-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CeI3NWzOMXO8LpreeQNfUm8HyIeDQGYO6/BWobweRwatbrw31f7ihU0u3OfXmOFp YLMfjcoRe4bUeMH8GPU/hA== 0000909518-00-000304.txt : 20000512 0000909518-00-000304.hdr.sgml : 20000512 ACCESSION NUMBER: 0000909518-00-000304 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED INDUSTRIAL CORP /DE/ CENTRAL INDEX KEY: 0000101271 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 952081809 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04252 FILM NUMBER: 626513 BUSINESS ADDRESS: STREET 1: 18 E 48TH ST CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2127528787 MAIL ADDRESS: STREET 1: 18 E 48TH STREET CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: TOPP INDUSTRIES CORP DATE OF NAME CHANGE: 19710510 FORMER COMPANY: FORMER CONFORMED NAME: HAYES MANUFACTURING CORP DATE OF NAME CHANGE: 19660911 10-Q 1 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 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 PART I - FINANCIAL INFORMATION ITEM I - FINANCIAL STATEMENTS UNITED INDUSTRIAL CORPORATION & SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in Thousands)
MARCH 31 DECEMBER 31* 2000 1999 ------------ ------------ 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 ======== ========
See accompanying notes * Reclassified to conform to 2000 presentation 1 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 UNITED INDUSTRIAL CORPORATION & SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
THREE MONTHS ENDED MARCH 31 --------------------------- 2000 1999 -------- -------- 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 ======== ========
See accompanying notes 3 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
Trans- Reconci- (dollars in thousands) Defense portation Energy Other liations Totals ------- --------- ------ ----- -------- ------ 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 =======
NOTE C - DIVIDENDS A quarterly dividend of $.10 per share is payable May 31, 2000. 4 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 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 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 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 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 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 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 EX-10 2 EXHIBIT 10-A 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 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 "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 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 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 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 "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 (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 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 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 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 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 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 SCHEDULE 1.1(B) - BORROWING BASE CERTIFICATE
Government Receivables Commercial Receivables ---------------------------------- ------------------------------- 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 ----------------------------------
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: _____________ EX-10 3 EXHIBIT 10-B 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 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 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 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 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 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 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 EX-27 4
5 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. 1,000 3-MOS DEC-31-1999 MAR-31-2000 13,044 3,462 48,915 0 52,429 127,801 122,806 87,971 213,342 64,767 3,887 0 0 14,374 98,216 213,342 49,936 50,960 36,960 47,440 0 0 2 3,518 1,289 2,229 0 0 0 2,229 .18 .18
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