<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
Filed by the Registrant /x/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Confidential, for Use of the Commission Only (as
/ / Preliminary Proxy Statement permitted by Rule 14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
</TABLE>
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>
UNITED INDUSTRIAL CORPORATION
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS MAY 9, 2000
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS OF
UNITED INDUSTRIAL CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders 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 9th day of
May, 2000, at 10:00 A.M., for the following purposes:
1. To elect two (2) directors to serve until the Annual Meeting of
Shareholders in 2003.
2. To consider and act upon a proposal to amend the Company's bylaws
to increase the size of the Company's Board of Directors from six (6) to
seven (7) directors.
3. To consider and act upon a proposal to ratify the appointment of
Ernst & Young LLP as independent auditors of the Company for 2000.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record on the books of the Company at the close of
business on March 23, 2000 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
shareholders may be examined.
Shareholders 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
April 7, 2000
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>
UNITED INDUSTRIAL CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 9, 2000
This statement is furnished to shareholders 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
Shareholders 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 9, 2000,
at 10:00 A.M. Shareholders of record at the close of business on March 23, 2000
will be entitled to notice of and to vote at such meeting and at all
adjournments thereof.
Shareholders 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 570 Lexington Avenue, New York, New York 10022. The approximate date on which
this Proxy Statement and the form of Proxy were first sent or given to the
shareholders of the Company was April 7, 2000. The Annual Report of the Company
for the year ended December 31, 1999, including audited financial statements,
has been sent to each shareholder.
VOTING RIGHTS
On March 23, 2000, there were outstanding and entitled to vote 12,373,638
shares of Common Stock. Shareholders are entitled to one vote, exercisable in
person or by proxy, for each share of Common Stock held on the record date of
March 23, 2000. 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 Kennedy Capital Management, Inc. and
Dimensional Fund Advisors Inc. is as of December 31, 1999 and as to Steel
Partners II, L.P. is as of March 29, 2000 and is based upon information
furnished to the Company by such entities in Schedules 13G or 13D.
<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) 9.78%
570 Lexington Avenue
New York, New York 10022
Common Stock Kennedy Capital Management, Inc. 776,100(2) 6.30%
10829 Olive Boulevard
St. Louis, Missouri 63141
Common Stock Dimensional Fund Advisors Inc. 914,440(3) 7.44%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Common Stock Steel Partners II, L.P. 1,048,530 8.47%
150 East 52 Street
New York, New York 10022
</TABLE>
(Footnotes on next page)
1
<PAGE>
(Footnotes continued from previous page)
- ------------------
(1) Includes 1,108,451 shares of Common Stock owned directly and 101,196 shares
owned by The Fein Foundation, of which Mr. Fein's spouse is a trustee.
(2) As of December 31, 1999, Kennedy Capital Management, Inc., a registered
investment advisor, has sole voting power as to 731,050 shares of Common
Stock and sole dispositive power as to 776,100 shares.
(3) Dimensional Fund Advisors Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940, is
deemed to have beneficial ownership of 914,440 shares of Common Stock as of
December 31, 1999. Dimensional furnishes investment advice to four
investment companies registered under the Investment Company Act of 1940,
and serves as investment manager to certain other commingled group trusts
and separate accounts (collectively, the "Funds"). In its role as investment
advisor or manager, Dimensional possesses voting and/or investment power
over the securities of the Company that are owned by the Funds. Dimensional
disclaims beneficial ownership of such securities.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 1, 2000, 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)(2) OF CLASS
- --------------------------------------------------------------- -------------------- --------
<S> <C> <C>
Edward C. Aldridge, Jr......................................... 25,000 (3)
Richard R. Erkeneff............................................ 530,444 4.16%
Harold S. Gelb................................................. 25,000 (3)
James H. Perry................................................. 43,440 (3)
Joseph S. Schneider............................................ 15,000 (3)
E. Donald Shapiro.............................................. 35,000 (3)
Robert W. Worthing............................................. 52,901(4) (3)
Susan Fein Zawel............................................... 363,204(5) 2.93%
All directors and executive officers as a group
consisting of 8 persons...................................... 1,089,989 8.43%
</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. Includes units in the Company's 401(k) plan, which
consist of shares of Common Stock and cash.
(2) Includes shares which the following persons have the right to acquire within
60 days through the exercise of stock options: Mr. Aldridge, 20,000 shares;
Mr. Erkeneff, 385,000 shares; Mr. Gelb, 20,000 shares; Mr. Perry,
37,000 shares; Mr. Schneider, 10,000 shares; Mr. Shapiro, 20,000 shares;
Mr. Worthing, 36,000 shares; Ms. Fein Zawel, 32,000 shares; and all
directors and executive officers as a group, 560,000 shares.
(3) Less than 1%.
(4) Does not include 500 shares of Common Stock owned by Mr. Worthing's spouse,
as to which he disclaims beneficial ownership.
(5) Includes 11,440 shares of Common Stock owned by Ms. Fein Zawel's spouse,
4,772 shares of Common Stock owned by Ms. Fein Zawel jointly with her
spouse, and 32,634 shares of Common Stock held in trust for her minor
children.
2
<PAGE>
I. ELECTION OF DIRECTORS
Two directors are to be elected at the Annual Meeting to hold office until
the Annual Meeting in 2003 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 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. Shareholders have cumulative voting
rights with respect to the election of directors. Under cumulative voting, each
shareholder 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 shareholder 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 2000. 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, 1999) PRINCIPAL OCCUPATION DIRECTOR
- --------------------------------------- ------------------ ------------------------------------------ --------
<S> <C> <C> <C>
NOMINEES FOR ELECTION TO SERVE UNTIL THE ANNUAL MEETING OF SHAREHOLDERS IN 2003
Harold S. Gelb......................... 79 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....................... 45 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 2001
Edward C. Aldridge, Jr................. 61 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).
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
AGE (AT BECAME
NAME DECEMBER 31, 1999) PRINCIPAL OCCUPATION DIRECTOR
- --------------------------------------- ------------------ ------------------------------------------ ----
<S> <C> <C> <C>
Joseph S. Schneider.................... 49 President of JSA Partners, Inc., a 1998
consulting firm in the aerospace and
defense industry (since September 1997);
Consultant with A.T. Kearney, a subsidiary
of Electronic Data Systems Corporation
(September 1995 to March 1997); President
of EDS/JSA International, Inc., a
management consulting firm (August 1994 to
September 1995) and successor company to
JSA International, Inc. of which he was
President (1981-1994); Chairman and
Co-founder of JSA Research, Inc., an
independent aerospace and defense research
firm serving institutional investors
(since 1993). Mr. Schneider is a director
of Signal Technology Corporation.
INCUMBENT DIRECTORS WHOSE TERM OF OFFICE EXPIRES IN 2002
Richard R. Erkeneff.................... 64 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 (January to November 1993);
and President (March 1992 to October 1992)
and Executive Vice President (1988 to
1992) of McDonnell Douglas Electronics
Systems Company.
E. Donald Shapiro...................... 68 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., Vasomedical,
Inc., Kranzco Realty Trust and Frequency
Electronics, Inc.
</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.
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, 1999, 1998 and 1997 of the chief executive officer and each
of the other 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 ($)(2)
- ------------------------------- ---- ---------- --------- ------------------- ------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
Richard R. Erkeneff ........... 1999 440,000 -- -- 100,000 18,432
President and Chief Executive 1998 440,000 220,000 57,181 -- 73,035
Officer of the Company and 1997 440,000 200,000 175,000 35,738
AAI
James H. Perry ................ 1999 168,480 -- -- 24,000 13,014
Vice President, Chief 1998 155,938 45,238 -- 18,000 12,862
Financial Officer and 1997 148,500 74,863 60,061 15,000 83,772
Treasurer of the Company
Robert W. Worthing ............ 1999 192,483 -- 24,000 17,992
Vice President and General 1998 192,483 63,422 12,000 17,696
Counsel of the Company and 1997 188,700 113,201 12,000 30,607
AAI
Susan Fein Zawel .............. 1999 155,952 -- 12,000 13,272
Vice President Corporate 1998 151,410 42,991 12,000 13,233
Communications, Secretary and 1997 144,200 70,763 12,000 10,954
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, including $57,181 for Mr. Erkeneff in
1998 and $60,061 in 1997 for Mr. Perry for reimbursement of taxes related to
relocation expenses.
(2) All amounts under this heading represent employer match contributions made
to the Company's 401(k) plan, contributions to the Company's Retirement Plan
and reimbursement of $57,181 of relocation expenses for Mr. Erkeneff in 1998
and $73,755 for Mr. Perry in 1997.
5
<PAGE>
OPTIONS GRANTED IN LAST FISCAL YEAR
The following table sets forth certain information concerning options
granted during 1999 to the named executives.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE --------------------
NAME GRANTED FISCAL YEAR ($/SHARE) EXPIRATION DATE 5% ($) 10% ($)
- -------------------------------- ---------- ------------ ----------- ---------------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard R. Erkeneff............. 100,000 22.52 9.8125 June 30, 2003(1) 617,206 1,564,113
James H. Perry.................. 18,000 4.05 9.00 March 3, 2009(2) 101,898 258,228
Robert W. Worthing.............. 12,000 2.70 9.00 March 3, 2009(2) 67,932 172,152
Susan Fein Zawel................ 12,000 2.70 9.00 March 3, 2009(2) 67,932 172,152
</TABLE>
- ------------------
(1) One half of the options are exercisable if the price of the Company's stock
is not less than $16 for 60 consecutive days. One half of the options are
exercisable if the price of the Company's stock is not less than $18 for 60
consecutive days.
(2) One-third of the options are exercisable upon the first anniversary of the
date of grant, which was March 4, 1999, an additional one-third of the
options are exercisable upon the second anniversary of the date of grant and
the balance of the options are exercisable upon the third anniversary of the
date of grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
SHARES AT FISCAL YEAR-END FISCAL YEAR-END ($)
ACQUIRED ON VALUE EXERCISABLE (E)/ EXERCISABLE (E)/
NAME EXERCISE # REALIZED ($) UNEXERCISABLE (U) UNEXERCISABLE (U)
- -------------------------------------------- ----------- ------------ -------------------- --------------------
<S> <C> <C> <C> <C>
Richard R. Erkeneff......................... 0 0 301,667(E) 465,417(E)
208,333(U) 114,583(U)
James H. Perry ............................ 0 0 22,000(E) 50,750(E)
32,000(U) 11,500(U)
Robert W. Worthing ........................ 0 0 25,000(E) 71,250(E)
23,000(U) 8,250(U)
Susan Fein Zawel ........................... 0 0 21,000(E) 55,500(E)
23,000(U) 8,250(U)
</TABLE>
EMPLOYMENT AGREEMENTS AND RELATED TRANSACTIONS
Mr. Erkeneff is employed as President and Chief Executive Officer of the
Company and AAI pursuant to an employment agreement dated December 8, 1998 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 June 30,
2001, 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 cash bonuses pursuant to the Company's Performance
Sharing Plan ("PSP"), plus a discretionary amount of up to forty percent (40%)
of the PSP formula as may be granted by the Company's Board of Directors, not to
exceed three hundred thirty thousand dollars ($330,000) per annum. On
January 4, 1999, in accordance with his employment agreement, Mr. Erkeneff also
received an option to acquire 100,000 shares of the Company's common stock
pursuant to the terms of the Company's 1994 Stock Option Plan, at $9 13/16 per
share, an exercise price equal to the fair market value of the common stock as
of the grant date, terminating on June 30, 2003. Of the total 100,000 shares
subject to this option, 50,000 shares may be purchased when the fair market
value of Common Stock is, for a period of not less than sixty (60) consecutive
days, not less than $16.00; and an additional 50,000 shares may be purchased
when the fair market value of Common Stock is, for a period of not less than
sixty (60) consecutive days, not less than $18.00. The employment agreement also
provides for Mr. Erkeneff to designate a beneficiary for $200,000 of a key man
life insurance policy.
6
<PAGE>
Mr. Perry is employed by the Company pursuant to an employment agreement
that provides he be paid a salary at the annual rate of $200,720 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
February 28, 2003, unless Mr. Perry's employment is terminated prior thereto by
the Company for cause. Pursuant to the employment agreement, Mr. Perry is
eligible to receive annual discretionary salary increases and cash bonuses as
may be granted by the Company's Board of Directors. In the event that the
Company terminates the employment of Mr. Perry without cause (as such term is
defined in the employment agreement), or if Mr. Perry terminates his employment
for Good Reason (as such term is defined in the employment agreement), Mr. Perry
will be entitled to (a) 150% of his annualized base salary, plus (b) an
incentive compensation award equal to 35% of the amount specified in (a) above,
payable over a period of 18 months following cessation of employment.
Mr. Worthing is employed by the Company pursuant to an employment agreement
that provides he be paid a salary at the annual rate of $220,043 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
February 28, 2003 unless Mr. Worthing's employment is terminated prior thereto
by the Company for cause. Pursuant to the employment agreement, Mr. Worthing is
eligible to receive annual discretionary salary increases and cash bonuses as
may be granted by the Company's Board of Directors. In the event that the
Company terminates the employment of Mr. Worthing without cause (as such term is
defined in the employment agreement), or if Mr. Worthing terminates his
employment for Good Reason (as such term is defined in the employment
agreement), Mr. Worthing will be entitled to (a) 150% of his annualized base
salary, plus (b) an incentive compensation award equal to 42% of the amount
specified in (a) above, payable over a period of 18 months following cessation
of employment.
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 $170,512 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
February 28, 2003, unless Ms. Fein Zawel's employment is terminated prior
thereto by the Company for cause. Pursuant to the employment agreement, Ms. Fein
Zawel is eligible to receive annual discretionary salary increases and cash
bonuses as may be granted by the Company's Board of Directors. In the event that
the Company terminates the employment of Ms. Fein Zawel without cause (as such
term is defined in the employment agreement), or if Ms. Fein Zawel terminates
her employment for Good Reason (as such term is defined in the employment
agreement), Ms. Fein Zawel will be entitled to (a) 150% of her annualized base
salary, plus (b) an incentive compensation award equal to 34% of the amount
specified in (a) above, payable over a period of 18 months following cessation
of employment.
RETIREMENT BENEFITS
All employees of the Company and its subsidiaries are eligible to
participate in the UIC Retirement Plan, a cash balance plan (the "Retirement
Plan") upon commencement of employment. In accordance with the Retirement 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
Retirement Plan also has options for early retirement and alternative forms of
payment, including lump sum benefits and benefits for surviving spouses. The
estimated annual benefit to be provided by the UIC Retirement Plan and payable
to Messrs. Erkeneff, Perry and Worthing and Ms. Fein Zawel, commencing at normal
retirement age, are $8,867, $13,527, $16,487 and $12,405, 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
7
<PAGE>
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 shareholder 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.
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 2000, the Committee
considered the financial performance of the Company in 1999, 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: In 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 shareholders 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 generally become exercisable in
three equal portions at one, two and three years following the date of grant,
with the exception of options granted to Mr. Erkeneff pursuant to his employment
agreement.
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
8
<PAGE>
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 was eligible for an annual cash incentive award of up to 50%
of his annual base salary. For 1999, the Compensation Committee reviewed the
performance of the Company and Mr. Erkeneff relative to financial and strategic
goals established for the year, and determined not to award him a bonus for 1999
at its meeting in February 2000.
The Committee believes strongly that stock option awards emphasize the
importance of increasing shareholder value. Mr. Erkeneff's employment agreement
provides for an option grant of 100,000 shares, of which 50,000 shares may be
purchased when the fair market value of Common Stock is, for a period of not
less than sixty (60) consecutive days, not less than $16.00; and the remaining
50,000 shares may be purchased when the fair market value of Common Stock is,
for a period of not less than sixty (60) consecutive days, not less than $18.00.
* * *
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
HAROLD S. GELB
EDWARD C. ALDRIDGE, JR.
JOSEPH S. SCHNEIDER
E. DONALD SHAPIRO
9
<PAGE>
PERFORMANCE GRAPH
The graph below compares the total returns which an investor would have
earned assuming the investment of $100 on December 31, 1994 in the Common Stock,
the Russell 2000 Value Index ("Russell 2000") and a constructed peer group
index. The constructed peer group consists of Cubic Corporation, EDO
Corporation, Comptek Research Inc., Sparton Corporation, Stanford
Telecommunications and Tech-Sym Corporation. The constructed peer group index
has been weighted in accordance with the stock market capitalization of each of
the component corporations.
TOTAL SHAREHOLDER RETURN
[GRAPHIC - GRAPH PLOTTED TO POINTS LISTED BELOW]
Value as of December 31,
---------------------------------------------------
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
UIC 100.00 123.14 130.27 249.35 233.64 227.90
R2000 Value 100.00 125.75 152.62 201.13 188.15 185.36
Peer Group 100.00 127.79 155.15 176.53 129.43 193.20
OTHER COMPENSATION
Directors received $20,000 per year and $1,000 for each meeting attended,
and a fee of $500 for each committee meeting attended. In lieu of such fees,
Mr. Gelb, Chairman of the Board, received $10,000 per month. In addition,
Messrs. Aldridge and Schneider also served as directors of AAI, for which they
received compensation of $2,000 per meeting. Further, the Board awarded the
Chairman of the Audit Committee, Mr. Shapiro, an additional $5,000 of
compensation for 1999, and each other member of the Audit Committee an
additional $2,000 of compensation for 1999.
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 (the "1996 Plan"). Pursuant to the 1996 Plan, each Eligible Director
(as defined in the 1996 Plan) is granted an option to purchase 15,000 shares of
Common Stock upon their initial appointment to the Board of Directors,
exercisable at the market price of the Company's Common Stock on the date of
grant. The options granted under the 1996 Plan expire ten years after the date
of grant and become exercisable (i) as to one-third of the total number of
shares subject to the grant on the date of grant (the "First Vesting Date"),
(ii) as to an additional one-third of the total number of shares subject to the
grant on the date of the next annual shareholders' meeting after the First
Vesting date (the "Second Vesting Date"), and (iii) as to the remaining
one-third of the total number of shares subject to the grant on the date of the
next annual shareholders' meeting after the Second Vesting Date (the "Final
Vesting Date"). On the date of the annual shareholders' meeting which takes
place during the calendar year in which the first anniversary of the Final
Vesting Date occurs, each Eligible Director shall automatically be granted an
option to purchase 15,000 shares of Common Stock, provided such grantee is an
Eligible Director in office immediately following such annual meeting.
10
<PAGE>
ADDITIONAL INFORMATION
The Board of Directors of the Company had a total of fourteen meetings
during 1999.
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 1999. The members are
E. Donald Shapiro, Edward C. Aldridge, Jr. and Joseph S. Schneider.
The Nominating Committee acts primarily as a selection committee to
recommend candidates for election to the Board of Directors. The committee met
once in 1999. The members consist of all of the current directors.
The Nominating Committee will consider nominees for directors recommended
by shareholders. Any shareholder may make such a recommendation by writing to:
Secretary, United Industrial Corporation, 570 Lexington Avenue, New York, New
York 10022.
The Compensation Committee makes recommendations to the Board of Directors
regarding the compensation structure of the Company as applied to executive
personnel. There were four Compensation Committee meetings held in 1999. The
members are Harold S. Gelb, Edward C. Aldridge, Jr., Joseph S. Schneider 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 1999 all Section 16(a)
filing requirements were complied with.
II. PROPOSED AMENDMENT TO BYLAWS
The Company recently received a letter dated March 9, 2000 (the "Nomination
Letter") from Steel Partners II, L.P., an 8.47% shareholder of the Company
("Steel"), indicating that Steel intended to nominate Warren G. Lichtenstein
("Lichtenstein") and James R. Henderson ("Henderson") for election as directors
of the Company at the Annual Meeting. The Company has since entered into a
settlement agreement with Steel (the "Settlement Agreement"), whereby Steel has
agreed to withdraw its nominations. In exchange, the Company has agreed, among
other things, to include a proposal in this Proxy Statement (the "Increased
Board Proposal") to amend the Company's bylaws to increase the number of
directors constituting the entire Board of Directors from six to seven. The
Company has further agreed that if the Increased Board Proposal is approved as
described below, then the Board of Directors shall elect Lichtenstein
immediately following the Annual Meeting as a director to fill the newly-created
vacancy on the Board of Directors for a term of two years. Certain information
about Lichtenstein may be found in Annex A attached hereto. If the Increased
Board Proposal is approved as described below and Lichtenstein is elected to the
Board of Directors, each of Steel, Lichtenstein and Henderson has further agreed
that it will not engage in any proxy solicitation with respect to the annual
meeting of shareholders of the Company to be held in 2001.
Pursuant to the Settlement Agreement, the Board of Directors has approved a
resolution, subject to stockholder approval, to amend Section 2 of Article III
of the Company's Amended and Restated Bylaws to provide that the Board of
Directors shall be seven (7) in number, as opposed to six (6) in number.
The Board of Directors recommends a vote for the proposed amendment to the
Company's Amended and Restated Bylaws to increase the number of directors
constituting the entire board of directors from six to seven. The Company's
executive officers and directors have agreed to vote in favor of this proposal.
Approval of this amendment requires the vote of the holders of at least 80% of
the shares of Common Stock that are outstanding as of the record date and
entitled to vote thereon at the meeting. If not otherwise provided, proxies will
be voted for approval of these amendments. Abstentions will be counted as shares
entitled to vote on the proposal, but will
11
<PAGE>
not be treated as either a vote for or against the proposal. A broker non-vote
will not be treated as a share entitled to vote on the proposal and will not be
considered as a vote for or against the proposal. Since an affirmative vote of
80% of the outstanding shares is required for adoption, abstentions and broker
non-votes will have the same affect as a vote against the proposal.
III. APPOINTMENT OF AUDITORS
It is proposed that the shareholders ratify the appointment of Ernst &
Young LLP as independent auditors of the Company for the year ending
December 31, 2000. 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. 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 Shareholders. 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 shareholders as of the record date for the meeting
will be available for examination by any shareholder, 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 shareholders 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 shareholders. With respect
to abstentions, the shares are considered present at the meeting for the
particular matter, but since they are not affirmative votes for the matter, they
will have the same effect as votes against the matter. With respect to broker
non-votes, the shares are not considered present at the meeting for the
particular matter as to which the broker withheld its vote. Consequently, broker
non-votes are not counted in respect of the matter, but they do have the
practical effect of reducing the number of affirmative votes required to achieve
a majority for such matter by reducing the total number of shares from which the
majority is calculated.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the next Annual
Meeting of Shareholders must be received by the Company no later than
November 21, 2000 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,
570 Lexington Avenue, New York, New York 10022.
The Company's by-laws provide that any shareholder entitled to vote for the
election of directors at a meeting may nominate persons for election as
directors only if written notice of such shareholder'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
shareholders, not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting of shareholders; and
(ii) with respect to an election
12
<PAGE>
to be held at a special meeting of shareholders 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 shareholder intends to bring before a meeting of
shareholders. 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 Innisfree M&A Incorporated to assist in the solicitation of proxies
for a fee of $50,000, 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, 1999, 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 23, 2000, TO SUSAN FEIN ZAWEL, SECRETARY,
UNITED INDUSTRIAL CORPORATION, 570 LEXINGTON AVENUE, NEW YORK, NEW YORK 10022.
Dated April 7, 2000 By Order of the Board of
Directors
Susan Fein Zawel
Secretary
13
<PAGE>
ANNEX A
WARREN G. LICHTENSTEIN (age 34) has been the Chairman of the Board,
Secretary and the Managing Member of Steel Partners, L.L.C. ("Steel LLC"), the
general partner of Steel Partners II, L.P., a partnership engaged in the
investing in securities of small cap companies, since January 1, 1996. Prior to
such time, Mr. Lichtenstein was the Chairman and a director of Steel Partners,
Ltd., the general partner of Steel Partners Associates, L.P., which was the
general partner of Steel Partners II, L.P., since 1993 and prior to January 1,
1996. Mr. Lichtenstein is a director of the following publicly held companies:
Gateway Industries, Inc., WebFinancial Corporation, PLM International, Inc.,
Tech-Sym Corporation, ECC International Corp. and Saratoga Beverage Group, Inc.
As of March 29, 2000, Mr. Lichtenstein beneficially owned 1,048,530 shares of
Common Stock, all of which were beneficially owned by Steel Partners II, L.P.,
and which constitutes 8.47% of the outstanding shares. The business address of
Mr. Lichtenstein is 150 E. 52nd Street, 21st Floor, New York, New York 10022.
In late 1995, Steel Partners II, L.P. commenced a proxy solicitation to
replace the incumbent directors of Medical Imaging Centers of America, Inc.
("MICA"). Thereafter, MICA initiated an action against Steel Partners II, L.P.,
Warren Lichtenstein, and others in the United States District Court for the
Southern District of California, Medical Imaging Centers of America, Inc. v.
Lichtenstein, et al., Case No. 96-0039B. On February 29, 1996, the Court issued
an Order granting, in part, MICA's motion for a preliminary injunction on the
grounds that plaintiff had demonstrated a probability of success on the merits
of its assertion that defendants had violated Section 13 of the Securities
Exchange Act of 1934. Under the Court's preliminary injunction, defendants in
the action were enjoined from voting certain of their shares at MICA's annual
meeting of shareholders, except pursuant to a formula under which they would be
voted in the same proportion as other votes cast at the meeting. The Court
declined to adjourn the annual meeting of shareholders. At the meeting, Steel
Partners II, L.P. received sufficient votes to elect its nominees to the Board
of MICA, after giving effect to the Court's preliminary injunction. The parties
thereafter settled their differences pursuant to an agreement under which MICA
agreed to initiate an auction process which, if not concluded within a certain
time period, would end and thereafter the designees of Steel Partners II, L.P.
would assume control of the Board of MICA. MICA was ultimately sold.
<PAGE>
P
R
O
X
Y
C
A
R
D
UNITED INDUSTRIAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS MAY 9, 2000
The undersigned hereby appoints Edward C. Aldridge, Jr., Joseph S.
Schneider 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 and in accordance with item 4 if no instruction to the contrary is indicated,
or if no instruction is given.
<PAGE>
X
Please mark your votes as in this example.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1. Election NOMINEES: Harold S. Gelb and
of Susan Fein Zawel
Directors.
FOR WITHHELD 2. To consider and act upon a FOR AGAINST ABSTAIN
------ ------ proposal to amend the --- --- ---
- - - - Company's bylaws to - - - - - -
------ ------ FOR, except vote WITHHELD from increase the size of the --- --- ---
the following nominees: Board of Directors from 6
to 7 directors.
-------------------------------
3. To consider and act upon a
proposal to ratify the
appointment of Ernst & FOR AGAINST ABSTAIN
Young LLP as independent --- --- ---
auditors of the Company for - - - - - -
2000. --- --- ---
4. In their discretion, to act
upon such other matters as
may properly come before FOR AGAINST ABSTAIN
the meeting or any --- --- ---
adjournment thereof. - - - - - -
--- --- ---
</TABLE>
DATE , 2000
--------------------------
SIGNATURE(S)(if held jointly)
--------------
--------------------------------------------
--------------------------------------------
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.
