2007 Equity Incentive Plan


    EXHIBIT
      4.1

     

    
 

    
      


      


      


      


      UNIVERSAL
        DETECTION TECHNOLOGY

      


      


      


      2007-2
        EQUITY INCENTIVE PLAN


      


      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      UNIVERSAL
        DETECTION TECHNOLOGY

      2007-2
        Equity Incentive Plan


       

      Universal
        Detection Technology, Inc. hereby adopts the 2007-2 Equity Incentive Plan,
        effective as of July 3, 2007, as follows: 

       

      SECTION
        1

      BACKGROUND,
        PURPOSE AND DURATION 

       

      1.1 Background
        and Effective Date.
        The Plan
        provides for the granting of Nonqualified Stock Options, Incentive Stock
        Options, Stock Appreciation Rights (or SARs), Restricted Stock, Performance
        Units, and Performance Shares. The Plan is adopted and effective as of July
        3,
        2007. The Company will seek stockholder approval in the manner and to the
        degree
        required under Applicable Laws. If the Company fails to obtain stockholder
        approval of the Plan within twelve (12) months after the date this Plan is
        adopted by the Board, pursuant to Section 422 of the Code, any Option granted
        as
        an Incentive Option at any time under the Plan will not qualify as an Incentive
        Option within the meaning of the Code and will be deemed to be a Non-Statutory
        Option.

      


      1.2 Purpose
        of the Plan.
        The
        purpose of the Plan is to promote the success, and enhance the value, of
        the
        Company by aligning the interests of Participants with those of the Company’s
        shareholders, and by providing Participants with an incentive for outstanding
        performance. The Plan is further intended to provide flexibility to the Company
        in its ability to motivate, attract, and retain the services of outstanding
        individuals, upon whose judgment, interest, and special effort the success
        of
        the Company largely is dependent.

      


      1.3 Duration
        of the Plan.
        The
        Plan shall commence on the date specified in Section 1.1 and subject to Section
        12 (concerning the Board’s right to amend or terminate the Plan), shall remain
        in effect thereafter. 

       

      SECTION
        2

      DEFINITIONS

       

      The
        following words and phrases shall have the following meanings unless a different
        meaning is plainly required by the context: 

       

      2.1 “1934
        Act”
        means
        the Securities Exchange Act of 1934, as amended. Reference to a specific
        section
        of the Exchange Act or regulation thereunder shall include such section or
        regulation, any valid regulation promulgated under such section, and any
        comparable provision of any future legislation or regulation amending,
        supplementing or superseding such section or regulation. 

       

      2.2 “Affiliate”
        means
        any corporation or any other entity (including, but not limited to, partnerships
        and joint ventures) controlling, controlled by, or under common control with
        the
        Company (e.g., a parent or subsidiary of the Company). 

       

      2.3 “Affiliated
        SAR”
        means an
        SAR that is granted in connection with a related Option, and which automatically
        will be deemed to be exercised at the same time that the related Option is
        exercised. 

       

      2.4 “Applicable
        Laws”
        means
        the requirements relating to the administration of equity plans under U.
        S.
        state corporate laws, U.S. federal and state securities laws, the Code, any
        stock exchange or quotation system on which the Shares are listed or quoted
        and
        the applicable laws of any foreign country or jurisdiction where Awards are,
        or
        will be, granted under the Plan.

       

      
        
          
          

        

        
          -1-

          
            

          

        

        
          
          

        

      

       

      2.5 “Award”
        means,
        individually or collectively, a grant under the Plan of Nonqualified Stock
        Options, Incentive Stock Options, SARs, Restricted Stock, Performance Units,
        or
        Performance Shares. 

       

      2.6 “Award
        Agreement”
        means
        the written agreement setting forth the terms and provisions applicable to
        each
        Award granted under the Plan. 

       

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

       

      2.8 “Change
        in Control”
        is
        defined in Section 15.4.

       

      2.9 “Code”
        means
        the Internal Revenue Code of 1986, as amended. Reference to a specific section
        of the Code or regulation thereunder shall include such section or regulation,
        any valid regulation promulgated under such section, and any comparable
        provision of any future legislation or regulation amending, supplementing
        or
        superseding such section or regulation. 

       

      2.10 “Committee”
        means
        the committee appointed by the Board to administer the Plan pursuant to
        Section 3.1,
        or if
        no committee has been so appointed, then Committee means the Board.


       

      2.11 “Company”
        means
        Universal Detection Technology, a California corporation, or any successor
        thereto. 

       

      2.12 “Consultant”
        means an
        individual who provides bona fide services to the Company and/or an Affiliate.
        

       

      2.13 “Director”
        means
        any individual who is a member of the Board of Directors of the Company.
        

       

      2.14 “Disability”
        means a
        permanent and total disability within the meaning of Code Section 22(e)(3).


       

      2.15 “Employee”
        means an
        employee of the Company or of an Affiliate, whether such employee is so employed
        at the time the Plan is adopted or becomes so employed subsequent to the
        adoption of the Plan. 

       

      2.16 “ERISA”
        means
        the Employee Retirement Income Security Act of 1974, as amended. Reference
        to a
        specific section of ERISA shall include such section, any valid regulation
        promulgated thereunder, and any comparable provision of any future legislation
        amending, supplementing or superseding such section. 

       

      2.17 “Fair
        Market Value”
        means as
        of any date, the value of a Share determined as follows:

       

      (a) If
        the
        Shares are listed on any established stock exchange or a national market
        system,
        its Fair Market Value shall be the closing sales price for such Share (or
        the
        closing bid, if no sales were reported) as quoted on such exchange or system
        on
        the day of, or the last market trading day prior to, the day of determination,
        as reported in The Wall Street Journal or such other source as the Committee
        deems reliable;

       

      (b) If
        the
        Shares are regularly quoted by a recognized securities dealer but selling
        prices
        are not reported, the Fair Market Value of the Share shall be the mean between
        the high bid and low asked prices for the Shares on the day of, or the last
        market trading day prior to, the day of determination, as reported in The
        Wall
        Street Journal or such other source as the Committee deems reliable; or


       

      
        
          
          

        

        
          -2-

          
            

          

        

        
          
          

        

      

       

      (c) the
        Fair
        Market Value shall be determined in good faith by the Committee. 

       

      2.18 “Freestanding
        SAR”
        means a
        SAR that is granted independently of any Option. 

       

      2.19 “Incentive
        Stock Option” or “ISO”
        means an
        option to purchase Shares, which is designated as an Incentive Stock Option
        and
        is intended to meet the requirements of Section 422 of the Code.


       

      2.20 “Nonqualified
        Stock Option”
        means an
        option to purchase Shares which is not intended to be an Incentive Stock
        Option.


       

      2.21 “Option”
        means an
        Incentive Stock Option or a Nonqualified Stock Option. 

       

      2.22 “Option
        Price”
        means
        the price at which a Share may be purchased pursuant to an Option. 

       

      2.23 “Participant”
        means an
        Employee, Consultant or Director who has an outstanding Award. 

       

      2.24 “Performance
        Share”
        means an
        Award granted to an Employee pursuant to Section 8 having an initial value
        equal
        to the Fair Market Value of a Share on the date of grant.

       

      2.25 “Performance
        Unit”
        means an
        Award granted to an Employee pursuant to Section 8 having an initial value
        (other than the Fair Market Value of a Share) that is established by the
        Committee at the time of grant. 

       

      2.26 “Period
        of Restriction”
        means
        the period during which the transfer of Shares of Restricted Stock are subject
        to restrictions. 

       

      2.27 “Plan”
        means
        the Universal Detection Technology 2007-2 Equity Incentive Plan, as set forth
        in
        this instrument and as hereafter amended from time to time. 

       

      2.28 “Restricted
        Stock”
        means an
        Award granted to a Participant pursuant to Section 7.

       

      2.29 “Retirement”
        means,
        in the case of an Employee, a Termination of Employment by reason of the
        Employee’s retirement at or after age 62. 

       

      2.30 “Rule
        16b-3”
        means
        Rule 16b-3 promulgated under the 1934 Act, and any future regulation amending,
        supplementing or superseding such regulation. 

       

      2.31 “Section
        16 Person”
        means a
        person who, with respect to the Shares, is subject to Section 16 of the
        1934 Act. 

       

      2.32 “Shares”
        means
        the shares of common stock of the Company. 

       

      2.33 “Stock
        Appreciation Right” or “SAR”
        means an
        Award, granted alone or in connection with a related Option, that pursuant
        to
        the terms of Section 7 is designated as an SAR. 

       

      
        
          
          

        

        
          -3-

          
            

          

        

        
          
          

        

      

       

      2.34 “Subsidiary”
        means
        any “subsidiary corporation” (other than the Company) as defined in Code
        Section 424(f). 

       

      2.35 “Tandem
        SAR”
        means an
        SAR that is granted in connection with a related Option, the exercise of
        which
        shall require forfeiture of the right to purchase an equal number of Shares
        under the related Option (and when a Share is purchased under the Option,
        the
        SAR shall be canceled to the same extent). 

       

      2.36 “Termination
        of Employment”
        means a
        cessation of the employee-employer or director or other service arrangement
        relationship between an Employee, Consultant or Director and the Company
        or an
        Affiliate for any reason, including, but not by way of limitation, a termination
        by resignation, discharge, death, Disability, Retirement, or the disaffiliation
        of an Affiliate, but excluding any such termination where there is a
        simultaneous reemployment or re-engagement by the Company or an Affiliate.
        

       

      SECTION
        3

      ADMINISTRATION
        

       

      3.1 The
        Committee.
        The
        Plan
        shall be administered by the Board of Directors or by a committee of the
        Board
        that meets the requirements of this Section 3.1
        (hereinafter referred to as “the
        Committee”).
        The
        Committee shall consist of not less than two (2) Directors. The members of
        the
        Committee shall be appointed from time to time by, and shall serve at the
        pleasure of, the Board of Directors. At such time as the Company has independent
        directors, any Committee shall be comprised solely of Directors who are both
        “outside directors” under Rule 16b-3 and “independent directors” under the
        requirements of any national securities exchange or system upon which the
        Shares
        are then listed and/or traded. 

       

      3.2 Authority
        of the Committee.
        The
        Committee shall have all powers and discretion necessary or appropriate to
        administer the Plan and to control its operation, including, but not limited
        to,
        the power (a) to determine which Employees, Consultants and Directors shall
        be
        granted Awards, (b) to prescribe the terms and conditions of such Awards,
        (c) to
        interpret the Plan and the Awards, (d) to adopt rules for the administration,
        interpretation and application of the Plan as are consistent therewith, and
        (e)
        to interpret, amend or revoke any such rules. 

       

      The
        Committee, in its sole discretion and on such terms and conditions as it
        may
        provide, may delegate all or any part of its authority and powers under the
        Plan
        to one or more directors and/or officers of the Company; provided,
        however,
        that
        the Committee may not delegate its authority and powers with respect to Section
        16 Persons. 

       

      3.3 Decisions
        Binding.
        All
        determinations and decisions made by the Committee shall be final, conclusive,
        and binding on all persons, and shall be given the maximum deference permitted
        by law. 

       

      SECTION
        4

      SHARES
        SUBJECT TO THE PLAN 

       

      4.1 Shares
        Available. 

       

      
        
          
          

        

        
          -4-

          
            

          

        

        
          
          

        

      

       

      4.1.1 Maximum
        Shares Available under Plan.
        The
        aggregate number of Shares available for issuance under the Plan may not
        exceed ninety million (90,000,000) Shares. 

       

      4.1.2 Adjustments.
        All
        Share numbers in this Section 4.1
        are
        subject to adjustment as provided in Section 15.

       

      4.2 Number
        of Shares.
        The
        following rules will apply for purposes of the determination of the number
        of
        Shares available for grant under the Plan: 

       

      (a) While
        an
        Award is outstanding, it shall be counted against the authorized pool of
        Shares,
        regardless of its vested status. 

       

      (b) The
        grant
        of an Option or Restricted Stock shall reduce the Shares available for grant
        under the Plan by the number of Shares subject to such Award. 

       

      (c) The
        grant
        of a Tandem SAR shall reduce the number of Shares available for grant by
        the
        number of Shares subject to the related Option (i.e., there is no double
        counting of Options and their related Tandem SARs); provided,
        however,
        that,
        upon the exercise of such Tandem SAR, the authorized Share pool shall be
        credited with the appropriate number of Shares representing the number of
        shares
        reserved for such Tandem SAR less the number of Shares actually delivered
        upon
        exercise thereof or the number of Shares having a Fair Market Value equal
        to the
        cash payment made upon such exercise. 

       

      (d) The
        grant
        of an Affiliated SAR shall reduce the number of Shares available for grant
        by
        the number of Shares subject to the SAR, in addition to the number of Shares
        subject to the related Option; provided, however, that, upon the exercise
        of
        such Affiliated SAR, the authorized Share pool shall be credited with the
        appropriate number of Shares representing the number of shares reserved for
        such
        Affiliated SAR less the number of Shares actually delivered upon exercise
        thereof or the number of Shares having a Fair Market Value equal to the cash
        payment made upon such exercise. 

       

      (e) The
        grant
        of a Freestanding SAR shall reduce the number of Shares available for grant
        by
        the number of Freestanding SARs granted; provided,
        however,
        that,
        upon the exercise of such Freestanding SAR, the authorized Share pool shall
        be
        credited with the appropriate number of Shares representing the number of
        shares
        reserved for such Freestanding SAR less the number of Shares actually delivered
        upon exercise thereof or the number of Shares having a Fair Market Value
        equal
        to the cash payment made upon such exercise. 

       

      (f) The
        Committee shall in each case determine the appropriate number of Shares to
        deduct from the authorized pool in connection with the grant of Performance
        Units and/or Performance Shares. 

       

      (g) To
        the
        extent that an Award is settled in cash rather than in Shares, the authorized
        Share pool shall be credited with the appropriate number of Shares having
        a Fair
        Market Value equal to the cash settlement of the Award. 

       

      4.3 Lapsed
        Awards.
        If an
        Award is cancelled, terminates, expires, or lapses for any reason (with the
        exception of the termination of a Tandem SAR upon exercise of the related
        Option, or the termination of a related Option upon exercise of the
        corresponding Tandem SAR), any Shares subject to such Award again shall be
        available to be the subject of an Award. 

       

      
        
          
          

        

        
          -5-

          
            

          

        

        
          
          

        

      

      SECTION
        5

      STOCK
        OPTIONS 

       

      5.1 Grant
        of Options.
        Options
        may be granted to Employees, Consultants and Directors at any time and from
        time
        to time, as determined by the Committee in its sole discretion. The Committee,
        in its sole discretion, shall determine the number of Shares subject to Options
        granted to each Participant. The Committee may grant ISOs, NQSOs, or a
        combination thereof. 

       

      5.2 Award
        Agreement.
        Each
        Option shall be evidenced by an Award Agreement that shall specify the Option
        Price, the expiration date of the Option, the number of Shares to which the
        Option pertains, any conditions to exercise of the Option, and such other
        terms
        and conditions as the Committee, in its discretion, shall determine. The
        Award
        Agreement also shall specify whether the Option is intended to be an ISO
        or a
        NQSO. 

       

      5.3 Option
        Price.
        Subject
        to the provisions of this Section 5.3,
        the
        Option Price for each Option shall be determined by the Committee in its
        sole
        discretion. 

       

      5.3.1 Nonqualified
        Stock Options.
        In the
        case of a Nonqualified Stock Option, the Option Price shall be not less than
        one
        hundred percent (100%) of the Fair Market Value of a Share on the date that
        the
        Option is granted. 

       

      5.3.2 Incentive
        Stock Options.
        In the
        case of an Incentive Stock Option, the Option Price shall be not less than
        one
        hundred percent (100%) of the Fair Market Value of a Share on the date that
        the
        Option is granted; provided,
        however,
        that if
        at the time that the Option is granted, the Employee (together with persons
        whose stock ownership is attributed to the Employee pursuant to Section 424(d)
        of the Code) owns stock possessing more than 10% of the total combined voting
        power of all classes of stock of the Company or any of its Subsidiaries,
        the
        Option Price shall be not less than one hundred and ten percent (110%) of
        the
        Fair Market Value of a Share on the date that the Option is granted. 

       

      5.3.3 Substitute
        Options.
        Notwithstanding the provisions of Sections 5.3.1
        and
5.3.2,
        in the
        event that the Company or an Affiliate consummates a transaction described
        in
        Section 424(a) of the Code (e.g., the acquisition of property or stock from
        an
        unrelated corporation), persons who become Employees, Consultants or Directors
        on account of such transaction may be granted Options in substitution for
        options granted by their former employer. If such substitute Options are
        granted, the Committee, in its sole discretion, may determine that such
        substitute Options shall have an exercise price less than 100% of the Fair
        Market Value of the Shares on the date the Option is granted. 

       

      5.4 Expiration
        of Options.
        Unless
        the applicable stock option agreement provides otherwise, each Option shall
        terminate upon the first to occur of the events listed in Section 5.4.1,
        subject
        to Section 5.4.2. 

       

      5.4.1 Expiration
        Dates. 

       

      (a) The
        date
        for termination of the Option set forth in the Award Agreement; 

       

      (b) The
        expiration of ten years from the date the Option was granted, or 

       

      (c) The
        expiration of three months from the date of the Participant’s Termination of
        Employment for a reason other than the Participant’s death, Disability or
        Retirement, or 

       

      
        
          
          

        

        
          -6-

          
            

          

        

        
          
          

        

      

      (d) The
        expiration of twelve months from the date of the Participant’s Termination of
        Employment by reason of Disability, or 

       

      (e) The
        expiration of twelve months from the date of the Participant’s death, if such
        death occurs while the Participant is in the employ or service of the Company
        or
        an Affiliate. 

       

      5.4.2 Committee
        Discretion.
        The
        Committee shall provide, in the terms of each individual Option, when such
        Option expires and becomes unexercisable. After the Option is granted, the
        Committee, in its sole discretion may extend the maximum term of such
        Option.
        The
        foregoing discretionary authority is subject to the limitations and restrictions
        on Incentive Stock Options set forth in Section 5.8.

       

      5.5 Exercise
        of Options.
        Options
        granted under the Plan shall be exercisable at such times, and subject to
        such
        restrictions and conditions, as the Committee shall determine in its sole
        discretion. After an Option is granted, the Committee, in its sole discretion,
        may accelerate the exercisability of the Option. 

       

      5.6 Payment.
        The
        Committee shall determine the acceptable form of consideration for exercising
        an
        Option, including the method of payment. In the case of an Incentive Stock
        Option, the Committee shall determine the acceptable form of consideration
        at
        the time of grant. Such consideration may consist entirely of:

       

      (a) cash;

       

      (b) check;

       

      (c) full
        recourse promissory note;

       

      (d) other
        Shares which (i) in the case of Shares acquired upon exercise of an Option,
        have been owned by the Participant for more than six (6) months on the date
        of
        surrender, and (ii) have a Fair Market Value on the date of surrender equal
        to the aggregate exercise price of the Shares as to which said Option shall
        be
        exercised;

       

      (e) consideration
        received by the Company from a licensed broker under a cashless exercise
        program
        implemented by the Company to facilitate “same day” exercises and sales of
        Options;

       

      (f) a
        reduction in the amount of any Company liability to the Participant, including
        any liability attributable to the Participant's participation in any
        Company-sponsored deferred compensation program or arrangement;

       

      (g) any
        combination of the foregoing methods of payment; or

       

      (h) such
        other consideration and method of payment for the issuance of Shares to the
        extent permitted by Applicable Laws. 

       

      5.7 Restrictions
        on Share Transferability.
        The
        Committee may impose such restrictions on any Shares acquired pursuant to
        the
        exercise of an Option, as it may deem advisable, including, but not limited
        to,
        restrictions related to Federal securities laws, the requirements of any
        national securities exchange or system upon which such Shares are then listed
        and/or traded, and/or any blue sky or state securities laws. 

       

      
        
          
          

        

        
          -7-

          
            

          

        

        
          
          

        

      

       

      5.8 Certain
        Additional Provisions for Incentive Stock Options. 

       

      5.8.1 Exercisability.
        The
        aggregate Fair Market Value (determined at the time the Option is granted)
        of
        the Shares with respect to which Incentive Stock Options are exercisable
        for the
        first time by any Employee during any calendar year (under all plans of the
        Company and its Subsidiaries) shall not exceed $100,000. 

       

      5.8.2 Termination
        of Employment.
        No
        Incentive Stock Option may be exercised more than three months after the
        Participant’s termination of employment for any reason other than Disability or
        death, unless (a) the Participant dies during such three-month period, and
        (b)
        the Award Agreement and/or the Committee permits later exercise. No Incentive
        Stock Option may be exercised more than one year after the Participant’s
        termination of employment on account of Disability, unless (a) the Participant
        dies during such one-year period, and (b) the Award Agreement and/or the
        Committee permit later exercise.

       

      5.8.3 Employees
        Only.
        Incentive Stock Options may be granted only to persons who are Employees
        of the
        Company and/or a Subsidiary at the time of grant. 

       

      5.8.4 Expiration.
        No
        Incentive Stock Option may be exercised after the expiration of 10 years
        from
        the date such Option was granted; provided,
        however,
        that if
        the Option is granted to an Employee who, together with persons whose stock
        ownership is attributed to the Employee pursuant to Section 424(d) of the
        Code,
        owns stock possessing more than 10% of the total combined voting power of
        all
        classes of the stock of the Company or any of its Subsidiaries, the Option
        may
        not be exercised after the expiration of 5 years from the date that it was
        granted.

       

      5.9 Nontransferability
        of Options.
        No
        Option granted under the Plan may be sold, transferred, pledged, assigned,
        or
        otherwise alienated or hypothecated, other than by will, the laws of descent
        and
        distribution, or as provided under Section 9. All Options granted to a
        Participant under the Plan shall be exercisable during his or her lifetime
        only
        by such Participant. 

       

      SECTION
        6

      STOCK
        APPRECIATION RIGHTS

       

      6.1 Grant
        of SARs.
        An SAR
        may be granted to an Employee, Consultant or Director at any time and from
        time
        to time as determined by the Committee, in its sole discretion. The Committee
        may grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination
        thereof. The Committee shall have complete discretion to determine the number
        of
        SARs granted to any Participant, and consistent with the provisions of the
        Plan,
        the terms and conditions pertaining to such SARs. However, the grant price
        of a
        Freestanding SAR shall be at least equal to the Fair Market Value of a Share
        on
        the date of grant. The grant price of Tandem or Affiliated SARs shall equal
        the
        Option Price of the related Option. 

       

      6.2 Exercise
        of Tandem SARs.
        Tandem
        SARs may be exercised for all or part of the Shares subject to the related
        Option upon the surrender of the right to exercise the equivalent portion
        of the
        related Option. A Tandem SAR may be exercised only with respect to the Shares
        for which its related Option is then exercisable. 

       

      6.2.1 ISOs.
        Notwithstanding any contrary provision of the Plan, with respect to a Tandem
        SAR
        granted in connection with an ISO: (i) the Tandem SAR shall expire no later
        than
        the expiration of the underlying ISO; (ii) the value of the payout with respect
        to the Tandem SAR shall be for no more than one hundred percent (100%) of
        the
        difference between the Option Price of the underlying ISO and the Fair Market
        Value of the Shares subject to the underlying ISO at the time the Tandem
        SAR is
        exercised; and (iii) the Tandem SAR shall be exercisable only when the Fair
        Market Value of the Shares subject to the ISO exceeds the Option Price of
        the
        ISO. 

       

      
        
          
          

        

        
          -8-

          
            

          

        

        
          
          

        

      

       

      6.3 Exercise
        of Affiliated SARs.
        An
        Affiliated SAR shall be deemed to be exercised upon the exercise of the related
        Option. The deemed exercise of an Affiliated SAR shall not necessitate a
        reduction in the number of Shares subject to the related Option. 

       

      6.4 Exercise
        of Freestanding SARs.
        Freestanding SARs shall be exercisable on such terms and conditions as the
        Committee, in its sole discretion, shall determine. 

       

      6.5 SAR
        Agreement.
        Each
        SAR shall be evidenced by an Award Agreement that shall specify the grant
        price,
        the term of the SAR, the conditions of exercise, and such other terms and
        conditions as the Committee, in its sole discretion, shall determine.


       

      6.6 Expiration
        of SARs.
        An SAR
        granted under the Plan shall expire upon the date determined by the Committee,
        in its sole discretion, and set forth in the Award Agreement. Notwithstanding
        the foregoing, the rules of Section 5.4
        (pertaining to Options) also shall apply to SARs. 

       

      6.7 Payment
        of SAR Amount.
        Upon
        exercise of an SAR, a Participant shall be entitled to receive payment from
        the
        Company in an amount determined by multiplying: 

       

      (a) The
        difference between the Fair Market Value of a Share on the date of exercise
        over
        the grant price; times 

       

      (b) The
        number of Shares with respect to which the SAR is exercised. 

       

      At
        the
        discretion of the Committee, the payment upon SAR exercise may be in cash,
        in
        Shares of equivalent value, or in some combination thereof. 

       

      6.8 Nontransferability
        of SARs.
        No SAR
        granted under the Plan may be sold, transferred, pledged, assigned, or otherwise
        alienated or hypothecated, other than by will, the laws of descent and
        distribution, or as permitted under Section 9. An SAR granted to a Participant
        shall be exercisable during the Participant’s lifetime only by such Participant.


       

      SECTION
        7

      RESTRICTED
        STOCK 

       

      7.1 Grant
        of Restricted Stock.
        Subject
        to the terms and provisions of the Plan, the Committee, at any time and from
        time to time, may grant Shares of Restricted Stock to Employees, Consultants
        or
        Directors in such amounts as the Committee, in its sole discretion, shall
        determine. 

       

      7.2 Restricted
        Stock Agreement.
        Each
        Award of Restricted Stock shall be evidenced by an Award Agreement that shall
        specify the Period of Restriction, the number of Shares granted, and such
        other
        terms and conditions as the Committee, in its sole discretion, shall determine.
        Unless the Committee determines otherwise, shares of Restricted Stock shall
        be
        held by the Company as escrow agent until the restrictions on such Shares
        have
        lapsed. 

       

      7.3 Transferability.
        Except
        as provided in this Section 7, Shares of Restricted Stock may not be sold,
        transferred, pledged, assigned, or otherwise alienated or hypothecated until
        the
        end of the applicable Period of Restriction. All rights with respect to the
        Restricted Stock granted to a Participant under the Plan shall be available
        during his or her lifetime only to such Participant. 

       

      
        
          
          

        

        
          -9-

          
            

          

        

        
          
          

        

      

       

      7.4 Other
        Restrictions.
        The
        Committee, in its sole discretion, may impose such other restrictions on
        any
        Shares of Restricted Stock as it may deem advisable including, without
        limitation, restrictions based upon the achievement of specific performance
        goals (Company-wide, divisional, and/or individual), and/or restrictions
        under
        applicable Federal or state securities laws; and may legend the certificates
        representing Restricted Stock to give appropriate notice of such restrictions.
        For example, the Committee may determine that some or all certificates
        representing Shares of Restricted Stock shall bear the following
        legend: 

       

      “The
        sale
        or other transfer of the shares of stock represented by this certificate,
        whether voluntary, involuntary, or by operation of law, is subject to certain
        restrictions on transfer as set forth in the Universal Detection Technology
        2007-2 Equity Incentive Plan, and in a Restricted Stock Agreement. A copy
        of the
        Plan and such Restricted Stock Agreement may be obtained from the Secretary
        of
        Universal Detection Technology.”

       

      7.5 Removal
        of Restrictions.
        Except
        as otherwise provided in this Section 7, Shares of Restricted Stock covered
        by
        each Restricted Stock grant made under the Plan shall be released from escrow
        as
        soon as practicable after the last day of the Period of Restriction. The
        Committee, in its discretion, may accelerate the time at which any restrictions
        shall lapse, and/or remove any restrictions. After the restrictions have
        lapsed,
        the Participant shall be entitled to have any legend or legends under Section
        7.4
        removed
        from his or her Share certificate, and the Shares shall be freely transferable
        by the Participant. 

       

      7.6 Voting
        Rights.
        During
        the Period of Restriction, Participants holding Shares of Restricted Stock
        granted hereunder may exercise full voting rights with respect to those Shares,
        unless the Committee determines otherwise. 

       

      7.7 Dividends
        and Other Distributions.
        During
        the Period of Restriction, Participants holding Shares of Restricted Stock
        shall
        be entitled to receive all dividends and other distributions paid with respect
        to such Shares, unless otherwise provided in the Award Agreement. If any
        such
        dividends or distributions are paid in Shares, the Shares shall be subject
        to
        the same restrictions on transferability and forfeitability as the Shares
        of
        Restricted Stock with respect to which they were paid. 

       

      7.8 Return
        of Restricted Stock to Company.
        Subject
        to the applicable Award Agreement and Section 7.5,
        upon
        the earlier of (a) the Participant’s Termination of Employment, or (b) the date
        set forth in the Award Agreement, the Restricted Stock for which restrictions
        have not lapsed shall revert to the Company and, subject to Section 4.3,
        again
        shall become available for grant under the Plan. 

       

      7.9 Repurchase
        Option.
        Unless
        the Committee determines otherwise, the Award Agreement shall grant the Company
        a repurchase option exercisable upon the voluntary or involuntary termination
        of
        the Participant's service with the Company for any reason (including death
        or
        Disability). The purchase price for Shares repurchased pursuant to the Award
        Agreement shall be the original price paid by the Participant and may be
        paid by
        cancellation of any indebtedness of the Participant to the Company. The
        repurchase option shall lapse at a rate determined by the
        Committee.

       

      7.10 Unrestricted
        Shares.
        Notwithstanding anything to the contrary in this Section 7, and subject to
        Applicable Laws, the Committee may issue Shares of Restricted Stock without
        any
        applicable restrictions.

       

      
        
          
          

        

        
          -10-

          
            

          

        

        
          
          

        

      

       

      SECTION
        8

      PERFORMANCE
        UNITS AND PERFORMANCE SHARES 

       

      8.1 Grant
        of Performance Units/Shares.
        Performance Units and Performance Shares may be granted to Employees,
        Consultants or Directors at any time and from time to time, as shall be
        determined by the Committee, in its sole discretion. The Committee shall
        have
        complete discretion in determining the number of Performance Units and
        Performance Shares granted to each Participant. 

       

      8.2 Value
        of Performance Units/Shares.
        Each
        Performance Unit shall have an initial value that is established by the
        Committee at the time of grant. Each Performance Share shall have an initial
        value equal to the Fair Market Value of a Share on the date of grant. The
        Committee shall set performance goals in its discretion which, depending
        on the
        extent to which they are met, will determine the number and/or value of
        Performance Units/Shares that will be paid out to the Participants. The time
        period during which the performance goals must be met shall be called the
        “Performance
        Period”.
        

       

      8.3 Earning
        of Performance Units/Shares.
        After
        the applicable Performance Period has ended, the holder of Performance
        Units/Shares shall be entitled to receive a payout of the number of Performance
        Units/Shares earned by the Participant over the Performance Period, to be
        determined as a function of the extent to which the corresponding performance
        goals have been achieved. After the grant of a Performance Unit/Share, the
        Committee, in its sole discretion, may adjust and/or waive the achievement
        of
        any performance goals for such Performance Unit/Share. 

       

      8.4 Form
        and Timing of Payment of Performance Units/Shares.
        Payment
        of earned Performance Units/Shares shall be made as soon as practicable after
        the expiration of the applicable Performance Period. The Committee, in its
        sole
        discretion, may pay earned Performance Units/Shares in the form of cash,
        in
        Shares (which have an aggregate Fair Market Value equal to the value of the
        earned Performance Units/Shares at the close of the applicable Performance
        Period) or in a combination thereof. 

       

      8.5 Cancellation
        of Performance Units/Shares.
        Subject
        to the applicable Award Agreement, upon the earlier of (a) the Participant’s
        Termination of Employment, or (b) the date set forth in the Award Agreement,
        all
        remaining Performance Units/Shares shall be forfeited by the Participant
        to the
        Company, and subject to Section 4.3,
        the
        Shares subject thereto shall again be available for grant under the Plan.
        

       

      8.6 Nontransferability.
        Performance Units/Shares may not be sold, transferred, pledged, assigned,
        or
        otherwise alienated or hypothecated, other than by will, the laws of descent
        and
        distribution, or as permitted under Section 9. A Participant’s rights under the
        Plan shall be exercisable during the Participant’s lifetime only by the
        Participant or the Participant’s legal representative.

       

      SECTION
        9

      BENEFICIARY
        DESIGNATION 

       

      If
        permitted by the Committee, a Participant may name a beneficiary or
        beneficiaries to whom any unpaid vested Award shall be paid in event of the
        Participant’s death. Each such designation shall revoke all prior designations
        by the same Participant and shall be effective only if given in a form and
        manner acceptable to the Committee. In the absence of any such designation,
        benefits remaining unpaid at the Participant’s death shall be paid to the
        Participant’s estate and, subject to the terms of the Plan, any unexercised
        vested Award may be exercised by the Committee or executor of the Participant’s
        estate.

       

      
        
          
          

        

        
          -11-

          
            

          

        

        
          
          

        

      

       

      SECTION
        10

      DEFERRALS
        

       

      The
        Committee, in its sole discretion, may permit a Participant to defer receipt
        of
        the payment of cash or the delivery of Shares that would otherwise be due
        to
        such Participant under an Award. Any such deferral elections shall be subject
        to
        such rules and procedures as shall be determined by the Committee in its
        sole
        discretion. 

       

      SECTION
        11

      RIGHTS
        OF
        EMPLOYEES AND CONSULTANTS 

       

      11.1 No
        Effect on Employment or Service.
        Nothing
        in the Plan shall interfere with or limit in any way the right of the Company
        to
        terminate any Participant’s employment or service at any time, with or without
        cause. 

       

      11.2 Participation.
        No
        Employee, Consultant or Director shall have the right to be selected to receive
        an Award under this Plan, or, having been so selected, to be selected to
        receive
        a future Award.

       

      SECTION
        12

      AMENDMENT,
        SUSPENSION, OR TERMINATION 

       

      The
        Board, in its sole discretion, may alter, amend or terminate the Plan, or
        any
        part thereof, at any time and for any reason. However, as required by Applicable
        Laws, no alteration or amendment shall be effective without further stockholder
        approval. Neither the amendment, suspension, nor termination of the Plan
        shall,
        without the consent of the Participant, alter or impair any rights or
        obligations under any Award theretofore granted. No Award may be granted
        during
        any period of suspension nor after termination of the Plan.

       

      SECTION
        13

      TAX
        WITHHOLDING 

       

      13.1 Withholding
        Requirements.
        Prior
        to the delivery of any Shares or cash pursuant to an Award, the Company shall
        have the power and the right to deduct or withhold, or require a Participant
        to
        remit to the Company, an amount sufficient to satisfy Federal, state, and
        local
        taxes required to be withheld with respect to such Award. 

       

      13.2 Shares
        Withholding.
        The
        Committee, in its sole discretion and pursuant to such procedures as it may
        specify from time to time, may permit a Participant to satisfy the minimum
        statutory tax withholding obligation, in whole or in part, by delivering
        to the
        Company Shares already owned for more than six (6) months having a value
        equal
        to the amount required to be withheld. The value of the Shares to be delivered
        will be based on their Fair Market Value on the date of delivery.

       

      SECTION
        14

      INDEMNIFICATION
        

       

      Each
        person who is or shall have been a member of the Committee, or of the Board,
        shall be indemnified and held harmless by the Company against and from any
        loss,
        cost, liability, or expense that may be imposed upon or reasonably incurred
        by
        him or her in connection with or resulting from any claim, notion, suit,
        or
        proceeding to which he or she may be a party or in which he or she may be
        involved by reason of any action taken or failure to act under the Plan or
        any
        Award Agreement and against and from any and all amounts paid by him or her
        in
        settlement thereof, with the Company’s approval, or paid by him or her in
        settlement thereof, with the Company’s approval, or paid by him or her in
        satisfaction of any judgment in any such action, suit, or proceeding against
        him
        or her, provided he or she shall give the Company an opportunity, at its
        own
        expense, to handle and defend the same before he or she undertakes to handle
        and
        defend it on his or her own behalf. The foregoing right of indemnification
        shall
        not be exclusive of any other rights of indemnification to which such persons
        may be entitled under the Company’s Certificate of Incorporation or Bylaws, as a
        matter of law, or otherwise, or any power that the Company may have to indemnify
        them or hold them harmless.

       

      
        
          
          

        

        
          -12-

          
            

          

        

        
          
          

        

      

      SECTION
        15

      ADJUSTMENTS UPON CHANGES IN CAPITALIZATION,
        DISSOLUTION, MERGER OR ASSET SALE 

      


      15.1 Changes
        in Capitalization; No Award Repricing.
        Subject
        to any required action by the shareholders of the Company, the number of
        Shares
        covered by each outstanding Award, and the number of Shares which have been
        authorized for issuance under the Plan but as to which no Awards have yet
        been
        granted or which have been returned to the Plan upon cancellation or expiration
        of an Award, as well as the price per Share covered by each such outstanding
        Award, shall be proportionately adjusted for any increase or decrease in
        the
        number of issued Shares resulting from a stock split, reverse stock split,
        stock
        dividend, combination or reclassification of the Shares, or any other increase
        or decrease in the number of issued Shares effected without receipt of
        consideration by the Company; provided,
        however,
        that
        conversion of any convertible securities of the Company shall not be deemed
        to
        have been “effected without receipt of consideration.” Such adjustment shall be
        made by the Board, whose determination in that respect shall be final, binding
        and conclusive. Except as expressly provided herein, no issuance by the Company
        of shares of stock of any class, or securities convertible into shares of
        stock
        of any class, shall affect, and no adjustment by reason thereof shall be
        made
        with respect to, the number or price of Shares subject to an Award. Further,
        except for the adjustments provided herein, no Award may be amended to reduce
        its initial exercise price, and no Award may be cancelled and replaced with
        an
        Award with a lower price.

      


      15.2 
        Dissolution or Liquidation.
        In the
        event of the proposed dissolution or liquidation of the Company, the Committee
        shall notify each Participant as soon as practicable prior to the effective
        date
        of such proposed transaction. The Committee in its discretion may provide
        for a
        Participant to have the right to exercise his or her Award until ten (10)
        days
        prior to such transaction as to all of the Shares covered thereby, including
        Shares as to which the Award would not otherwise be exercisable. In addition,
        the Committee may provide that any Company repurchase option applicable to
        any
        Shares purchased upon exercise of an Award shall lapse as to all such Shares,
        provided the proposed dissolution or liquidation takes place at the time
        and in
        the manner contemplated. To the extent it has not been previously exercised,
        an
        Award will terminate immediately prior to the consum-mation of such proposed
        action.

      


      15.3 Merger
        or Asset Sale.
        In the
        event of a merger of the Company with or into another corporation, or the
        sale
        of substantially all of the assets of the Company, each outstanding Award
        shall
        be assumed or an equivalent option or right substituted by the successor
        corporation or a Parent or Subsidiary of the successor corporation. In the
        event
        that the successor corporation refuses to assume or substitute for the Award,
        the Participant shall fully vest in and have the right to exercise the Award
        as
        to all of the Shares as to which it would not otherwise be vested or
        exercisable. If an Award becomes fully vested and exercisable in lieu of
        assumption or substitution in the event of a merger or sale of assets, the
        Committee shall notify the Participant in writing or electronically that
        the
        Award shall be fully vested and exercisable for a period of fifteen (15)
        days
        from the date of such notice, and the Award shall terminate upon the expiration
        of such period. For the purposes of this paragraph, the Award shall be
        considered assumed if, following the merger or sale of assets, the option
        or
        right confers the right to purchase or receive, for each Share subject to
        the
        Award immediately prior to the merger or sale of assets, the consideration
        (whether stock, cash, or other securities or property) received in the merger
        or
        sale of assets by holders of Shares for each Share held on the effective
        date of
        the transaction (and if holders were offered a choice of consideration, the
        type
        of consideration chosen by the holders of a majority of the outstanding Shares);
        provided,
        however,
        that if
        such consideration received in the merger or sale of assets is not solely
        common
        stock of the successor corporation or its Parent, the Committee may, with
        the
        consent of the successor corporation, provide for the consideration to be
        received upon the exercise of the Award, for each Share subject to the Award,
        to
        be solely common stock of the successor corporation or its Parent equal in
        fair
        market value to the per share consideration received by holders of Shares
        in the
        merger or sale of assets.

      


      
        
          
          

        

        
          -13-

          
            

          

        

        
          
          

        

      

      15.4 Change
        in Control.
        In the
        event of a Change of Control (as defined below), except as otherwise determined
        by the Board, the Participant shall fully vest in and have the right to exercise
        the Awards as to all of the Shares, including Shares as to which it would
        not
        otherwise be vested or exercisable. If an Award becomes fully vested and
        exercisable as the result of a Change of Control, the Committee shall notify
        the
        Participant in writing or electronically prior to the Change of Control that
        the
        Award shall be fully vested and exercisable for a period of fifteen (15)
        days
        from the date of such notice, and the Award shall terminate upon the expiration
        of such period. For purposes of this Agreement, a “Change of Control” means the
        happening of any of the following events:

       

      (a) When
        any
“person,” as such term is used in Sections 13(d) and 14(d) of the Exchange
        Act (other than the Company, a Subsidiary or a Company employee benefit plan,
        including any trustee of such plan acting as trustee) is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
        directly or indirectly, of securities of the Company representing fifty percent
        (50%) or more of the combined voting power of the Company’s then outstanding
        securities entitled to vote generally in the election of directors;
        or

       

      (b) The
        stockholders of the Company approve a merger or consolidation of the Company
        with any other corporation, other than a merger or consolidation which would
        result in the voting securities of the Company outstanding immediately prior
        thereto continuing to represent (either by remaining outstanding or by being
        converted into voting securities of the surviving entity) more than fifty
        percent (50%) of the total voting power represented by the voting securities
        of
        the Company or such surviving entity outstanding immediately after such merger
        or consolidation, or the stockholders of the Company approve an agreement
        for
        the sale or disposition by the Company of all or substantially all the Company’s
        assets; or

       

      (c) A
        change
        in the composition of the Board of Directors of the Company, as a result
        of
        which fewer than a majority of the directors are Incumbent Directors.
“Incumbent
        Directors”
shall
        mean directors who either (A) are directors of the Company as of the date
        the Plan is approved by the stockholders, or (B) are elected, or nominated
        for election, to the Board of Directors of the Company with the affirmative
        votes of at least a majority of the Incumbent Directors at the time of such
        election or nomination (but shall not include an individual whose election
        or
        nomination is in connection with an actual or threatened proxy contest relating
        to the election of directors to the Company). 

       

      SECTION
        16

      CONDITIONS
        UPON ISSUANCE OF SHARES 

       

      16.1 Legal
        Compliance.
        Shares
        shall not be issued pursuant to the exercise of an Award unless the exercise
        of
        such Award and the issuance and delivery of Shares shall comply with Applicable
        Laws and shall be further subject to the approval of counsel for the Company
        with respect to such compliance. 

       

      16.2 Investment
        Representations.
        As a
        condition to the exercise of an Award, the Company may require the Participant
        exercising such Award to represent and warrant at the time of any such exercise
        that the Shares are being purchased only for investment and without any present
        intention to sell or distribute such Shares if, in the opinion of counsel
        for
        the Company, such a representation is required.

       

      
        
          
          

        

        
          -14-

          
            

          

        

        
          
          

        

      

      16.3 No
        Rights as Stockholder
        .
No
        Participant will have any of the rights of a stockholder with respect to
        any
        shares of Common Stock until the Shares are issued to the said Participant.
        After Shares are issued to the Participant, the Participant will be a
        stockholder and will have all the rights of a stockholder with respect to
        such
        shares of Common Stock, including the right to vote and receive all dividends
        or
        other distributions made or paid with respect to such shares. 

       

      SECTION
        17

      INABILITY
        TO OBTAIN AUTHORITY 

       

      The
        inability of the Company to obtain authority from any regulatory body having
        jurisdiction, which authority is deemed by the Company's counsel to be necessary
        to the lawful issuance and sale of any Shares hereunder, shall relieve the
        Company of any liability in respect of the failure to issue or sell such
        Shares
        as to which such requisite authority shall not have been obtained.

       

      SECTION
        18

      RESERVATION OF SHARES
        

       

      The
        Company, during the term of this Plan, will at all times reserve and keep
        available such number of Shares as shall be sufficient to satisfy the
        requirements of the Plan.

      


      SECTION
        19

      LEGAL
        CONSTRUCTION 

       

      19.1 Gender
        and Number.
        Except
        where otherwise indicated by the context, any masculine term used herein
        also
        shall include the feminine; the plural shall include the singular and the
        singular shall include the plural. 

       

      19.2 Severability.
        In the
        event any provision of the Plan shall be held illegal or invalid for any
        reason,
        such illegality or invalidity shall not affect the remaining parts of the
        Plan,
        and the Plan shall be construed and enforced as if the illegal or invalid
        provision had not been included.

       

      19.3 Requirements
        of Law.
        The
        granting of Awards and the issuance of Shares under the Plan shall be subject
        to
        all Applicable Laws.

       

      19.4 Governing
        Law.
        The
        Plan and all Award Agreements shall be construed in accordance with and governed
        by the laws of the State of California.

       

      19.5 Captions.
        Captions are provided herein for convenience only, and shall not serve as
        a
        basis for interpretation or construction of the Plan.

       

      *
        * * * *
        * * * *

       

       

      -15-