<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
-------
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
UNITED INDUSTRIAL CORPORATION
- - - ---------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - - ---------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
4) Proposed maximum aggregate value of transaction:
* Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
[ ] Filing Fee of $______________ was previously paid on ___________ __,
199_, the date the Preliminary Proxy Statement was filed.
<PAGE>
UNITED
INDUSTRIAL CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS MAY 10, 1994
TO THE STOCKHOLDERS OF
UNITED INDUSTRIAL CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of United
Industrial Corporation will be held at the Park Lane Hotel (Ballroom Suite,
2nd floor) located at 36 Central Park South, New York, New York on the 10th
day of May, 1994 at 10:00 A.M., for the following purposes:
1. To elect one (1) director to serve until the Annual Meeting of
Stockholders in 1997.
2. To consider and act upon the United Industrial Corporation 1994
Stock Option Plan.
3. To consider and act upon a proposal to ratify the appointment of
Ernst & Young as independent auditors of the Company for 1994.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record on the books of the Company at the close of
business on March 18, 1994 will be entitled to notice of, and to vote at, the
meeting. The stock transfer books will not be closed. See the "Miscellaneous"
section of the accompanying Proxy Statement as to the place where the list of
stockholders may be examined.
Stockholders are cordially invited to attend the meeting in person.
Every stockholder (whether he owns one or more shares and whether or not he
intends to attend the meeting in person) who wishes to vote with respect to
matters to come before the meeting is urged to sign, date and return promptly
the enclosed Proxy. Your compliance with this request will enable the Company
to avoid unnecessary expenses and delay. A return envelope requiring no
postage if mailed in the United States is enclosed for your convenience in
replying.
Order of the Board of Directors
Howard M. Bloch
Secretary and Treasurer
March 30, 1994
PLEASE MAIL YOUR PROXY . . . NOW!
IMPORTANT
WE HOPE THAT YOU CAN ATTEND THIS MEETING
IN PERSON, BUT IF YOU CANNOT DO SO PLEASE
MARK, DATE, SIGN AND RETURN THE ENCLOSED
PROXY.
<PAGE>1
UNITED INDUSTRIAL CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 10, 1994
This statement is furnished to stockholders of United Industrial
Corporation (the "Company") in connection with the solicitation of proxies by
the Board of Directors of the Company to be voted at the Annual Meeting of
Stockholders of the Company to be held at the Park Lane Hotel (Ballroom
Suite, 2nd floor) located at 36 Central Park South, New York, New York on May
10, 1994, at 10:00 A.M. Stockholders of record at the close of business on
March 18, 1994 will be entitled to notice of and to vote at such meeting and
at all adjournments thereof.
Stockholders who execute proxies may revoke them at any time before they
are voted by giving written notice of such revocation to the Secretary of the
Company. When a proxy is received, properly executed, prior to the meeting,
the shares represented thereby will be voted at the meeting in accordance
with the terms thereof.
The complete mailing address of the Company's principal executive
offices is 18 East 48th Street, New York, New York 10017. The approximate
date on which this Proxy Statement and the form of Proxy were first sent or
given to the stockholders of the Company was March 30, 1994. The Annual
Report of the Company for the year ended December 31, 1993, including audited
financial statements, has been sent to each stockholder.
VOTING RIGHTS
On March 30, 1994, there were outstanding and entitled to vote
12,258,693 shares of Common Stock. Stockholders are entitled to one vote,
exercisable in person or by proxy, for each share of Common Stock held on the
record date of March 18, 1994. The holders of a majority of the outstanding
shares of Common Stock entitled to vote at the meeting shall constitute a
quorum.
At the record date, more than 5% of the Company's outstanding voting
securities was beneficially owned by each of the persons named in the
following table, except that the information as to Dimensional Fund Advisors
is as of December 31, 1993 and is based upon information furnished to the
Company by it in a Schedule 13G.
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
- - - -------------- --------------------- -------------------- --------
Common Stock Bernard Fein 2,594,414(1) 21.16%
18 East 48th Street
New York, New York 10017
Common Stock Dimensional Fund Advisors 642,834(2) 5.24
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
- - - --------
(1) Includes shares of Common Stock owned directly as follows: Mr. Fein-
1,108,451 shares, Slake Investments, Ltd., as nominee for members of Mr.
Fein's family-579,021 shares, Mr. Fein's children and custodianships for
Mr. Fein's minor grandchildren-240,301 shares, Fein Investing Properties
Inc.-565,445 shares, and The Fein Foundation, of which Mr. Fein is a
trustee-101,196 shares.
(2) Dimensional Fund Advisors has shared voting power as to 131,000 of such
shares, and sole voting power as to the remainder of such shares, but
has sole dispositive power as to all such shares.
<PAGE>2
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 1, 1994 the number of shares
of Common Stock of the Company beneficially owned by each director of the
Company, each nominee for director, each executive officer named in the
Summary Compensation Table below, and by all directors and executive officers
of the Company as a group. Except as otherwise indicated all shares are owned
directly.
Amount and Percent
Nature of Beneficial of
Name or Group Ownership(1) Class
- - - ------------- ------------ ------
Rick S. Bierman 9,030(2) (3)
Howard M. Bloch 44,758 (3)
Bernard Fein 2,594,414(4) 21.16%
Maurice L. Rosenthal - (5) -
Myron Simons 7,510(6) (3)
Daniel E. McCoy 377 (3)
Richard R. Erkeneff - -
All directors and executive
officers as a group
consisting of 8 persons 2,647,059(7) 21.59%
- - - --------
(1) The information as to securities owned by directors, nominees and
executive officers was furnished to the Company by such directors,
nominees and executive officers.
(2) These 9,030 shares of Common Stock are owned by Mr. Bierman's daughter.
Does not include 42,537 shares of Common Stock owned by Mr. Bierman's
wife, as to which he disclaims beneficial ownership. Such shares of
Common Stock, and the 9,030 shares of Common Stock owned by Mr.Bierman's
daughter, are included within Mr. Fein's beneficial ownership.
(3) Less than 1%.
(4) See the table above under "Voting Rights".
(5) Does not include 10,027 shares of Common Stock owned by Mr. Rosenthal's
wife, as to which he disclaims beneficial ownership.
(6) Does not include 14,141 shares of Common Stock owned by Mr. Simons'
wife, as to which he disclaims beneficial ownership.
(7) See footnotes above and footnote (1) to the table under "Voting Rights".
Mr. McCoy had an inadvertent untimely reporting on Form 5 regarding the
acquisition of 101 shares of Common Stock prior to December 31, 1993.
I. ELECTION OF DIRECTOR
One director is to be elected at the meeting to hold office until the
annual meeting in 1997 and until his successor is elected and qualified. The
nominee recommended by the Board of Directors of the Company is Bernard Fein.
Should the nominee become unable to serve or otherwise be unavailable
for election, it is intended that persons named in the Proxy will vote for
the election of such person as the Board of Directors may recommend in the
place of such nominee. The Board of Directors knows of no reason why the
nominee might be unable to serve or otherwise be unavailable for election.
Mr. Fein is presently a member of the Board of Directors.
Directors are elected by a plurality of the shares present in person or
represented by proxy at the Annual Meeting. Stockholders have cumulative
voting rights with respect to the election of directors. Under cumulative
voting, each stockholder is entitled to the same number of votes per share as
the number of directors to be elected (or, for purposes of this election, one
vote per share). A stockholder may cast all of such votes for a single
nominee or distribute them between the nominees, as he wishes, either by so
marking his ballot at the meeting or by specific voting instructions sent to
the Company with a signed Proxy. Unless authority to vote for the nominee for
director is withheld, it is the intention of the persons named in the
accompanying Proxy to vote the Proxies in such manner as will elect as
director the person who has been nominated by the Board of Directors.
<PAGE>3
The following table sets forth certain information with respect to the
nominee and each director whose term does not expire in 1994. Except as
otherwise indicated, each nominee and director has held his present principal
occupation for the past five years.
Age (at
Decem-
ber 31, Became
Name 1993) Principal Occupation Director
- - - ---- ----- -------------------- --------
NOMINEE FOR ELECTION TO SERVE UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN
1997
Bernard Fein 85 Chairman of the Board and Presi- 1959
dent of the Company
INCUMBENT DIRECTORS WHOSE TERM OF OFFICE EXPIRES IN 1996
Maurice L. Rosenthal* 71 President of Robeco Inc., an 1991
importer and distributor of
specialty chemicals
Myron Simons* 73 Financial Consultant 1978
INCUMBENT DIRECTORS WHOSE TERM OF OFFICE EXPIRES IN 1995
Rick S. Bierman 44 Attorney 1989
Howard M. Bloch 66 Vice President, Secretary and 1975
Treasurer of the Company
- - - --------
* Members of the Company's Audit Committee
None of the directors or nominees is a director of any other company
with a class of securities registered pursuant to Section 12 of the
Securities Exchange Act of 1934 or subject to the requirements of Section
15(d) of such Act or any company registered as an investment company under
the Investment Company Act of 1940.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual
compensation for services in all capacities to the Company for the fiscal
years ended December 31, 1993, 1992 and 1991 of the chief executive officer
and each other executive officer of the Company whose annual compensation
exceeded $100,000.
<TABLE>
<CAPTION>
Annual Compensation
----------------------------------------
Other All Other
Name and Principal Position Year Salary Bonus Annual(1) Compensation
- - - --------------------------- ---- ------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Bernard Fein 1993 $321,538 $ 55,000
Chairman of the Board and President 1992 321,538 72,000
of the Company 1991 321,538 90,000
Howard M. Bloch 1993 $248,000 $ 50,000
Vice President, Secretary and Treasurer 1992 239,163 70,400
of the Company and Vice President 1991 221,663 88,000
of AAI Corporation (a subsidiary of
the Company)
Daniel E. McCoy(2) 1993 $163,833 $ 81,916
President of Detroit Stoker Company 1992 101,250 52,500
(a subsidiary of the Company)
Richard R. Erkeneff(3) 1993 $ 30,000 $100,000
President of AAI Corporation
Thomas V. Murphy(4) 1993 $101,196 $116,929
Former President of AAI Corporation 1992 251,784
1991 224,848 $ 65,000
(footnotes on following page)
<PAGE>4
<FN>
- - - --------
(1) The aggregate amount of other compensation does not exceed the lesser of
$50,000 or 10% of the total annual salary and bonus reported for such
executive officer.
(2) Mr. McCoy has an employment agreement with Detroit Stoker which is
described under Executive Compensation-Employment Agreements. He
commenced his employment with Detroit Stoker in May 1992.
(3) Mr. Erkeneff has an employment agreement with AAI Corporation which is
described under Executive Compensation-Employment Agreements. He
commenced his employment with AAI Corporation in November 1993.
(4) Mr. Murphy resigned his position with AAI Corporation in May 1993. He
also received a severance payment of $116,929.
</TABLE>
EMPLOYMENT AGREEMENTS
Mr. McCoy is employed by Detroit Stoker Company, a subsidiary of the
Company ("Detroit Stoker"), pursuant to an employment agreement that provides
he be paid a salary at the annual rate of $150,000, which has been increased
to $163,833, and participate in all life insurance, medical, retirement,
pension or profit sharing, disability or other employee benefit plans
generally made available to other executive officers of Detroit Stoker. The
employment agreement terminates on May 4, 1997, unless Mr. McCoy's employment
is terminated prior thereto by Detroit Stoker for cause. Pursuant to the
employment agreement, Mr. McCoy received a signing bonus of $50,000 in 1992.
Mr. Erkeneff is employed by AAI Corporation, a subsidiary of the Company
("AAI") pursuant to an employment agreement that provides he be paid a salary
at the annual rate of $260,000 and participate in all life insurance,
medical, retirement, pension or profit sharing, disability or other employee
benefit plans generally made available to other executive officers of AAI.
The employment agreement terminates on November 14, 1996, unless Mr.
Erkeneff's employment is terminated prior thereto by AAI for cause. Pursuant
to the employment agreement, Mr. Erkeneff is entitled to a signing bonus of
$100,000, one half of which was paid in November 1993, and the balance will
be paid in November 1994.
RETIREMENT BENEFITS
Pursuant to agreements with AAI, at retirement Mr. Bloch is entitled to
retirement payments from AAI of $12,000 per year payable to him or his estate
for 15 years. Mr. Bloch and Mr. Erkeneff also participate in AAI's defined
benefit pension plan. Mr. Bloch received payments from the AAI deferred
benefit pension plan in the amount of $10,340 during 1993. The following
table illustrates the amount of estimated annual benefits payable to
employees of AAI upon retirement at age 65 at various salary levels (average
of the highest 5 consecutive years out of the last 15 years) and
years-of-service classifications:
15 Years 25 Years 35 Years
Average Salary of Service of Service of Service
- - - -------------- ---------- ---------- -----------
$125,000 $28,125 $48,438 $70,312
250,000 56,250 96,875 108,963
300,000 67,500 108,963 108,963
Remuneration covered by the plan comprises earnings, including salary or
wages, incentive payments and bonuses. The benefit amounts listed in the
table are not subject to any deduction for Social Security benefits or other
offset amounts. The plan provides for monthly pension benefits for life,
commencing at the normal retirement age of 65. The plan also has options for
early retirement and alternative forms of payment, including benefits for
surviving spouses. All employees of AAI are eligible to participate in the
plan upon commencement of employment. The plan provides for vesting of
benefits as follows: 1st 5 years-0, after 5 years-100%. In addition, there is
full vesting at age 55 regardless of the number of years of employment. The
amount of the annual pension benefit is a percentage of a participant's final
average compensation, as set forth above, such percentage being equal to 1
1/2% for each year of service up to 20 plus 1 3/4% for each year of service
thereafter. Mr. Bloch has 5 years of service credited under the plan and Mr.
Erkeneff has less than one year of service credited under the plan.
<PAGE>5
In addition, pursuant to a Supplemental Employee Retirement Plan
Agreement, Mr. Bloch is entitled to supplemental retirement payments from the
Company in the form of a monthly annuity for life with a guaranteed period of
ten years. The amount of the monthly payment will be equal to $5,042.68 plus
$83.33 for each completed calendar month worked after December 31, 1993.
Mr. McCoy participates in Detroit Stoker's non-union retirement benefit
plan. The following table illustrates the amount of estimated annual benefits
payable to employees of Detroit Stoker upon retirement at age 65 at various
salary levels (average of the highest 5 consecutive years out of the last 15
years) and years-of-service classifications:
15 Years 25 Years 35 Years
Average Salary of Service of Service of Service
- - - -------------- ---------- ---------- ----------
$125,000 $28,642 $47,738 $66,833
150,000 34,642 57,738 80,833
175,000 40,642 67,738 94,833
Remuneration covered by the plan comprises earnings, including salary or
wages, incentive payments and bonuses. The plan provides for monthly pension
benefits for life, commencing at the normal retirement age of 65. The plan
also has options for early retirement and alternative forms of payment,
including benefits for surviving spouses. All employees of Detroit Stoker are
eligible to participate in the plan upon commencement of employment. The plan
provides for vesting of benefits as follows:
1st 5 years-0, after 5 years-100%. The amount of the annual pension benefit
is a percentage of a participant's final average compensation as set forth
above, reduced by a Social Security offset, such percentage being equal to
1.35% for each year of service not in excess of 35 years, plus .25% of final
average compensation, as set forth above, for each year of service in excess
of 35 years. Mr. McCoy has less than two years of service credited under the
plan.
COMPENSATION COMMITTEE REPORT
It is the policy of the Compensation Committee to establish and maintain
executive compensation at competitive levels which will enable the Company to
attract and retain highly qualified key management employees. The base
salaries for executive officers being recruited by the Company are determined
by reference to the responsibilities of the position, the experience of the
individual and competitive conditions within the industry. Salary increases,
if any, are determined with reference to the performance of the executive
officer, the assignment of any increased level of responsibility (including
promotions), the performance of the Company and the compensation paid to
executive employees of other companies in the defense industry or other
comparable industry. Bonuses, if any, are determined with reference to the
performance of the executive officer and the anticipated earnings of the
Company in the particular year.
The Company's executive employees receive no forms of compensation other
than salary, bonuses and customary benefits.
The compensation of Mr. Fein, as the Company's chief executive officer,
is described above in the Summary Compensation Table. His compensation
consists primarily of his base salary which has remained at an annual rate of
$321,538 since 1990, and a cash bonus of $55,000 in 1993. This bonus amount
was established by the Compensation Committee on December 9, 1993 with Mr.
Fein abstaining. The Compensation Committee reduced Mr. Fein's 1993 bonus to
75% of the amount paid to him as a bonus in 1992, because of a reduction in
the Company's earnings from 1992 to 1993.
The Compensation Committee has recommended the adoption of the 1994
Stock Option Plan discussed under "APPROVAL OF 1994 STOCK OPTION PLAN,"
subject to the approval of the Company's stockholders at the Annual Meeting.
The 1994 Stock Option Plan will not become effective until such approval is
obtained. The Committee believes that the Plan will help to achieve the
Committee's policy as set forth above.
<PAGE>6
Section 162(m) of the Internal Revenue Code of 1986 limits a company's
deduction for compensation paid to executive officers in excess of $1 million
in any one year. So long as Bernard Fein serves as a member of the
Compensation Committee or Option Committee, the Company would not qualify for
certain exceptions provided by such section.
COMPENSATION COMMITTEE
Bernard Fein
Myron Simons
Rick S. Bierman
PERFORMANCE GRAPH
The graph below compares the total returns which an investor would have
earned assuming the investment of $100 on December 31, 1988 in the Common
Stock, the Standard & Poor's 500 Composite Stock Index ("S&P 500") and a
constructed peer group index of the common stock of six corporations of
substantially the same size (by revenues) as the Company, all of which are
involved in the defense industry. Those corporations are: Watkins Johnson
Company, EDO Corporation, Whitehall Corporation, Tech Sym Corporation,
Sparton Corporation and Moog Incorporated. The constructed peer group index
has been weighted in accordance with the stock market capitalization of each
of the component corporations.
[GRAPH GOES HERE]
OTHER COMPENSATION
Directors' Fees. During 1993, Directors who were not employees received
annual compensation of $8,000, and a fee of $500 for each committee meeting
attended.
ADDITIONAL INFORMATION
The Board of Directors of the Company had a total of nine meetings
during 1993.
Among its standing committees, the Company has an Audit Committee, a
Nominating Committee and a Compensation Committee. The Audit Committee
recommends to the Board the engagement and discharge of the independent
auditors for the Company, analyzes the reports of such auditors,
<PAGE>7
and makes such recommendations to the Board with respect thereto as such
committee may deem advisable. There were two Audit Committee meetings held in
1993. The members are Maurice L.Rosenthal and Myron Simons.
The Compensation Committee makes recommendations to the Board of
Directors regarding the compensation structure of the Company as applied to
executive personnel. There was one Compensation Committee meeting held in
1993. The members are Bernard Fein, Myron Simons and Rick S. Bierman.
The Nominating Committee acts primarily as a selection committee to
recommend candidates for election to the Board of Directors. The committee
met once in 1993. The members are Bernard Fein, Howard M. Bloch and Myron
Simons.
The Nominating Committee will consider nominees for directors
recommended by stockholders. Any stockholder may make such a recommendation
by writing to: Secretary of the Nominating Committee, United Industrial
Corporation, 18 East 48th Street, New York, New York 10017.
There are no family relationships between any nominee, director or
executive officer of the Company, except that Mr. Bierman is a son-in-law of
Mr. Fein.
II. APPROVAL OF 1994 STOCK OPTION PLAN
GENERAL
The Board of Directors of the Company and its Compensation Committee
have approved the Company's 1994 Stock Option Plan, subject to stockholder
approval. The purpose of the 1994 Stock Option Plan is to provide certain key
employees of the Company and its subsidiaries an opportunity to acquire an
ownership interest in the Company and thereby create in such employees an
increased interest in and greater concern for the welfare of the Company, to
retain their continued employment, and to secure and retain the services of
persons capable of filling key positions with the Company and its
subsidiaries. Pursuant to the 1994 Stock Option Plan, the Company may grant
options with respect to an aggregate of up to 600,000 shares of Common Stock,
with no individual optionee to receive in excess of 150,000 shares of Common
Stock upon exercise of options granted under the 1994 Stock Option Plan.
Options granted pursuant to the plan may be either incentive stock options
("ISOs") or non-qualified stock options ("NQSOs"). Shares of Common Stock
subject to options may be either authorized and unissued shares, or
previously issued shares acquired or to be acquired by the Company and held
in its treasury. The following summary of the 1994 Stock Option Plan is not
intended to be complete and is qualified in its entirety by reference to the
1994 Stock Option Plan, which is attached as Exhibit A to this Proxy
Statement. No options have been granted pursuant to the 1994 Stock Option
Plan.
SUMMARY OF THE PLAN
Administration. The 1994 Stock Option Plan is administered by an option
committee of the Board of Directors of the Company, which is comprised of
"disinterested persons" within the meaning of Rule 16b-3 under Section 16(b)
of the Exchange Act (the "Option Committee"). The members of the Option
Committee will be: Bernard Fein, Myron Simons and Rick S. Bierman. Any or all
powers and functions of the Option Committee may be exercised at any time and
from time to time by the Board of Directors or an executive committee of the
Board of Directors (the "Executive Committee"), provided all of the members
of the Board or the Executive Committee are "disinterested persons" within
the meaning of Rule 16b-3. (References in this discussion to the "Committee"
include the Option Committee, the Board of Directors and the Executive
Committee to the extent any of the foregoing administers the 1994 Stock
Option Plan.) The authority of the Committee includes, among other things,
determining the persons to whom options are granted, the timing of any
grants, the number of shares subject to each option, the period of
exercisability, the designation of options as ISOs or NQSOs and the other
terms and provisions thereof.
<PAGE>8
Officers subject to Section 16(a) of the Exchange Act may not, and the
Committee also has the authority to require, as a condition to any grant,
that any other grantee also may not, sell or otherwise dispose of shares
acquired pursuant to the exercise of an option within six months of the date
an option is granted.
Eligibility. Options may be granted only to salaried key employees of
the Company or any subsidiary or parent corporation of the Company now
existing or subsequently formed or acquired, except Bernard Fein and members
of the Option Committee.
Grant, Terms and Conditions of Options. The Company will not receive any
monetary consideration for granting options.
The exercise price for each share subject to an option will be an amount
that the Committee determines, in its good faith judgment, to be not less
than 100% of the fair market value of the Common Stock on the date the option
is granted. In the case of ISOs, however, the exercise price per share of
ISOs granted to any holder of capital stock of the Company (or any subsidiary
or parent corporation) representing 10% or more of the voting power of the
Company (or any subsidiary or parent corporation) will be in an amount that
the Committee determines, in its good faith judgment, to be not less than
110% of the fair market value of the Common Stock on the date the ISO is
granted.
Under the 1994 Stock Option Plan, fair market value per share means:
(1) if the shares are listed on a national securities exchange or
reported on the NASDAQ Stock Market-National Market ("NASDAQ-NMS"), the
last reported sale price per share on such exchange or such system on
the date the option is granted or, if the shares are not traded or
reported on such date, then on the closest preceding date on which such
shares were traded or reported; or
(2) if the shares are not listed on a national securities exchange or
reported on NASDAQ-NMS but are quoted in the over-the-counter market,
the average of the closing bid and ask quotations in such market for
such shares on the date the option is granted or, if there are no such
quotations on such date, then on the closest preceding date on which
such quotations are available; provided, however, that if, in the
judgment of the Committee, there is not a regular, active public market
for the shares, fair market value per share shall be determined by the
Committee in its good faith judgment. The determination by the Committee
of fair market value will be conclusive and binding.
Payment for shares purchased upon the exercise of options may be in cash
or, if the terms of an option so provide, with other shares of Common Stock
or an executed promissory note on such terms and conditions as the Committee
shall determine.
Options granted under the 1994 Stock Option Plan are exercisable at such
times, in such amounts and during such period or periods as the Committee may
determine at the date the option is granted. ISOs, however, are not
exercisable after ten years from the date of grant and, in the case of a
person who at the date of grant owns capital stock of the Company (or any
subsidiary or parent corporation) representing 10% or more of the voting
power of the Company (or any subsidiary or parent corporation), are not
exercisable after five years from the date of grant. Except as otherwise
provided under the Internal Revenue Code of 1986, as amended (the "Code"), if
the aggregate fair market value of shares subject to ISOs (under any plan of
the Company or any subsidiary or parent corporation of the Company)
exercisable for the first time in any calendar year exceeds $100,000, such
options will be treated as NQSOs.
In addition, the Committee has the right to accelerate, in whole or in
part, from time to time, conditionally or unconditionally, the right to
exercise any option granted under the 1994 Stock Option Plan.
In the event of retirement, termination by the Company of employment
with or without cause, termination of employment by an optionee with or
without good reason or upon death or disability, special rules will apply
regarding the exercisability of options.
<PAGE>9
Options may not be transferred except by will or the laws of descent or
distribution. Options are only exercisable during the lifetime of a holder by
such holder.
In the event of a "change in control" of the Company, all then
outstanding options shall immediately become exercisable. The Committee, in
its sole discretion, may determine that, upon the occurrence of a "change in
control," each option outstanding under the 1994 Stock Option Plan shall
terminate within a specified number of days after notice to the holder, and
such holder shall receive, with respect to each share subject to such option,
an amount in cash or other property, or any combination thereof, equal to the
excess of the aggregate fair market value at the time of such transaction of
the shares subject to such option over the aggregate exercise price therefor.
The foregoing provision does not apply to options granted to officers subject
to Section 16(a) of the Exchange Act within six months prior to a
change-in-control, unless an exemption from liability under Section 16(b) of
the Exchange Act is otherwise available.
Effect of Change in Common Stock. In the event of any change in the
Common Stock through merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, split-up, split-off, combination of shares,
exchange of shares, or other like change in capital structure of the Company,
an adjustment will be made to each outstanding option so that such option
thereafter is exercisable for such securities, cash and/or property as would
have been received had such option been exercised in full immediately prior
to such transaction and been exchanged in such transaction. An adjustment
will be made successively each time any such change occurs.
Amendment or Termination. The Board of Directors of the Company may at
any time amend or terminate the 1994 Stock Option Plan, provided that no such
action affects or impairs the rights of an optionee under any previously
granted option. Notwithstanding the foregoing, without the approval of the
Company's stockholders, no amendment or change may be made (a) increasing the
total number of shares of Common Stock reserved for options under the plan
(other than an increase resulting from an adjustment), (b) reducing the
exercise price of any ISO, (c) modifying the provisions of the plan relating
to eligibility or (d) materially increasing the benefits accruing to
participants under the plan.
The Board of Directors recommends a vote FOR the approval of the
adoption of the 1994 Stock Option Plan. A favorable vote of a majority of the
shares present at the meeting in person or by proxy is required for approval.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The statements in the following paragraphs are based on federal income
tax law and interpretational authorities as of the date of this Proxy
Statement, which are subject to change at any time. The law is technical and
complex and the statements represent only a general summary of some of the
applicable provisions.
Incentive Options
ISOs under the 1994 Stock Option Plan are intended to meet the
definitional requirements of Section 422(b) of the Code for "incentive stock
options."
Under the Code, the grantee of an ISO generally is not subject to
regular income tax upon the receipt or exercise of such ISO (except that the
alternative minimum tax may apply). If after exercising an ISO, an employee
disposes of the shares of Common Stock so acquired after the longer of two
years from the date of grant or one year from the date of transfer of shares
of Common Stock pursuant to the exercise of such ISO (the "applicable holding
period"), the employee will normally recognize a long-term capital gain or
loss equal to the excess, if any, of the amount received for the shares of
Common Stock over the exercise price. If, however, an employee does not hold
the shares of Common Stock so acquired for the applicable holding period, the
disposition is normally a "disqualifying disposition," and the employee would
recognize income in the year of the disqualifying disposition equal to the
excess of the amount received for the shares of Common Stock over the
exercise price. Of that income, the portion equal to the excess of the fair
market value of the shares at the time the
<PAGE>10
ISO was exercised over the exercise price will be ordinary income and the
balance, if any, will be long-term or short-term capital gain depending on
whether the holding period for the shares of Common Stock exceeded one year
and provided that the employee held such shares as a capital asset at such
time.
If, in a disqualifying disposition, the employee sells the shares of
Common Stock at a price that is below the fair market value of the shares of
Common Stock at the time the ISO was exercised, the amount of ordinary income
will be limited to the amount by which the amount realized on the sale
exceeds the exercise price.
An employee who exercises an ISO by delivering shares previously
acquired pursuant to the exercise of an ISO is treated as making a
"disqualifying disposition" of such shares if the employee delivers such
shares before the expiration of the applicable holding period with respect to
such shares. Upon the exercise of an ISO with previously acquired shares as
to which no disqualifying disposition occurs, it would appear that the
employee would not recognize gain or loss with respect to such previously
acquired shares.
A deduction will not be allowed to the Company for federal income tax
purposes with respect to the grant or exercise of an ISO or the disposition,
after the applicable holding period, of the shares of Common Stock acquired
upon exercise of an ISO. In the event of a disqualifying disposition, a
federal income tax deduction will be allowed to the Company in an amount
equal to the ordinary income to be recognized by the optionee, provided that
such amount constitutes an ordinary and necessary business expense to the
Company, is reasonable and the Company satisfies its withholding obligation,
if any, with respect to such income.
Non-Qualified Options
A NQSO is an option that does not qualify as an "incentive stock option"
under Section 422(b) of the Code. An individual who receives a NQSO will not
recognize any taxable income upon the grant of such NQSO. Generally, upon
exercise of a NQSO, an individual will be treated as having received ordinary
income in an amount equal to the excess of the fair market value of the
shares of Common Stock at the time of exercise over the exercise price.
Any optionee who is an officer of the Company or a beneficial owner of
more than ten percent (10%) of any class of registered equity securities of
the Company should consult with his or her tax advisor as to whether, as a
result of Section 16(b) of the Exchange Act and the rules and regulations
thereunder that are related thereto, the timing of income recognition is
deferred for any period following the exercise of a NQSO (i.e., the "Deferral
Period"). If there is a Deferral Period, absent a written election (pursuant
to Section 83(b) of the Code) filed with the Internal Revenue Service within
30 days after the date of transfer of the shares of Common Stock pursuant to
the exercise of the option to include in income, as of the transfer date, the
excess (on such date) of the fair market value of such shares of Common Stock
over their exercise price, recognition of income by the individual will be
deferred until the expiration of the Deferral Period, if any.
The ordinary income recognized with respect to the transfer of shares of
Common Stock or receipt of cash upon exercise of a NQSO under the 1994 Stock
Option Plan will be subject to both wage withholding and employment taxes. In
addition to the customary methods of satisfying the withholding tax
liabilities that arise upon the exercise of a NQSO, an individual may satisfy
the liability in whole or in part by directing its Company to withhold shares
of Common Stock from those that would otherwise be issuable to the individual
or by tendering other shares of Common Stock owned by the individual. The
withheld shares of Common Stock and other tendered shares will be valued at
their fair market value as of the date that the tax obligation arises.
Individuals who, by virtue of their positions with the Company, are subject
to Section 16(b) of the Exchange Act may elect this method of satisfying the
withholding obligation only during certain restricted periods.
An individual's tax basis in the shares of Common Stock received on
exercise of a NQSO will be equal to the amount of any cash paid on exercise,
plus the amount of ordinary income recognized by
<PAGE>11
such individual as a result of the receipt of such shares of Common Stock.
The holding period for such shares would begin just after the transfer of
shares of Common Stock or, in the case of an officer or beneficial owner of
more than 10% of any class of registered equity securities of the Company who
does not elect to be taxed as of the exercise date, just after the expiration
of the Deferral Period, if any. A deduction for federal income tax purposes
will be allowed to the Company in an amount equal to the ordinary income
taxable to the individual, provided that such amount constitutes an ordinary
and necessary business expense, is reasonable and the Company satisfies its
withholding obligation with respect to such income.
If an individual exercises a NQSO by delivering shares to the Company,
other than shares previously acquired pursuant to the exercise of an ISO
which is treated as a "disqualifying disposition" as described above, the
individual will not recognize gain or loss with respect to the exchange of
such shares, even if their then fair market value is different from the
individual's tax basis. The individual, however, will be taxed as described
above with respect to the exercise of the NQSO as if he or she had paid the
exercise price in cash, and the Company likewise generally will be entitled
to an equivalent tax deduction. So long as the individual receives a separate
identifiable stock certificate therefor, the tax basis and the holding period
for that number of shares of Common Stock received on such exercise that is
equal to the number of shares surrendered on such exercise will be equal to
the tax basis and include the holding period of those shares surrendered. The
individual's tax basis and holding period for the additional shares received
on exercise of a NQSO paid for, in whole or in part, with shares will be the
same as if the individual had exercised the NQSO solely for cash.
Change in Control
As described above, upon a "change in control" of the Company, all the
then outstanding options shall immediately become exercisable. In general, if
the total amount of payments to optionees that are contingent upon a "change
of control" of the Company (as defined in Section 280G of the Code),
including payments upon the exercise of options under the 1994 Stock Option
Plan that vest upon a "change in control," equals or exceeds three times the
recipient's "base amount" (generally, such recipient's average annual
compensation for the five years preceding the change in control), then,
subject to certain exceptions, the payments may be treated as "parachute
payments" under the Code, in which case a portion of such payments would be
non-deductible to the Company and the recipient would be subject to a 20%
excise tax on such portion of the payments.
CERTAIN LIMITATIONS ON DEDUCTIBILITY OF EXECUTIVE COMPENSATION
With certain exceptions, Section 162(m) of the Code limits the Company's
deduction for compensation paid to certain executive officers in excess of $1
million per executive per taxable year (including any deduction with respect
to the exercise of a NQSO or the disqualifying disposition of stock purchased
pursuant to an ISO). This limitation may apply to options granted under the
Plan and, in any event, will apply to any options granted under the Plan
while Bernard Fein is a member of the Compensation Committee.
III. APPOINTMENT OF AUDITORS
It is proposed that the stockholders ratify the appointment of Ernst &
Young as independent auditors of the Company for the year ending December 31,
1994. Ernst & Young have been the independent auditors of the Company since
1962. It is expected that a representative of Ernst & Young will be present
at the Annual Meeting with the opportunity to make a statement if he desires
to do so and will be available to respond to appropriate questions.
The Board of Directors recommends that the accompanying Proxy be voted
in favor of such appointment. A favorable vote of a majority of the shares
present at the meeting in person or by proxy is required for approval.
<PAGE>12
IV. MISCELLANEOUS
The Board of Directors knows of no business to come before the meeting
other than as stated in the Notice of the Annual Meeting of Stockholders.
Should any business other than that set forth in said Notice properly come
before the meeting, it is the intention of the persons named in the
accompanying Proxy to vote said Proxy in accordance with their judgment on
such matters.
A list of the Company's stockholders as of the record date for the
meeting will be available for examination by any stockholder, for purposes
germane to the meeting, during ordinary business hours, for ten days prior to
the date of the meeting at the offices of the Company.
All shares represented by the accompanying proxy given prior to the
meeting will be voted in the manner specified therein. Proxy cards returned
without specification will be voted in accordance with the recommendation of
the Board of Directors. The shares of stockholders who have properly with
held authority to vote for the nominee proposed by the Board of Directors
(including broker non-votes) will not be counted toward achieving a
plurality. As to any matters which may come before the meeting other than
those specified above, the proxy holders will be entitled to exercise
discretionary authority. A majority of the Common Stock present in person or
represented by proxy will constitute a quorum at the Annual Meeting.
For purposes of this meeting, except for the election of directors,
which requires a plurality vote, the affirmative vote of the majority of
shares present in person or represented by proxy at the meeting for a
particular matter is required for the matter to be deemed an act of the
stockholders. With respect to abstentions, the shares are considered present
at the meeting for the particular matter, but since they are not affirmative
votes for the matter, they will have the same effect as votes against the
matter. With respect to broker non-votes, the shares are not considered
present at the meeting for the particular matter as to which the broker
withheld its vote. Consequently, broker non-votes are not counted in respect
of the matter, but they do have the practical effect of reducing the number
of affirmative votes required to achieve a majority for such matter by
reducing the total number of shares from which the majority is calculated.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the next Annual
Meeting of Stockholders must be received by the Company no later than
November 28, 1994 to be considered for inclusion in the Company's Proxy
Statement and form of Proxy relating to that meeting. Such proposals should
be addressed to Mr. Howard M. Bloch, Secretary and Treasurer, United
Industrial Corporation, 18 East 48th Street, New York, New York 10017.
EXPENSES OF SOLICITATION
The Company will bear the cost of the solicitation of Proxies. In
addition to the use of the mails, proxies may be solicited by the executive
employees and directors of the Company personally, by telephone or by
telegram. Brokers, nominees, fiduciaries and other custodians will be
requested to forward soliciting material to the beneficial owners of shares
and will be reimbursed for their expenses.
UNITED INDUSTRIAL CORPORATION WILL FURNISH A COPY OF ITS ANNUAL REPORT
ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1993, WITHOUT EXHIBITS, WITHOUT
CHARGE TO EACH PERSON WHO FORWARDS A WRITTEN REQUEST THEREFOR, INCLUDING A
REPRESENTATION THAT HE WAS A BENEFICIAL HOLDER OF COMMON STOCK OF UNITED
INDUSTRIAL CORPORATION ON MARCH 18, 1994 TO HOWARD M. BLOCH, SECRETARY AND
TREASURER, UNITED INDUSTRIAL CORPORATION, 18 EAST 48TH STREET, NEW YORK, NEW
YORK 10017.
Dated March 30, 1994 By Order of the Board of Directors
Howard M. Bloch
Secretary and Treasurer
<PAGE>A-1
EXHIBIT A
UNITED INDUSTRIAL CORPORATION
1994 STOCK OPTION PLAN
1. PURPOSES
United Industrial Corporation, a Delaware corporation (the "Company"),
wishes to provide certain of its key employees and certain key employees of
any subsidiary corporation or parent corporation of the Company now existing
or hereafter formed or acquired who are responsible for the continued growth
of the Company an opportunity to acquire a proprietary interest in the
Company, and thereby create in such key employees an increased interest in
and a greater concern for the welfare of the Company and its subsidiaries.
The Company, by means of the Plan, seeks to retain the services of
persons now holding key positions and also to secure and retain the services
of persons capable of filling such positions.
The stock options ("Options") offered pursuant to this 1994 Stock Option
Plan (the "Plan") are a matter of separate inducement and are not in lieu of
any salary or other compensation for the services of any key employee.
The Options granted under the Plan are intended to be either incentive
stock options ("Incentive Options") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or options that do
not meet the requirements for Incentive Options ("Non-Qualified Options").
The Company makes no warranty, however, as to the qualification of any Option
as an Incentive Option.
2. STOCK SUBJECT TO THE PLAN
Options granted under the Plan shall be exercisable for shares of common
stock, $1.00 par value per share, of the Company ("Common Stock"). The total
number of shares of Common Stock of the Company authorized for issuance upon
the exercise of Options under the Plan (the "Shares") shall not exceed, in
the aggregate, 600,000 Shares, with no individual optionee to receive in
excess of 150,000 Shares upon exercise of Options granted under the Plan,
subject to adjustment in accordance with Section 11 of the Plan.
Shares available for issuance under the Plan may be either authorized
but unissued Shares, Shares of issued stock held in the Company's treasury,
or both, at the discretion of the Company. If and to the extent that Options
granted under the Plan expire or terminate without having been exercised, the
Shares covered by such expired or terminated Options may again be subject to
an Option under the Plan.
Except as provided in Sections 18 and 22 hereof, the Company may, from
time to time during the period beginning on March 10, 1994 (the "Effective
Date") and ending on March 10, 2004 (the "Termination Date"), grant to
certain key employees of the Company, or certain key employees of any
subsidiary corporation or parent corporation of the Company, Incentive
Options and/or Non-Qualified Options under the terms hereinafter set forth.
As used in the Plan, the term "parent corporation" and "subsidiary
corporation" shall mean a corporation within the definitions of such terms
contained in Sections 424(e) and 424(f) of the Code, respectively.
3. ADMINISTRATION
The board of directors of the Company (the "Board of Directors") shall
designate from among its members an option committee, which may also be any
other committee of the Board of Directors (the "Committee"), to administer
the Plan. The Committee shall consist of no fewer than two (2)
<PAGE>A-2
members of the Board of Directors, each of whom shall be a "disinterested
person" within the meaning of Rule 16b-3 (or any successor rule or
regulation) promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). A majority of the members of the Committee shall
constitute a quorum and the act of a majority of the members of the Committee
shall be the act of the Committee. Any member of the Committee may be removed
at any time either with or without cause by resolution adopted by the Board
of Directors and any vacancy on the Committee at any time may be filled by
resolution adopted by the Board of Directors.
Any and all powers and functions of the Committee may be exercised at
any time and from time to time by the Board of Directors or an executive
committee of the Board of Directors (the "Executive Committee"; references
below to the Committee shall be deemed to include references to the Board of
Directors and the Executive Committee, except as the context otherwise
requires); provided, however, that all of the members of the Board of
Directors or the Executive Committee, as the case may be, shall be
"disinterested persons" within the meaning of Rule 16b-3 (or any successor
rule or regulation) promulgated under the Exchange Act.
Subject to the express provisions of the Plan, the Committee shall have
the authority, in its sole discretion, to determine the key employees to whom
Options shall be granted, the time when such persons shall be granted
Options, the number of Shares which shall be subject to each Option, the
purchase price of each Share which shall be subject to each Option, the
period(s) during which such Options shall be exercisable (whether in whole or
part), and the other terms and provisions thereof (which need not be
identical). In determining the key employees to whom Options shall be granted
and the number of Shares for which Options are to be granted to each key
employee, the Committee shall give due consideration to the length of
service, performance, the amount of earnings and the responsibilities and
duties of such person.
Subject to the express provisions of the Plan, the Committee also shall
have the authority to construe the Plan and the Options granted hereunder, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of the Options (which need not be
identical) and to make all other determinations necessary or advisable for
administering the Plan. The Committee also shall have the authority to
require, in its discretion, as a condition of the granting of any such
Option, that the employee agree (a) not to sell or otherwise dispose of
Shares acquired pursuant to the exercise of such Option for a period of six
(6) months following the date of the acquisition of such Option and (b) that
in the event of termination of employment of such employee, other than as a
result of dismissal without cause or Termination For Good Reason (as defined
in Section 7 herein), such employee will not, for a period to be fixed at the
time of the grant of the Option, enter into any other employment or
participate directly or indirectly in any other business or enterprise which
is competitive with the business of the Company or any subsidiary corporation
or parent corporation of the Company, or enter into any employment in which
such employee will be called upon to utilize special knowledge obtained
through employment with the Company or any subsidiary corporation or parent
corporation thereof. Any officer of the Company or any subsidiary corporation
or parent corporation who is subject to the reporting requirements of Section
16(a) of the Exchange Act (or any successor provision) shall not be entitled
to sell or otherwise dispose of any Shares acquired upon the exercise of any
Option for a period of six (6) months from the date such Option was granted.
Any determination of the Committee on the matters referred to in this
Section 3 shall be conclusive.
The Committee may employ such legal or other counsel, consultants and
agents as it may deem desirable for the administration of the Plan and may
rely upon any opinion or computation received from any such counsel,
consultant or agent. Expenses incurred by the Committee in the engagement of
such counsel, consultant or agent shall be paid by the Company or such
subsidiary corporation or parent corporation of the Company whose employees
have benefitted from the Plan, as determined by the Committee. No member or
former member of the Board of Directors, the Executive Committee or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Options granted hereunder.
<PAGE>A-3
4. ELIGIBILITY
Options may be granted only to salaried key employees of the Company or
any subsidiary corporation or parent corporation of the Company now existing
or hereafter formed or acquired, except Bernard Fein and members of the
Committee.
The Plan does not create a right in any person to participate in, or be
granted options under, the Plan.
5. OPTION PRICE AND PAYMENT
The price for each Share purchasable under any Option granted hereunder
shall be determined by the Committee in its good faith judgment, but shall
not be less than one hundred percent (100%) of the "fair market value" (as
defined below) per Share at the date the Option is granted; provided,
however, that in the case of an Incentive Option granted to a key employee
who, at the time such Option is granted, owns shares of the Company or any
subsidiary corporation or parent corporation representing more than ten
percent (10%) of the total combined voting power of all classes of stock of
the Company or any subsidiary corporation or parent corporation, the purchase
price for each Share shall be not less than one hundred ten percent (110%) of
the fair market value per Share at the date the Option is granted. In
determining the stock ownership of a key employee for any purpose under the
Plan, the rules of Section 424(d) of the Code shall be applied, and the
Committee may rely on representations of fact made to it by the key employee
and believed by it to be true.
For purposes of the Plan, "fair market value," with respect to any date
of determination, means:
(i) if the Shares are listed or admitted to trading on a national
securities exchange in the United States or reported through the National
Association of Securities Dealers Automated Quotation System-National Market
System ("NASDAQ-NMS"), then the closing sale price on such exchange or
NASDAQ-NMS on such date or, if no trading occurred or quotations were
available on such date, then on the closest preceding date on which the
Shares were traded or quoted; or
(ii) if not so listed or reported but a regular, active public market
for the Shares exists (as determined in the sole discretion of the Committee,
whose decision shall be conclusive and binding), then the average of the
closing bid and ask quotations per Share in the over-the-counter market for
such Shares in the United States on such date or, if no such quotations are
available on such date, then on the closest date preceding such date. For
purposes of the foregoing, a market in which trading is sporadic and the ask
quotations generally exceed the bid quotations by more than 15% shall not be
deemed to be a "regular, active public market."
If the Committee determines that a regular, active public market does
not exist for the Shares, the Committee shall determine the fair market value
of the Shares in its good faith judgment based on the total number of shares
of Common Stock then outstanding, taking into account all outstanding
options, warrants, rights or other securities exercisable or exchangeable
for, or convertible into, shares of Common Stock.
Upon the exercise of an Option granted hereunder, the Company shall
cause the purchased Shares to be issued only when it shall have received the
full purchase price therefor in cash; provided, however, that in lieu of
cash, the holder of an Option may, if the terms of such Option so provide and
to the extent permitted by applicable law, exercise an Option (a) in whole or
in part, by delivering to the
<PAGE>A-4
Company shares of Common Stock of the Company (in proper form for transfer
and accompanied by all requisite stock transfer tax stamps or cash in lieu
thereof) owned by such holder having a fair market value equal to the cash
exercise price applicable to that portion of the Option being exercised, the
fair market value of the shares of Common Stock so delivered to be determined
as of the date immediately preceding the date of exercise, or as otherwise
may be required to comply with or conform to the requirements of any
applicable law or regulations, or (b) in part, by delivering to the Company
an executed promissory note on such terms and conditions as the Committee
shall deter mine at the time of grant, in its sole discretion; provided,
however, that the principal amount of such note shall not exceed ninety
percent (90%) (or such lesser percentage as would be permitted by applicable
margin regulations) of the aggregate purchase price of the Shares then being
purchased pursuant to the exercise of such Option.
6. TERMS OF OPTIONS AND LIMITATIONS ON THE RIGHT OF EXERCISE
Any Option granted hereunder shall be exercisable at such times, in such
amounts and during such period or periods as the Committee shall determine at
the date of the grant of such Option; provided, however, that an Incentive
Option shall not be exercisable after the expiration of ten (10) years from
the date such Option is granted; provided, further, that in the case of an
Incentive Option granted to a person who, at the time such Incentive Option
is granted, owns stock of the Company or any subsidiary corporation or parent
corporation of the Company representing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any
subsidiary corporation or parent corporation of the Company, such Incentive
Option shall not be exercisable after the expiration of five (5) years from
the date such Incentive Option is granted.
The Committee shall have the right to accelerate, in whole or in part,
from time to time, conditionally or unconditionally, rights to exercise any
Option granted hereunder. To the extent that an Option is not exercised
within the period of exercisability specified therein, it shall expire as to
the then unexercised part.
Except as otherwise provided under the Code, to the extent that the
aggregate fair market value of stock for which Incentive Options (under all
stock option plans of the Company and of any parent corporation or subsidiary
corporation of the Company) are exercisable for the first time by an employee
during any calendar year exceeds one hundred thousand dollars ($100,000),
such Options shall be treated as Non-Qualified Options. For purposes of this
limitation, (a) the fair market value of stock is determined as of the time
the Option is granted, (b) the limitation will be applied by taking into
account Options in the order in which they were granted, and (c) Incentive
Options granted before 1987 shall not be taken into account.
In no event shall an Option granted hereunder be exercised for a
fraction of a Share or for less than one hundred (100) Shares (unless the
number purchased is the total balance for which the Option is then
exercisable).
A person entitled to receive Shares upon the exercise of an Option shall
not have the rights of a stockholder with respect to such Shares until the
date of issuance of a stock certificate to him or her for such Shares;
provided, however, that until such stock certificate is issued, any holder of
an Option using previously acquired shares of Common Stock in payment of an
option exercise price shall continue to have the rights of a stockholder with
respect to such previously acquired shares of Common Stock.
7. TERMINATION OF EMPLOYMENT
Upon termination of employment of any key employee with the Company and
all subsidiary corporations and parent corporations of the Company, any
Option previously granted to such employee, unless otherwise specified by the
Committee in the Option shall, to the extent not theretofore exercised,
terminate and become null and void; provided, however, that:
A. if any key employee shall die while in the employ of such
corporation or during either the one (1) year or three (3) month period,
whichever is applicable, specified in clauses (B), (C) and (D) below,
any Option granted hereunder, unless otherwise specified by the
Committee in the Option, shall be exercisable for any or all of such
number of Shares that such employee is entitled to exercise at the time
of death, by the legal representative of such employee or such person
who acquired such Option by bequest or inheritance or by reason of the
death of such employee, at any time up to and including one (1) year
after the date of death;
<PAGE>A-5
B. if the employment of any key employee shall terminate by reason
of such employee's disability (as described in Section 22(e)(3) of the
Code), any Option granted hereunder, unless otherwise specified by the
Committee in the Option, shall be exercisable for any or all of such
number of Shares that such employee is entitled to exercise at the
effective date of termination of employment by reason of disability, at
any time up to and including one (1) year after the effective date of
such termination of employment;
C. if the employment of any key employee shall terminate (i) by
reason of the employee's retirement (at such age or upon such conditions
as shall be specified by the Committee), (ii) by the key employee for
"good reason" (only if such employee is party to a written employment
agreement with the Company or any subsidiary corporation or parent
corporation which expressly provides for termination by the key employee
for "good reason," and such employee validly terminates his or her
employment for "good reason," as such term is defined in the agreement
("Termination For Good Reason")), or (iii) by the employer other than
for cause (as defined below), such Option, unless otherwise specified by
the Committee in the Option, shall be exercisable for any or all of such
number of Shares that such employee is entitled to exercise at the
effective date of termination of employment, at any time up to and
including three (3) months after the effective date of such termination
of employment; and
D. if the employment of any employee shall terminate by any reason
other than that provided for in clauses (A), (B) or (C) above, such
Option, unless otherwise specified by the Committee in such Option
shall, to the extent not theretofore exercised, become null and void.
None of the events described above shall extend the period of
exercisability of the Option beyond the expiration date thereof. If an Option
granted hereunder shall be exercised by the legal representative of a
deceased grantee or by a person who acquired an Option granted hereunder by
bequest or inheritance or by reason of the death of any employee or former
employee, written notice of such exercise shall be accompanied by a certified
copy of letters testamentary or equivalent proof of the right of such legal
representative or other person to exercise such Option.
For purposes of the Plan, the term "for cause" shall mean (a) with
respect to an employee who is a party to a written employment agreement with,
or, alternatively, participates in a compensation or benefit plan (other than
the Plan) of, the Company or a subsidiary corporation or parent corporation
of the Company, which agreement or plan contains a definition of "for cause"
or "cause" (or words of like import) for purposes of termination of
employment or services thereunder by the Company or such subsidiary
corporation or parent corporation of the Company, "for cause" or "cause" as
defined therein (if an employee is both party to an employment agreement and
participates in such a plan, the definition contained in such employment
agreement shall control); or (b) in all other cases, as determined by the
Committee or the Board of Directors, in its sole discretion, (i) the willful
commission by an employee of an act that causes or may cause substantial
damage to the Company or a subsidiary corporation or parent corporation of
the Company; (ii) the commission by an employee of an act of fraud in the
performance of such employee's duties on behalf of the Company or a
subsidiary corporation or parent corporation of the Company; (iii) conviction
of the employee for commission of a felony in connection with the performance
of his duties on behalf of the Company or a subsidiary corporation or parent
corporation of the Company; or (iv) the continuing failure of an employee to
perform the duties of such employee to the Company or a subsidiary
corporation or parent corporation of the Company that has not been cured
within 15 days after written notice thereof has been given to the employee by
the Committee.
For purposes of the Plan, an employment relationship shall be deemed to
exist between an individual and a corporation if, at the time of
determination, the individual was an "employee" of such corporation for
purposes of Section 422(a) of the Code. If an individual is on leave of
absence taken with the consent of the corporation by which such individual
was employed, or is on active military service, and is determined to be an
"employee" for purposes of the exercise of an Option, such individual shall
not be entitled to exercise such Option during such period and while the
employment
<PAGE>A-6
is treated as continuing intact unless such individual shall have obtained
the prior written consent of such corporation, which consent shall be signed
by the chairman of the board of directors, the president, a senior
vice-president or other duly authorized officer of such corporation.
A termination of employment shall not be deemed to occur by reason of
(i) the transfer of an employee from employment by the Company to employment
by a subsidiary corporation or a parent corporation of the Company or (ii)
the transfer of an employee from employment by a subsidiary corporation or a
parent corporation of the Company to employment by the Company or by another
subsidiary corporation or parent corporation of the Company.
8. EXERCISE OF OPTIONS
Subject to the limitations on exercise referred to in Sections 6 and 7
hereof, Options granted under the Plan shall be exercised by the optionee as
to all or part of the Shares covered thereby by giving written notice of
exercise to the Corporate Secretary of the Company at the principal business
office of the Company, specifying the number of Shares to be purchased and
specifying a business day not more than ten (10) days from the date such
notice is given for the payment of the purchase price against delivery of the
Shares being purchased. Subject to the terms of Sections 13, 14 and 15
hereof, the Company shall cause certificates for the Shares so purchased to
be delivered at the principal business office of the Company, against payment
of the full purchase price, on the date specified in the notice of exercise.
9. USE OF PROCEEDS
The cash proceeds of the sale of Shares subject to the Options granted
hereunder are to be added to the general funds of the Company and used for
its general corporate purposes as the Board of Directors shall determine.
10. NON-TRANSFERABILITY OF OPTIONS
An Option granted hereunder shall not be transferable, whether by
operation of law or otherwise, other than by will or the laws of descent and
distribution, and any Option granted hereunder shall be exercisable, during
the lifetime of the holder, only by such holder. Except to the extent
provided above, Options may not be assigned, transferred, pledged,
hypothecated or disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar
process.
11. ADJUSTMENT OF SHARES; EFFECT OF CERTAIN TRANSACTIONS
Notwithstanding any other provision contained herein, in the event of
any change in the Shares subject to the Plan or to any Option granted under
the Plan (through merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, split-up, split-off, spin-off, combination of
shares, exchange of shares, or other like change in the capital structure of
the Company), an adjustment shall be made to each outstanding Option such
that each such Option shall thereafter be exercisable for such securities,
cash and/or other property as would have been received in respect of the
Shares subject to such Option had such Option been exercised in full
immediately prior to such change, and such an adjustment shall be made
successively each time any such change shall occur. The term "Shares" after
any such change shall refer to the securities, cash and/or property then
receivable upon exercise of an Option. In addition, in the event of any such
change, the Committee shall make any further adjustment to the maximum number
of Shares which may be acquired under the Plan pursuant to the exercise of
Options, the maximum number of Shares for which Options may be granted to any
one employee and the number of Shares and price per Share subject to
outstanding Options as shall be equitable to prevent dilution or enlargement
of rights under such Options, and the determination of the Committee as to
these matters shall be conclusive and binding on the optionee; provided,
however, that (a) each such adjustment with respect to an Incentive Option
shall comply with the rules of Section
<PAGE>A-7
424(a) of the Code (or any successor provision) and (b) in no event shall any
adjustment be made which would render any Incentive Option granted hereunder
other than an "incentive stock option" as defined in Section 422 of the Code.
In the event of a "change in control" of the Company, all then
outstanding Options shall immediately become exercisable. For purposes of the
Plan, a "change in control" of the Company shall occur if (a) any person or
other entity (other than any of the Company's subsidiaries), including any
person as defined in Section 13(d)(3) of the Exchange Act, becomes the
beneficial owner, as defined in Rule13d-3 of the Exchange Act, directly or
indirectly, of more than fifty percent (50%) of the total combined voting
power of all classes of capital stock of the Company normally entitled to
vote for the election of directors of the Company (the "Voting Stock"), (b)
the Board of Directors approves the sale of all or substantially all of the
property or assets of the Company, (c) the Board of Directors approves a
consolidation or merger of the Company with another corporation (other than
with any of the Company's subsidiaries), the consummation of which would
result in the stockholders of the Company immediately before the occurrence
of the consolidation or merger owning, in the aggregate, less than 50% of the
Voting Stock of the surviving entity, or (d) a change in the Board of
Directors occurs with the result that the members of the Board of Directors
on the date hereof (the "Incumbent Directors") no longer constitute a
majority of such Board of Directors, provided that any person becoming a
director whose election or nomination for election was supported by a
majority of the Incumbent Directors shall be considered an Incumbent Director
for purposes hereof.
The Committee, in its sole discretion, may determine that, upon the
occurrence of a transaction described in the preceding paragraph, each Option
outstanding hereunder shall terminate within a specified number of days after
notice to the holder, and such holder shall receive, with respect to each
Share subject to such Option, an amount equal to the excess of the fair
market value of such Shares immediately prior to the occurrence of such
transaction over the exercise price per Share of such Option; such amount
shall be payable in cash, in one or more of the kinds of property payable in
such transaction, or in a combination thereof, as the Committee in its
discretion shall determine. The provisions contained in the preceding
sentence shall be inapplicable to an Option granted within six (6) months
before the occurrence of a change in control if the holder of such Option is
subject to the reporting requirements of Section 16(a) of the Exchange Act
and no exemption from liability under Section 16(b) is otherwise available to
such holder.
12. RIGHT TO TERMINATE EMPLOYMENT
The Plan shall not impose any obligation on the Company or on any
subsidiary corporation or parent corporation thereof to continue the
employment of any holder of an Option and it shall not impose any obligation
on the part of any holder of an Option to remain in the employ of the Company
or of any subsidiary corporation or parent corporation thereof.
13. PURCHASE FOR INVESTMENT
Except as hereinafter provided, the Committee may require the holder of
an Option granted hereunder, as a condition of exercise of such Option in the
event the Shares subject to such Option are not registered pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "Securities Act"), and applicable state securities laws, to execute and
deliver to the Company a written statement, in form satisfactory to the
Committee, in which such holder (1) represents and warrants that such holder
is purchasing or acquiring the Shares acquired thereunder for such holder's
own account, for investment only and not with a view to the resale or
distribution thereof in violation of any federal or state securities laws,
and (2) agrees that any subsequent resale or distribution of any of such
Shares shall be made only pursuant to either (i) an effective registration
statement under the Securities Act covering such Shares and under applicable
state securities laws or (ii) specific exemptions from the registration
requirements of the Securities Act and any applicable state securities laws,
based on a written opinion of counsel, in form and substance satisfactory to
counsel for the Company, as to the application thereto of any such
exemptions.
<PAGE>A-8
Nothing herein shall be construed as requiring the Company to register
Shares subject to any Option under the Securities Act or any state securities
law and, to the extent deemed necessary by the Company, Shares issued upon
exercise of an Option may contain a legend to the effect that registration
rights had not been granted with respect to such Shares.
14. ISSUANCE OF STOCK CERTIFICATES; LEGENDS; PAYMENT OF EXPENSES
Upon any exercise of an Option granted hereunder and payment of the
purchase price therefor, a certificate or certificates representing the
Shares shall be issued by the Company in the name of the person exercising
the Option and shall be delivered to or upon the order of such person.
The Company may endorse such legend or legends upon the certificates for
Shares issued pursuant to the Plan and may issue such "stop transfer"
instructions to its transfer agent in respect of such Shares as the
Committee, in its sole discretion, determines to be necessary or appropriate
to (a) prevent a violation of, or to comply with the procedures for an
exemption from, the registration requirements of the Securities Act, (b)
implement the provisions of the Plan and any agreement between the Company
and the optionee or grantee with respect to such Shares or (c) permit the
Company to determine the occurrence of a disqualifying disposition, as
described in Section 421(b) of the Code, of Shares transferred upon exercise
of an Incentive Option granted under the Plan.
The Company shall pay all issue or transfer taxes with respect to the
issuance or transfer of Shares, as well as all fees and expenses necessarily
incurred by the Company in connection with such issuance or transfer, except
fees and expenses which may be necessitated by the filing or amending of a
registration statement under the Securities Act, which fees and expenses
shall be borne by the recipient of the Shares unless such registration
statement has been filed by the Company for its own corporate purposes (and
the Company so states) in which event the recipient of the Shares shall bear
only such fees and expenses as are attributable solely to the inclusion of
the Shares an optionee receives in the registration statement.
All Shares issued as provided herein shall be fully paid and
nonassessable to the extent permitted by law.
15. WITHHOLDING TAXES
The Company may require an employee exercising a Non-Qualified Option
granted hereunder, or disposing of Shares acquired pursuant to the exercise
of an Incentive Option in a disqualifying disposition (within the meaning of
Section 421(b) of the Code), to reimburse the corporation which employs such
employee for any taxes required by any governmental regulatory authority to
be withheld or otherwise deducted and paid by such corporation in respect of
the issuance or disposition of such Shares. In lieu thereof, the corporation
which employs such employee shall have the right to withhold the amount of
such taxes from any other sums due or to become due from such corporation to
the employee upon such terms and conditions as the Committee shall prescribe.
The corporation that employs such employee may, in its discretion, hold the
stock certificate to which such employee is entitled upon the exercise of an
Option as security for the payment of such withholding tax liability, until
cash sufficient to pay that liability has been accumulated. In addition, at
any time that the Company becomes subject to a withholding obligation under
applicable law with respect to the exercise of a Non-Qualified Option (the
"Tax Date"), except as set forth below, a holder of a Non-Qualified Option
may elect to satisfy, in whole or in part, the holder's related personal tax
liabilities (an "Election") by (a) directing the Company to withhold from
Shares issuable in the related exercise either a specified number of Shares
or Shares having a specified value (in each case not in excess of the related
personal tax liabilities), (b) tendering Shares previously issued pursuant to
the exercise of an Option or other shares of the Company's Common Stock owned
by the holder or (c) combining any or all of the foregoing Elections in any
fashion. An Election shall be irrevocable. The withheld Shares and other
shares of Common Stock tendered in payment shall be valued at their fair
market value (as determined under Section 5) on the Tax Date. The Committee
may disapprove of any Election, suspend or terminate the right to make
Elections or provide that the right to make Elections shall not
<PAGE>A-9
apply to particular Shares or exercises. The Committee may impose any
additional conditions or restrictions on the right to make an Election as it
shall deem appropriate. In addition, the Company shall be authorized, without
the prior written consent of the employee, to effect any such withholding
upon exercise of a Non-Qualified Option by retention of Shares issuable upon
such exercise having a fair market value at the date of exercise (as
determined under Section 5) which is equal to the amount to be withheld;
provided, however, that the Company shall not be authorized to effect such
withholding without the prior written consent of the employee if such
withholding would subject such employee to liability under Section 16(b) of
the Exchange Act. The Committee may prescribe such rules as it determines
with respect to employees subject to the reporting requirements of Section
16(a) of the Exchange Act to effect such tax withholding in compliance with
the Rules established by the Securities and Exchange Commission (the
"Commission") under Section 16 of the Exchange Act and the positions of the
staff of the Commission thereunder expressed in no-action letters exempting
such tax withholding from liability under Section 16(b) of the Exchange Act.
16. LISTING OF SHARES AND RELATED MATTERS
If at any time the Committee shall determine that the listing,
registration or qualification of the Shares subject to such Option on any
securities exchange or under any applicable law, or the consent or approval
of any governmental regulatory authority, is necessary or desirable as a
condition of, or in connection with, the granting of an Option, or the
issuance of Shares thereunder, such Option may not be exercised in whole or
in part unless such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Committee.
17. AMENDMENT OF THE PLAN
The Board of Directors may, from time to time, amend the Plan, provided
that no amendment shall be made, without the approval of the stockholders of
the Company, that will (a) increase the total number of Shares reserved for
Options under the Plan (other than an increase resulting from an adjustment
provided for in Section 11 hereof), (b) reduce the exercise price of any
Incentive Option granted hereunder, (c) modify the provisions of the Plan
relating to eligibility, or (d) materially increase the benefits accruing to
participants under the Plan. The Committee shall be authorized to amend the
Plan and the Options granted thereunder to permit the Incentive Options
granted thereunder to qualify as "incentive stock options" within the meaning
of Section 422 of the Code and the Treasury Regulations promulgated
thereunder. The rights and obligations under any Option granted before
amendment of the Plan or any unexercised portion of such Option shall not be
adversely affected by amendment of the Plan or the Option without the consent
of the holder of such Option.
18. TERMINATION OR SUSPENSION OF THE PLAN
The Board of Directors may at any time suspend or terminate the Plan.
The Plan, unless sooner terminated under Section 22 or by action of the Board
of Directors, shall terminate at the close of business on the Termination
Date. Options may not be granted while the Plan is suspended or after it is
terminated. Rights and obligations under any Option granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of
the Plan, except upon the consent of the person to whom the Option was
granted. The power of the Committee to construe and administer any Options
under Section 3 that are granted prior to the termination or suspension of
the Plan shall continue after such termination or during such suspension.
19. SAVINGS PROVISION
With respect to persons subject to Section 16 of the Exchange Act,
transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 (or any successor provision) under the Exchange Act.
To the extent any provision of the Plan or action by the Committee fails to
so comply, it shall be deemed null and void to the extent permitted by law
and deemed advisable by the Committee.
<PAGE>A-10
20. GOVERNING LAW
The Plan, the Options granted hereunder and all related matters shall be
governed by, and construed and enforced in accordance with, the laws of the
State of New York from time to time obtaining.
21. PARTIAL INVALIDITY
The invalidity or illegality of any provision herein shall not be deemed
to affect the validity of any other provision.
22. EFFECTIVE DATE
The Plan shall become effective at 5:00 P.M., New York City time, on the
Effective Date; provided, however, that if the Plan is not approved by a vote
of the stockholders of the Company at an annual meeting or any special
meeting within twelve (12) months after the Effective Date, the Plan and any
Options granted thereunder shall terminate.
<PAGE>
UNITED INDUSTRIAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS MAY 10, 1994
The undersigned hereby appoints Bernard Fein, Howard M. Bloch and Myron
Simons or any of them, attorneys and proxies with full power of substitution
in each of them, in the name, place and stead of the undersigned to vote as
proxy all the stock of the undersigned in United Industrial Corporation.
(To be Signed on Reverse Side)
SEE REVERSE
SIDE
Please mark, sign, date and return this proxy in the enclosed envelope.
<PAGE>
/X/ Please mark your
vote as in this
example.
The share represented by this proxy will be voted for proposals 1 through 4
if no instruction to the contrary is indicated or if no
instruction is given.
1. Election of the following nominee as set forth in the proxy statement
FOR WITHHELD Nominee:
/ / / / Bernard Fein
For, except vote withheld for the following nominee:
- - - -----------------------------------
FOR AGAINST ABSTAIN
2. To consider and act upon the United Industrial / / / / / /
Corporation 1994 Stock Option Plan.
3. To consider and act upon a proposal to ratify / / / / / /
the appointment of Ernst & Young as Independent
Auditors of the Company for 1994.
4. In their discretion, to act upon such other / / / / / /
matters as may properly come before the
meeting or any adjournment thereof.
(Note: Please sign exactly as your name appears hereon. Executors,
Administrators, Trustees, etc. should so indicate when signing, giving full
title as such. If signer is a corporation, execute in full corporate name by
authorized officer. If shares held in the name of two or more persons, all
should sign.)
- - - -----------------------------------------
- - - -----------------------------------------
SIGNATURE(S) DATE
