Document:

Exhibit 10.1

                         UNITED INDUSTRIAL CORPORATION

                           Management Incentive Plan

                                  January 2007

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TABLE OF CONTENTS

Definitions...................................................................1
Plan Amendment and Termination................................................2
Effective Date of the Plan....................................................2

MANAGEMENT INCENTIVE PLAN (MIP)...............................................2
Philosophy....................................................................2
General Features..............................................................2
Payments......................................................................3
Entitlements..................................................................3
Administration................................................................4
Miscellaneous.................................................................5

SETTING FINANCIAL TARGETS AND PERFORMANCE OBJECTIVES..........................6

FINANCIAL TARGETS.............................................................6
Financial Target Measurement..................................................6
Guidelines for Objective Setting and Evaluation...............................6

PERFORMANCE OBJECTIVES........................................................7
Guidelines for Setting and Evaluating the Performance Objective...............7
Guidelines for Reviewing Overall Personal Performance.........................9
Incentive Calculation.........................................................9
Target Incentive Compensation Award (TICA) Amount Calculation- EXAMPLE.......10
SUMMARY......................................................................11
Termination of Employment....................................................14

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Definitions
Except as otherwise specified or as the context otherwise may require, the
following terms have the meanings indicated below for the purposes of this Plan:

BOARD means the Board of Directors of United Industrial Corporation, a Delaware
corporation, and its successors.

COMMITTEE means the Board's Compensation and Stock Option Committee, as
constituted from time to time by the Board.

COMPANY means UIC and each Subsidiary (as defined below) of UIC. Compensation
Year or Year means the fiscal year of UIC.

DISABILITY means disability according to the terms of the United Industrial
Corporation Long-Term Disability Plan, or comparable plan of any Subsidiary, as
from time to time may be applicable with respect to the particular Participant.

FULL PARTICIPANT means, other than a Limited Participant, an eligible Company
employee selected for Plan participation in accordance with the procedures set
forth herein, and whose compensation is calculated in U.S. dollars.

LIMITED PARTICIPANT means an eligible Company employee selected for Plan
participation in accordance with the procedures set forth herein, who is
seconded, on a temporary basis from a foreign subsidiary, and/or paid
compensation by Company with a basis in currency OTHER THAN U.S. dollars.

PARTICIPANT means, either collectively or individually, Limited Participant(s)
and Full Participant(s), as defined herein. Plan means the 2007 Management
Incentive Plan (MIP) as set forth herein. Plan Compensation means the incentive
compensation earned for the Year as a consequence of the Plan. Retirement means
retirement according to the terms of the retirement plan of the Company or its
Subsidiary.

SUBSIDIARY means any corporation in which the Company owns total equity
interest.

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PLAN AMENDMENT AND TERMINATION

UIC, by action of the Board or the Committee, may, in its sole and absolute
discretion, amend, suspend or terminate the Plan at any time, with or without
advance notice to Participants.

EFFECTIVE DATE OF THE PLAN

This Plan shall be effective as of January 1, 2007 and relates to the 2007
Compensation Year.

                        MANAGEMENT INCENTIVE PLAN (MIP)

PHILOSOPHY

The UIC Management Incentive Plan is a variable, cash-based incentive plan
designed to focus management attention on performance factors important to the
continued success of their business unit and the Company overall. Achievement of
high standards of business and individual performance should be rewarded
financially; conversely, significant compensation should be at risk for failure
to achieve those high standards. The opportunity to earn incentive compensation
in addition to base salary is an integral part of our total compensation
approach. The Plan serves as a direct link between a Participant's compensation
and the performance of a business unit or the Company overall.

GENERAL FEATURES

Participants are senior managers in a position to significantly affect the
performance of their business unit. These are generally managers with
responsibility across an entire business unit, i.e. headquarter executives;
product line and other general or program managers; and selected functional
managers.

To be eligible to be selected to participate, a new hire to the Company or a
newly eligible employee must be employed as of 30 September of the Compensation
Year. Part-year Participants (i.e., employed after 1 January but prior to 30
September of the Compensation Year) shall be eligible for Plan Compensation
calculated pro-rata to the number of days actively employed during the
Compensation Year.

Target incentives are a function of the annual results, both by the individual
and their business unit. It is over and above the base salary, established using
competitive comparisons.

The Target Incentive Compensation Award (TICA) percentage, a percentage of base
salary, is similarly determined.

                                       7
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Plan Compensation may range from zero (0) to two hundred percent (200%) of a
Participant's TICA. The TICA percentage varies from ten (10) to fifty (50)
percent of Participant's base salary. Plan Compensation is not guaranteed. The
Plan requires reasonable risk on the part of the Participant, commensurate with
potential reward--an opportunity to raise total compensation significantly.

Full Participants are ELIGIBLE, but Limited Participants are INELIGIBLE, for the
following benefits:

  o  A  maximum  life  insurance   benefit  of  four  hundred  thousand  dollars
     ($400,000.00)

  o  If elected during enrollment, Long Term Disability (LTD)coverage on annual
     compensation, which shall include both the Participant's annual base salary
     and their TICA award,  as though earned at the one hundred  percent level),
     to a maximum benefit of two hundred thousand dollars  ($200,000.00) up to a
     maximum benefit of $10,000 a month.

  o  Accidental  Death and  Dismemberment  benefit  equal to three (3) times the
     Participant's   annual   compensation   (which   shall   include  both  the
     Participant's  annual base salary and their TICA award, as though earned at
     the one  hundred  percent  (100%)  level,  rounded  to the next  higher one
     thousand  dollars  ($1,000.00)  subject to a maximum of three  hundred  and
     thirty thousand dollars ($330,000.00)).

PAYMENTS

The distribution of Plan Compensation shall be made to Full Participants by
March 15, and to Limited Participants by the next regular pay cycle after March
15, following the Compensation Year.

ENTITLEMENTS

GENERAL  RULE:  Except  as  otherwise  set forth in the Plan,  to  receive  Plan
Compensation,  a  Participant  must be an employee of the Company at the time of
payment of Plan Compensation.

DEATH,  RETIREMENT,  LAYOFF AND DISABILITY:  If a Participant dies,  retires, is
laid off, or becomes disabled after the close of a Compensation Year, but before
payment is made, the distribution of Plan Compensation shall be made by March 15
following  the  Compensation  Year. If death,  retirement,  layoff or disability
occurs during the  Compensation  Year,  the award shall be prorated based on the
portion of the year the  Participant  was  employed and payment made by March 15
following the Compensation Year.

For purposes of this clause, layoff is a termination which is not for cause, as
defined below, but rather is due to a permanent or indefinite reduction in the
work force, including, but not limited to, the elimination of a Participant's
position as a result of facility closure, discontinuance or relocation of
operations, acquisition, reorganization or sale (including a sale by the Company
of a business unit, division, product line or functionally related group of
assets.)

<PAGE>

With respect to a Participant's Termination of Employment prior to the date of
Plan Compensation payment, termination shall be deemed to have been for cause:

A.   Absent an employment or service agreement,  change in control agreement, or
     similar  agreement  between the Company and the Participant in effect as of
     the date of termination (or where such an agreement does not define "cause"
     (or words of like import)), in the event: (i) Participant was convicted of,
     or  plead  guilty  or nolo  contendere  to,  a  felony;  (ii)  Participant:
     committed  illegal  or  willful  or  grossly  negligent  conduct,  acted in
     violation of the Company Code of Business Conduct and Ethics (including but
     not limited to acts of dishonesty or fraud), caused potential  reputational
     or  economic  injury  to the  Company;  or  (iii)  Participant  materially,
     willfully,  and  deliberately  failed to perform  his/her  duties,  despite
     written notice and an opportunity to effectively cure, as determined by the
     Committee; or

B.   As provided in any applicable  employment or service  agreement,  change in
     control  agreement,  or  similar  agreement  in  effect  as of the  date of
     termination,  provided,  however,  that with regard to any agreement  under
     which the  definition  of "cause" only applies on occurrence of a change in
     control,  such  definition  of "cause"  shall not apply  unless a change in
     control  actually  takes place (and then only with regard to a  termination
     thereafter),  in which  case  paragraph  A above  shall  apply to any other
     termination for cause.

ADMINISTRATION

The Plan shall be administered and interpreted by the Committee.

The Committee shall have full authority to select Participants in the Plan and
to make all other necessary determinations under the Plan. In particular, the
Committee shall have the authority:

To determine the TICA Percentage for each Participant hereunder;

To determine the terms and conditions, not inconsistent with the terms of this
Plan, of Plan Compensation granted hereunder, based on such factors, if any, as
the Committee shall determine in its sole discretion;

To grant exceptions to this rule, including but not limited to partial Plan
Compensation, which, unless otherwise indicated, shall not be deemed to be a
general revision to entitlement under the Plan by any Participant(s); and

To determine whether, to what extent, and under what circumstances, Plan
Compensation amounts shall be deferred either automatically or at the
Participant's election, in any case, subject to, and in accordance with, Section
409A of the Internal Revenue Code.

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GUIDELINES. The Committee shall, in its sole discretion, have the authority to
adopt, alter and repeal such administrative rules, guidelines and practices
governing this Plan and perform all acts, including the delegation of its
responsibilities (to the extent permitted by applicable law), as it shall, from
time to time, deem advisable; to construe and interpret the terms and provisions
of this Plan; and to otherwise supervise the administration of this Plan. The
Committee may, in its sole discretion, correct any defect, supply any omission
or reconcile any inconsistency in this Plan in the manner and to the extent it
shall deem necessary to effectuate the purpose and intent of this Plan. The
Committee may, in its sole discretion, adopt special guidelines and provisions
for persons who are residing in or employed in, or subject to, the taxes of, any
domestic or foreign jurisdictions to comply with applicable laws and
regulations, including, but not limited to, tax and securities laws of such
domestic or foreign jurisdictions.

DECISIONS FINAL. Any decision,  interpretation  or other action made or taken in
good faith by or at the direction of the Company, the Board or the Committee (or
any of its  members)  arising  out of or in  connection  with this Plan shall be
within the absolute  discretion of all and each of them, as the case may be, and
shall be final,  binding and  conclusive  on the Company and all  employees  and
Participants and their respective heirs, executors,  administrators,  successors
and assigns.

The Compensation Committee may delegate certain of these activities and all
other matters as it determines in its sole discretion.

MISCELLANEOUS

NO CONTRACT OR GUARANTEE OF CONTINUED EMPLOYMENT. For Full and Limited
Participants, unless otherwise superceded by a written service or employment
agreement (if any), or as may be required under applicable laws, participation
in the Plan shall not be deemed to be the grant of a right, a contract of
employment, nor a guarantee of continued employment. Subject to the terms of
such an agreement, the Company specifically reserves the right to terminate
employment of a Participant at any time with or without cause and with or
without notice or assigning a reason.

NO GUARANTEE OF PLAN COMPENSATION. Eligibility to participate and participation
in this Plan does not guarantee the payment of Plan Compensation. Participation
by Full and Limited Participants is determined for each Compensation Year;
participation in one or more Plan Year(s) does not guarantee participation in
any future Plan Year(s).

ASSIGNMENT AND TRANSFERS. Except for transfer by will or by the laws of descent
and distribution, rights under the Plan may not be transferred or assigned.

WITHHOLDING TAX. With respect to Plan Compensation, the Company will make
deductions i) permitted under agreement between Participant and the Company, ii)
required under applicable law, as of the date of distribution of the Plan
Compensation.

GOVERNING LAW. This Plan and actions taken in connection herewith
shall be governed and construed in accordance with the laws of the State of
Delaware (regardless of the law that might otherwise govern under applicable
Delaware principles of conflict of laws).

<PAGE>

              SETTING FINANCIAL TARGETS AND PERFORMANCE OBJECTIVES

Key to an effective and equitable management incentive plan are the quality,
realism and stretch of the financial targets and personal performance
objectives. In setting these targets and objectives, the Company focuses on high
standards, continuous improvement and Participant involvement. Plan Compensation
is built around these two basic factors: a Financial Target and a Performance
Objective. The weighting varies from one business unit to another, reflecting
the relative importance of business to individual performance for that unit
during any Compensation Year. The sum of the Financial Target factor percentage
and Performance Objective factor percentage is one hundred percent (100%). The
two factors are intended to be based upon significant results that need to be
achieved if the business unit's strategic and overall performance objectives are
to be realized.

The Financial Target measures metrics important to the business unit. Budgets,
as well as past and expected future performance results, are the criteria used
in setting the Financial Target.

The Performance Objective consists of important personal objectives directly
related to a Participant's major responsibilities. For example, these objectives
could include such areas as market and/or customer share improvement; cost
improvements; product development; pricing; inventory levels; introduction or
improvement of products, processes or systems; health, safety and environmental
performance; or management development. Personal performance objectives are set
annually for each Participant through the Key Accountability Document (KAD). The
Compensation Committee sets the personal performance objectives for the Chief
Executive Officer.

     UIC recognizes circumstances change throughout the year. A Participant's
     significant   achievements  for  the   Compensation   Year  which  are  not
     contemplated in the KAD will be reviewed and may be  incorporated  into the
     Participant's  Performance  Objective  Factor  at the  discretion  of their
     supervisor.  As to such unanticipated  significant  achievements by CEO (or
     other  Participants  for whom the  Committee  determines  its  review to be
     appropriate), the discretion shall be exercised by the Committee.

                               FINANCIAL TARGETS

FINANCIAL TARGET MEASUREMENT

At the beginning of the Compensation Year, Financial Targets are reviewed and
approved by the Committee. Budgets and adjusted past and expected business unit
performance are compared with previously set targets.

GUIDELINES FOR OBJECTIVE SETTING AND EVALUATION

A  Financial  Target of one (1.0) is the  level at which  the  business  unit is
expected to perform for the Compensation Year; achievement of the expected level
of financial  performance  would  result in a Financial  Target with a one (1.0)
rating.  Therefore,  each unit's  budget is the primary  starting  point for one
(1.0) Financial Target level.

<PAGE>

o The one (1.0) Financial Target is generally established at a level judged to
  have a reasonable  chance of attainment and match the  commitments  made to
  the UIC Board; the zero (0) and two (2.0) extremes are normally established
  in terms of reasonable stretch and relative risk.

o Financial Targets are first developed by unit/division management. The CEO and
  appropriate  staff  discuss  and agree upon  Financial  Targets  that would
  equate to the zero (0), one (1) and two (2) levels.

o In   rating  actual   performance   against  the  Financial Targets, actual
  performance  is  adjusted  to  level  the  effect  of  accounting  changes,
  acquisition  costs,  land sales,  strategic  restructuring  costs,  capital
  expenditures, etc.

o Adjusted actual performance is compared to the Financial Target. No award is
  made for results at or below the zero (0) level.  Twice the target award is
  paid for adjusted actual performance at or above the two (2.0) level.

o Financial Targets are approved by the Committee early in the Compensation Year
  but can be adjusted by the Committee in case of change in the business.

                             PERFORMANCE OBJECTIVES

GUIDELINES FOR SETTING AND EVALUATING THE PERFORMANCE OBJECTIVE

Each Participant submits personal performance objectives in KAD format to
his/her manager. Personal performance objectives are based on the major job
responsibilities assigned to the individual and are related to the business
unit's strategic and/or UIC's overall performance objectives.

o  To develop  personal  performance  objectives,  each  Participant must
   understand and commit to the operating  unit's business and human resources
   strategies.

o  The two to five most important personal performance  objectives should
   be  submitted  to the next  higher-level  manager for review and  approval.
   Objectives  should state results  required to help ensure that the personal
   performance can be measured.  In many cases,  measurement of results cannot
   be quantified.  When this quantification is not possible, there should be a
   clear   statement  of  the  criteria   that  will  be  used  to  judge  the
   accomplishment of the personal performance objectives.  For example, if the
   objective  is to  develop  a  strategic  plan,  success  is not  determined
   primarily  by a plan being  developed  on time but  rather  the  quality of
   thinking  that the plan  portrays.  The KAD should lay out the  criteria to
   determine the quality.  Measurements  enable the Participant and manager to
   determine  whether the  objective  or a portion of the  objective  has been
   successfully achieved.

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<PAGE>

o  Objectives  should be stated in  measurable  terms and should  include
   timing.

o  Objectives  should  identify  specific  achievements  expected and not
   merely restate major responsibilities or plans to accomplish them.

o  Objectives  should be  realistic  with some  stretch and be based on actual
   conditions.

o  The degree of  difficulty  may vary among the  objectives.  A priority
   ranking or assessment of relative  difficulty,  included with the statement
   of the objective, will be of value during the review to determine the level
   of the Performance Objective rating.

o  In determining the Performance  Objective rating (using the scale of
   zero (0) to two (2)), the following are all to be considered:

      o    The  accomplishment  of annual objectives and the significance of
           those objectives to overall business unit results.

      o    Demonstration of leadership

      o    Degree of difficulty of the objectives.

      o    Overall   performance   of   major   responsibilities   including
           self-development.

      o    Performance  in  response  to   unanticipated   circumstances  or
           opportunities.

      o    Contributions  to the  management  team and  important  corporate
           initiatives.

<PAGE>

GUIDELINES FOR REVIEWING OVERALL PERSONAL PERFORMANCE

Five general levels of personal performance are suggested, with definitions of
possible performance and a suggested Performance Objective rating range for
each.

-------------------------------------------------------------------------------
Performance
Objective
Rating
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
0 to .5        Overall performance was considerably less than standard. Did
(KAD score     not meet objectives primarily because of own performance.
below 2)       Performance in unplanned circumstances was below expectations.
               Individual did not demonstrate satisfactory improvement during
               the year.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
..5 to .95      Overall performance of major position responsibilities did not
(KAD score     meet all expectations. Some objectives were achieved but not
between 2      in a totally satisfactory manner. Measurable progress was made
and 2.8)       during the year and current progress is satisfactory.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
..9 to 1.05     Overall performance of major responsibilities met current
(KAD score     standards. Objectives substantially met, especially those
between        of greater significance to business objectives. Performance in
2.8 and 3.1)   unplanned circumstances met or exceeded expectations.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1.1 to 1.5     Overall performance consistently met or exceeded standards
(KAD score     for all responsibilities. Objectives were generally exceeded
between        during the year. Function for which responsible has shown
3.2 and 4)     significant progress. Significant unplanned circumstances
               occurred during the year and related performance exceeded
               expectations
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1.5 to 2.0     Outstanding performance in all aspects of current job. All
(KAD score     objectives were exceeded with recognition of these
between 4      accomplishments. Has demonstrated success of at least one major
and 5          breakthrough or significant project. Professional performer
               on all job functions and 4 and 5) recognized as such by peers
               and superiors.
--------------------------------------------------------------------------------

Achievement of more difficult objectives receives a higher Performance Objective
rating, which translates into a higher incentive award. For example, a
Participant who sets unusually demanding objectives and then misses one might
receive a 1.4 Performance Objective rating. A Participant who set more easily
achieved objectives and then hits them all might receive a 1.0 Performance
Objective rating.

                             INCENTIVE CALCULATION

To  determine  a  Participant's  Plan  Compensation,  the  Financial  Target and
Performance   Objective  factors  are  rated  and  weighted   according  to  the
predetermined  split.  The two results are totaled and multiplied by the product
of the Participant's Compensation Year base salary earnings multiplied times the
Participant's TICA (prorated for partial-year  participation as may be permitted
or as otherwise approved).

<PAGE>

1. TARGET INCENTIVE COMPENSATION AWARD (TICA) AMOUNT CALCULATION- EXAMPLE

If your base salary is $100,000.00 and in the Plan Year, your Target Percentage
is ten percent (10%), the TICA Amount is calculated as follows:

Assume:
Your Base Salary: $100,000
Your Target Percentage: 10%
Your Target Incentive Compensation Award Amount: $10,000
You were employed the entire year

2. WEIGHTED PERFORMANCE FACTOR CALCULATION:

Assume for the Plan Year:

Your Performance Factor is weighted at thirty percent (30%) of the overall bonus
award.

Your Performance Factor rating was 1.2, (or a KAD score of 3.4)

The Performance Factor calculation would be:
$100,000 * 10% * (30% * 1.2) = $3,600.00

3. WEIGHTED FINANCIAL FACTOR CALCULATION

Assume for the Plan Year:

Your Financial Factor is weighted at seventy percent (70%) of the overall bonus
award.

To determine Your Financial Factor, examine the weighted result of each of the
three Financial Target sub-factors (i.e., orders, profit, cash):

Orders:  with a weight of forty percent  (40%),  for which you achieved a result
against target of 1.2, resulting in a sub-factor of .48

                                       12
<PAGE>

Profit:  with a weight of thirty percent (30%),  for which you achieved a result
against target of .8 resulting in a sub-factor of .24

Cash: with a weight of thirty percent (30%), for which you achieved a result
against target of 2 resulting in a sub-factor of .6 The overall Financial Factor
in this example would be 1.32 (.48+.24+.6).

The Financial Factor calculation would be:
$100,000 * 10% * (70% * 1.32) = $9,240.00

4. FINAL MIP BONUS CALCULATION:

Performance Factor + Financial Factor
$3,600.00 + $9,240.00= $12,840.00

                                    SUMMARY

UIC's Management Incentive Plan is an integral part of our competitive total
compensation program, offering incentives and rewards offset by commensurate
risk. Participants are individually selected from among those managers whose
decisions significantly affect UIC's performance.

Financial Targets and Performance Objectives are set in areas that require focus
and emphasis in the Compensation Year including actions intended to execute
longer term strategies. Performance is rigorously measured against the Financial
Targets and Performance Objectives and on an overall basis.

Both business unit and individual performance affect incentive awards.Exhibit 10.2

                         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  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.
<PAGE>

     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,  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.

<PAGE>

     (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 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.

<PAGE>

     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 _____ (___) 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

     (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).

<PAGE>

     (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 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]

<PAGE>

     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    _________________    by
_________________________.

                                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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