SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
--------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------- -------------
Commission file number #1-4252
-------
UNITED INDUSTRIAL CORPORATION
-------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-2081809
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Identification No.)
incorporation or organization)
570 Lexington Avenue, New York, NY 10022
------------------------------------------------------------
(Address of principal executive offices)
Not Applicable
------------------------------------------------------------
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT.
Indicate by check mark whether the registrant (1)has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. 12,374,638 shares of common
stock as of May 3, 2000.
78495.0001
<PAGE>
UNITED INDUSTRIAL CORPORATION
INDEX
Page #
------
Part I - Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - Unaudited
March 31, 2000 and December 31, 1999 1
Consolidated Condensed Statements of Operations -
Three Months Ended March 31, 2000 and 1999 2
Consolidated Condensed Statements of Cash Flows
Three Months Ended March 31, 2000 and 1999 3
Notes to Consolidated Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
Item 3. Qualitative and Quantitative Disclosures
about Market Risk 7
PART II - Other Information 9
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
UNITED INDUSTRIAL CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31*
2000 1999
------------ ------------
<S> <C> <C>
ASSETS (Unaudited)
- ------
Current Assets
Cash & cash equivalents $ 13,044 $ 13,092
Marketable securities 3,462 -
Trade receivables 48,915 48,395
Inventories
Finished goods & work-in-process 49,375 38,902
Materials & supplies 3,054 3,285
-------- --------
52,429 42,187
Deferred income taxes 6,949 6,949
Prepaid expenses & other current assets 3,002 3,239
-------- --------
Total Current Assets 127,801 113,862
Other assets 50,706 56,005
Property & equipment - less allowances
for depreciation (2000-$87,971; 1999-$86,248) 34,835 35,833
-------- --------
$213,342 $205,700
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 8,701 $ 9,837
Accrued employee compensation & taxes 7,286 7,710
Customer advances 34,507 25,705
Federal income taxes 1,744 636
Other liabilities 5,755 7,847
Provision for contract losses 6,774 7,026
-------- --------
Total Current Liabilities 64,767 58,761
Long-term liabilities 3,887 3,887
Deferred income taxes 7,310 7,383
Postretirement benefits other than pensions 24,788 24,614
Shareholders' Equity
- --------------------
Common stock $1.00 par value
Authorized - 30,000,000 shares; outstanding 12,373,638 shares and
12,294,138 shares - March 31, 2000 and December 31, 1999 (net of
shares in treasury) 14,374 14,374
Additional capital 89,398 89,483
Retained earnings 24,608 23,616
Treasury stock, at cost, 2,000,510 shares at
March 31, 2000 and 2,080,010 shares at
December 31, 1999 (15,790) (16,418)
-------- --------
112,590 111,055
-------- --------
$213,342 $205,700
======== ========
</TABLE>
See accompanying notes
* Reclassified to conform to 2000 presentation
1
<PAGE>
UNITED INDUSTRIAL CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
Three Months Ended March 31
---------------------------
2000 1999
----------- ----------
(Unaudited)
Net sales $ 49,936 $ 47,070
Operating costs & expenses
Cost of sales 36,960 32,015
Selling & administrative 10,480 10,989
Other (income) expense - net (498) 1,010
Interest expense 2 23
Interest income (526) (619)
-------- --------
46,418 43,418
-------- --------
Income before income taxes 3,518 3,652
Income taxes 1,289 1,338
-------- --------
Net income $ 2,229 $ 2,314
======== ========
Net earnings per share:
Basic $ .18 $ .19
===== =====
Diluted $ .18 $ .19
===== =====
See accompanying notes
2
<PAGE>
UNITED INDUSTRIAL CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
---------------------------
2000 1999
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES (Unaudited)
- --------------------
Net income $ 2,229 $ 2,314
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 2,238 1,846
Deferred income taxes (73) (118)
Decrease in provision for contract losses (252) (705)
Changes in operating assets and liabilities (5,375) (2,570)
Increase (decrease) in federal income taxes
payable 1,108 (715)
-------- -------
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES (125) 52
INVESTING ACTIVITIES
Increase in marketable securities (3,462) (1,182)
Purchase of property and equipment (1,057) (1,946)
Decrease (increase) in other assets - net 5,130 (389)
-------- --------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 611 (3,517)
FINANCING ACTIVITIES
Increase in long-term liabilities 174 80
Proceeds from exercise of stock options 529 43
Dividends (1,237) (1,226)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES ( 534) (1,103)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (48) (4,568)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 13,092 21,126
-------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 13,044 $ 16,558
======== ========
</TABLE>
See accompanying notes
3
<PAGE>
UNITED INDUSTRIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
March 31, 2000
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 2000
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1999.
NOTE B - SEGMENT INFORMATION
<TABLE>
<CAPTION>
Trans- Reconci-
(dollars in thousands) Defense portation Energy Other liations Totals
------- --------- ------ ----- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Three months ended March 31, 2000
- ---------------------------------
Revenues from external customers $41,126 $ 1,016 $ 7,794 $ - $ - $49,936
Intersegment revenues 219 - - - (219) -
Equity profit (loss) in ventures 68 (70) - - - (2)
Segment profit (loss) 3,562 (805) 1,226 (465) - 3,518
Income before income taxes $ 3,518
=======
Three months ended March 31, 1999
Revenues from external customers $35,980 $ 2,650 $ 8,440 $ - $ - $47,070
Intersegment revenues 140 - - - (140) -
Equity profit (loss) in ventures 84 (1,336) - - - (1,252)
Segment profit (loss) 4,038 (1,143) 1,183 (426) - 3,652
Income before income taxes $ 3,652
=======
</TABLE>
NOTE C - DIVIDENDS
A quarterly dividend of $.10 per share is payable May 31, 2000.
4
<PAGE>
NOTE D - WEIGHTED AVERAGE SHARES
Three Months Ended
March 31
2000 1999
---------- ----------
Weighted average shares 12,373,638 12,258,713
Dilutive effect of stock options 215,725 226,297
---------- ----------
Diluted weighted average shares 12,589,363 12,485,010
========== ==========
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Forward Looking Information
This report contains "forward looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward looking
statements are based on management's expectations, estimates, projections and
assumptions. Words such as "expects," "anticipates," "intends," "plans,"
"believes," "estimates," and variations of such words and similar expressions
are intended to identify such forward looking statements which include, but are
not limited to, projections of revenues, earnings, segment performance, cash
flows and contract awards. These forward looking statements are subject to risks
and uncertainties which could cause the Company's actual results or performance
to differ materially from those expressed or implied in such statements. These
risks and uncertainties include, but are not limited to, the following: the
Company's successful execution of internal performance plans; performance issues
with key suppliers, subcontractors and business partners; legal proceedings;
product demand and market acceptance risks; the effect of economic conditions;
the impact of competitive products and pricing; product development,
commercialization and technological difficulties; capacity and supply
constraints or difficulties; legislative or regulatory actions impacting the
Company's energy segment and transportation business; changing priorities or
reductions in the U.S. Government defense budget; contract continuation and
future contract awards; and U.S. and international military budget constraints
and determinations.
Results of Operations
Three months ended March 31, 2000 compared to three months ended March 31, 1999:
Consolidated net sales increased by $2,866,000 or 6.1% to $49,936,000 in the
first quarter of 2000 from $47,070,000 during the same period in 1999. Sales in
the Defense segment increased $5,146,000 or 14% to $41,126,000 from $35,980,000
during the same period in 1999. The Energy segment's sales decreased $646,000 or
8% in the first quarter of 2000 to $7,794,000 from $8,440,000 in the first
quarter of 1999. Sales in the Transportation segment decreased $1,634,000 or
61.7% to $1,016,000 during the first quarter of 2000 from $2,650,000 during the
1999 first quarter generally due to delays in electric trolley bus production.
This delay was caused by the failure of certain subsidiaries of Skoda a.s that
are major subcontractors
5
<PAGE>
to Electric Transit, Inc. (ETI) to deliver bus frames and other major components
to the Company due to their working capital financing difficulties. ETI is owned
65% by Skoda a.s. and 35% by the Company. Financing arrangements finalized with
the Czech Export Bank in February 2000 are expected to provide the necessary
working capital to the Skoda a.s. subsidiaries and ETI to execute the San
Francisco electric trolley bus program. Consequently, production has begun in
the Czech Republic, which should result in production commencing at the
Company's facility at the end of the second quarter.
Since December 31, 1999 the backlog increased $42,000,000 to $335,000,000; the
increases were $33,000,000 in the Defense segment, $7,000,000 in the Energy
segment and $2,000,000 in the Transportation segment.
Gross margin decreased to 26% in the first quarter of 2000 from 32% in the first
quarter of 1999. The gross margin in the Defense segment for the first quarter
of 2000 was 25.1% compared to 30.9% in the first quarter of 1999. The 1999 gross
margin in the Defense segment included accumulated production efficiencies
achieved on certain contracts but not previously determinable. The Energy
segment gross margin was 34.4% in the first quarter of 2000 and 34.7% in the
first quarter of 1999. The gross margin in the Transportation segment was a loss
of $17,000 in the first quarter of 2000 compared to a profit of $995,000 in the
first quarter of 1999, primarily due to a rail vehicle overhaul contract
completed in 1999.
Selling and administrative expenses for the three months ended March 31, 2000
decreased $509,000 or 4.6% to $10,480,000 from $10,989,000 in the first quarter
of 1999. Selling and administrative expenses decreased in all segments.
Other income/expense increased $1,508,000 to income of $498,000 in the first
quarter of 2000 from expenses of $1,010,000 in the first quarter of 1999. The
increase was primarily due a to a reduction in the equity loss in ETI. During
1999 the Transportation segment recorded 100% of the ETI loss because of Skoda's
inability to meet its financial obligations under ETI's shareholder agreement.
Beginning in 2000, in view of Skoda's financing arrangements with the Czech
Export Bank, the Company has returned to recording its equity interest in the
earnings of ETI at 35%. In the first quarter of 1999, 100% of the loss or
$1,336,000 was recorded compared to a loss of $70,000, or 35% of the loss, in
the first quarter of 2000.
Income before taxes decreased by $134,000 or 37% in the first quarter of 2000
from the same period in 1999. Net income decreased $85,000 in the first quarter
of 2000 compared to the same period in 1999. Earnings per share were $.18 per
diluted share in the first quarter of 2000 compared to $.19 per diluted share in
the first quarter of 1999.
Liquidity and Capital Resources
Cash and cash equivalents decreased $48,000 to $13,044,000 at March 31, 2000
from $13,092,000 at December 31, 1999. However, the Company's investments in
marketable securities increased $3,462,000 from December 31, 1999. During the
first three months of 2000 changes in operating assets and liabilities of
$5,375,000 were partially offset by a decrease in other assets of $5,130,000.
Other assets decreased from the receipt of cash of $5,702,000 for the payment of
a note receivable from ETI. The Company currently has no significant fixed
commitment for capital expenditures.
6
<PAGE>
The Company expects that available cash and existing lines of credit will be
sufficient to meet its cash requirements for the remainder of the calendar year.
Its cash requirements consist primarily of its obligation to fund operations. In
March 2000, the existing loan agreements were amended, among other things, to
extend the expiration date to January 11, 2001, increase the sublimit on letter
of credit obligations to $16,500,000 and to limit the aggregate amount of
advances to be made to a borrowing base, as defined.
Contingent Matters
Reference is made to Item 3. Legal Proceedings, in the annual report on Form
10-K for the year ended December 31, 1999, which is incorporated herein by
reference except as set forth below.
As indicated in the Annual Report on Form 10-K for the year ended December 31,
1999, the Company, along with numerous other parties, has been named in five
tort actions in Maricopa County Superior Court relating to environmental matters
based on allegations partially related to a predecessor's operation of a small
facility at a site in the State of Arizona that manufactured semi-conductors
between 1959 and 1960. All such operations of the Company were sold by 1961.
These tort actions seek recovery for personal injury and property damage among
other damages based on exposure to solvents allegedly released at the site.
These suits allege that the plaintiffs have been exposed to contaminated
groundwater in the Phoenix/Scottsdale, Arizona area and suffer increased risk of
disease and other physical effects. They also assert property damages under
various theories; seek to have certain scientific studies performed concerning
health risks, preventive measures and long-term effects; and seek incidental and
consequential damages, punitive damages, and an injunction against actions
causing further exposures.
The Company reached an agreement to settle all of these matters with the
plaintiffs for, among other items, a cash payment of $4,250,000. The Superior
Court of Maricopa County has scheduled a hearing for final approval of the
settlement for March 14, 2000. The settlement has been approved by the Superior
Court of Maricopa County.
In connection with certain of its contracts, the Company commits to certain
performance guarantees. The ability of the Company to perform under these
guarantees may, in part, be dependent on the performance of other parties,
including partners and subcontractors. If the Company is unable to meet these
performance obligations, the performance guarantees could have a material
adverse effect on product margins and the Company's results of operations,
liquidity or financial position. The Company monitors the progress of its
partners and subcontractors and does not believe that their performance will
adversely affect these contracts as of March 31, 2000.
ITEM 3 - QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
A portion of the Company's operations consists of manufacturing and sales
activities in foreign jurisdictions, and some of these transactions are
denominated in foreign currencies. As a result, the Company's financial
results could be affected by changes in foreign exchange rates. To
7
<PAGE>
mitigate the effect of changes in these rates, the Company has entered into two
foreign exchange contracts. There has been no material change in the firmly
committed sales exposures and related derivative contracts from December 31,
1999. (See Item 7A - Form 10-K for December 31, 1999.)
8
<PAGE>
UNITED INDUSTRIAL CORPORATION AND SUBSIDIARIES
PART II - Other Information
ITEM 4 - Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders of the Registrant was held
on May 9, 2000.
(b) Harold S. Gelb and Susan Fein Zawel were elected directors at
the meeting, for terms ending in 2003. The incumbent directors
whose terms of office continued after the meeting are Richard
R. Erkeneff, E. Donald Shapiro, Edward C. Aldridge, Jr., and
Joseph S. Schneider.
(c) Voting for the election of directors of the Registrant:
WITHHELD (including
FOR broker non-votes)
Harold S. Gelb 11,048,407 531,569
Susan Fein Zawel 10,192,200 1,387,776
Other Matters:
11,351,668 shares were voted in favor of the proposal to ratify the
appointment of Ernst & Young LLP as independent auditors of the
Registrant for 2000 with 170,730 shares voted against, 57,578
abstentions and no broker non-votes. 9,705,275 shares were voted in
favor of the proposed amendment to the Amended and Restated Bylaws of
the Corporation with 1,797,886 shares voted against, 76,815 abstentions
and no broker non-votes. Since at least 80% of the outstanding shares
did not vote for the amendment, the amendment was not approved.
Reference is made to the Registrant's Proxy Statement dated April 7,
2000 for its 2000 Annual Meeting for additional information concerning
the matters voted on at the meeting.
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
10(a) - Third Amendment to Revolving Line of Credit Loan Agreement,
Term Loan Agreement and Security Agreement
10(b) - First Amendment to Revolving Note
27 - Financial Data Schedule
(b) The Registrant did not file any reports on Form 8-K during the
quarter ended March 31, 2000.
9
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNITED INDUSTRIAL CORPORATION
Date May 11, 2000 By: /s/ James H. Perry
------------ --------------------------------
James H. Perry
Chief Financial Officer
Vice President and
Treasurer
10
<PAGE>
UNITED INDUSTRIAL CORPORATION AND SUBSIDIARIES
INDEX OF EXHIBITS FILED HEREWITH
Exhibit No.
- -----------
10(a) Third Amendment to Revolving Line of Credit
Loan Agreement, Term Loan Agreement and
Security Agreement
10(b) First Amendment to Revolving Note
27 Financial Data Schedule
11
Exhibit 10(a)
THIRD AMENDMENT TO
REVOLVING LINE OF CREDIT LOAN AGREEMENT, TERM
LOAN AGREEMENT AND SECURITY AGREEMENT
-------------------------------------
THIS THIRD AMENDMENT TO REVOLVING LINE OF CREDIT LOAN AGREEMENT, TERM
LOAN AGREEMENT AND SECURITY AGREEMENT (the "Third Amendment") is made as of
March 31, 2000, by and among United Industrial Corporation, a Delaware
corporation, having an address of 570 Lexington Avenue, New York, New York
10022, and the other Persons included within the definition of the Borrower
(hereinafter redefined), and First Union Commercial Corporation, a North
Carolina corporation, having an address of 1970 Chain Bridge Road, McLean,
Virginia 22101 ("Lender").
RECITALS
A. United Industrial Corporation and certain of its subsidiaries and
the Lender are parties to a Revolving Line of Credit Loan Agreement, Term Loan
Agreement and Security Agreement, dated as of June 11, 1997 (the "Loan
Agreement"), as amended by First Amendment to Revolving Line of Credit Loan
Agreement, Term Loan Agreement and Security Agreement (the "First Amendment")
made as of October 1, 1998, and by Second Amendment to Revolving Line of Credit
Loan Agreement, Term Loan Agreement and Security Agreement (the "Second
Amendment") made as of December 31, 1998 (said agreement, as so amended, being
hereinafter called the "Loan Agreement").
B. The Borrower and the Lender desire further to amend the Loan
Agreement to extend the Ending Date (as defined in the Loan Agreement) to
January 11, 2001, to amend the Borrower's financial covenant regarding its Debt
Service Coverage Ratio, to provide that aggregate amount of Advances to be made
under the Revolving Loan shall henceforth be limited by a Borrowing Base
(hereinafter defined), to increase the sublimit on letters of credit, and for
certain other purposes hereinafter set forth.
C. The Borrower's obligation to repay Advances under the Revolving Loan
(as defined in the Loan Agreement) is evidenced by a Revolving Note, dated as of
June 11, 1997, in the stated principal amount of Seventeen Million, Five Hundred
Thousand Dollars ($17,500.000.00). The parties are simultaneously executing a
First Amendment To Revolving Note extending the maturity date of the Revolving
Note to January 11, 2001 and to change the signatures thereon to reflect the
revised definition of "Borrower" as hereinafter provided. The Revolving Note, as
so amended, is hereinafter called the "Revolving Note."
AGREEMENTS
NOW, THEREFORE, in consideration of the premises, the mutual agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Lender hereby
agree as follows:
1
<PAGE>
1. The recitals are incorporated herein by reference. Capitalized terms used but
not defined herein shall have the meanings ascribed to them in the Loan
Agreement.
2. To induce the Lender to enter into this Third Amendment, the Borrower
warrants and represents to the Lender that:
a. The Borrower's books and record properly reflect the
Borrower's financial condition, and no material adverse change
in the Borrower's financial condition has occurred since the
last date that the Borrower provided financial reports to the
Lender; and
b. No litigation is pending or threatened against the Borrower of
which the Borrower has not informed the Lender in writing; and
c. The Borrower is in compliance with all provisions of the Loan
Agreement and with all applicable laws and regulations.
d. Borrower has the power and authority to enter into this Third
Amendment, to perform its obligations hereunder, to execute
all documents being executed and delivered in connection
herewith, and to incur the obligations provided for herein,
all of which have been duly authorized and approved in
accordance with the Borrower's organizational documents;
e. This Third Amendment, together with all documents executed in
connection herewith or pursuant hereto, constitute the valid
and legally binding obligations of the Borrower in accordance
with their respective terms;
f. The Borrower's obligations under the Loan Documents remain
valid and enforceable obligations, and the execution and
delivery of this Third Amendment and the other documents
executed in connection herewith shall not be construed as a
novation of the Loan Agreement or the other Loan Documents.
3. Section 1.1 of the Loan Agreement is amended by adding new definitions as
follows:
"Adjusted EBITDA" means EBITDA, adjusted by adding the absolute value
of the one-time expense reported on the Borrower's December 31, 1999
financial statements in the amount of Five Million Dollars
($5,000,000.00), said expense being described more specifically in
Schedule 1.1(A) attached hereto and made a part hereof.
"Allowed Amount of Advances" means the aggregate amount of all Advances
of principal under the Revolving Loan permitted to be outstanding at
any particular time under the Paragraph below titled "Allowed Amount of
Advances."
2
<PAGE>
"Borrowing Base" means the sum of: (i) ninety percent (90%) of the
Borrower's Eligible Government Accounts, plus (ii) eighty-five percent
(85%) of Borrower's Eligible Commercial Accounts.
"Borrowing Base Certificate" means a certificate substantially in the
form of Schedule 1.1(B) attached hereto and made a part hereof (or such
subsequent form as the Lender shall require).
"Commercial Accounts" means all Accounts due from Customers other than
the Government.
"Contra Account" means an Account due from an account debtor to which
the Borrower owes money.
"Customer" means any governmental entity (federal, state, county,
municipal or otherwise) or business entity (corporation, association,
partnership, limited liability company or partnership, sole
proprietorship or otherwise) or individual to which Borrower provides
goods or services for compensation; however, certain individual
agencies of the United States Government and certain branches of
certain major corporations, as determined by the Lender in its sole
discretion, shall be treated as Customers in their own right, separate
and distinct from other such agencies or branches and from the United
States Government or the corporation of which they are a part.
"Eligible," when used to describe an Account, means that the Account
conforms to the following criteria:
i. the Account has been Billed;
ii. in the case of a Commercial Account, less than
ninety-one (91) days have passed from the original
billing date, or, in the case of a Government
Account, less than one hundred and twenty-one (121)
days have passed from the original billing date;
iii. at Lender's option, in the case of a Government
Account, Borrower has made an Assignment of all
Payments due or to become due under the Government
Contract giving rise to the Account;
iv. the Account arose from a bona fide sale of goods or
services to a Customer; the goods or services have
been delivered or provided to the Customer; Borrower
possesses receipts from the Customer acknowledging
delivery of the goods or performance of the services;
and Customer has not returned or rejected the goods
or services;
3
<PAGE>
v. the Account is based upon an enforceable written
order or contract for goods or services;
vi. the Borrower's title to the Account is absolute and
is not subject to any prior assignment, claim, escrow
agreement, lien or security interest, and Borrower
otherwise has the full and unqualified right and
power to assign and grant a security interest in the
Account to the Lender;
vii. the amount shown on the books of Borrower and on any
invoice, certificate, schedule or statement delivered
to the Lender regarding the amount due on the Account
is due and owing to Borrower;
viii. the Account is not subject to any claim of reduction,
counterclaim, set-off, recoupment or other defense in
law or equity, or any claim for credits, allowances
or adjustments by the Customer because of returned,
inferior or damaged goods, unsatisfactory services or
for any other reason;
ix. the Customer has not notified Borrower of any dispute
concerning any of the goods or services giving rise
to the Account, nor made claim that the goods or
services fail to conform to the requirements of the
Customer's order or contract, nor notified Borrower
to cure any default under the Customer's order or
contract;
x. the Account does not arise out of a Customer's
contract or order that by its terms forbids or makes
void or unenforceable the Borrower's assignment of
the Account to the Lender;
xi. the Borrower has not received any note, trade
acceptance draft or other instrument tendered in
payment of the Account;
xii. Borrower has not received any notice of the death of
the Customer or any partner in a Customer that is a
partnership; nor has Borrower received any notice of
dissolution, termination of existence, insolvency,
business failure, appointment of a receiver for any
part of the property of, assignment for the benefit
of creditors by, or the filing of a petition in
bankruptcy or the commencement of any proceeding
under any bankruptcy or insolvency laws by or against
the Customer;
xiii. the Customer is not incorporated in any jurisdiction
outside the United States and is not conducting its
business primarily outside the United States;
4
<PAGE>
xiv. Borrower is not indebted in any manner to the
Customer;
xv. no bond has been issued or is contemplated with
respect to the goods or services furnished by the
Borrower or with respect to the project or contract
for which those goods or services were furnished; and
xvi. the Account is not an Ineligible Account.
"Government Contracts" means all contracts with a Government, including
all renewals, extensions, modifications, change orders and amendments
thereof and thereto.
"Ineligible Accounts" shall include the following Accounts:
i. Accounts that do not conform with the criteria set
forth for Eligible Accounts;
ii. An Account owing by any account debtor for which the
Lender has deemed fifty percent (50%) or more of the
account debtor's other Accounts to be non-Eligible;
however, for purposes of this category of Ineligible
Accounts, each Government Contract shall be treated
as an individual Customer;
iii. Government Accounts arising under Government
Contracts which contain an express prohibition
against assignment of Borrower's rights to Payment;
iv. The last payment due on a Government Account, unless
such Government Account arises from a Government
Contract which is a "fixed price contract" (as
defined in the Federal Acquisition Regulations) which
does not include any provision for progress payments,
incentive arrangements or price redetermination;
v. Contra Accounts;
vi. Accounts receivable from ETI or PUI;
vii. Accounts receivable from Affiliates or subsidiaries
of the Borrower;
viii. Unbilled Accounts, including, but not limited to,
progress payments, retainages, milestones and final
payments; or
5
<PAGE>
ix. Any Account deemed by the Lender, in the exercise of
its sole and absolute discretion, to be an Ineligible
Account because of uncertainty as to the
creditworthiness of the Customer or because the
Lender otherwise considers the collateral value
thereof to the Lender to be impaired or its ability
to realize such value to be insecure.
However, Borrower may request that Lender regard as Eligible any
Account that would otherwise be classified an Ineligible Account.
Lender may grant or deny any such request in its sole discretion.
4. The definition of "Borrower" contained in Section 1.1 of the Loan Agreement
is modified to delete AAI Systems Management, Inc. and UIC-Del. Corporation, to
add AAI/ACL Technologies Europe Limited, and to change the name of NEO Products
Co. to UIC Products Co., such that the first sentence of the definition of
"Borrower" shall hereafter read as follows:
"Borrower" means United Industrial Corporation, AAI
Corporation, AAI Engineering Support, Inc., AAI/ACL Technologies, Inc.,
AAI/ACL Technologies Europe Limited, Detroit Stoker Company, Midwest
Metallurgical Laboratory, Inc., UIC Products Co., Symtron Systems,
Inc., and AAI MICROFLITE Simulation International Corporation.
The remaining sentences of the definition of "Borrower" are unchanged, and shall
remain in full force and effect.
5. The definition of "Debt Service Coverage Ratio" contained in Section 1.1 of
the Loan Agreement is revised, effective as of December 31, 1999 and continuing
to and including September 30, 2000, to read as follows:
"Debt Service Coverage Ratio" means (i) Adjusted EBITDA, less Ten
Million Dollars ($10,000.00), divided by (ii) the sum of interest
expense, CMLT, CPCL and dividends paid on common or preferred shares of
stock in the Borrower;
provided, that on and after December 31, 2000, the words "Adjusted EBITDA" in
the definition of "Debt Service Coverage Ratio shall be replaced with the word
"EBITDA" and the words "Ten Million Dollars ($10,000,000.00)" shall be replaced
with the words "capital expenditures;" and provided, further, that the foregoing
amendment to the definition of Debt Service Coverage Ratio shall not apply to
any quarter prior to the quarter ending December 31, 1999, and the previous
definition of Debt Service Coverage Ratio shall apply prior to the quarter
ending December 31, 1999.
6. The definition of "Ending Date" contained in Section 1.1 of the Loan
Agreement is deleted in its entirety and replaced with the following:
6
<PAGE>
"Ending Date" means January 11, 2001.
7. The last sentence of the definition of "Tangible Net Worth" contained in
Section 1.1 of the Loan Agreement is deleted in its entirety and replaced with
the following:
Investments in or assets of AAI International, Inc., Seti, Inc., AAI
Medical, Inc., AAI California Carshell, Inc., UIC International
Corporation, AAI Aerospace Services Corp. or AAI Romania Technologies,
S.R.L. shall not be included in tangible net worth.
8. Paragraphs a and b of Section 2.1 of the Loan Agreement are deleted in their
entirety and replaced with the following:
a. Allowed Amount of Advances. The aggregate principal amount of
Advances outstanding under the Revolving Note at any time shall not
exceed the lesser of:
i. the difference between (i) the Maximum Revolving
Commitment Amount and (ii) the LOC Obligations; or
ii. the difference between (i) the Borrowing Base and
(ii) the LOC Obligations.
Borrower may decrease the Maximum Revolving Commitment Amount by
providing Lender ten (10) days prior written notice of the decrease,
but the Maximum Revolving Commitment Amount may not thereafter be
increased without the Lender's written consent.
b. Mandatory Prepayments. If the principal outstanding under the
Revolving Loan, at any time exceeds the Allowed Amount of Advances,
then Borrower shall make an immediate payment of principal under the
Revolving Loan in an amount sufficient that the principal outstanding
under the Revolving Loan will no longer exceed the Allowed Amount of
Advances. If the amount of the Borrower's Senior Debt at any time
exceeds the maximum amount that will enable Borrower to comply with any
of the affirmative covenants provided hereinafter (including, without
limiting the generality of the foregoing, any covenant limiting the
Borrower's ratio of Senior Debt to EBITDA), then Borrower shall make an
immediate payment of principal under the Revolving Loan in an amount
sufficient to enable Borrower to comply with all applicable financial
covenants provided hereinafter.
9. Clause (i) and (v) of Section 2.1, Paragraph (d) are deleted in their
entirety and replaced with the following:
7
<PAGE>
(i) the aggregate amount of LOC Obligations shall at
no time exceed Sixteen Million, Five Hundred
Thousand Dollars ($16,500,000.00);
(v) issuance of the Letter of Credit shall not cause the
principal amount outstanding under the Revolving
Note to exceed the Allowed Amount of Advances;
10. Section 5.20 is deleted in its entirety and replaced with the following:
5.20 Certain Subsidiaries of AAI Corporation. None of AAI
International, Inc., Seti, Inc., AAI Medical, Inc., AAI California
Carshell, Inc., AAI Aerospace Services Corp. or AAI Romania
Technologies, S.R.L.: (1) currently engages in any business activity,
(2) owns assets having an aggregate value in excess of Fifty Thousand
Dollars ($50,000.00); or (3) has any liability, except as a guarantor
of AAI Corporation's obligations to Lender under the 1994 Agreement.
11. Clause (i) of Section 6.3 of the Loan Agreement is deleted in its entirety
and replaced with the following: "(i) AAI Corporation may dissolve any or all of
AAI International, Inc., Seti, Inc., AAI California Carshell, Inc., AAI Medical,
Inc., AAI Aerospace Services Corp. or AAI Romania Technologies, S.R.L."
12. A new Paragraph g is added to Section 6.11 of the Loan Agreement providing
as follows:
g. Monthly Borrowing Base Certificates. As soon as available,
but not later than twenty (20) days after the end of each month,
Borrower shall provide Lender with an updated Borrowing Base
Certificate, providing information regarding the Borrowing Base current
as of the last day of the month just ended.
13. Paragraph a of Section 6.14 of the Loan Agreement is revised, effective
December 31, 1999, to read as follows:
a. Debt Service Coverage Ratio. A minimum Debt Service
Coverage Ratio of 1.75 to 1.0 at all times. Compliance with this
covenant shall be tested quarterly.
14. Section 7.11 of the Loan Agreement is deleted in its entirety and replaced
with the following:
7.11 Certain Inactive Subsidiaries of AAI Corporation. Make
any investment in, lend money to, advance funds to or guaranty
obligations of any of the following subsidiaries of AAI Corporation:
AAI International, Inc., Seti, Inc.,
8
<PAGE>
AAI California Carshell, Inc., AAI Medical, Inc., AAI Aerospace
Services Corp. or AAI Romania Technologies, S.R.L. Without the prior
written consent of the Lender, Borrower shall not suffer or permit AAI
International, Inc., Seti, Inc., AAI California Carshell, Inc., AAI
Medical, Inc., AAI Aerospace Services Corp. or AAI Romania
Technologies, S.R.L. to transact business of any kind.
15. A new Section 7.12 is added to Article 7 of the Loan Agreement, effective as
of January 1, 2000 but not prior to that date, to provide that the Borrower
shall not:
7.12 Limit on Annual Capital Expenditures. Make capital
expenditures in any calendar year that exceed in the aggregate the sum
of Ten Million Dollars ($10,000,000.00).
16. In consideration of Lender's agreement to this Third Amendment, Borrower
promises to pay to Lender, on demand, a loan fee of Twenty-Five Thousand Dollars
($25,000.00).
17. The Borrower promises to pay, on demand, all costs (including attorneys
fees) incurred by the Lender for: (i) the preparation of this Third Amendment,
the First Amendment to Revolving Note of even date and any other expenses
relating to this Third Amendment.
18. The Borrower authorizes the Lender to advance funds to itself or to third
parties to pay the fees and costs mentioned in the two immediately preceding
paragraphs, which shall be deemed to be Advances to the Borrower under the Loan
Agreement.
19. The Security Interest in the Collateral granted by the Loan Agreement shall
henceforth secure not only the Loans made pursuant to the Loan Agreement but
also any other credit that Lender may extend to the Borrower.
20. ARBITRATION. UPON DEMAND OF ANY PARTY HERETO, WHETHER MADE BEFORE OR AFTER
INSTITUTION OF ANY JUDICIAL PROCEEDING, ANY CONTROVERSY OR CLAIM ARISING OUT OF
OR RELATING TO THE LOAN DOCUMENTS BETWEEN PARTIES HERETO (A "DISPUTE") SHALL BE
RESOLVED BY BINDING ARBITRATION CONDUCTED UNDER AND GOVERNED BY THE COMMERCIAL
FINANCIAL DISPUTES ARBITRATION RULES (THE "ARBITRATION RULES") OF THE AMERICAN
ARBITRATION ASSOCIATION ("AAA") AND THE FEDERAL ARBITRATION ACT. DISPUTES MAY
INCLUDE, WITHOUT LIMITATION, TORT CLAIMS, COUNTERCLAIMS, A DISPUTE AS TO WHETHER
A MATTER IS SUBJECT TO ARBITRATION, CLAIMS BROUGHT AS CLASS ACTIONS, OR CLAIMS
ARISING FROM DOCUMENTS EXECUTED IN THE FUTURE. A JUDGMENT UPON THE AWARD MAY BE
ENTERED IN ANY COURT HAVING JURISDICTION. NOTWITHSTANDING THE FOREGOING, THIS
ARBITRATION PROVISION DOES NOT APPLY TO DISPUTES UNDER OR RELATED TO SWAP
AGREEMENTS. ALL ARBITRATION HEARINGS SHALL BE CONDUCTED IN THE CITY OR COUNTY
9
<PAGE>
WHERE THE LENDER'S OFFICE, AS FIRST STATED ABOVE, IS LOCATED, OR AT SUCH OTHER
PLACE AS THE PARTIES MAY IN WRITING AGREE. A HEARING SHALL BEGIN WITHIN 90 DAYS
OF DEMAND FOR ARBITRATION AND ALL HEARINGS SHALL CONCLUDE WITHIN 120 DAYS OF
DEMAND FOR ARBITRATION. THESE TIME LIMITS MAY NOT BE EXTENDED UNLESS A PARTY
SHOWS CAUSE FOR EXTENSION AND THEN FOR NO MORE THAN A TOTAL OF 60 DAYS. THE
EXPEDITED PROCEDURES SET FORTH IN RULE 51, ET SEQ., OF THE ARBITRATION RULES
SHALL APPLY TO DISPUTES IN WHICH THE CLAIM IS LESS THAN $1,000,000.00.
ARBITRATORS SHALL BE LICENSED ATTORNEYS SELECTED FROM THE COMMERCIAL FINANCIAL
DISPUTE ARBITRATION PANEL OF THE AAA. THE PARTIES DO NOT WAIVE APPLICABLE
FEDERAL OR STATE SUBSTANTIVE LAW EXCEPT AS PROVIDED HEREIN. NOTWITHSTANDING THE
PRECEDING BINDING ARBITRATION PROVISIONS, THE PARTIES AGREE TO PRESERVE WITHOUT
DIMINUTION, CERTAIN REMEDIES THAT ANY PARTY MAY EXERCISE BEFORE OR AFTER AN
ARBITRATION PROCEEDING IS BROUGHT. THE PARTIES SHALL HAVE THE RIGHT TO PROCEED
IN ANY COURT OF PROPER JURISDICTION OR BY SELF HELP TO EXERCISE OR PROSECUTE THE
FOLLOWING REMEDIES, AS APPLICABLE: (1) ALL RIGHTS TO FORECLOSE AGAINST ANY REAL
OR PERSONAL PROPERTY OR OTHER SECURITY BY EXERCISING A POWER OF SALE OR UNDER
APPLICABLE LAW BY JUDICIAL FORECLOSURE INCLUDING A PROCEEDING TO CONFIRM THE
SALE; (2) ALL RIGHTS OF SELF HELP, INCLUDING WITHOUT LIMITATION, PEACEFUL
OCCUPATION OF REAL PROPERTY AND COLLECTION OF RENTS, SETOFF, AND PEACEFUL
POSSESSION OF PERSONAL PROPERTY; (3) OBTAINING PROVISIONAL OR ANCILLARY REMEDIES
INCLUDING INJUNCTIVE RELIEF, SEQUESTRATION, GARNISHMENT, ATTACHMENT, APPOINTMENT
OF RECEIVER AND FILING AN INVOLUNTARY BANKRUPTCY PROCEEDING; AND (4) WHEN
APPLICABLE, A JUDGMENT BY CONFESSION OF JUDGMENT. ANY CLAIM OR CONTROVERSY WITH
REGARD TO ANY PARTY'S ENTITLEMENT TO SUCH REMEDIES IS A DISPUTE. THE PARTIES
AGREE THAT THEY SHALL NOT HAVE A REMEDY OF PUNITIVE OR EXEMPLARY DAMAGES AGAINST
OTHER PARTIES IN ANY DISPUTE, AND THEY HEREBY WAIVE ANY RIGHT OR CLAIM TO
PUNITIVE OR EXEMPLARY DAMAGES THEY MAY NOW HAVE OR WHICH MAY ARISE IN THE FUTURE
IN CONNECTION WITH ANY DISPUTE WHETHER THE DISPUTE IS RESOLVED BY ARBITRATION OR
JUDICIALLY.
21. Except as modified by this Third Amendment, the Loan Agreement remains in
full force and effect and unmodified. Borrower warrants and represents that it
has no offsets or defenses to its obligations under the Loan Documents, as so
modified.
22. This Third Amendment may be signed in several counterparts which, when
executed, shall constitute a single agreement. A counterpart containing a
facsimile signature shall be effective to the same extent as if it were a
counterpart containing an original signature, but shall be confirmed promptly
with a counterpart containing an original signature.
10
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Third
Amendment, or have caused this Third Amendment to be duly executed on their
behalf, as of the day and year first hereinabove written.
BORROWER: UNITED INDUSTRIAL CORPORATION
By: /s/ Richard Erkeneff
-----------------------------------
Richard Erkeneff, President
AAI CORPORATION
By: /s/ Paul J. Michaud
-----------------------------------
Paul J. Michaud, Vice President,
Chief Financial Officer & Treasurer
AAI ENGINEERING SUPPORT, INC.
By: /s/ Paul J. Michaud
-----------------------------------
Paul J. Michaud, Vice President,
Chief Financial Officer & Treasurer
AAI/ACL TECHNOLOGIES, INC.
By: /s/ Paul J. Michaud
-----------------------------------
Paul J. Michaud, Vice President &
Chief Financial Officer
11
<PAGE>
AAI/ACL TECHNOLOGIES EUROPE LIMITED
By: /s/ Paul J. Michaud
-----------------------------------
Paul J. Michaud, Vice President & Chief
Financial Officer
DETROIT STOKER COMPANY
By: /s/ James Perry
-----------------------------------
James Perry
Vice President
MIDWEST METALLURGICAL LABORATORY, INC.
By: /s/ James Perry
-----------------------------------
James Perry
Vice President
UIC PRODUCTS CO.
By: /s/ James Perry
-----------------------------------
James Perry
Vice President
SYMTRON SYSTEMS, INC.
By: /s/ Robert Worthing
-----------------------------------
Robert Worthing, Vice President,
General Counsel, and Assistant
Secretary
12
<PAGE>
AAI MICROFLITE Simulation International
Corporation
By: /s/ Paul J. Michaud
-----------------------------------
Paul J. Michaud
President
AGREED TO BY LENDER: FIRST UNION COMMERCIAL CORPORATION
By: /s/ Michael J. Landini
-----------------------------------
Michael J. Landini
Vice President
13
<PAGE>
SCHEDULE 1.1(B) - BORROWING BASE CERTIFICATE
<TABLE>
<CAPTION>
Government Receivables Commercial Receivables
---------------------------------- -------------------------------
<S> <C> <C>
Billed receivables per last certificate
---------------------------------- -------------------------------
(+) New billed receivables
---------------------------------- -------------------------------
(-) Credit memos/Returns
---------------------------------- -------------------------------
(+) Miscellaneous debits
---------------------------------- -------------------------------
(-) Miscellaneous credits
---------------------------------- -------------------------------
(-) Receivables collected
---------------------------------- -------------------------------
(-) Discounts
---------------------------------- -------------------------------
(=) Total Net Receivables
---------------------------------- -------------------------------
Less ineligible receivables:
---------------------------------- -------------------------------
(-) Over 120 day gov't or over 90 commercial
---------------------------------- -------------------------------
(-) Escrow receivables
---------------------------------- -------------------------------
(-) Bonded receivables
---------------------------------- -------------------------------
(-) At-Risk, final close-outs
---------------------------------- -------------------------------
(-) Contra, ETI, PUI
---------------------------------- -------------------------------
(-) Other ineligible
---------------------------------- -------------------------------
(=) Eligible Billed Receivables
---------------------------------- -------------------------------
90% x Eligible Gov't; 85% x Eligible Commercial
---------------------------------- -------------------------------
----------------------------------
Borrowing Base (90% elig. gov't + 85% elig. commercial):
----------------------------------
Lesser of Borrowing Base or $17,500,000:
----------------------------------
(-) LOC Obligations
----------------------------------
(=) Allowed Amount of Advances
----------------------------------
----------------------------------
Loan Balance per last Certificate
----------------------------------
Payments
----------------------------------
Advance Request
----------------------------------
New Balance (after advance requested)
----------------------------------
Net availability (Allowed Amount of Advances - New Balance) Must be >=0
----------------------------------
</TABLE>
CERTIFICATION
Re: Revolving Line of Credit Loan Agreement, Term Loan Agreement and Security
Agreement, dated June 11, 1997 among United Industrial Corporation and
subsidiaries and First Union Commercial Corporation, as amended from time to
time (the "Agreement"). Capitalized terms used in this Certificate and not
defined herein are defined in the Agreement.
I certify to the Lender that I am familiar with the terms of the Agreement. I
have conducted current review of the Borrower's books, records and activities to
determine the Borrower's compliance with the Agreement and the continuing
validity of the Borrower's representations and warranties under the Agreement.
My review has included, if necessary, interviews with officers and employees of
the Borrower whose duties require them to have personal knowledge of
certifications made herein. Based on my review, the information in the above
table is correct, and you are authorized to rely on it. All representations and
warranties in the Agreement and the other Loan Documents are true and correct
with the same force and effect as though such representations and warranties had
been made on the date of this Certification. The Borrower is in compliance with
all terms and provisions of the Agreement and other Loan Documents, and no
default or event of default exists under the Loan Documents, and no condition,
event or act that, with the passage of time or giving or notice or both, would
constitute an event of default under the Loan Documents exists. Borrower
requests an Advance in the amount stated above.
United Industrial Corporation
By: _______________ Effective date: ____________
Name: ______________ Date signed: ____________
Title: _____________
Exhibit 10(b)
FIRST AMENDMENT
TO REVOLVING NOTE
THIS FIRST AMENDMENT TO REVOLVING NOTE ("First Amendment"), made as of
March 31, 2000, by and between United Industrial Corporation, AAI Corporation,
AAI Engineering Support, Inc., AAI/ACL Technologies, Inc., AAI/ACL Technologies
Europe Limited, Detroit Stoker Company, Midwest Metallurgical Laboratory, Inc.,
UIC Products Co., Symtron Systems, Inc., and AAI MICROFLITE Simulation
International Corporation (collectively, the "Borrower"), and First Union
Commercial Corporation, a North Carolina Corporation (the "Lender").
RECITALS
A. United Industrial Corporation and certain of its subsidiaries
entered into a Revolving Note, dated as of June 11, 1997, in
the maximum principal amount of Seventeen Million, Five
Hundred Thousand Dollars ($17,500,000.00) made payable to the
order of First Union Commercial Corporation (the "Revolving
Note").
B. The Revolving Note evidences Borrower's obligations to repay
advances of principal made by the Lender under a Revolving
Line of Credit Loan Agreement And Security Agreement, dated
June 11, 1997, as amended by First Amendment to Revolving Line
of Credit Loan Agreement and Security Agreement dated as of
October 1, 1998, by Second Amendment to Revolving Line of
Credit Loan Agreement and Security Agreement dated as of
December 31, 1998, and Third Amendment to Revolving Line of
Credit Loan Agreement and Security Agreement of even date
herewith (the "Loan Agreement"). The Revolving Note is
governed, in part, by certain provisions of the Loan
Agreement.
C. The Borrower and the Lender desire to amend the Revolving Note
for the purpose of extending the Maturity Date (as defined in
the Revolving Note) to January 11, 2001, for the purpose of
changing the definition of "Borrower" to the definition set
forth above and for certain other purposes hereinafter set
forth.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises, the mutual agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Lender hereby
agree as follows:
1. Capitalized terms used in this First Amendment but not defined herein
have the meanings ascribed to them in the Revolving Note. The term
"Borrower" shall henceforth refer to the Persons encompassed by the
term "Borrower" as defined above.
1
<PAGE>
2. The Maturity Date is extended to and including January 11, 2001.
3. Except as modified by this First Amendment, the Revolving Note remains
in full force and effect and unmodified. Borrower warrants and
represents that it has no offsets or defenses to its obligations under
the Revolving Note, as modified by this First Amendment.
4. In consideration of Lender's agreement to this First Amendment, the
Borrower hereby releases and waives any and all claims of any kind that
it may have against the Lender as of the date of this First Amendment
arising out of or relating to the Loan Agreement or the Revolving Note,
as amended by this First Amendment.
5. ARBITRATION. UPON DEMAND OF ANY PARTY HERETO, WHETHER MADE BEFORE OR
AFTER INSTITUTION OF ANY JUDICIAL PROCEEDING, ANY CONTROVERSY OR CLAIM
ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS BETWEEN PARTIES HERETO
(A "DISPUTE") SHALL BE RESOLVED BY BINDING ARBITRATION CONDUCTED UNDER
AND GOVERNED BY THE COMMERCIAL FINANCIAL DISPUTES ARBITRATION RULES
(THE "ARBITRATION RULES") OF THE AMERICAN ARBITRATION ASSOCIATION
("AAA") AND THE FEDERAL ARBITRATION ACT. DISPUTES MAY INCLUDE, WITHOUT
LIMITATION, TORT CLAIMS, COUNTERCLAIMS, A DISPUTE AS TO WHETHER A
MATTER IS SUBJECT TO ARBITRATION, CLAIMS BROUGHT AS CLASS ACTIONS, OR
CLAIMS ARISING FROM DOCUMENTS EXECUTED IN THE FUTURE. A JUDGMENT UPON
THE AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION.
NOTWITHSTANDING THE FOREGOING, THIS ARBITRATION PROVISION DOES NOT
APPLY TO DISPUTES UNDER OR RELATED TO SWAP AGREEMENTS. ALL ARBITRATION
HEARINGS SHALL BE CONDUCTED IN THE CITY OR COUNTY WHERE THE LENDER'S
OFFICE, AS FIRST STATED ABOVE, IS LOCATED, OR AT SUCH OTHER PLACE AS
THE PARTIES MAY IN WRITING AGREE. A HEARING SHALL BEGIN WITHIN 90 DAYS
OF DEMAND FOR ARBITRATION AND ALL HEARINGS SHALL CONCLUDE WITHIN 120
DAYS OF DEMAND FOR ARBITRATION. THESE TIME LIMITS MAY NOT BE EXTENDED
UNLESS A PARTY SHOWS CAUSE FOR EXTENSION AND THEN FOR NO MORE THAN A
TOTAL OF 60 DAYS. THE EXPEDITED PROCEDURES SET FORTH IN RULE 51, ET
SEQ., OF THE ARBITRATION RULES SHALL APPLY TO DISPUTES IN WHICH
THE CLAIM IS LESS THAN $1,000,000.00. ARBITRATORS SHALL BE LICENSED
ATTORNEYS SELECTED FROM THE COMMERCIAL FINANCIAL DISPUTE ARBITRATION
PANEL OF THE AAA. THE PARTIES DO NOT WAIVE APPLICABLE FEDERAL OR STATE
SUBSTANTIVE LAW EXCEPT AS PROVIDED HEREIN. NOTWITHSTANDING THE
PRECEDING BINDING ARBITRATION PROVISIONS, THE PARTIES AGREE TO PRESERVE
WITHOUT DIMINUTION, CERTAIN REMEDIES THAT ANY
2
<PAGE>
PARTY MAY EXERCISE BEFORE OR AFTER AN ARBITRATION PROCEEDING IS
BROUGHT. THE PARTIES SHALL HAVE THE RIGHT TO PROCEED IN ANY COURT OF
PROPER JURISDICTION OR BY SELF HELP TO EXERCISE OR PROSECUTE THE
FOLLOWING REMEDIES, AS APPLICABLE: (1) ALL RIGHTS TO FORECLOSE AGAINST
ANY REAL OR PERSONAL PROPERTY OR OTHER SECURITY BY EXERCISING A POWER
OF SALE OR UNDER APPLICABLE LAW BY JUDICIAL FORECLOSURE INCLUDING A
PROCEEDING TO CONFIRM THE SALE; (2) ALL RIGHTS OF SELF HELP, INCLUDING
WITHOUT LIMITATION, PEACEFUL OCCUPATION OF REAL PROPERTY AND COLLECTION
OF RENTS, SETOFF, AND PEACEFUL POSSESSION OF PERSONAL PROPERTY; (3)
OBTAINING PROVISIONAL OR ANCILLARY REMEDIES INCLUDING INJUNCTIVE
RELIEF, SEQUESTRATION, GARNISHMENT, ATTACHMENT, APPOINTMENT OF RECEIVER
AND FILING AN INVOLUNTARY BANKRUPTCY PROCEEDING; AND (4) WHEN
APPLICABLE, A JUDGMENT BY CONFESSION OF JUDGMENT. ANY CLAIM OR
CONTROVERSY WITH REGARD TO ANY PARTY'S ENTITLEMENT TO SUCH REMEDIES IS
A DISPUTE. THE PARTIES AGREE THAT THEY SHALL NOT HAVE A REMEDY OF
PUNITIVE OR EXEMPLARY DAMAGES AGAINST OTHER PARTIES IN ANY DISPUTE, AND
THEY HEREBY WAIVE ANY RIGHT OR CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES
THEY MAY NOW HAVE OR WHICH MAY ARISE IN THE FUTURE IN CONNECTION WITH
ANY DISPUTE WHETHER THE DISPUTE IS RESOLVED BY ARBITRATION OR
JUDICIALLY.
6. Lender has executed this First Amendment for the sole purpose of
evidencing its consent hereto, and not for the purpose of becoming
liable on the Revolving Note as a co-maker, endorser or guarantor.
7. This Third Amendment may be signed in several counterparts which, when
executed, shall constitute a single agreement. A counterpart containing
a facsimile signature shall be effective to the same extent as if it
were a counterpart containing an original signature, but shall be
confirmed promptly with a counterpart containing an original signature.
BORROWER: UNITED INDUSTRIAL CORPORATION
By: /s/ Richard Erkeneff
--------------------------------
Richard Erkeneff, President
3
<PAGE>
AAI CORPORATION
By: /s/ Paul J. Michaud
--------------------------------
Paul J. Michaud, Vice President,
Chief Financial Officer & Treasurer
AAI ENGINEERING SUPPORT, INC.
By: /s/ Paul J. Michaud
--------------------------------
Paul J. Michaud, Vice President,
Chief Financial Officer & Treasurer
AAI/ACL TECHNOLOGIES, INC.
By: /s/ Paul J. Michaud
--------------------------------
Paul J. Michaud, Vice President &
Chief Financial Officer
AAI/ACL TECHNOLOGIES EUROPE LIMITED
By: /s/ Paul J. Michaud
--------------------------------
Paul J. Michaud, Vice President &
Chief Financial Officer
DETROIT STOKER COMPANY
By: /s/ James Perry
--------------------------------
James Perry
Vice President
4
<PAGE>
MIDWEST METALLURGICAL LABORATORY, INC.
By: /s/ James Perry
--------------------------------
James Perry
Vice President
UIC PRODUCTS CO.
By: /s/ James Perry
--------------------------------
James Perry
Vice President
SYMTRON SYSTEMS, INC.
By: /s/ Robert Worthing
--------------------------------
Robert Worthing, Vice President,
General Counsel, and Assistant
Secretary
AAI MICROFLITE Simulation
International Corporation
By: /s/ Paul J. Michaud
--------------------------------
Paul J. Michaud
President
CONSENTED TO: FIRST UNION COMMERCIAL CORPORATION
By: /s/ Michael J. Landini
--------------------------------------
Michael J. Landini, Vice President
5
<PAGE>
STATE OF MARYLAND )
) To-wit:
COUNTY/CITY OF BALTIMORE )
I Darlene J. Koch, a Notary Public in and for the jurisdiction
aforesaid, do certify that James Perry, whose name is signed to the writing
above, bearing date as of April 3rd, 2000, has acknowledged the same before me
in my jurisdiction aforesaid.
Given under my hand and seal this 3rd day of April, 2000.
/s/ Darlene J. Koch
-----------------------------
Notary Public
My Commission Expires: Darlene J. Koch, Notary Public
Baltimore County
State of Maryland
My Commission Expires Dec. 1, 2001
STATE OF MARYLAND )
) To-wit:
COUNTY/CITY OF BALTIMORE )
I Darlene J. Koch, a Notary Public in and for the jurisdiction
aforesaid, do certify that Paul J. Michaud, whose name is signed to the writing
above, bearing date as of March 30, 2000, has acknowledged the same before me
in my jurisdiction aforesaid.
Given under my hand and seal this 30th day of March, 2000.
/s/ Darlene J. Koch
-----------------------------
Notary Public
My Commission Expires: Darlene J. Koch, Notary Public
Baltimore County
State of Maryland
My Commission Expires Dec. 1, 2001
6
<PAGE>
STATE OF MARYLAND )
) To-wit:
COUNTY/CITY OF BALTIMORE )
I Darlene J. Koch, a Notary Public in and for the jurisdiction
aforesaid, do certify that Robert Worthing, whose name is signed to the writing
above, bearing date as of March 30th, 2000, has acknowledged the same before me
in my jurisdiction aforesaid.
Given under my hand and seal this 30th day of March, 2000.
/s/ Darlene J. Koch
-----------------------------
Notary Public
My Commission Expires: Darlene J. Koch, Notary Public
Baltimore County
State of Maryland
My Commission Expires Dec. 1, 2001
STATE OF MARYLAND )
) To-wit:
COUNTY/CITY OF BALTIMORE )
I Darlene J. Koch, a Notary Public in and for the jurisdiction
aforesaid, do certify that Richard Erkeneff, whose name is signed to the writing
above, bearing date as of March 30th, 2000, has acknowledged the same before me
in my jurisdiction aforesaid.
Given under my hand and seal this 30th day of March, 2000.
/s/ Darlene J. Koch
-----------------------------
Notary Public
My Commission Expires: Darlene J. Koch, Notary Public
Baltimore County
State of Maryland
My Commission Expires Dec. 1, 2001
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
financial statements contained in the body of the accompanying Form 10-Q and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-2000
<CASH> 13,044
<SECURITIES> 3,462
<RECEIVABLES> 48,915
<ALLOWANCES> 0
<INVENTORY> 52,429
<CURRENT-ASSETS> 127,801
<PP&E> 122,806
<DEPRECIATION> 87,971
<TOTAL-ASSETS> 213,342
<CURRENT-LIABILITIES> 64,767
<BONDS> 3,887
0
0
<COMMON> 14,374
<OTHER-SE> 98,216
<TOTAL-LIABILITY-AND-EQUITY> 213,342
<SALES> 49,936
<TOTAL-REVENUES> 50,960
<CGS> 36,960
<TOTAL-COSTS> 47,440
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2
<INCOME-PRETAX> 3,518
<INCOME-TAX> 1,289
<INCOME-CONTINUING> 2,229
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,229
<EPS-BASIC> .18
<EPS-DILUTED> .18
</TABLE>
