Exhibit 10.3

UNITED INDUSTRIAL CORPORATION

2006 LONG TERM INCENTIVE PLAN

Name of Optionee:                                                              

Grant
Date:                                                                           

Number of Shares:                                                              

Exercise Price:                                                      

Re: Grant of Incentive Stock Option

Dear                                        :

On May 18, 2006, the shareholders of United Industrial Corporation (the
“Company”) authorized and approved the Company’s 2006 Long Term Incentive Plan
(the “Plan”), which was previously adopted by the Board of Directors. A copy of
the Plan is annexed hereto and shall be deemed a part hereof as if fully set
forth herein. Unless the context otherwise requires, capitalized terms used
herein but not defined shall have the meanings set forth in the Plan.

1.             Grant of Option. Effective [GRANT DATE], the Compensation and
Stock Option Committee (the “Committee”) of the Board of Directors authorized
this grant, as incentive compensation and not in lieu of any salary or other
compensation for your services, of an option (the “Option”) to purchase, in
accordance with the terms and conditions set forth in the Plan, but subject to
the terms and conditions set forth in this agreement (this “Agreement”) and in
the Plan, an aggregate of ________ shares of common stock of the Company, $1.00
par value per share (the “Common Stock”), at a price of $________ per share,
which is the fair market value of a share of Common Stock on [GRANT DATE], as
determined under the Plan.

2.             Tax Matters. The Option is intended to qualify as an “incentive
stock option” within the meaning of section 422 of the Internal Revenue Code of
1986, as amended (the “Code”), but it is specifically understood that no
warranty is made to you as to such qualification. Notwithstanding the foregoing,
the Option shall not qualify as an “incentive stock option,” among other events,
(i) if you dispose of the shares of Common Stock acquired pursuant to the Option
at any time during the two (2) year period following the grant date of the
Option or the one (1) year period following the date on which the Option is
exercised; (ii) except in the event of your death or disability (as defined in
section 22(e)(3) of the Code), if you are not employed by the Company at all
times during the period beginning on the grant date of the Option and ending on
the day three (3) months before the date of exercise of the Option; or (iii) to
the extent that the aggregate fair market value (determined as of the time the
Option is granted) of the shares of Common Stock subject to “incentive stock
options” which become

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exercisable for the first time in any calendar year exceeds $100,000. To the
extent that the Option does not qualify as an “incentive stock option,” it shall
not affect the validity of the Option and shall constitute a separate
non-qualified stock option.

3.             Vesting and Exercisability; Option Term. Subject to the condition
that you do not experience a Termination of Employment and subject to the
provisions of Section 4 hereof, the Option may be exercised by you, on a
cumulative basis, during a period of five (5) years commencing on the date of
grant of the Option and terminating at the close of business on [EXPIRATION
DATE], as follows:

(a)           up to _____ of the total number of shares subject to the Option
may be purchased by you commencing _____ year(s) after the grant date;

(b)           up to an additional _____ of the total number of shares subject to
the Option may be purchased by you commencing _____ years after the grant date;
and

(c)           the balance of the total number of shares subject to the Option
may be purchased by you commencing _____ years after the grant date.

IN NO EVENT SHALL THE OPTION BE EXERCISED FOR A FRACTION OF A SHARE OR FOR LESS
THAN ONE HUNDRED (100) SHARES (UNLESS THE NUMBER PURCHASED IS THE TOTAL BALANCE
FOR WHICH THE OPTION IS THEN EXERCISABLE). THE UNEXERCISED PORTION OF THE OPTION
GRANTED HEREIN SHALL AUTOMATICALLY AND WITHOUT NOTICE TERMINATE AND BECOME NULL
AND VOID UPON THE EXPIRATION OF FIVE (5) YEARS FROM THE DATE OF THE GRANT OF THE
OPTION.

4.             TERMINATION OF EMPLOYMENT. IF, PRIOR TO THE EXPIRATION OF FIVE
(5) YEARS FROM THE DATE OF GRANT OF THE OPTION, YOU EXPERIENCE A TERMINATION OF
EMPLOYMENT, THE OPTION SHALL TERMINATE ON THE APPLICABLE DATE SPECIFIED IN THIS
SECTION 4; PROVIDED, HOWEVER, THAT NONE OF THE EVENTS DESCRIBED IN THIS
SECTION 4 SHALL EXTEND THE PERIOD OF EXERCISABILITY OF THE OPTION BEYOND FIVE
(5) YEARS FROM THE DATE OF GRANT OF THE OPTION.

(a)           Termination for Cause; Resignation. The Option shall terminate
upon the date of your Termination of Employment, if you experience a Termination
of Employment by the Company for Cause, by you as a result of your resignation
for any reason (other than Retirement), or by you as a result of your Retirement
after the occurrence of an event that would constitute grounds for a termination
by the Company for Cause.

(b)           Termination by Reason of Death. The Option shall terminate upon
the expiration of one (1) year after your death if your death occurs either
during your employment or within the one-year or three-month period after a
Termination of Employment specified in Sections 4(c) and 4(d) hereof, except
that the Option shall be exercisable during the one-year period after your death
only to the extent that it would have been exercisable on the date of your
death.

(c)           Termination by Reason of Disability. The Option shall terminate
upon the expiration of one (1) year after your Termination of Employment by
reason of your Disability,

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except that the Option shall be exercisable during such one-year period only to
the extent that it would have been exercisable immediately prior to such
Termination of Employment.

(d)           Termination Without Cause; Retirement. The Option shall terminate
upon the expiration of three (3) months from the date of your Termination of
Employment, if you experience a Termination of Employment by the Company without
Cause or by you as a result of your Retirement (other than as described in
Section 4(a) hereof), except that the Option shall be exercisable during such
three-month period only to the extent that it would have been exercisable
immediately prior to such Termination of Employment.

(e)           Unvested Portion of the Option. In addition, any portion of the
Option that is not vested and exercisable as of the date of your Termination of
Employment for any reason shall terminate and expire as of the date of such
termination.

5.             Method of Exercise. The Option may be exercised by notice to the
Company in a form required by the Committee addressed to the Director of Fiscal
or the Accounting Manager of the Company at the principal place of business of
the Company, together with payment of the aggregate exercise price. Payment of
the exercise price shall be made, in accordance with the provisions of
Section 6.3(d) of the Plan, (i) in cash or by check, (ii) to the extent
permitted under applicable law, through an open market, broker-assisted
transaction authorized by the Committee and consistent with the provisions of
Section 6.3(d)(ii) of the Plan, or (iii) on such other terms and conditions as
may be acceptable to the Committee.

6.             Restrictions on Transfer. The Option is not transferable by you
otherwise than by will or the laws of descent and distribution, and is
exercisable, during your lifetime, only by you. The Option may not be assigned,
transferred (except by will or the laws of descent and distribution), pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar proceeding. Any attempt to so
assign, transfer, pledge or hypothecate the Option or subject the Option to
execution, attachment or similar proceeding contrary to the provisions hereof,
shall be null and void and without any force or effect.

7.             Limitation of Rights. The Option shall not confer upon you any
privileges of a shareholder of the Company with respect to any shares of Common
Stock issuable upon exercise hereof, including without limitation any right to
vote such shares of Common Stock or to receive dividends or other distributions
in respect thereof, until the date of the issuance to you of a stock certificate
evidencing the shares of Common Stock. In addition, nothing in this Agreement
shall confer upon you any right to continued employment with the Company or any
Subsidiary or to interfere in any way with the right of the Company to terminate
your employment with the Company or any Subsidiary at any time.

8.             Legends. If the Company, in its sole discretion, shall determine
that it is necessary in order to comply with applicable securities laws, the
certificate or certificates representing the shares purchased pursuant to the
exercise of the Option shall bear an appropriate

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legend in form and substance, as determined by the Company, giving notice of
applicable restrictions on transfer under or in respect of such laws.

9.             Investment Representations. It shall be a condition of the
exercise of the Option that if, at the time of exercise of the Option, there
does not exist a registration statement on an appropriate form under the
Securities Act of 1933, as mended (the “Act”), which registration statement
shall have become effective and shall include a prospectus which is current with
respect to the shares subject to the Option, you shall execute and deliver to
the Company a written statement, in a form satisfactory to the Committee, in
which you represent and warrant (i) that you are purchasing the shares for your
own account and not with a view to the resale or distribution thereof and
(ii) that any subsequent offer for sale or sale of any such shares shall be made
either pursuant to (x) a registration statement on an appropriate form under the
Act, which registration statement shall have become effective and shall be
current with respect to the shares being offered and sold, or (y) a specific
exemption from the registration requirements of the Act, but in claiming such
exemption, you shall, prior to any offer for sale or sale of such shares, obtain
a favorable written opinion from counsel for or approved by the Company as to
the applicability of such exemption.

10.           Withholding Taxes. As provided in the Plan, the Company may
withhold from sums due or to become due to you from the Company an amount
necessary to satisfy its obligation to withhold taxes incurred by reason of the
disposition of the shares acquired by exercise of the Option in a disqualifying
disposition (within the meaning of Section 421(b) of the Code), or may require
you to reimburse the Company in such amount. The Company may hold the stock
certificate to which you are entitled upon the exercise of the Option as
security for payment of the withholding tax liability, until cash sufficient to
pay such liability has been accumulated.

11.           Disqualifying Dispositions. In the event that you dispose of the
shares issued upon exercise of the Option within either two (2) years following
the date of grant or one year following the date of exercise of the Option, you
must deliver to the Company, within seven (7) days following such disposition, a
written notice specifying the date on which the shares were disposed of, the
number of shares disposed, and, if such disposition was by a sale or exchange,
the amount of consideration received.

12.           Prohibited Activities. It shall be a condition of the grant of the
Option that, and upon exercise of the Option you shall be deemed to have
certified that:

(a)           Non-Solicitation. For a period of three (3) years from and after
your Termination of Employment, you shall not:

(i)            directly or indirectly solicit, entice or induce any employee of
the Company or of any of its Subsidiaries or affiliated companies to be employed
by any person, firm or corporation which is, directly or indirectly, in
competition with the business or activities of the Company or any of its
Subsidiaries or affiliated companies; or

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(ii)           directly or indirectly approach any such employee for these
purposes; or

(iii)          authorize or knowingly approve the taking of such actions by
other persons on behalf of any such person, firm or corporation, or assist any
such person, firm or corporation in taking such action; or

(iv)          directly or indirectly solicit, raid, entice or induce any person,
firm or corporation (other than the U.S. Government or its agencies) who or
which on the date hereof is, or at any time during the period hereunder shall
be, a customer of the Company or of any of its Subsidiaries or affiliated
companies to become a customer for the same or similar products which it
purchased from the Company or any of its Subsidiaries or affiliated companies,
or any other person, firm or corporation, and you shall not approach any such
customer for such purpose or authorize or knowingly approve the taking of such
actions by any other person.

(b)           Non-Disclosure. You shall not divulge, furnish or make available
to anyone at any time, except as part of your employment by the Company or any
of its Subsidiaries or affiliated companies either during or subsequent to such
employment, any knowledge or information with respect to confidential or
proprietary information, methods, processes, plans or materials of the Company
or any of its Subsidiaries or affiliated companies, or with respect to any other
confidential or proprietary aspects of the business of the Company or any of its
Subsidiaries or affiliated companies (the activities prohibited by
Section 12(a) hereof and this Section 12(b) are collectively referred to herein
as the “Prohibited Activities”).

(c)           Forfeiture; Remedies; Enforcement.

(i)            Upon the exercise of the Option, you shall be deemed to have
certified and agreed that you are in compliance with the terms and conditions of
the Plan and that you have not engaged in and do not intend to engage in any of
the Prohibited Activities. In the event that you engage in any of the Prohibited
Activities (i) prior to any exercise of the Option, the Committee shall have the
right to immediately terminate the Option (whether or not vested and
exercisable), and the Option shall thereupon immediately terminate and expire,
and/or (ii) during the one-year period following the later of (x) your
Termination of Employment and (y) the date on which the Option was exercised,
the Committee shall have the right, as applicable, to immediately terminate the
Option (whether or not vested and exercisable), and the Company shall be
entitled to recover from you at any time within one year after the later of
(x) and (y), and you shall pay over to the Company, an amount equal to any gain
realized as a result of the exercise of the Option (whether at the time of
exercise or thereafter).

(ii)           You acknowledge and agree that the Committee’s and the Company’s
remedies at law for a breach or threatened breach of the foregoing provisions of
the Option in respect of the Prohibited Activities would be inadequate and, in
recognition of this fact, you agree that, in the event of such a breach or
threatened breach, in addition to

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any remedies at law, the Committee and/or the Company, without posting any bond,
shall be entitled to obtain equitable relief in the form of specific
performance, a temporary restraining order, a temporary or permanent injunction
or any other equitable remedy which may then be available.

(iii)          If it is determined by a court of competent jurisdiction in any
state that any restriction in this Agreement in respect of the Prohibited
Activities is excessive in duration or scope or is unreasonable or unenforceable
under the laws of that state, it is the intention of the parties that such
restriction may be modified or amended by the court to render it enforceable to
the maximum extent permitted by the laws of that state.

(d)           Survival. The terms and provisions of this Section 12 shall
survive your Termination of Employment and the expiration of the Option and this
Agreement as set forth herein.

13.           Provisions of the Plan Control. This Agreement and the Option are
subject to all of the terms, conditions, limitations and restrictions contained
in the Plan, which shall be controlling in the event of any conflicting or
inconsistent provisions.

14.           Entire Agreement. This Agreement and the Plan constitute the
entire agreement between you and the Company with respect to the subject matter
hereof and thereof, merging any and all prior agreements.

[SIGNATURES ON FOLLOWING PAGE]

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Please indicate your acceptance of all of the terms and conditions of the
Option, this Agreement and the Plan by signing in the space provided below and
returning the original of this letter to me.

Very truly yours,

 

 

 

 

 

 

 

UNITED INDUSTRIAL CORPORATION

 

 

 

 

 

 

 

By:

 

 

Name:

Jonathan A. Greenberg

 

Title:

Vice President, General Counsel and Secretary

 

 

 

ACCEPTED:

 

 

 

 

 

 

 

 

 

 

 

Signature:

 

 

Date:

 

 

 

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