Unassociated Document


     

    Universal
      Capital Management, Inc. 

    2006
      Equity Incentive Plan

     

    
      	1.  	
              Purpose
                of the Plan

            


    

     

    The
      purpose of this Universal Capital Management, Inc. 2006 Equity Incentive Plan
      is
      to (i) assist Universal Capital Management, Inc. in attracting and retaining
      Employees with outstanding abilities; (ii) to promote the identification of
      the
      Employees’ interests with those of the stockholders of the Company; and (iii) to
      issue Options to Non-Employees, which the Board or its Committee determines
      is
      in the best interest of the Company and its stockholders.

     

    
      	2.  	
              Definitions

            


    

     

    For
      the
      purposes of the Plan, except where the context clearly indicates otherwise,
      the
      following terms shall have the meanings set forth below:

     

    “Award
      Agreement” means the written agreement, executed by the committee or the Board
      or its delegate, and the Optionee, that sets forth the terms of an Option.
      

     

    “Board”
      means the Board of Directors of the Company.

     

    “Code”
      means the U.S. Internal Revenue Code of 1986, as amended.

     

    “Commission”
      means the U.S. Securities and Exchange Commission.

     

    “Committee”
      means the Committee described in Section 5.1 hereof.

     

    “Company”
      means Universal Capital Management, Inc., a Delaware corporation.

     

    “Director”
      means a member of the Board.

     

    “Employee”
      means an individual who is employed by the Company, as determined by the Board
      or the Committee in its sole discretion.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Fair
      Market Value” of Shares means (i) if the Shares are then listed and traded on a
      registered national or regional securities exchange or quoted on The National
      Association of Securities Dealers Automated Quotation System, the average of
      the
      high and low sales price of a Share on such exchange or quotation system on
      the
      date of a grant or issuance of an Option, or (ii) if the Shares are not traded
      on a registered national or regional securities exchange or quoted in such
      a
      quotation system, the fair market value as determined by the Committee, based
      on
      such valuation methods as the Committee determines to be appropriate as long
      as
      such methods are permitted by the 40 Act; provided, however, that in no event
      shall Fair Market Value be less than that determined under section 409A of
      the
      Code. 

     

    “Incentive
      Stock Option” means an Option that is designated as an incentive stock option in
      the Award Agreement, to the extent such Option qualifies as an “incentive stock
      option” under section 422 of the Code.

     

    “40
      Act”
means the Investment Company Act of 1940, as from time to
      time
      amended.

     

    “Non-Employee
      Director” means a Director who is not an Employee. 

     

    “Option”
      means the right to purchase Shares, as set forth in an Award
      Agreement.

     

    “Optionee”
      means any individual to whom an Option has been granted, all or a portion of
      which remains unexercised.

     

    “Plan”
      means the Universal Capital Management, Inc., 2006 Equity Incentive Plan, as
      set
      forth herein and as amended from time to time.

     

    “Rule
      16b-3” means Rule 16b-3 promulgated pursuant to Section 16(b) of the Securities
      Exchange Act of 1934, as amended or any successor rule.

     

    “Share”
      means one share of voting common stock, par value $.001 per share, of the
      Company, and such other stock that may be substituted therefor pursuant to
      Section 7 hereof.

     

    
      
        
        

      

      
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      	3.  	
              Eligible
                Persons

            


    

     

    Every
      individual, including, but not limited to, any individual who at the date of
      grant of an Option is (i) an Employee or (ii) a Non-Employee Director,
is
      eligible
      to receive Options under this Plan. 

     

    The
      foregoing notwithstanding, no Options
      shall be
      issued hereunder to any (i) Non-Employee Director unless
      all of all the requirements of Section 61(a)(3)(B)(i)(II) of the 40
      Act
      have been satisfied or (ii) individual who is neither an Employee nor a
      Non-Employee Director, unless, in both cases, the Board or the Committee
      determines prior to such issuance that it is in
      the
      best interest of the Company and its stockholders and otherwise satisfies all
      of
      the requirements of Section 61(a)(3)(C)(ii) of the 40 Act.

     

    
      	4.  	
              Stock
                Subject to this Plan; Maximum Number of
                Grants

            


    

     

    4.1  Subject
      to Section 4.2, the total number
      of
      Shares which may be issued under Options granted pursuant to
      this
      Plan shall not exceed Two Million
      (2,000,000) shares of common stock of the Company. The Shares covered
      by the portion of any grant under this Plan which expires unexercised shall
      become available again for grants under this Plan. In the event of any merger,
      reorganization, consolidation, recapitalization, stock dividend or other change
      in corporate structure affecting the Stock, an equitable substitution or
      proportionate adjustment shall be made in (i) the aggregate number of Shares
      reserved for issuance under the Plan and the maximum number of Shares that
      may
      be granted to any Optionee in any calendar year and (ii) the kind, number and
      exercise price of shares subject to outstanding securities, in each case as
      may
      be determined by the Board or the Committee, in its sole discretion. Such other
      substitutions or adjustments shall be made as may be determined by the Board
      or
      the Committee, in its sole discretion. In connection with any event described
      in
      this Section 4.1 or a sale by the Company of all or substantially all of its
      assets, the Board or the Committee may provide, in its sole discretion, for
      the
      cancellation of any outstanding Award Agreement in exchange for a payment in
      cash or other property equal to the Fair Market Value of the Option issuable
      on
      exercise of such cancelled Award Agreement less the exercise price or purchase
      price thereof.

     

    
      
        
        

      

      
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    4.2  Notwithstanding
      Section 4.1, the amount of voting securities that would result from the exercise
      of all outstanding Options at the time of grant hereunder shall not exceed
      25%
      of the outstanding voting securities of the Company, except that if the amount
      of voting securities that would result from exercise of all outstanding Options
      granted hereunder to the Company’s Directors, officers and Employees pursuant to
      any executive compensation plan meeting the requirements of Section 61(a)(3)(B)
      of the 40 Act would exceed 15% of the outstanding voting securities of the
      Company, then the total amount of voting securities that would result from
      the
      exercise of all outstanding Options at the time of grant hereunder shall not
      exceed 20% of the outstanding voting securities of the Company.

     

    
      	5.  	
              Administration

            


    

     

    5.1  This
      Plan
      shall be administered by the Board or
      by a
      committee to which administration
      of the Plan, or of part of the Plan, is delegated by the Board. The
      Board
      shall appoint and remove members
      of the Committee in its discretion in accordance with applicable laws.
If
      necessary in order to comply with applicable stock exchange rules, Rule 16b-3
      and section
      162(m) of the Code, the Committee shall, in the Board’s discretion, be
comprised
      solely of “non-employee directors,” within the meaning of said Rule 16b-3,
      and “outside directors,” within the meaning of section 162(m) of the Code.
The
      foregoing notwithstanding, the
      Board, in its absolute discretion, may at any time and from time
      to
      time exercise any and all rights and duties under this Plan, provided that
      in
      the event that the Board grants Options, each such grant shall be approved
      by a
      majority of the members of the Board who have no financial interest in the
      proposed issuance and by a majority of the Board
      as
      a whole.

     

    5.2  Subject
      to the other provisions of this Plan, the Board or the Committee shall
have
      the
      authority, in its discretion and subject to the provisions of Section
5.1:
      (i)
      to grant Options; (ii) to determine the Fair Market Value of
      the
      Shares; (iii) to determine the exercise prices of Options, which
      exercise prices shall in no event be less than the Fair Market Value of the
      Shares covered by the grant at the date of issuance;
      (iv) to
      determine the individuals to whom, and the time or times at which, Options
      shall be granted, and the number of Shares subject to each Option grant; (v)
      subject to Section 7, to determine the terms of each Option, which terms shall
      be set forth in the Award Agreement; (vi) to
      interpret this Plan; (vii)
      with the consent of the holder of an Option, to modify or amend any Option;
      (viii)
      to
      authorize any person to execute any Award Agreement on behalf of the Company;
      and (xi) to make all other determinations deemed necessary or advisable for
      the
      administration of this Plan not specifically reserved to the Board or
      stockholders of the Company pursuant to Section 61 of the 40 Act.
      The
      Board or the Committee may delegate nondiscretionary administrative
      duties to such Employees or other parties as it deems proper.

     

    
      
        
        

      

      
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    5.3  All
      questions of interpretation, implementation, and application of this Plan shall
      be determined by the Committee or the Board, as applicable. Such determinations
      shall be final
      and
      binding on all persons.

     

    
      	6.  	
              Granting
                of Options; Agreement

            


    

     

    6.1  No
      Options
      shall
      be granted under this Plan after ten (10) years from the date
      of
      adoption of this Plan by the Board.

     

    6.2  Each
      Option
      shall be
      evidenced by an Award Agreement, in form satisfactory to the Committee, executed
      by the Company and the Optionee.

     

    
      	7.  	
              Terms
                and Conditions of Options

            


    

     

    7.1  General
      Terms and Conditions of Options.
      Unless
      otherwise provided in an Award Agreement, all Options shall be subject to the
      following terms and conditions:

     

    7.1.1  Time
      of Exercise.
      Subject
      to Section 6, Options
      granted
      under this Plan shall be exercisable in accordance with the terms of the Award
      Agreement.

     

    7.1.2  Non-transferability
      of Rights.
      No
Option
      shall be
      assignable or otherwise transferable by the Optionee except by will, by the
      laws
      of descent and distribution or pursuant to a qualified domestic relations order.
      During the life of the Optionee, an Option
      shall be
      exercisable only by the Optionee.

     

    
      
        
        

      

      
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    7.1.3  Payment.
      Except
      as provided below, payment in full, in cash, shall be made for all Shares
      purchased at the time notice of exercise of an Option is given to the Company.
      Such notice shall be in the form approved by the Board or Committee. The
      Committee may authorize any one or more of the following additional methods
      of
      payment:

     

    (a)  Delivery
      by the Optionee of Shares already owned by the Optionee for all or part of
      the
      exercise price, provided the Fair Market Value of such Shares is equal on the
      date of exercise to the aggregate exercise price, or such portion thereof as
      the
      Optionee is authorized to pay by delivery of such Shares; 

     

    (b)  Through
      the surrender of Shares then issuable upon exercise of the Option, provided
      the
      Fair Market Value of such Shares is equal on the date of exercise to the
      aggregate exercise price, or such portion thereof as the Optionee is authorized
      to pay by surrender of such Shares; and

     

    (c)  Delivery
      by the Optionee of a promissory note; provided, that payment with a note is
      only
      acceptable by Optionees who are not executive officers or Directors. Such
      promissory notes must be recourse to the maker and must (i) have a term of
      not
      more than one year; (ii) bear interest at no less than the prevailing rate
      applicable to 90-day United States Treasury bills at the time the loan is made;
      (iii) at all times be fully collateralized (such collateral may include any
      securities issued by the Company); (iv) be approved by a majority of the
      directors of the Company who have no financial interest in such transaction
      and
      a majority of such directors who are not interested persons of the Company
      as
      defined in Section 2(a)(19) of the 40 Act on the basis that the loan is in
      the
      best interests of such Company and its shareholders; and (v) be substantially
      in
      the form of Exhibit
      I.

     

    
      
        
        

      

      
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    7.1.4  Termination
      of Employment.
      

     

    (a)  If
      for
      any reason other than death or disability, an Optionee who at time of the grant
      of an Option under the Plan was an Employee ceases to be an Employee (such
      event
      being called a “Termination”),
      Options held at the date of Termination (to the extent then exercisable) may
      be
      exercised in whole or in part at any time within three months of the date of
      such Termination; provided,
      however,
      that if
      such exercise of the Option would result in liability for the Optionee under
      Section 16(b) of the Securities Exchange Act of 1934, then such three-month
      period automatically shall be extended until the tenth day following the last
      date upon which Optionee has any liability under Section 16(b) (but in no event
      after the expiration date of such Option).

     

    (b)  If
      an
      Optionee dies or becomes permanently and totally disabled (within the meaning
      of
      section 22(e)(3) of the Code) or within the period that the Option remains
      exercisable after Termination, Options then held (to the extent then
      exercisable) may be exercised, in whole or in part, by the Optionee, by the
      Optionee’s personal representative or by the person to whom the Option is
      transferred by devise or the laws of descent and distribution, at any time
      within twelve months after the death or twelve months after the permanent and
      total disability of the Optionee or any longer period specified in the Award
      Agreement or by amendment thereof (but in no event after the expiration date
      of
      such Option). 

     

    (c)  For
      purposes of this Section 7.1.4, an Optionee’s employment shall not be deemed to
      terminate by reason of sick leave, military leave or other leave of absence
      approved by the Committee, if the period of any such leave does not exceed
      90
      days or, if longer, if the Optionee’s right to reemployment by the Company is
      guaranteed either contractually or by statute.

     

    7.1.5  Each
      Optionee shall, no later than the date as of which any amount attributable
      to an
      Option first becomes includible in the gross income of the Optionee for tax
      purposes, pay to the Company, or make arrangements satisfactory to the Committee
      regarding payment of, any Federal, state, or local taxes of any kind required
      by
      law to be withheld with respect to such security. The obligations of the Company
      under the Plan shall be conditional on the making of such payments or
      arrangements, and the Company shall, to the extent permitted by law, have the
      right to deduct any such taxes from any payment of any kind otherwise due to
      the
      Optionee.

     

    
      
        
        

      

      
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    7.1.6  Term.
      No
      Option shall be exercisable more than 10 years after the date of grant, or
      such
      lesser period of time as is set forth in the Award Agreement.

     

    7.1.7  Total
      Purchase.
      No
      Optionee shall, in any calendar year, be granted Options to purchase more than
      400,000 Shares. Options granted to the Optionee and cancelled during the same
      calendar year shall be counted against such maximum number of Shares. In the
      event that the number of Options which may be granted is adjusted as provided
      in
      this Plan, the above limit shall automatically be adjusted in the same ratio.
      

     

    7.1.8  Exercise
      Price for Options.

     

    (a)  Incentive
      Stock Options shall be granted only to Employees. The exercise price of each
      Option shall be at least equal to the Fair Market Value of the Shares subject
      to
      the Option as of the date of grant provided, however, that no Incentive Stock
      Option shall be granted to any Employee who at the time the Incentive Stock
      Option is granted, owns capital stock of the Company possessing more than 10%
      of
      the total combined voting power or value of all classes of capital stock of
      the
      Company, determined in accordance with the provisions of sections 422(b)(6)
      and
      424(d) of the Code, unless the exercise price of such Incentive Stock Option
      is
      at least 110% percent of the Fair Market Value of the Shares subject to the
      Incentive Stock Option as of the date of grant and such Incentive Stock Option
      is not exercisable by its terms after the expiration of five (5) years from
      the
      date of grant.

     

    (b)  An
      Incentive Stock Option shall be granted hereunder only to the extent that the
      aggregate Fair Market Value (determined at the time the Incentive Stock Option
      is granted) of the Shares with respect to which such Incentive Stock Option
      and
      any other “incentive stock option” (within the meaning of section 422 of the
      Code) are exercisable for the first time by any Optionee during any calendar
      year (under the Plan and all other plans of the Company within the meaning
      of
      section 422(d) of the Code) does not exceed $100,000. 

     

    
      
        
        

      

      
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      	8.  	
              Manner
                Of Exercise

            


    

     

    8.1  An
      Optionee wishing to exercise an Option shall give notice to the
      Company in the form approved by the Board or the Committee accompanied
      by payment of the exercise
      price and provision for withholding taxes as provided in Section 7.


     

    8.2  Promptly
      after the receipt of notice of exercise of an Option and
      the
      payments required under Section 8.1, the Company shall, without stock
issue
      or
      transfer taxes to the Optionee or other person entitled to exercise the
Option,
      deliver to the Optionee or such other person a certificate or certificates
      for
      the requisite number of Shares. An Optionee or permitted transferee of the
      Option shall not have any privileges as a stockholder with respect to any Shares
      covered by the Option until the date of issuance (as evidenced by the
      appropriate entry on the books of the Company
      or a duly
      authorized transfer agent) of such Shares.

     

    
      	9.  	
              Employment
                or Consulting Relationship

            


    

     

    Nothing
      in this Plan or any Option granted hereunder shall interfere with
      or
      limit in any way the right of the Company to terminate
      any Optionee’s position as Director, officer and/or Employee at any time, nor
      confer upon any Optionee any right to continue in any such position
      with the Company.

     

    
      	10.  	
              Conditions
                Upon Issuance of Shares

            


    

     

    Shares
      shall not be issued pursuant to the exercise of an Option unless the exercise
      of
      such Option and the issuance and delivery of such
      Shares pursuant thereto shall comply with all relevant provisions of law,
      including, without limitation, the Securities Act of 1933, as amended
(the
      “Securities Act”) and the 40 Act.

     

    
      
        
        

      

      
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      	11.  	
              Nonexclusivity
                of the Plan

            


    

     

    The
      adoption of this Plan shall not be construed as creating any limitations on
      the
      power of the Company to adopt such other incentive arrangements
      as it may deem desirable, including, without limitation, the granting of
      incentives or securities other than under the Plan.

     

    
      	12.  	
              Amendments
                to Plan

            


    

     

    The
      Board
      may at any time amend, alter, suspend or discontinue this Plan.
      Without the consent of an Optionee, no amendment, alteration, suspension or
      discontinuance may adversely affect the outstanding Options held by such holder
      except to
      conform this Plan and Options
      to the
requirements
      of (a) federal or other tax laws relating to incentive stock options or (b)
      the
      Securities Act of 1933 or the 40 Act. No amendment, alteration, suspension
      or
      discontinuance shall require stockholder approval
      unless the Board concludes that stockholder approval is advisable or
required,
      whether pursuant to the terms of the 40 Act, applicable stock exchange rules,
      or
      otherwise.

     

    
      	13.  	
              Effective
                Date of Plan; Termination

            


    

     

    This
      Plan
      shall become effective upon adoption by the Board; provided,
      however,
      that no
      Option shall be exercisable unless and until consent of
      more
      than a majority of the outstanding securities of the Company approve such Plan,
      whether by written consents or by voting at a validly called stockholders’
meeting; provided,
      further,
      however,
      that in
      addition to such stockholder approval, no Options shall be issued to any
      individual who is not an Employee until the Plan is approved by order of the
      Commission pursuant to Section 61(a)(3)(B)(i)(II) of the 40 Act. Options may
      be
      granted and exercised under this Plan only in compliance with all applicable
      federal and state securities laws. This Plan shall terminate within ten years
      from the date
      of
      its adoption by the Board.

     

    
      	14.  	
              Compliance
                With Law

            


    

     

    Notwithstanding
      the
      foregoing, for so long as the Company is a regulated business development
      company under the 40 Act: (i) this Plan shall be implemented in accordance
      with
      the provisions of the 40 Act and no grants may be made in violation of the
      provisions of the 40 Act, (ii) this Plan shall not be effective as to any grant
      that is prohibited under the 40 Act without Commission relief unless or until
      the Commission, upon application by the Company, shall issue an order
      granting relief to allow the Company to make such grant pursuant to
      the
      Plan,
      and (iii) any grant made in violation of the 40 Act will be null and
      void.

     

    
      
        
        

      

      
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    Exhibit
      I

     

    FORM
      OF PROMISSORY NOTE

     

    THIS
      PROMISSORY NOTE
      is made
      as of the ____ day of _____________, 20__ at __________,
      ______________.

     

    FOR
      VALUE RECEIVED,
      the
      undersigned (“Maker”) promises to pay to the order of Universal Capital
      Management, Inc. (“Payee”) the principal sum of ___________________ Dollars
      ($__________) in lawful money of the United States of America with interest
      calculated on the balance remaining unpaid from time to time at the rate of
      ____________________ (___%) per annum, which represents the [rate applicable
      to
      90-day U.S. Treasury bills] on the date hereof.

     

    Except
      as
      provided otherwise in this Promissory Note, (a) repayment shall be made in
      eleven (11) equal monthly installments of ________________________ Dollars
      ($__________) each, payable on the first day of each calendar month; (b) the
      first such payment shall be made on the first day of ______________, 20__;
      and
      (c) if not sooner paid in accordance with the terms hereof, all remaining
      principal and interest shall become due and payable on the first anniversary
      hereof.

     

    Maker
      may
      prepay the principal hereof in whole or in part at any time and from time to
      time without penalty or premium; provided, however, that partial prepayments
      of
      principal shall be applied to the monthly installments due pursuant hereto
      in
      the inverse order of maturity.

     

    The
      obligations of this Promissory Note are fully secured by a Security Agreement
      entered into on the date hereof between the Maker and the Payee on terms
      satisfactory to Payee in accordance with the terms therein.

     

    Maker
      hereby irrevocably waives presentment, protest, notice of protest, and dishonor.
      

     

    If
      any
      installment of principal or interest is not paid within fifteen (15) days of
      the
      date when due, the holder hereof, at his option, may declare all remaining
      installments of principal immediately due and payable and proceed to collect
      the
      same at once.

     

    Witness:

     

    
      	_________________________________________	 	
              _________________________________________
                (SEAL)

            


    

     

     

     

    
      
        
        

      

      
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