to Section 7.1 of the
Credit Agreement, and (f) represents and warrants that the organization
documents, borrowing resolutions and incumbency certificates of such Guarantor
have not been changed or amended since the most recent date that certified
copies thereof were delivered to the Lender.

 

5.                                       REPRESENTATIONS AND WARRANTIES.  To
induce the Lenders to enter into this Fourth Amendment, the Borrower and each
Guarantor hereby certifies, represents and warrants to the Lenders that:

 

5.1.                              Organization.  The
Borrower is a corporation duly organized, existing and in good standing under
the laws of the State of Delaware, with all requisite power to conduct its
business as presently conducted.  The
Borrower is duly qualified to do business as a foreign entity under the laws of
each jurisdiction in which the failure to be so qualified would reasonably be
expected to have a Material Adverse Effect in all foreign jurisdictions wherein
the nature of its activities require such qualification or licensing. The
Articles of Incorporation and Bylaws, borrowing resolutions and incumbency
certificate of the Borrower have not been changed or amended since the most
recent date that certified copies thereof were delivered to the Lenders.  The exact legal name of the Borrower is as
set forth in the preamble of this Fourth Amendment, and the Borrower currently
does not conduct, nor has it during the last five (5) years conducted, business
under any other name or trade name.  The
Borrower will not change its name, its organizational identification number, if
it has one, its type of organization, its jurisdiction of organization or other
legal structure other than in accordance with the Credit Agreement.

 

5.2.                              Authorization.  The
Borrower and each Guarantor are duly authorized to execute and deliver this Fourth
Amendment and is and will continue to be duly authorized to borrow monies under
the Credit Agreement, as amended hereby, and to perform its obligations under
the Credit Agreement, as amended hereby.

 

5.3.                              No Conflicts.  The
execution and delivery of this Fourth Amendment and the performance by the
Borrower of its obligations under the Credit Agreement, as amended hereby, do
not and will not conflict with the articles of incorporation or bylaws of the
Borrower or conflict with, result in a breach of or constitute (with or without
notice or lapse of time or both) a default under any Requirement of Law or
Contractual Obligation of the Borrower, or require termination of any
Contractual Obligation, except such breach or default which individually or in
the aggregate could not reasonably be expected to have a Material Adverse
Effect.

 

5.4.                              Validity and Binding Effect.  The
Credit Agreement, as amended hereby, is a legal, valid and binding obligation
of the Borrower, enforceable against the Borrower in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency or other
similar laws of general application affecting the enforcement of creditors’
rights or by general principles of equity.

 

5.5.                              Compliance with Credit Agreement.  The
representation and warranties set forth in Section 6 of the Credit
Agreement, as amended hereby, are true and correct in all material aspects with
the same effect as if such representations and warranties had been made on

 

4

 

the
date hereof, with the exception that all references to the financial statements
or filings of the Borrower with the Securities and Exchange Commission shall
mean the financial statements or filings of the Borrower with the Securities and
Exchange Commission most recently delivered to the Lenders, in each case as
amended by the information provided in any report or notice delivered by the
Borrower to the Administrative Agent pursuant to Section 7.1 of the Credit
Agreement, and except for such changes as are specifically permitted under the
Credit Agreement.  In addition, the
Borrower has complied with and is in compliance with all of the covenants set
forth in the Credit Agreement, as amended hereby, including, but not limited
to, those set forth in Section 7 thereof.

 

5.6.                              No Default.  As of the date hereof, no
Default or Unmatured Default under the Credit Agreement, as amended hereby, has
occurred or is continuing.

 

5.7.                              No Subordinated Debt Default.  As
of the date hereof, no default under the Subordinated Note or any of the
documents securing the Subordinated Note, or event or condition which, with the
giving of notice or the passage of time, or both, would constitute a default
under the Subordinated Note or any of the documents securing the Subordinated
Note, has occurred or is continuing.

 

5.8.                              No Material Adverse Change. 
There has been no material adverse change in the business condition
(financial or otherwise), operations, performance, properties or prospects of
the Borrower and its Subsidiaries, considered as a whole, from that reflected
in the financial statements most recently delivered to the Lenders.

 

5.9.                              Sarbanes-Oxley Compliance.  The
Borrower, the Borrower’s Chief Executive Officer, and the Borrower’s Chief
Financial Officer are in compliance with all requirements of Section 302
and Section 906 of the Sarbanes-Oxley Act of 2002 and all rules and
regulations related thereto.

 

6A.                             CONDITIONS PRECEDENT.  This Fourth Amendment shall
become effective as of the date above first written after receipt by the Administrative
Agent of the following documents:

 

6.1.                              Fourth Amendment.  This
Fourth Amendment executed by the Borrower, the Guarantors, the Administrative
Agent and the Lenders.

 

6.2                                 Certificate of the Borrower’s Secretary. 
Secretary’s Certificate of Borrower, in form and substance acceptable to
the Administrative Agent, with such attachments as required therein, including,
without limitation, resolutions, incumbency and signatures of signing
Authorized Officers, which resolutions authorize Borrowers’ issuance of the New
Subordinated Debt and its execution of this Fourth Amendment and the Offering
Documents.

 

6.3                                 Closing Statement.  A
closing statement, accompanied by a certificate of the Borrower’s Chief
Financial Officer in form acceptable to the Agent, prepared and delivered at
the closing and issuance of the New Subordinated Debt, which statement
describes the Net Costs paid or to be paid from the proceeds of such Debt
issuance.

 

5

 

B.                                     CONDITION SUBSEQUENT

 

6.4                                 Delivery of Final Offering Documents.  Within
three (3) days of the issuance of the New Subordinated Notes, Borrower will
deliver five (5) copies of each finally executed Offering Document, duly
executed by Borrower and each party thereto.

 

7.                                       GENERAL.

 

7.1.                              Governing Law; Severability.  This
Fourth Amendment shall be construed in accordance with and governed by the laws
of Illinois.  Wherever possible each provision
of the Credit Agreement and this Fourth Amendment shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of the Credit Agreement and this Fourth Amendment shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of the Credit Agreement and this Fourth
Amendment.

 

7.2.                              Successors and Assigns.  This
Fourth Amendment shall be binding upon the Borrower, the Guarantors, the Administrative
Agent and the Lenders and their respective successors and assigns, and shall
inure to the benefit of the Borrower, the Guarantors, the Administrative Agent
and the Lenders and the successors and assigns of the Lenders.

 

7.3.                              Continuing Force and Effect of Loan Documents
and Subsidiary Guaranty.  Except as specifically modified or amended by
the terms of this Fourth Amendment, all other terms and provisions of the
Credit Agreement and the other Loan Documents are incorporated by reference
herein, and in all respects, shall continue in full force and effect.  The Borrower, by execution of this Fourth
Amendment, hereby reaffirms, assumes and binds itself to all of the
obligations, duties, rights, covenants, terms and conditions that are contained
in the Credit Agreement and the other Loan Documents. Each of the Guarantors,
by execution of this Fourth Amendment, hereby reaffirms, assumes and binds
itself to all of the obligations, duties, rights, covenants, terms and
conditions that are contained in the Subsidiary Guaranty.

 

7.4.                              References to Credit Agreement.  Each
reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”,
or words of like import, and each reference to the Credit Agreement in any and
all instruments or documents delivered in connection therewith, shall be deemed
to refer to the Credit Agreement, as amended hereby.

 

7.5.                              Expenses.  The Borrower shall pay all
costs and expenses in connection with the preparation of this Fourth Amendment
and other related Loan Documents, including, without limitation, reasonable
attorneys’ fees and time charges of attorneys who may be employees of the
Lenders or any affiliate or parent of the Lenders.  The Borrower shall pay any and all stamp and
other taxes, UCC, trademark or patent search fees, title report or insurance
fees, filing fees and other costs and expenses in connection with the execution
and delivery of this Fourth Amendment and the other instruments and documents
to be delivered hereunder, and agrees to save the Lenders harmless from and
against any and all liabilities with respect to or resulting from any delay in
paying or omission to pay such costs and expenses.

 

6

 

7.6.                              Counterparts.                       This Fourth Amendment may be executed in any
number of counterparts, all of which shall constitute one and the same
agreement.

 

7

 

IN WITNESS WHEREOF, the parties hereto have executed
this Fourth Amendment to Credit Agreement and Reaffirmation of Subsidiary
Guaranty as of the date first above written.

 

	
   

  	
  QUIXOTE CORPORATION

  
	
   

  	
  A Delaware corporation, as Borrower

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel P. Gorey

  	
   

  
	
   

  	
  Name:

  	
  Daniel P. Gorey

  
	
   

  	
  Title:

  	
  Vice President, Chief Financial Officer & Treasurer

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  c/o Quixote Corporation

  
	
   

  	
   

  	
  35 East Wacker Drive

  
	
   

  	
   

  	
  Chicago, Illinois 60601

  
	
   

  	
  Attention:

  	
  Daniel P. Gorey

  
	
   

  	
   

  
	
   

  	
  Telephone No.:

  	
  (312) 467-6755

  
	
   

  	
  Facsimile No.:

  	
  9312) 467-1356

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  QUIXOTE TRANSPORTATION SAFETY, INC.

  
	
   

  	
  TRANSAFE CORPORATION

  
	
   

  	
  ENERGY ABSORPTION SYSTEMS, INC.

  
	
   

  	
  ENERGY ABSORPTION SYSTEMS (AL) LLC

  
	
   

  	
  SURFACE SYSTEMS, INC.

  
	
   

  	
  NU-METRICS, INC.

  
	
   

  	
  HIGHWAY INFORMATION SYSTEMS, INC.

  
	
   

  	
  U. S. TRAFFIC CORPORATION

  
	
   

  	
  (formerly known as Green Light Acquisition Corporation)

  
	
   

  	
  PEEK TRAFFIC CORPORATION,

  
	
   

  	
  (formerly known as Vision Acquisition Corporation),

  
	
   

  	
  as Guarantors

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel P. Gorey

  	
   

  
	
   

  	
  Name:

  	
  Daniel P. Gorey

  
	
   

  	
  Title:

  	
  Vice President and Treasurer

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  c/o Quixote Corporation

  
	
   

  	
   

  	
  35 East Wacker Drive

  
	
   

  	
   

  	
  Chicago, Illinois 60601

  
	
   

  	
  Attention:

  	
  Daniel P. Gorey

  
	
   

  	
   

  
	
   

  	
  Telephone No.:

  	
  (312) 467-6755

  
	
   

  	
  Facsimile No.:

  	
  (312) 467-0197

  
						

 

8

 

	
   

  	
  THE NORTHERN TRUST COMPANY, for Itself and,

  
	
   

  	
  as Administrative Agent for the Lenders

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Erin Sullivan

  	
   

  
	
   

  	
  Name:

  	
  Erin Sullivan

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  The Northern Trust Company

  
	
   

  	
   

  	
  50 South LaSalle Street

  
	
   

  	
   

  	
  Chicago, Illinois 60675

  
	
   

  	
  Attention:

  	
  Erin Sullivan

  
	
   

  	
   

  
	
   

  	
  Telephone No.:

  	
  (312) 557-7340

  
	
   

  	
  Facsimile No.:

  	
  (312) 444-7028

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LASALLE BANK NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephanie Kline

  	
   

  
	
   

  	
  Name:

  	
  Stephanie Kline

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  LaSalle National
  Association

  
	
   

  	
   

  	
  135 South
  LaSalle Street

  
	
   

  	
   

  	
  Chicago,
  Illinois 60603

  
	
   

  	
  Attention:

  	
  Stephanie Kline

  
	
   

  	
   

  
	
   

  	
  Telephone No.:

  	
  (312) 904-2771

  
	
   

  	
  Facsimile No.:

  	
  (312) 904-6546

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HARRIS TRUST AND SAVINGS BANK

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Derek R. Cook

  	
   

  
	
   

  	
  Name:

  	
  Derek R. Cook

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  Harris Trust and Savings Bank

  
	
   

  	
   

  	
  111 West Monroe Street

  
	
   

  	
   

  	
  Tenth Floor West

  
	
   

  	
   

  	
  Chicago, Illinois 60603

  
	
   

  	
  Attention:

  	
  Derek R. Cook

  
	
   

  	
   

  
	
   

  	
  Telephone No.:

  	
  (312) 461-3593

  
	
   

  	
  Facsimile No.:

  	
  (312) 461-2591

  
							

 

9

 

	
   

  	
  NATIONAL CITY BANK OF THE MIDWEST

  
	
   

  	
  (f/k/a National City Bank of Michigan/Illinois)

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard Michalik

  	
   

  
	
   

  	
  Name:

  	
  Richard Michalik

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
  Address:

  	
  National City Bank of the Midwest

  
	
   

  	
   

  	
  (f/k/a National City Bank of Michigan/Illinois)

  
	
   

  	
   

  	
  One North Franklin

  
	
   

  	
   

  	
  36th Floor

  
	
   

  	
   

  	
  Chicago, Illinois 60606

  
	
   

  	
  Attention:

  	
  Richard Michalik

  
	
   

  	
  Telephone No.:

  	
  (312) 384-4650

  
	
   

  	
  Facsimile No.:

  	
  (312) 240-0301

  
						

 

10

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