<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / 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, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / 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:
<PAGE>
PRELIMINARY COPY
UNITED
INDUSTRIAL CORPORATION
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS MAY 13, 1997
- --------------------------------------------------------------------------------
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 13th day of
May, 1997, at 10:00 A.M., for the following purposes:
1. To elect two (2) directors to serve until the Annual Meeting of
Stockholders in 2000.
2. To consider and act upon a proposal to approve the Company's 1996
Stock Option Plan for Nonemployee Directors.
3. To consider and act upon a proposal to ratify the appointment of
Ernst & Young LLP as independent auditors of the Company for 1997.
4. To consider and act upon proposals by certain stockholders as set
forth under 'Proposals of Certain Stockholders' in the accompanying Proxy
Statement, if brought before the meeting.
5. 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 27, 1997 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. Whether
or not you plan to be present at the Annual Meeting, please sign, date and
return the enclosed Proxy to ensure that your shares are voted. A return
envelope which requires no postage if mailed in the United States, is enclosed
for your convenience.
By Order of the Board of Directors
Susan Fein Zawel
Secretary
March 31, 1997
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>
PRELIMINARY COPY
UNITED INDUSTRIAL CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 13, 1997
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 13, 1997,
at 10:00 A.M. Stockholders of record at the close of business on March 27, 1997
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 31, 1997. The Annual Report of the Company
for the year ended December 31, 1996, including audited financial statements,
has been sent to each stockholder.
VOTING RIGHTS
On March 27, 1997, there were outstanding and entitled to vote 12,175,543
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 27, 1997. 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 Sanford C. Bernstein & Co., Inc. and
Dimensional Fund Advisors Inc. is as of December 31, 1996 and is based upon
information furnished to the Company by such entities in Schedules 13G.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- --------------------- --------------------------------------- -------------------- --------
<S> <C> <C> <C>
Common Stock Bernard Fein 1,209,647(1) 9.94%
18 East 48th Street
New York, New York 10017
Common Stock Sanford C. Bernstein & Co., Inc. 983,357(2) 8.08
One State Street Plaza
New York, New York 10004
Common Stock Dimensional Fund Advisors Inc. 660,634 5.43
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
</TABLE>
- ------------------
(1) Includes 1,108,451 shares of Common Stock owned directly and 101,196 shares
owned by The Fein Foundation, of which Mr. Fein is a trustee.
(2) Sanford C. Bernstein & Co., Inc. has sole and shared voting power as to
788,600 and 24,400 of such shares, respectively, but has sole dispositive
power as to all such shares.
1
<PAGE>
(3) Dimensional Fund Advisors Inc. ('Dimensional'), a registered investment
advisor, is deemed to have beneficial ownership of 660,634 shares of Common
Stock as of December 31, 1996, all of which shares are held in portfolios of
Dimensional, DFA Investment Dimensions Group Inc., a registered open-end
investment company ('DFA'), or in series of the DFA Investment Trust Company
(the 'DFA Trust'). Dimensional has sole voting power as to 468,934 shares,
but officers of Dimensional who also serve as officers of DFA and the DFA
Trust have sole voting power as to an additional 101,200 shares owned by DFA
and 90,500 shares owned by the DFA Trust, in their capacities as officers of
DFA and the DFA Trust, respectively.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 1, 1997, 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.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF BENEFICIAL PERCENT
NAME OR GROUP OWNERSHIP(1) OF CLASS
- --------------------------------------------------------------- -------------------- --------
<S> <C> <C>
Edward C. Aldridge, Jr......................................... 5,000 (2)
James M. Ballentine............................................ -- --
Howard M. Bloch................................................ 44,758 (2)
Richard R. Erkeneff............................................ 76,804(3) (2)
Harold S. Gelb................................................. 5,000 (2)
John J. Henning................................................ 10,193(3) (2)
E. Donald Shapiro.............................................. 15,000 (2)
Robert W. Worthing............................................. 14,967(3)(4) (2)
Susan Fein Zawel............................................... 340,191(3)(5) 2.79%
All directors and executive officers as a group
consisting of 11 persons..................................... 524,934(3) 4.28%
</TABLE>
- ------------------
(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) Less than 1%.
(3) Includes shares which the following persons have the right to acquire within
60 days through the exercise of stock options: Mr. Erkeneff, 68,000 shares;
Mr. Henning, 5,000 shares; Mr. Worthing, 7,000 shares; Ms. Fein Zawel, 5,334
shares; and all directors and executive officers as a group, 95,334 shares.
(4) Does not include 500 shares of Common Stock owned by Mr. Worthing's spouse,
as to which he disclaims beneficial ownership.
(5) Includes shares of Common Stock owned as follows: 216,114 shares owned by
Ms. Fein Zawel, her spouse and minor children and 118,743 shares owned by
Fein Investing Properties, Inc., of which Ms. Fein Zawel and her minor
children are shareholders.
2
<PAGE>
I. ELECTION OF DIRECTORS
Two directors are to be elected at the Annual Meeting to hold office until
the Annual Meeting in 2000 and until their successors are elected and qualified.
The nominees recommended by the Board of Directors of the Company are Harold S.
Gelb and Susan Fein Zawel. Should the nominees 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 persons as the Board of Directors may
recommend in the place of such nominee. The Board of Directors knows of no
reason why the nominees might be unable to serve or otherwise be unavailable for
election. Mr. Gelb and Ms. Fein Zawel are both presently members 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, two votes per
share). A stockholder may cast all of such votes for a single nominee or
distribute them between the nominees, as he or she wishes, either by so marking
the ballot at the meeting or by specific voting instructions sent to the Company
with a signed Proxy. Unless authority to vote for the nominees 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 directors the persons who have
been nominated by the Board of Directors.
The following table sets forth certain information with respect to the
nominees and each director whose term does not expire in 1997. Except as
otherwise indicated, each nominee and director has held his or her present
principal occupation for the past five years.
<TABLE>
<CAPTION>
AGE (AT BECAME
NAME DECEMBER 31, 1996) PRINCIPAL OCCUPATION DIRECTOR
- --------------------------------------- ------------------ ------------------------------------------ --------
<S> <C> <C> <C>
NOMINEES FOR ELECTION TO SERVE UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN 2000
Harold S. Gelb......................... 76 Chairman of the Board of the Company 1995
(since November 1995); private investor
(since 1985); and retired senior partner
of Ernst & Young LLP, an accounting firm.
Susan Fein Zawel....................... 42 Vice President Corporate Communications 1995
and Associate General Counsel (since June
1995), Secretary (since May 1994) and
Counsel (1992 to 1995) of the Company.
INCUMBENT DIRECTORS WHOSE TERM OF OFFICE EXPIRES IN 1999
Richard R. Erkeneff.................... 61 President of the Company (since October 1995
1995) and AAI Corporation, a subsidiary of
the Company ('AAI') (since November 1993);
Senior Vice President of the Aerospace
Group at McDonnell Douglas Corporation, an
aerospace firm (October 1992 to November
1993); and President (March 1992 to
October 1992) and Executive Vice President
(1988 to 1992) of McDonnell Douglas
Electronics Systems Company.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
AGE (AT BECAME
NAME DECEMBER 31, 1996) PRINCIPAL OCCUPATION DIRECTOR
- --------------------------------------- ------------------ ------------------------------------------ --------
<S> <C> <C> <C>
E. Donald Shapiro...................... 64 The Joseph Solomon Distinguished Professor 1996
of Law (since 1983) and Dean/Professor of
Law (1973-1983) of New York Law School.
Mr. Shapiro is a director of Loral Space
and Communications, Ltd., Bank Leumi Trust
Co., Eyecare Products PLC, Vasomedical,
Inc., Vion, Inc., Kranzco Realty Trust,
Premier Laser Systems, Cafe U.S.A. and
Telepad Corporation.
INCUMBENT DIRECTORS WHOSE TERM OF OFFICE EXPIRES IN 1998
Edward C. Aldridge, Jr................. 58 President and Chief Executive Officer of 1995
the Aerospace Corporation, a non-profit
federally funded research and development
center that provides technical support for
the U.S. national security launch and
space systems (since 1992); President of
McDonnell Douglas Electronic Systems
Company (1988 to 1992); and served as both
Secretary and Under Secretary of the Air
Force (1981 to 1988).
Howard M. Bloch........................ 69 Vice Chairman of the Board and retired 1975
Vice President of the Company (until
1995).
</TABLE>
- ------------------
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, except as set forth above.
The Company has recently received a letter from OPT.CO INC. indicating that
it intends to nominate David A. Lang and Alan S. Parsow for election as
directors of the Company at the Annual Meeting. For additional information
regarding Messrs. Lang and Parsow which was furnished to the Company by OPT.CO
INC. see Annex B hereto.
4
<PAGE>
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, 1996, 1995 and 1994 of the chief executive officer and each
of the other four most highly compensated executive officers of the Company
whose annual compensation exceeded $100,000.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
--------------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($)(1) OPTIONS COMPENSATION ($)(3)
- ------------------------------- ---- ---------- --------- ------------------- ------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
Richard R. Erkeneff (2) .......
President and Chief Executive 1996 440,000 100,000 250,000 9,112
Officer of the Company and 1995 299,547 50,000 30,000 9,102
AAI 1994 265,182 85,000 12,000
James M. Ballentine ...........
President of Detroit Stoker
Company (a subsidiary of the 1996 180,000 96,580 2,700
Company) 1995 124,846
John J. Henning ...............
President of Symtron Systems, 1996 250,016 15,000 8,751
Inc. (a subsidiary of the 1995 250,016 8,670
Company) 1994 250,016
Robert W. Worthing ............
Vice President and General 1996 185,016 56,707 9,000 9,802
Counsel of the Company and 1995 157,712 39,710 9,000 14,926
AAI 1994 145,496 44,798 6,000
Susan Fein Zawel .............. 1996 140,000 34,517 9,000 8,315
Vice President Corporate 1995 132,000 30,000 6,000 7,387
Communications, Secretary and 1994 75,083 18,000 5,000
Associate General Counsel of
the Company
</TABLE>
- ------------------
(1) The aggregate amount of other compensation represents perquisites that
exceed the lesser of $50,000 or 10% of the total annual salary and bonus
reported for such executive officer.
(2) Mr. Erkeneff was elected President and Chief Executive Officer of the
Company on January 17, 1996 and remains President of AAI. Mr. Erkeneff has
an employment agreement with the Company which is described under Executive
Compensation--Employment Agreements. He commenced employment with AAI in
November 1993.
(3) All amounts under this heading represent employer match contributions made
to the Company's 401(k) plans and contributions to the Company's Retirement
Plan.
5
<PAGE>
OPTIONS GRANTED IN LAST FISCAL YEAR
The following table sets forth certain information concerning options
granted during 1996 to the named executives.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE --------------------
NAME GRANTED FISCAL YEAR ($/SHARE) EXPIRATION DATE 5% ($) 10% ($)
- ----------------------------- ---------- ------------ ----------- -------------------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard R. Erkeneff.......... 30,000 8.16% 5.00 February 26, 2006(1) 94,350 239,100
150,000 40.82% 5.375 March 27, 2006(2) 507,131 1,285,163
John J. Henning.............. 15,000 4.08% 5.00 February 26, 2006(1) 47,175 119,550
</TABLE>
- ------------------
(1) One-third of the options are exercisable upon the first anniversary of the
date of grant, which was February 26, 1996, an additional one-third of the
options are exercisable upon the second anniversary of the date of grant and
the balance of the options are exercisable upon the third anniversary of the
date of grant.
(2) One-third of the options are exercisable upon the first anniversary of the
date of grant, which was March 27, 1996, an additional one-third of the
options exercisable upon the second anniversary of the date of grant and the
balance of the options are exercisable upon the third anniversary of the
date of grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY
SHARES AT FISCAL OPTIONS AT
ACQUIRED ON YEAR-END ($) FISCAL YEAR-END ($)
EXERCISE VALUE EXERCISABLE (E)/ EXERCISABLE (E)/
NAME ($) REALIZED ($) UNEXERCISABLE (U) UNEXERCISABLE (U)
- -------------------------------------------- ----------- ------------ -------------------- --------------------
<S> <C> <C> <C> <C>
Richard R. Erkeneff......................... 0 0 184,000(U) 1$05,750(U)
8,000(E) $9,000(E)
John J. Henning............................. 0 0 15,000(U) 1$3,125(U)
Robert W. Worthing.......................... 0 0 8,000(U) $4,500(U)
7,000(E) $5,625(E)
Susan Fein Zawel............................ 0 0 5,666(U) $3,374(U)
5,333(E) $4,500(E)
</TABLE>
EMPLOYMENT AGREEMENTS
Mr. Erkeneff is employed as President and Chief Executive Officer of the
Company and AAI pursuant to an employment agreement dated March 26, 1996 that
provides he be paid a salary at the annual rate of $440,000 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 the Company or AAI. The employment agreement terminates on January
1, 1999, unless Mr. Erkeneff's employment is terminated prior thereto by the
Company for cause. Pursuant to the employment agreement, Mr. Erkeneff is
eligible to receive annual discretionary bonuses as may be granted by the
Company's Board of Directors, not to exceed 50% of his then annual salary.
Pursuant to the employment agreement, Mr. Erkeneff also received options to
acquire 150,000 shares of the Company's common stock pursuant to the terms of
the Company's 1994 Stock Option Plan, at an exerise price equal to the fair
market value of the common stock as of the grant date. The options vest in three
equal annual installments commencing one year after the grant date. The Company
also agreed to grant Mr. Erkeneff options to acquire an additional 75,000 shares
one year after the date of the employment agreement and an additional 75,000
shares two years after the date of the employment agreement. The employment
agreement also provides for Mr. Erkeneff to designate a beneficiary for $200,000
of a key man life insurance policy.
Ms. Fein Zawel is employed by the Company pursuant to an employment
agreement that provides she be paid a salary at the annual rate of $132,000 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 the Company. The employment agreement terminates on
December 1, 1998, unless Ms. Fein Zawel's employment is terminated prior thereto
by the Company for cause. Pursuant to the employment agreement, Ms.
6
<PAGE>
Fein Zawel is eligible to receive annual discretionary bonuses as may be granted
by the Company's Board of Directors.
RETIREMENT BENEFITS
On November 30, 1994, the Company terminated the Retirement Plan of Detroit
Stoker Company (the 'Detroit Plan') but retained the assets of the Detroit Plan
in the trust associated with the Detroit Plan. In 1996, the assets of the trust
of the Detroit Plan were merged into the Cash Balance Pension Plan for the
Employees of AAI Corporation ('Cash Balance Plan'). The provisions of the Cash
Balance Plan apply only to active employees at January 1, 1995 and individuals
who become employees after January 1, 1995. The benefit formula for a
participant in any of the predecessor defined benefit plans who was not an
active employee at the effective date has not changed. In accordance with the
Cash Balance Plan, a participant's accrued benefit includes the actuarial
equivalent of the participant's accrued benefit under the applicable predecessor
defined benefit plan as of December 31, 1994 plus annual allocations based upon
a percentage of salary and interest earned on such participant's account
thereafter. The Cash Balance Plan also has options for early retirement and
alternative forms of payment, including lump sum benefits and benefits for
surviving spouses. All employees of AAI, Symtron Systems, Inc. and the Company
are eligible to participate in the Cash Balance Plan upon commencement of
employment. A participant's benefits under the applicable predecessor plans
remain unchanged. At the time of the merger the name of the Cash Balance Plan
was changed to the UIC Retirement Plan. The estimated annual benefit to be
provided by the UIC Retirement Plan and payable to Messrs. Erkeneff,
Worthing and Henning and Ms. Fein Zawel, commencing at normal retirement age,
are $3,314, $8,016, $3,526 and $5,667, respectively.
UNITED INDUSTRIAL CORPORATION HEALTH-CARE PLAN FOR RETIRED DIRECTORS.
The Company has implemented the United Industrial Corporation Health-Care
Plan for Retired Directors (the 'Plan'), which was adopted by the Company's
Board of Directors on December 18, 1995. The Board may, in its sole discretion,
amend, suspend or terminate the Plan, at any time, with or without prior notice.
A director of the Company is eligible to participate in the Plan if he or she
(i) ceases to be a member of the Board, (ii) has served as a member of the Board
for 15 full years, (iii) has attained the age of 65, (iv) is eligible for
Medicare Part A, and (v) has enrolled in both Medicare Part A and Medicare Part
B and any other available supplemental medical or hospitalization coverage by
reason of entitlement under any government entitlement, including, without
limitation, that provided under Title XVIII of the Social Security Act. A
director who participates in the Plan is entitled to coverage under the group
medical plan available to the executive officers of the Company on the same
terms and conditions as such coverage is available to such executive officers
and their spouses and dependents. If a director who participates in the Plan
resides outside the service area of the Company's group medical plan, such
director and his or her spouse and dependents will receive medical benefit
coverage under a medical plan or health insurance policy which provides benefits
that are reasonably comparable to the benefits under the Company's group medical
plan; however, if no such coverage is reasonably available (whether due to
geography or the physical condition of the director or his or her spouse or
dependents), then the Company will reimburse such director for any reasonable
expense that would have been covered under the Company's group medical plan.
Benefits provided under the Plan will be secondary to any benefits under any
other hospitalization or major medical plan or arrangement provided to such
director under government entitlements or provided to such director (either
directly or indirectly through such director's spouse) by any other personal or
employer-provided health-care plan or health insurance policy.
COMPENSATION COMMITTEE REPORT
The Compensation Committee is responsible for establishing and reviewing
the salaries, compensation plans and other remuneration of the officers of the
Company. The programs adopted by the Committee link compensation to the
Company's financial performance and to growth in stockholder value.
COMPENSATION PHILOSOPHY: The Company's compensation program applicable to
all of the executive officers is based on three primary elements:
o Base salary compensation
o Annual cash incentive compensation
o Long-term incentive compensation
The Company's executives receive no other form of compensation other than
customary benefits.
7
<PAGE>
BASE SALARY COMPENSATION: The base salaries for the executive officers are
determined based upon the responsibilities of the position, the experience level
of the individual and the competitive conditions within the industry. The
Company and the Committee consider the compensation paid to executive employees
of other companies in the defense industry and related industries. These
companies are broader than the peer group of publicly-traded defense companies
used for comparison of five-year cumulative return in this Proxy Statement. When
adjusting base salaries for individual executive officers in 1996, the Committee
considered the financial performance of the Company in 1995, the performance of
the individual executive officer, any changed duties and responsibilities and
the base salaries paid to individuals in comparable positions in other
companies.
ANNUAL INCENTIVE COMPENSATION: For fiscal 1996, the Committee approved the
Performance Sharing Plan ('PSP') which provides annual incentive awards to
executive officers and other key employees. The PSP provides a bonus pool based
on Company and/or subsidiary performance against performance measures set for
each respective unit. These measures include, but are not limited to, profit,
return on net assets, cash flow and quality improvement. Awards for individuals
are based on a combination of business unit and individual performance.
Participants are assigned a target award percentage (stated as a percentage of
base salary) reflecting his or her level of responsibility.
LONG-TERM INCENTIVE COMPENSATION: Both the Company's management and the
Compensation Committee believe that significant stock ownership in the Company
links the economic interests of stockholders and management and therefore is a
major incentive for management. The Company's long-term incentive plan is
designed to provide the recipient with a proprietary interest in the growth and
performance of the Company and the value of its shares.
The Compensation Committee recommends grants of stock options to executive
officers and other key employees under the Company's 1994 Stock Option Plan. All
options are granted at fair market value and become exercisable in three equal
portions at one, two and three years following the date of grant.
The Compensation Committee determines the size of any option grant under
the Plan based upon the Committee's perceived value of the grant to motivate and
retain the individual executive, the level of long-term incentive practices
within comparable companies and the individual executive's responsibilities and
overall performance. Although the Committee supports and encourages stock
ownership in the Company by its executive officers, it has not promulgated any
standards regarding levels of ownership by executive officers.
CEO COMPENSATION: Mr. Erkeneff was elected President and Chief Executive of
the Company in January 1996. Pursuant to his employment agreement, his salary
was set at $440,000. The Compensation Committee believes that this rate of
annual salary reflects the prevailing competitive marketplace for similar
companies, as confirmed in an opinion provided by an independent outside
compensation consultant.
Mr. Erkeneff is eligible for an annual cash incentive award of up to 50% of
his annual base salary. For 1996, the Compensation Committee reviewed the
performance of the Company and Mr. Erkeneff relative to financial and strategic
goals established for the year, and awarded him a bonus of $100,000 for 1996 at
its meeting in February 1997.
The Compensation Committee also reviewed the performance of Mr. Erkeneff
for purposes of recommending an award of stock options for 1996. The Committee
believes strongly that stock option awards emphasize the importance of
increasing stockholder value. Mr. Erkeneff's employment agreement provides for a
grant of 75,000 options one year after the date of the agreement. In addition to
the grant pursuant to the employment agreement, the Compensation Committee
recommended that the Stock Option Committee award Mr. Erkeneff 100,000 options
in recognition of his performance in 1996, at its meeting in February 1997.
* * *
Section 162(m) of the Internal Revenue Code of 1986 limits a publicly-held
corporation's deduction for compensation paid to certain executive officers in
excess of $1 million per executive per taxable year, unless the compensation
qualifies as 'performance based' compensation. Stock options currently granted
under the 1994 Stock Option Plan (as amended) will not qualify for this
exception. As of today, annual cash compensation for any executive officer has
been far below the $1 million threshold. The Compensation Committee will address
the deductibility at an appropriate time in the future.
COMPENSATION COMMITTEE
HOWARD M. BLOCH
HAROLD S. GELB
E. DONALD SHAPIRO
8
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PERFORMANCE GRAPH
The graph below compares the total returns which an investor would have
earned assuming the investment of $100 on December 31, 1991 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.
TOTAL SHAREHOLDER RETURNS
Dec91 Dec92 Dec93 Dec94 Dec95 Dec96
----- ----- ----- ----- ----- -----
UNITED INDUSTRIAL CORP 100 110.87 63.41 63.35 76.02 82.53
S&P 500 INDEX 100 107.62 118.46 120.03 165.13 203.05
PEER GROUP 100 106.41 135.18 160.26 235.7 220.96
OTHER COMPENSATION
Directors' Fees. During 1996, directors who were not employees received
compensation of $2,000 per meeting, and a fee of $500 for each committee meeting
attended. Effective January 17, 1996, in lieu of such fees, Messrs. Gelb,
Chairman of the Board, and Bloch, Vice Chairman of the Board, received $6,000
per month and $4,000 per month, respectively. During any period in which Mr.
Bloch is not in the New York City area, however, his compensation is reduced on
the basis of the compensation received by other directors. In addition, Messrs.
Aldridge and Bloch also served as directors of AAI, for which they received
compensation of $2,000 per meeting.
All current directors are eligible to participate in the medical plan
available to the executive officers of the Company. The Company also has a
medical plan for retired directors as described above.
Nonemployee directors also participate in the Company's 1996 Stock Option
Plan for Nonemployee Directors, subject to approval by stockholders at this
Annual Meeting. Such plan is more fully described in 'Approval of the 1996 Stock
Option Plan--Summary of the Plan'.
ADDITIONAL INFORMATION
The Board of Directors of the Company had a total of thirteen meetings
during 1996.
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, and makes such
recommendations to the Board with respect thereto as such committee may deem
advisable. There were six Audit Committee meetings held in 1996. The members are
E. Donald Shapiro, Howard M. Bloch and Harold S. Gelb.
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The Nominating Committee acts primarily as a selection committee to
recommend candidates for election to the Board of Directors. The committee met
once in 1996. The members consist of all of the current directors.
The Nominating Committee will consider nominees for directors recommended
by stockholders. Any stockholder may make such a recommendation by writing to:
Secretary, United Industrial Corporation, 18 East 48th Street, New York, New
York 10017.
The Compensation Committee makes recommendations to the Board of Directors
regarding the compensation structure of the Company as applied to executive
personnel. There were two Compensation Committee meetings held in 1996. The
members are Howard M. Bloch, Harold S. Gelb and E. Donald Shapiro.
There are no family relationships between any nominee, director or
executive officer of the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and any persons who own more than ten percent of the
Company's Common Stock to file reports of initial ownership of the Company's
Common Stock and subsequent changes in that ownership with the Securities and
Exchange Commission and the New York Stock Exchange. Such persons are also
required to furnish the Company with copies of all Section 16(a) forms they
file. Based solely upon a review of the copies of the forms furnished to the
Company, or written representations from certain reporting persons that no Form
5's were required, the Company believes that during 1996 all Section 16(a)
filing requirements were complied with, except that reports for one transaction
each were filed late by Richard R. Erkeneff, John J. Henning, James H. Perry,
Treasurer and Chief Financial Officer of the Company, and E. Donald Shapiro.
II. APPROVAL OF 1996 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS
GENERAL
The Board of Directors of the Company and its Compensation Committee have
approved the Company's 1996 Stock Option Plan for Nonemployee Directors, subject
to stockholder approval. The purpose of the 1996 Stock Option Plan is to attract
and retain the services of outstanding Nonemployee Directors by providing them
an opportunity to acquire an ownership interest in the Company and thereby
create in such directors an increased interest in and greater concern for the
welfare of the Company. Pursuant to the 1996 Stock Option Plan, the Company may
grant options with respect to an aggregate of up to 300,000 shares of Common
Stock ('Shares'). Options granted pursuant to the 1996 Stock Option Plan are
intended to be 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 1996 Stock Option Plan is not intended to
be complete and is qualified in its entirety by reference to the 1996 Stock
Option Plan, which is attached as Exhibit A to this Proxy Statement. On July 22,
1996, Messrs. Aldridge, Bloch, Gelb and Shapiro were each granted options to
purchase 15,000 Shares, subject to stockholder approval of the 1996 Stock Option
Plan.
SUMMARY OF THE PLAN
Administration. The 1996 Stock Option Plan is administered by the Board of
Directors of the Company (the 'Board'), which may designate from among its
members a committee to exercise all power and authority of the Board of
Directors at any time and from time to time to administer the 1996 Stock Option
Plan. (References in this discussion to the 'Board' includes any committee to
the extent it administers the 1996 Stock Option Plan.) The authority of the
Board 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 and the other terms and provisions thereof.
Eligibility. Options may be granted only to members of the Board of the
Company who are not employees of the Company or any subsidiary corporation or
parent corporation of the Company (each an 'Eligible Director').
Grant, Terms and Conditions of Options. The Company will not receive any
monetary consideration for granting options.
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Subject to approval of the 1996 Stock Option Plan at this Annual Meeting
('Stockholder Approval'), the 1996 Stock Option Plan became effective on July
22, 1996 (the 'Effective Date').
The exercise price for each Share subject to an option will be an amount
that the Board 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.
Under the 1996 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 System ('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 a regular, active public market for the shares
exists (as determined in the sole discretion of the Board) then 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 Board, there
is not a regular, active public market for the shares, fair market value
per share shall be determined by the Board in its good faith judgment. The
determination by the Board 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.
Any option granted to an Eligible Director shall be exercisable, on a
cumulative basis, for a period commencing on the date of grant and ending ten
(10) years after the date of grant of such option as follows:
(a) up to one third of the total number of Shares subject to an option
may be exercised as of the date of grant of an option;
(b) up to an additional one third of the total number of Shares
subject to an option may be exercised as of the date of the annual meeting
of stockholders of the Company next following the date of grant of an
option ('Second Vesting Date'), provided that such holder is an Eligible
Director immediately following such annual meeting;
(c) the balance of the total number of Shares subject to an option may
be exercised as of the date of the annual meeting of stockholders of the
Company next following the Second Vesting Date (the 'Final Vesting Date'),
provided such holder is an Eligible Director immediately following such
annual meeting.
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.
On the Effective Date, each Eligible Director was granted an option to
purchase 15,000 Shares and the Nonemployee Directors as a group were granted
options to purchase 60,000 Shares (subject to adjustment as provided in the 1996
Stock Option Plan), at an exercise price of $6.25 per share, subject to
stockholder approval of the 1996 Stock Option Plan. The value of the options are
not able to be determined since it will be based on the difference between the
market value and the exercise price on the date of exercise. Each Eligible
Director who was granted an option to purchase Shares on the Effective Date may
not sell or otherwise dispose of such Shares until at least six months after the
date the 1996 Stock Option Plan is approved by stockholders. Future Eligible
Directors shall automatically be granted an option to purchase 15,000 Shares
(subject to adjustment as provided in the Plan) upon their initial appointment
or election to the Board of Directors. On the date of the annual meeting of
stockholders of the Company which takes place during the calendar year in which
the first anniversary of the Final Vesting Date of an option occurs, the holder
of such option shall automatically be granted an additional option to purchase
15,000 Shares (subject to adjustment as provided in the Plan), provided that
such holder is an Eligible Director in office immediately following such annual
meeting. On March 3, 1997, the closing price of the Shares on the New York Stock
Exchange was $7.625.
In the event an Eligible Director's service as a director of the Company is
terminated by reason of such Eligible Director's death, disability or voluntary
retirement or by the failure of the Company to nominate for re-election such
Eligible Director, with or without cause, special rules will apply regarding the
exercisability of options.
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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. Upon the occurrence of a 'change
in control,' each option outstanding under the 1996 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 the kinds of property payable in such transaction 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 thereof.
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, spin-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 1996 Stock Option Plan shall terminate at
the close of business on July 21, 2006, unless sooner terminated in accordance
with its terms. The Board of Directors of the Company may at any time amend or
terminate the 1996 Stock Option Plan, provided that (i) no amendment shall
become effective without the approval of the stockholders of the Company to the
extent that stockholder approval is required in order to comply with Rule 16b-3
(or any successor provision) under the Securities Exchange Act of 1934, as
amended (the 'Exchange Act'), and (ii) if required in order to comply with Rule
16b-3 under the Exchange Act, no provision of the 1996 Stock Option Plan
addressing eligibility to participate in the 1996 Stock Option Plan or the
amount, price or timing of options to be granted under the 1996 Stock Option
Plan may be amended more than once every six months, other than to comport with
changes in the Internal Revenue Code of 1986, as amended (the 'Code'), the
Employee Retirement Income Security Act of 1974, as amended, or the rules
promulgated thereunder.
The Board of Directors recommends that the accompanying Proxy be voted in
favor of the adoption of the 1996 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 following discussion is based on federal income tax law and
interpretational authorities as of the date of this Proxy Statement, which are
subject to change (possibly on a retroactive basis).
A Nonemployee Director who receives a NQSO will not recognize any taxable
income upon the grant of such NQSO. Generally, upon exercise of a NQSO, a
Nonemployee Director will be treated as having received ordinary income in an
amount equal to the excess of the fair market value of the Shares at the time of
exercise over the exercise price.
A Nonemployee Director should consult with his or her tax advisor as to
whether, as a result of Section 16(b) of the Exchange Act, 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 pursuant to the exercise
of the NQSO to include in income, as of the transfer date, the excess (on such
date) of the fair market value of such Shares over their exercise price,
recognition of income by the Nonemployee Director will be deferred until the
expiration of the Deferral Period.
A Nonemployee Director's tax basis in the Shares 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 such Nonemployee Director as a result of the
receipt of such Shares and the holding period for such Shares would begin just
after the transfer of the Shares or, in the case of a Nonemployee Director 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
Nonemployee Director, provided that such amount constitutes an ordinary and
necessary business expense and is reasonable.
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If a Nonemployee Director exercises a NQSO by delivering other Shares (as
permitted), the Nonemployee Director 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 Nonemployee Director's tax basis. The Nonemployee Director,
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 employer
corporation likewise generally will be entitled to an equivalent tax deduction.
So long as the Nonemployee Director receives a separate identifiable stock
certificate therefor, his or her tax basis in that number of Shares received on
such exercise that is equal to the number of Shares surrendered on such exercise
will include his or her tax basis in the Shares surrendered and his or her
holding period for such number of Shares received will include his or her
holding period for the Shares surrendered. The Nonemployee Director'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 Nonemployee
Director had exercised the NQSO solely for cash.
III. APPOINTMENT OF AUDITORS
It is proposed that the stockholders ratify the appointment of Ernst &
Young LLP as independent auditors of the Company for the year ending December
31, 1997. Ernst & Young LLP have been the independent auditors of the Company
since 1962. It is expected that a representative of Ernst & Young LLP 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.
IV. PROPOSALS OF CERTAIN STOCKHOLDERS
Kenneth Steiner, 14 Stoner Avenue, Great Neck, New York 11021, a
stockholder of the Company, who is the owner of record of 800 shares of Common
Stock has advised the Company that at the forthcoming Annual Meeting of
Stockholders he intends to introduce a proposal from the floor. The proposal and
the reasons of the proposing stockholder in support thereof, are set forth
below:
(NO. 4 ON PROXY CARD)
STOCKHOLDER PROPOSAL CONCERNING ELIMINATION OF A CLASSIFIED
BOARD OF DIRECTORS
'RESOLVED, that the stockholders of the Company request that the Board of
Directors take the necessary steps, in accordance with state law, to declassify
the Board of Directors so that all directors are elected annually, such
declassification to be effected in a manner that does not affect the unexpired
terms of directors previously elected.'
STOCKHOLDER'S SUPPORTING STATEMENT
The election of directors is the primary avenue for a stockholder to
influence corporate governance policies and to hold management accountable for
its implementation of those policies. I believe that the classification of the
Board of Directors, which results in only a portion of the Board being elected
annually, is not in the best interests of the Company and its stockholders.
The Board of Directors of the Company is divided into three classes serving
staggered three-year terms. I believe that the Company's classified Board of
Directors maintains the incumbency of the current Board and therefore of current
management, which in turn limits management's accountability to shareholders.
The elimination of the Company's classified board would require each new
director to stand for election annually and allow the stockholders an
opportunity to register their views on the performance of the Board collectively
and each director individually. I believe this is one of the best methods
available to the stockholder to ensure that the Company will be managed in a
manner that is in the best interests of the stockholders.
A classified board might also be seen as an impediment to a potential
takeover of the Company's stock at a premium price. With the inability to
replace the majority of the Board at one annual meeting, an outside suitor might
be reluctant to make an offer in the first place.
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I am a founding member of the Investors Rights Association of America and I
believe that concerns expressed by companies with classified boards that the
annual election of all directors could leave companies without experienced
directors in the event that all incumbents are voted out by stockholders, are
unfounded. In my view, in the unlikely event that stockholders vote to replace
all directors, this decision would express stockholder dissatisfaction with the
incumbent directors and reflect the need for change.
I URGE YOUR SUPPORT. VOTE FOR THIS RESOLUTION.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL
The Board of Directors believes that classification of the Board, which was
originally approved at the Company's 1970 Annual Meeting, helps to assure
continuity and stability in leadership and policy since approximately two-thirds
of the directors at any time will have had prior experience on the Board. Board
classification is also intended to encourage any person seeking to acquire
control of the Company to initiate such action through arms-length negotiations
with management and the Board of Directors, who are in a position to negotiate a
transaction which is fair to all stockholders. When a similar proposal to
eliminate the classified Board was last submitted to the Company in 1996,
holders of 4,473,686 shares (60.1%) voted against the proposal, holders of
2,637,071 shares (35.4%) voted for the proposal and holders of 333,293 shares
(4.5%) abstained.
The Board of Directors recommends that you vote against the proposal.
Proxies solicited by the Board of Directors will be voted against the adoption
of this proposal unless the stockholders specifically indicate in their Proxies
their desire to have their shares voted in favor of the proposal or to abstain.
Approval of the proposal will require the favorable vote of the majority of
votes cast.
------------------
William Steiner, 4 Radcliff Drive, Great Neck, New York 11024, a
stockholder of the Company, who is the owner of record of 1,920 shares of Common
Stock has advised the Company that at the forthcoming Annual Meeting of
Stockholders he intends to introduce a proposal from the floor. The proposal and
the reasons of the proposing stockholder in support thereof, are set forth
below.
(NO. 5 ON PROXY CARD)
STOCKHOLDER PROPOSAL CONCERNING ENGAGEMENT OF AN INVESTMENT BANKER
'RESOLVED, that the shareholders of the Company recommend and deem it
desirable and in their best interest that the board of directors immediately
engage the services of a nationally recognized investment banker to explore all
alternatives to enhance the value of the Company. These alternatives should
include, but not be limited to, the possible sale, merger or other transaction
involving the Company.'
STOCKHOLDER'S SUPPORTING STATEMENT
In support of the above resolution, the proponent believes that in view of
the unacceptable performance of the Company over the past five years, the
deplorable stock price, and in my opinion, ineffective management, the board of
directors should take immediate action to engage the services of an investment
banker to explore all alternatives to enhance the value of the Company.
I am the founder of the Investors Rights Association of America and it is
my opinion that the value of the Company can be enhanced if the above resolution
is carried out and the shareholders would at long last be able to salvage
meaningful monetary rewards for their patience and long suffering.
Nell Minow, a highly acclaimed corporate governance specialist, and
principal of the LENS Fund, which specializes in increasing the value of
under-performing companies, has stated:
'Companies can only justify asking investors to take the risk of
investing in equities by delivering a competitive rate of return on the
invested capital. When a company's management and board cannot meet that
goal, they owe it to their investors to submit themselves to an independent
evaluation by an outside firm, to ensure that all options are objectively
evaluated.
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If a company's performance lags over a sustained period, it is time
for the shareholders to send a message of no confidence to the board,
reminding them that they have to hold management--and themselves--to a
higher standard.'
I URGE YOUR SUPPORT. VOTE FOR THIS RESOLUTION.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL
The Board of Directors believes that it would not be a worthwhile
expenditure of the Company's funds to commission a study of the type proposed by
Mr. Steiner. The Board has a duty to act in the best interest of all
stockholders. Maximizing stockholder value is most certainly an important
component of that duty and the subject of stockholder values is considered often
by the Board of Directors and management. The Board consists of individuals
familiar with the Company's business and with the industries in which the
Company operates.
The Board of Directors periodically reviews from a strategic perspective
the long term outlook for the Company. The prospects for the Company's current
businesses are reviewed and business plans developed. The Company continually
evaluates acquisition prospects as well as the benefits that may be derived from
selling existing businesses and reinvesting the net proceeds thereof in new or
existing businesses. The Company addressed these issues in its December 5, 1996
letter to stockholders, in which the Company stated that its strategy is to
focus on the Company's core defense and related businesses and evaluate the
divestiture of the unrelated businesses in an orderly fashion so as to maximize
returns.
The Board of Directors believes that the interest of stockholders is best
served by causing the Company to be operated effectively and efficiently to
generate increasing operating earnings. To that end, the Company continually
develops plans and takes steps to achieve this goal. It is the focus on
continual improvement in the Company's performance and diligent pursuit of the
Company's long term plans that will maximize stockholder value, not appointment
of a third party to study the Company and its prospects, a subject with which
the Board is knowledgeable. The Board, however, may determine to retain an
investment banking firm to assist it in the possible sale of any of its
businesses which the Board might consider selling.
The Board of Directors recommends that you vote against the proposal.
Proxies solicited by the Board of Directors will be voted against the adoption
of this proposal unless the stockholders specifically indicate in their Proxies
their desire to have their shares voted in favor of the proposal or to abstain.
Approval of the proposal will require the favorable vote of the majority of
votes cast.
V. MISCELLANEOUS
The Board of Directors knows of no business to come before the meeting
other than as stated in the Notice of 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 withheld authority to
vote for the nominees 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. The holders of a
majority of the outstanding shares of 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
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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
26, 1997 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
Susan Fein Zawel, Secretary, United Industrial Corporation, 18 East 48th Street,
New York, New York 10017.
The Company's by-laws provide that any stockholder entitled to vote for the
election of directors at a meeting may nominate persons for election as
directors only if written notice of such stockholder's intent to make such
nomination is given, either by personal delivery or by mail to the Secretary of
the Company (i) with respect to an election to be held at an annual meeting of
stockholders, not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting of stockholders; and (ii)
with respect to an election to be held at a special meeting of stockholders for
the election of directors, not earlier than the 90th day prior to such special
meeting and not later than the close of business on the later of the 60th day
prior to such special meeting or the 10th day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board to be selected at such meeting. Similar notice
provisions apply with respect to any other proposal which a Stockholder intends
to bring before a meeting of Stockholders. A copy of the pertinent by-law
provision, which sets forth additional requirements with respect to such notice,
is available on request to the Secretary of the Company at the address set forth
above.
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 telecopy. The Company
has retained Georgeson & Company, Inc. to assist in the solicitation of proxies
for a fee of $10,000, plus reimbursement of out-of-pocket expenses. 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, 1996, WITHOUT EXHIBITS, WITHOUT CHARGE
TO EACH PERSON WHO FORWARDS A WRITTEN REQUEST THEREFOR, INCLUDING A
REPRESENTATION THAT SUCH PERSON WAS A BENEFICIAL HOLDER OF COMMON STOCK OF
UNITED INDUSTRIAL CORPORATION ON MARCH 27, 1997, TO SUSAN FEIN ZAWEL, SECRETARY,
UNITED INDUSTRIAL CORPORATION, 18 EAST 48TH STREET, NEW YORK, NEW YORK 10017.
Dated March 31, 1997 By Order of the Board of
Directors
Susan Fein Zawel
Secretary
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ANNEX A
UNITED INDUSTRIAL CORPORATION
1996 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS
1. PURPOSES
United Industrial Corporation, a Delaware corporation (the 'Company'),
desires to attract and retain the services of outstanding nonemployee directors
by affording them an opportunity to acquire a proprietary interest in the
Company through automatic, non-discretionary awards of options ('Options')
exercisable to purchase shares of Common Stock (as defined below), and thus to
create in such directors an increased interest in and a greater concern for the
welfare of the Company and its subsidiaries.
The Options offered pursuant to this United Industrial Corporation 1996
Stock Option Plan for Nonemployee Directors (the 'Plan') are a matter of
separate inducement and are not in lieu of any other compensation for the
services of any director.
The Options granted under the Plan are intended to be options that do not
meet the requirements for incentive stock options within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the 'Code').
As used in the Plan, the term 'parent corporation' and 'subsidiary
corporation' shall mean a corporation coming within the definition of such terms
contained in Sections 424(e) and 424(f) of the Code, respectively.
2. STOCK SUBJECT TO THE PLAN
Options granted under the Plan shall be exercisable for shares of the
Company's common stock, par value $1.00 per share ('Common Stock').
The total number of shares of Common Stock authorized for issuance under
the Plan upon the exercise of Options (the 'Shares'), shall not exceed, in the
aggregate, 300,000 of the currently authorized shares of Common Stock of the
Company, such number to be subject to adjustment in accordance with Section 13
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.
3. EFFECTIVE DATE AND TERM OF THE PLAN
The Plan shall become effective at 5:00 p.m., New York City time, on July
22, 1996 (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 of stockholders within twelve months after the Effective
Date, the Plan and any Options granted hereunder shall terminate. The Plan shall
terminate at the close of business on July 21, 2006 (the 'Termination Date'),
unless sooner terminated in accordance with its terms.
4. ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company
(the 'Board of Directors'), which may designate from among its members a
committee to exercise all power and authority of the Board of Directors at any
time and from time to time to administer the Plan. (References herein to the
Board of Directors shall be deemed to include references to any such committee,
except as the context otherwise requires.) Subject to the express provisions of
the Plan, the Board of Directors shall have authority to construe the Plan and
the Options granted hereunder, to prescribe, amend and rescind rules and
regulations relating to the Plan and to make all other ministerial
determinations necessary or advisable for administering the Plan. However, the
timing of grants of Options under the Plan and the determination of the amounts
and prices of such Options shall be effected automatically in accordance with
the terms and provisions of the Plan without further action by the Board of
Directors.
The determination of the Board of Directors on matters referred to in this
Section 4 shall be conclusive.
A-1
<PAGE>
5. ELIGIBILITY
Each member of the Board of Directors who is not an employee of the Company
or any subsidiary corporation or parent corporation of the Company shall be
eligible to be granted Options under the Plan ('Eligible Directors').
6. OPTION GRANTS
On the Effective Date, each Eligible Director then in office shall
automatically be granted an Option to purchase 15,000 Shares (subject to
adjustment as provided in Section 13), subject to the approval of the Plan by
the stockholders of the Company at the Annual Meeting of Stockholders to be held
in 1997. Future Eligible Directors shall automatically be granted an Option to
purchase 15,000 Shares (subject to adjustment as provided in Section 13) upon
their initial appointment or election to the Board of Directors. On the date of
the annual meeting of stockholders of the Company which takes place during the
calendar year in which the first anniversary of the Final Vesting Date (as
defined below) of an Option occurs, the holder of such Option shall
automatically be granted an Option to purchase 15,000 Shares (subject to
adjustment as provided in Section 13), provided such holder is an Eligible
Director in office immediately following such annual meeting. Each Option
granted to an Eligible Director pursuant to the Plan shall be evidenced by a
written agreement between the Company and such Eligible Director. Any Eligible
Director entitled to receive an Option grant pursuant to the Plan may elect to
decline the Option.
7. OPTION PRICE AND PAYMENT
The price for each Share purchasable upon exercise of any Option granted
hereunder shall be an amount equal to the fair market value per Share on the
date of grant. For purposes of the Plan, fair market value per share 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 Board of
Directors, 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 Board of Directors determines that a regular, active public market
does not exist for the Shares, the Board of Directors 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. In lieu of cash, the holder of an Option may,
to the extent permitted by applicable law, exercise an Option in whole or in
part, by delivering to the Company shares of Common Stock (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 by the
delivery of such shares. In lieu of the actual delivery to the Company of such
shares of Common Stock, the holder of an Option may exercise an Option by
providing the Company with a notarized statement attesting to the number of
shares of Common Stock owned which are intended to be exchanged and, if the
stock certificates representing such shares are held by the option holder, with
such certificate numbers, and upon receipt of such notarized statement and upon
verification of the existence of such shares, the Company shall cause to be
issued to the option holder only the number of incremental Shares to which the
option holder is entitled upon exercise of the Option. The fair market value per
Share of shares so delivered by the option holder to the Company shall be
determined as of the date immediately
A-2
<PAGE>
preceding the date on which the Option is exercised in accordance with this
Section 7, or as may be required in order to comply with or to conform to the
requirements of any applicable laws or regulations.
8. TERMS OF OPTIONS AND LIMITATIONS ON THE RIGHT OF EXERCISE
Any Option granted to an Eligible Director shall be exercisable, on a
cumulative basis, for a period commencing on the date of grant and ending ten
(10) years after the date of grant of such Option as follows:
(a) up to one third of the total number of Shares subject to an Option
may be exercised as of the date of grant of an Option;
(b) up to an additional one third of the total number of Shares
subject to an Option may be exercised as of the date of the annual meeting
of stockholders of the Company next following the date of grant of an
Option ('Second Vesting Date'), provided that such holder is an Eligible
Director immediately following such annual meeting; and
(c) the balance of the total number of Shares subject to an Option may
be exercised as of the date of the annual meeting of stockholders of the
Company next following the Second Vesting Date (the 'Final Vesting Date'),
provided such holder is an Eligible Director immediately following such
annual meeting.
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.
In no event shall an Option granted hereunder be exercised for a fraction
of a Share or for less than one hundred 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.
Each Eligible Director shall agree not to sell or otherwise dispose of
Shares acquired pursuant to an Option granted on the Effective Date for a period
of six (6) months following the date the Plan is approved by the stockholders of
the Company.
9. TERMINATION OF DIRECTORSHIP
If an Eligible Director's service as a director of the Company is
terminated, any Option previously granted to such Eligible Director shall, to
the extent not theretofore exercised, terminate and become null and void;
provided, however, that:
(a) if an Eligible Director holding an outstanding Option dies,
including during either the three (3) month or one (1) year period,
whichever is applicable, specified in clause (b) immediately below, such
Option shall, to the extent exercisable on the date of death and not
theretofore exercised, remain exercisable for one (1) year after such
Eligible Director's death, by such Eligible Director's legatee,
distributee, guardian or legal or personal representative; and
(b) if the service of an Eligible Director holding an outstanding
Option is terminated by reason of (i) such Eligible Director's disability
(as described in Section 22(e)(3) of the Code), (ii) voluntary retirement
from service as a director of the Company or (iii) failure of the Company
to nominate for re-election such Eligible Director who is otherwise
eligible, except if such failure to nominate for re-election is due to any
act of (A) fraud or intentional misrepresentation or (B) embezzlement,
misappropriation or conversion of assets or opportunities of the Company or
any subsidiary corporation or parent corporation of the Company (in which
case, such Option shall terminate and no longer be exercisable), such
Option shall, to the extent exercisable on the date of such termination and
not therefore exercised, remain exercisable at any time up to and including
(X) three (3) months after the date of such termination of service in the
case of termination by reason of voluntary retirement or failure of the
Company to nominate for re-election such Eligible Director who is otherwise
eligible, subject to the above exceptions thereto stated in this clause
(b), and (Y) one (1) year after the date of termination of service in the
case of termination by reason of disability.
None of the events described above shall extend the period of
exercisability of an Option beyond the expiration date thereof. If an Option
granted hereunder shall be exercised by the legal representative of a
A-3
<PAGE>
deceased Eligible Director or former Eligible Director, or by a person who
acquired an Option granted hereunder by bequest or inheritance or by reason of
the death of any Eligible Director or former Eligible Director, 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.
10. EXERCISE OF OPTIONS
Subject to the express provisions of the Plan, Options granted under the
Plan shall be exercised by the optionee as to all or part of the Shares covered
thereby by the giving of written notice of the exercise thereof to the Corporate
Secretary of the Company at the principal business office of the Company,
specifying the number of Shares to be purchased, the proposed form of payment
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 15, 16 and 17 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.
11. 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.
12. 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
such 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.
13. ADJUSTMENT OF SHARES; CHANGE IN CONTROL
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 Board of Directors 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 Eligible Director 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 Board of Directors as to these matters shall be conclusive
and binding on the optionee.
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 Rule 13d-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')
A-4
<PAGE>
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.
Upon the occurrence of a transaction described in clauses (b) or (c) of 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 the kinds of property payable in such
transaction.
14. RIGHT TO TERMINATE SERVICE
The Plan shall not impose any obligation on the Company or on any
subsidiary corporation or parent corporation thereof to continue the service of
any Eligible Director holding Options and shall not impose any obligation on the
part of any Eligible Director holding Options to remain in the service of the
Company or of any subsidiary corporation or parent corporation thereof.
15. PURCHASE FOR INVESTMENT
Except as hereinafter provided, the Board of Directors may require the
holder of an Option granted hereunder, as a condition to 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 Board of
Directors, in which such holder (a) 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 (b) 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.
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 have not been granted with respect to such Shares.
16. 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 Board of
Directors, in its sole discretion, determines to be necessary or appropriate to
(a) prevent a violation of, or to perfect an exemption from, the registration
requirements of the Securities Act or (b) implement the provisions of the Plan
and any agreement between the Company and the optionee with respect to such
Shares.
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 that 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.
A-5
<PAGE>
17. WITHHOLDING TAXES
The Company shall require an Eligible Director exercising an Option to pay
to the Company, upon its demand, such amount as may be requested by the Company
for the purpose of satisfying any liability to withhold federal, state, local or
foreign income or other taxes. If the amount requested is not paid, the Company
shall have no obligation to issue, and the Eligible Director shall have no right
to receive, the Shares subject to such Option.
18. LISTING OF SHARES AND RELATED MATTERS
If at any time the Board of Directors 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 Board of
Directors.
19. AMENDMENT OF THE PLAN
The Board of Directors may, from time to time, amend the Plan; provided,
however, that (i) no amendment shall become effective without the approval of
the stockholders of the Company to the extent that stockholder approval is
required in order to comply with Rule 16b-3 (or any successor provision) under
the Securities Exchange Act of 1934, as amended (the 'Exchange Act'), and (ii)
if required in order to comply with Rule 16b-3 under the Exchange Act, no
provision of the Plan addressing eligibility to participate in the Plan or the
amount, price or timing of Options to be granted under the Plan may be amended
more than once every six months, other than to comport with changes in the Code,
the Employee Retirement Income Security Act of 1974, as amended, or the rules
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.
20. TERMINATION OR SUSPENSION OF THE PLAN
The Board of Directors may at any time suspend or terminate the Plan.
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
ministerial power of the Board of Directors to construe and administer any
Options under Section 4 that are granted prior to the termination or suspension
of the Plan shall continue after such termination or during such suspension.
21. 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 in effect.
22. PARTIAL INVALIDITY
The invalidity or illegality of any provision herein shall not be deemed to
affect the validity of any other provision.
A-6
<PAGE>
ANNEX B
The following information was provided by OPT.CO INC. as to which the Company
assumes no responsibility.
The following table sets forth, as of March 11, 1997, the number of shares
of the Common Stock of the Company that are beneficially owned by OPT.CO INC.,
David A. Lang and Alan S. Parsow and all persons acting in concert with it:
<TABLE>
<CAPTION>
NAME AMOUNT
- --------------------------------------------- ------
<S> <C>
OPT.CO INC................................... 1,500
David A. Lang................................ 8,000
Alan S. Parsow............................... 2,500
</TABLE>
The following table sets forth certain information with respect to Messrs.
Lang and Parsow.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL AGE (AT
BUSINESS ADDRESS DECEMBER 31, 1996) PRINCIPAL OCCUPATION OR EMPLOYMENT
- --------------------------------- ------------------ ----------------------------------------------------------
<S> <C> <C>
David A. Lang ................... 47 President of OPT.CO INC., a private investment company*
250 West 94th Street (since 1991)
New York, NY 10025 President of Deep Creek TeleServices Company LLC, a
business development company (since 1997 formation).
Director of Informedix, Inc., a development-stage medical
electronics company (since 1989)
Vice-President of Faneuil Research Ltd., a market research
company (1993-1995)
Alan S. Parsow .................. 47 Private Investor, General Partner of Parsow Partnership,
2222 Skyline Drive Ltd. and Elkhorn Partners L.P., both Nebraska limited
Elkhorn, Nebraska 68022 investment partnerships* (since 1989)
Vice-President of Parsow's Fashions for Men
(since 1980)
Director of CACI International Inc. (since 1992).
Republic Funds Group (since 1987)
</TABLE>
Each of Messrs. Lang and Parsow has held his present principal occupation,
indicated by asterisk (*), for the past five years. There are no family
relationships between Messrs. Lang or Parsow and any director or executive
officer of the Company.
B-1
<PAGE>
PRELIMINARY COPY
UNITED INDUSTRIAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS MAY 13, 1997
The undersigned hereby appoints Edward C. Aldridge, Jr., Richard R. Erkeneff and
E. Donald Shapiro 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.
The shares represented by this proxy will be voted for proposals 1 through 3,
against proposals 4 and 5 and in accordance with item 6 if no instruction to the
contrary is indicated, or if no instruction is given.
1. Election of the following nominees as set forth in the proxy statement
/ / FOR the nominees listed below (except as marked to the contrary below)
/ / WITHHELD AUTHORITY to vote for all nominees listed below
Harold S. Gelb and Susan Fein Zawel
For, except vote withheld from the following nominee(s).
- --------------------------------------------------------------------------------
2. To consider and act upon a proposal to approve the Company's 1996 Stock
Option Plan for Nonemployee Directors
/ / FOR / / AGAINST / / ABSTAIN
3. To consider and act upon a proposal to ratify the appointment of Ernst &
Young LLP as independent auditors of the Company for 1997.
/ / FOR / / AGAINST / / ABSTAIN
(TO BE SIGNED ON REVERSE SIDE)
<PAGE>
4. To consider and act upon a proposal by a certain stockholder with respect to
a classified board of directors, if brought before the meeting.
/ / FOR / / AGAINST / / ABSTAIN
5. To consider and act upon a proposal by a certain stockholder with respect to
the engagement of an investment banker, if brought before the meeting.
/ / FOR / / AGAINST / / ABSTAIN
6. In their discretion, to act upon such other matters as may properly come
before the meeting or any adjournment thereof.
Please mark, sign, date and return this proxy in the enclosed envelope.
(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.)
___________________________________
Dated: Signature
___________________________________
Dated: Signature if
held jointly
