SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14A-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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[ ] Definitive Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Additional Materials Commission Only (as permitted)
[ ] Soliciting Material Pursuant to by Rule 14a-6(e)(2)
Rule 14a-12
UNITED INDUSTRIAL CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not applicable
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applicable.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): Not
applicable.
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September 7, 2002
Dear United Industrial Shareholder:
We, the Board of United Industrial Corporation,(1) are writing to seek your
support for the re-election of Richard R. Erkeneff, our President and CEO, and
Paul J. Hoeper, a prominent member of America's defense community, as Directors
at the Annual Meeting on October 4, 2002. WE STRONGLY BELIEVE THAT THEIR
ELECTION REPRESENTS THE BEST OPPORTUNITY FOR SHAREHOLDERS TO MAXIMIZE THE VALUE
OF THEIR UNITED INDUSTRIAL INVESTMENT.
WE URGE YOU TO SIGN, DATE AND RETURN TODAY THE ENCLOSED WHITE PROXY CARD IN THE
POSTAGE PAID ENVELOPE WITH A VOTE FOR THEIR ELECTION.
As you may know, a hedge fund, Steel Partners II, L.P., is waging a costly and
disruptive proxy fight to elect another one of its employees to your Board. This
nominee, if elected, would serve on the Board with Warren Lichtenstein, a
current Board member, who controls Steel Partners. WE DO NOT BELIEVE THAT THE
ELECTION OF STEEL PARTNERS' NOMINEE IS IN THE BEST INTERESTS OF THE REST OF
UNITED INDUSTRIAL'S SHAREHOLDERS, AND WE URGE YOU NOT TO SIGN A GOLD PROXY CARD
FOR ANY REASON.
WE BELIEVE OUR NOMINEES DESERVE YOUR SUPPORT. AS MORE FULLY DISCUSSED BELOW:
o We are committed to maximizing shareholder value and are
actively seeking the sale of the Company.
o Our nominees are eminently qualified to lead the Company and
to bring about a sale.
WE BELIEVE STEEL PARTNERS DOES NOT DESERVE YOUR SUPPORT:
o If elected, Steel Partners, a 10% shareholder, will control
one-third of your Board.
o Steel Partners has made no proposals for selling the Company
that differ from your Board's current program.
o Steel Partners has proposed as its nominee an employee of
Steel Partners with no apparent defense industry experience.
o Steel Partners may have ulterior motives and has engaged in
questionable activities in the past.
YOUR BOARD IS EXECUTING ITS PLAN TO
MAXIMIZE SHAREHOLDER VALUE
WE ARE ACTIVELY SEEKING A SALE OF THE COMPANY
The Board of United Industrial is committed to delivering maximum value to the
Company's shareholders. To achieve that goal, we engaged Wachovia Securities, a
well-known investment bank specializing in companies like United Industrial, to
help us analyze strategic alternatives to enhance shareholder value. Based on
this analysis, THE BOARD DETERMINED THAT A SALE OF ALL OR PART OF THE COMPANY IS
THE BEST WAY TO MAXIMIZE SHAREHOLDER VALUE. WE HAVE AUTHORIZED WACHOVIA TO
IDENTIFY AND ACTIVELY SOLICIT INTEREST FROM POTENTIAL PURCHASERS OF THE COMPANY.
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1. With the exception of Warren Lichtenstein
WE ALREADY HAVE MADE SUBSTANTIAL PROGRESS. On July 26, 2002, we sold our
transportation overhaul contracts with New Jersey Transit Corporation and
Maryland Transit Administration. The sale of those non-core contracts (which, in
the aggregate, generated losses) was a critical element in advancing the overall
sale process and assuring the best possible sales price for the Company. Since
July 26, we have opened discussions with a broad range of new potential
purchasers, as well as renewed discussions with parties who had previously
expressed interest. AT THIS TIME, WE ARE ACTIVELY ENGAGED IN DISCUSSIONS WITH
NUMEROUS PARTIES, AND WACHOVIA IS CONTINUING TO PROACTIVELY CONTACT AND PROVIDE
INFORMATION TO ADDITIONAL PARTIES.
YOUR BOARD IS COMMITTED TO SELLING UNITED INDUSTRIAL AT THE BEST PRICE AS
QUICKLY AS POSSIBLE. THE ELECTION OF MESSRS. ERKENEFF AND HOEPER IS CRITICAL TO
THIS PROCESS AND WILL ALLOW US TO CONTINUE MOVING FORWARD AS QUICKLY AND
SMOOTHLY AS POSSIBLE.
MESSRS. ERKENEFF AND HOEPER
ARE BETTER QUALIFIED TO LEAD AND SELL THE COMPANY
We believe Messrs. Erkeneff and Hoeper, seasoned defense industry leaders, are
much more likely to bring about a sale of all or part of the Company at the best
possible price. Moreover, they are eminently qualified to lead the Company
pending completion of a sale.
Mr. Erkeneff, our President and CEO, has been directly responsible for our
success in the defense market since 1993 and has worked in the industry for 44
years. Under Mr. Erkeneff's leadership as CEO since October 20, 1995, the
Company's stock price has climbed from $5.87 to $19.55 on September 5, 2002. Mr.
Hoeper, who has been a Director of AAI Corporation, the Company's wholly-owned
defense subsidiary, since June 2001, has more than 20 years of industry
experience, including service as Assistant Secretary of the Army and Deputy
Under Secretary of Defense. In fact, since joining the Board of the Company in
August 2002, Mr. Hoeper has been instrumental in contacting interested parties
in furtherance of the sales process.
Both executives have extensive contacts in the defense sector and understand the
Company's products and their relevance to future U.S. Defense Department needs.
WE ARE CONFIDENT THAT MESSRS. ERKENEFF AND HOEPER, TOGETHER WITH THE OTHER
MEMBERS OF THE BOARD, ARE THE RIGHT TEAM TO LEAD THE COMPANY FORWARD AND BRING
ABOUT A SUCCESSFUL AND TIMELY SALE.
DON'T LET STEEL PARTNERS, A 10% DISSIDENT SHAREHOLDER,
CONTROL ONE-THIRD OF YOUR BOARD AND PROMOTE ITS OWN AGENDA AT THE
EXPENSE OF OTHER SHAREHOLDERS
Mr. Lichtenstein has been a member of United Industrial's Board of Directors
since May 2001, and Steel Partners currently owns approximately 10% of the
Company's outstanding common stock. Mr. Lichtenstein is seeking to replace a
Board candidate with another Steel Partners' employee, Glen M. Kassan, whose
qualifications, we believe, are highly questionable. If he is elected, Steel
Partners would control ONE-THIRD of your Board. In our opinion, this would
result in the DISPROPORTIONATE REPRESENTATION of one minority shareholder on
your Board.
We can only speculate as to what Mr. Lichtenstein's true motives may be. WHILE
HE CLAIMS THAT HIS OBJECTIVE IS A SALE OF UNITED INDUSTRIAL, THE BOARD IS
ALREADY MOVING FORWARD WITH A PROCESS TO SELL THE COMPANY, AND MR.
LICHTENSTEIN'S PROXY FIGHT, WE BELIEVE, CAN ONLY SERVE TO DISRUPT THIS PROCESS.
MR. LICHTENSTEIN HAS NOT DISCLOSED THAT HE HAS APPROACHED UNITED INDUSTRIAL IN
THE PAST ABOUT A POTENTIAL BUSINESS COMBINATION WITH ECC INTERNATIONAL, A
DEFENSE COMPANY OF WHICH STEEL PARTNERS IS A 29.2% AND LARGEST STOCKHOLDER AND
WHOSE EMPLOYEE IS THE INTERIM PRESIDENT AND CEO. WHETHER MR. LICHTENSTEIN'S BID
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FOR GREATER REPRESENTATION ON YOUR BOARD IS PART OF A PLAN TO TRY TO MERGE
UNITED INDUSTRIAL WITH ECC INTERNATIONAL, WE JUST DON'T KNOW.
STEEL PARTNERS' NOMINEE IS AN EMPLOYEE OF STEEL PARTNERS
AND HAS NO APPARENT DEFENSE INDUSTRY EXPERIENCE
We consider Mr. Kassan's qualifications to serve on your Board to be highly
suspect. He is an employee of Steel Partners and holds positions with a variety
of companies in which Steel Partners has made investments. We do not believe he
has a Department of Defense security clearance.
Mr. Kassan holds or recently held positions with WebFinancial Corporation, SL
Industries, Gateway Industries, Inc., Tandycrafts, Inc., Puroflow, Incorporated
and U.S. Diagnostic Inc., all of which are companies Steel Partners has invested
in. It appears that none of these companies do any business with the Department
of Defense.
In addition, we believe that the performance and value of certain of these
companies have deteriorated since Mr. Kassan and Steel Partners have become
involved. For example, according to an August 19, 2002 press release, U.S.
Diagnostic Inc., where Mr. Kassan has served as Chairman of the Board since
March 27, 2001, is currently negotiating to sell substantially all of its
operating assets through a transaction that would require a VOLUNTARY CHAPTER 11
FILING in Federal Bankruptcy Court. If the transaction is consummated in
accordance with the terms now under discussion, the company has said that it
believes "there IS LITTLE LIKELIHOOD THAT THE [C]OMPANY'S CURRENT EQUITY HOLDERS
WILL RECEIVE ANY DISTRIBUTION in respect of their equity interests in the
[c]ompany."(2)
At Tandycrafts, Inc., where Mr. Kassan has been a director since November 2000,
the company filed for CHAPTER 11 PROTECTION in U.S. Bankruptcy Court on May 15,
2001 after failing to refinance its debt or receive a credit extension from its
banks, and its stock was DELISTED FROM THE NEW YORK STOCK EXCHANGE in May 2001.
With Steel now in control of the company and Mr. Kassan on its Board,
Tandycrafts is trading in the pink sheets market and has recently closed near a
penny a share.
STEEL PARTNERS' CHECKERED HISTORY --
SECURITIES LAW VIOLATIONS
You should also be aware of Mr. Lichtenstein's and Steel Partners' questionable
track record. Mr. Lichtenstein has a history of making investments through Steel
Partners in small public companies and then using those positions to gain
control of the companies in order to promote his own agenda. Since 1995 alone,
Mr. Lichtenstein has become embroiled in conflicts with at least eight public
companies.
Moreover, according to an SEC filing by Kinark Corp., Steel Partners admitted to
securities trading in violation of the federal securities laws. Kinark stated in
its filing that Steel Partners admitted making trades in violation of Section
16(b) of the Securities Exchange Act of 1934, and was required to return to
Kinark the profits from its illegal trades.(3) In addition, a preliminary
injunction was entered against Mr. Lichtenstein and certain other persons in
connection with their investment in Medical Imaging Centers of America, Inc.
based on the court's determination that Medical Imaging had demonstrated "a high
probability of success on the merits" in asserting that Mr. Lichtenstein and his
co-defendants had violated Section 13(d) of the Securities Exchange Act of 1934,
which relates to the disclosure of ownership interests in publicly traded
companies.(4)
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2. Aug. 19, 2002 U.S. Diagnostic Inc. Press Release.
3. Oct. 13, 1995 Kinark Corp. Form 8-K Item 5.
4. Feb. 29, 1996 Order in Medical Imaging Centers of America, Inc. v. Warren G.
Lichtenstein, Civil No. 96-0039-B (AJB) (S.D. Cal.).
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PROTECT YOUR INVESTMENT BY VOTING THE WHITE PROXY CARD TODAY
A VOTE FOR MESSRS. ERKENEFF AND HOEPER WILL KEEP THE SALE PROCESS MOVING
We urge you to protect your investment in United Industrial by voting the WHITE
proxy card today for Messrs. Erkeneff and Hoeper. By voting the WHITE proxy
card, you can be confident that Messrs. Erkeneff and Hoeper are committed to
effecting a sale of the Company as quickly as possible in order to maximize
shareholder value. By voting the WHITE proxy card, you will help assure that
Messrs. Erkeneff and Hoeper, along with the other members of the Board, can
continue moving the sale process through to completion, without disruption.
Please review the enclosed materials very carefully, and we encourage you to
return your WHITE proxy card as soon as possible. If you have any questions,
please do not hesitate to contact our proxy solicitors, Innisfree M&A
Incorporated at 877-266-1890.
Thank you for your support.
Sincerely,
/s/ Harold S. Gelb /s/ Susan Fein Zawel /s/ Joseph S. Schneider
Harold S. Gelb Susan Fein Zawel Joseph S. Schneider
/s/ Richard R. Erkeneff /s/ Paul J. Hoeper
Richard R. Erkeneff Paul J. Hoeper
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IMPORTANT
If your shares are held in your own name, please sign,
date and return the enclosed WHITE proxy card today.
If your shares are held in "Street-Name," only your broker or your bank
can vote your shares.
Please direct the person responsible for your account to execute on your
behalf a WHITE proxy card with a vote FOR Proposals 1,2 and 3.
If you have any questions or need assistance in voting your shares, please call:
INNISFREE M&A INCORPORATED
501 Madison Avenue, 20th Floor
New York, New York 10022
CALL TOLL-FREE 877-266-1890
Banks and Brokers call collect (212) 750-5833
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Except for the historical information contained herein, information set forth in
this letter may contain forward-looking statements 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. The
Company makes no commitment to update any forward-looking statement or to
disclose any facts, events or circumstances after the date hereof that may
affect the accuracy of any forward-looking statement. For additional information
about the Company and its various risk factors, reference is made to the
Company's most recent Annual Report on Form 10-K as filed with the Securities
and Exchange Commission.
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