Document:

Exhibit 10.8

EMPLOYMENT AGREEMENT

          This
Agreement (“Agreement”) is made effective as of the _______ day of
_______________, 2007, by and among KAISER FEDERAL BANK (the “Bank”), a
federally chartered stock savings bank, with its principal administrative
office at 1359 N. Grand Ave., Covina, California 91724 and JEANNE R. THOMPSON
(“Executive”). Any reference to the “Company” herein shall mean KAISER FEDERAL
FINANCIAL GROUP, INC., the holding company of the Bank. The Company is a party
to this Agreement for the sole purpose of guaranteeing the payments required
hereunder, except as otherwise provided herein.

          WHEREAS, Executive is currently employed as
the Chief Operating Officer of the Bank; and 

          WHEREAS, the Bank desires to assure itself
of the continued services of Executive pursuant to the terms of this Agreement.

          NOW, THEREFORE, in consideration of the
mutual covenants herein contained, and upon the other terms and conditions
hereinafter provided, the parties hereby agree as follows:

	
 

	
 

	
1.

	
POSITION AND RESPONSIBILITIES

          During
the period of his/her employment hereunder, Executive agrees to serve as Chief
Operating Officer of the Bank. During said period, Executive also agrees to
serve, if elected, as an officer and director of any subsidiary or affiliate of
the Bank or the Company.

	
 

	
 

	
2.

	
TERMS AND DUTIES

          (a)
The term of this Agreement and the period of Executive’s employment
hereunder shall begin as of the date first above written and shall continue for
twenty-four (24) full calendar months thereafter. Commencing July 1, 2008 and
continuing on the first day of July of each year thereafter (the “Anniversary
Date”), this Agreement shall renew for an additional year such that the
remaining term shall be twenty-four (24) months, provided, however, that in
order for the Agreement to renew, the disinterested members of the Board of
Directors of the Bank (the “Board”) must take the following actions prior to
each non-renewal notice period (as described in the next sentence): (i) at
least sixty (60) days prior to the Anniversary Date, conduct a comprehensive
performance evaluation and review of Executive for purposes of determining
whether to extend the Agreement; and (ii) affirmatively approve the renewal or
non-renewal of the Agreement, which decision shall be included in the minutes
of the Board’s meeting. If the decision of such disinterested members of the
Board is not to renew the Agreement, then the Board shall provide the Executive
with a written notice of non-renewal (“Non-Renewal Notice”) at least thirty
(30) days and not more than sixty (60) days prior to any Anniversary Date, such
that this Agreement shall terminate at the end of twenty-four (24) months
following such Anniversary Date. 

          (b)
During the period of his/her employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, Executive

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shall
faithfully perform his/her duties hereunder including activities and services
related to the organization, operation and management of the Bank.

	
 

	
 

	
3.

	
COMPENSATION AND REIMBURSEMENT

          (a)
The compensation specified under this Agreement shall constitute the salary and
benefits paid for the duties described in Section 2(b). The Bank shall pay
Executive as compensation a salary of not less than $144,664 per year (“Base
Salary”). Such Base Salary shall be payable in accordance with the customary
payroll practices of the Bank. During the period of this Agreement, Executive’s
Base Salary shall be reviewed at least annually; the first such review will be
made no later than July 1 of each year during the term of this Agreement and
shall be effective from that date through the end of the next succeeding June.
Such review shall be conducted by the President and Chief Executive Officer,
and he/she may increase, but not decrease, Executive’s Base Salary (any
increase in Base Salary shall become the “Base Salary” for purposes of this
Agreement). In addition to the Base Salary provided in this Section 3(a),
the Bank shall provide Executive at no cost to Executive with all such other
benefits as are provided uniformly to permanent full-time employees of the
Bank.

          (b)
The Bank will provide Executive with employee benefit plans, arrangements and
perquisites substantially equivalent to those in which Executive was
participating or otherwise deriving benefit from immediately prior to the
beginning of the term of this Agreement, and the Bank will not, without
Executive’s prior written consent, make any changes in such plans, arrangements
or perquisites which would adversely affect Executive’s rights or benefits
thereunder, except for amendments that are generally applicable to all
employees. Without limiting the generality of the foregoing provisions of this
Section 3(b), Executive will be entitled to participate in or receive
benefits under any employee benefit plans including but not limited to,
retirement plans, supplemental retirement plans, pension plans, profit-sharing
plans, health-and-accident plans, medical coverage or any other employee
benefit plan or arrangement made available by the Bank in the future to its
senior executives and key management employees, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans
and arrangements. Executive will be entitled to incentive compensation and
bonuses as provided in any plan of the Bank in which Executive is eligible to
participate (and he/she shall be entitled to a pro rata distribution under any
incentive compensation or bonus plan as to any year in which a termination of
employment occurs, other than Termination for Cause). Nothing paid to Executive
under any such plan or arrangement will be deemed to be in lieu of other compensation
to which Executive is entitled under this Agreement.

          (c)
In addition to the Base Salary provided for by Section 3(a), the Bank
shall pay or reimburse Executive for all reasonable travel and other reasonable
expenses incurred by Executive in performing his/her obligations under this
Agreement and may provide such additional compensation in such form and such
amounts as may from time to time be determine.

	
 

	
 

	
4.

	
OUTSIDE ACTIVITIES

          Executive
may serve as a member of the board of directors of business, community and
charitable organizations subject to the approval of the President and Chief
Executive Officer, provided that in each case such service shall not materially
interfere with the performance of

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his/her duties
under this Agreement or present any conflict of interest. Such service to and
participation in outside organizations shall be presumed for these purposes to
be for the benefit of the Bank, and the Bank shall reimburse Executive his/her
reasonable expenses associated therewith.

	
 

	
 

	
5.

	
WORKING FACILITIES AND EXPENSES

          Executive’s
principal place of employment shall be at the Bank’s principal executive
offices. The Bank shall provide Executive, at his/her principal place of
employment, with a private office, stenographic services and other support
services and facilities suitable to his/her position with the Bank and
necessary or appropriate in connection with the performance of his/her duties
under this Agreement. The Bank shall reimburse Executive for his/her ordinary
and necessary business expenses incurred in connection with the performance of
his/her duties under this Agreement, including, without limitation, fees for
memberships in such clubs and organizations that Executive and the President
and Chief Executive Officer mutually agree are necessary and appropriate to
further the business of the Bank, and travel and reasonable entertainment
expenses. Reimbursement of such expenses shall be made upon presentation to the
Bank of an itemized account of the expenses in such form as the Bank may
reasonably require. 

	
 

	
 

	
6.

	
PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION

          (a)
The provisions of this Section 6 shall apply upon the occurrence of an
Event of Termination (as herein defined) during Executive’s term of employment
under this Agreement. As used in this Agreement, an “Event of Termination”
shall mean and include any one or more of the following:

          (i)      the
involuntary termination by the Bank of Executive’s full-time employment
hereunder for any reason other than (A) Retirement, Death or Disability, as
defined in Section 7 below, or (B) Termination for Cause as defined in
Section 8 hereof; or

          (ii)      Executive’s
voluntary resignation from the Bank’s employ, upon 

	
 

	
 

	
 

	
          (A)       a
  material diminution in Executive’s base compensation;

	
 

	
 

	
 

	
          (B)       a
  material diminution in Executive’s authority duties or responsibilities; 

	
 

	
 

	
 

	
          (C)       a
  requirement that Executive must report to a corporate officer or employee
  instead of reporting directly to the President and Chief Executive Officer;

	
 

	
 

	
 

	
          (D)       a
  material diminution in the budget over which Executive retains authority;

	
 

	
 

	
 

	
          (E)       a
  change in the geographic location at which Executive must perform his/her
  duties that is more than twenty-five (25) miles from the location of
  Executive’s principal workplace on the date of this Agreement; or

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  (F)     any
  other action or inaction that constitutes a material breach by the Bank of
  this Agreement.

Upon the
occurrence of any event described in clauses (ii) (A), (B), (C), (D), (E)
or (F), above, Executive shall have the right to elect to terminate his/her
employment under this Agreement by resignation upon sixty (60) days prior
written notice given within a reasonable period of time not to exceed ninety
(90) days after the initial event giving rise to said right to elect; provided,
however that the Bank shall have at least thirty (30) days to cure such
condition and provided that Executive actually terminates employment within two
years after the initial occurrence of such event. Notwithstanding the preceding
sentence, in the event of a continuing breach of this Agreement by the Bank,
Executive, after giving due notice within the prescribed time frame of an
initial event specified above, shall not waive any of his/her rights solely
under this Agreement and this Section 6 by virtue of the fact that
Executive has submitted his/her resignation but has remained in the employment
of the Bank and is engaged in good faith discussions to resolve any occurrence
of an event described in clauses (A), (B), (C), (D), (E) or (F) above. 

          (iii)      (A)
Executive’s involuntary termination by the Bank (other than Termination for Cause)
on the effective date of, or at any time following, a Change in Control, or (B)
Executive’s resignation from employment with the Bank or the Company (or any
successor thereto) following a Change in Control as a result of any event
described in Section 6(a)(ii)(A), (B), (C), (D), (E) or (F) above. For these
purposes, a Change in Control of the Bank or the Company shall mean a change in
control of a nature that: (i) would be required to be reported in response to
Item 5.01 of the current report on Form 8-K, as in effect on the date hereof,
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
(the “Exchange Act”); or (ii) results in a Change in Control of the Bank or the
Company within the meaning of the Home Owners’ Loan Act, as amended, and
applicable rules and regulations promulgated thereunder (collectively, the
“HOLA”) as in effect at the time of the Change in Control; or (iii) without
limitation such a Change in Control shall be deemed to have occurred at such
time as (a) any “person” (as the term is used in Sections 13(d) and 14(d) of
the Exchange Act) 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 25% or more of the combined voting power of Company’s
outstanding securities, except for any securities purchased by the Bank’s
employee stock ownership plan or trust; or (b) individuals who constitute the
Board on the date hereof (the “Incumbent Board”) cease for any reason to constitute
at least a majority thereof, provided
that any person becoming a director subsequent to the date hereof whose
election was approved by a vote of at least three-quarters of the directors
comprising the Incumbent Board, or whose nomination for election by the
Company’s stockholders was approved by the same Nominating Committee serving
under an Incumbent Board, shall be, for purposes of this clause (b),
considered as though he or she were a member of the Incumbent Board; or (c) a
plan of reorganization, merger, consolidation, sale of all or substantially all
the assets of the Bank or the Company or similar transaction in which the Bank
or Company is not the surviving institution occurs or is effected; or
(d) a proxy statement soliciting proxies from stockholders of the Company,
by someone other than the current management of the Company is distributed,
seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Company or similar transaction with one or more
corporations as a result of which the outstanding shares of the class of
securities then subject to the plan are exchanged for or converted into cash or
property or securities not issued by the Company; or (e) a tender offer is

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made for 25%
or more of the voting securities of the Company and the shareholders owning
beneficially or of record 25% or more of the outstanding securities of the
Company have tendered or offered to sell their shares pursuant to such tender
offer and such tendered shares have been accepted by the tender offeror. 

          (b)
Upon the occurrence of an Event of Termination within thirty (30) days after
the Date of Termination, as defined in Section 9(b), the Bank shall pay
Executive, or, in the event of his/her subsequent death, his/her beneficiary
or beneficiaries, or his/her estate, as the case may be, as severance pay or
liquidated damages, or both, a sum equal to (i) the Executive’s earned but
unpaid Base Salary and benefits, plus (ii) two (2) times the sum of
(A) Base Salary and (B) the highest rate of bonus awarded to Executive
during the prior two (2) years; provided, however, that such Event of
Termination must qualify as a “Separation from Service” as defined in Internal
Revenue Code (“Code”) Section 409A and the regulations thereunder. Notwithstanding
the foregoing, to the extent Executive is a “Specified Employee” as defined in
Code Section 409A, and such earlier payment would trigger penalties under Code
Section 409A, then such payment shall be made on the first day of the seventh
month following Executive’s Separation from Service. Such payment shall not be
reduced in the event Executive obtains other employment following Separation
from Service.

          (c)
Upon the occurrence of an Event of Termination, the Bank will cause to be
continued, at the Bank’s expense, life insurance coverage and non-taxable
medical and dental insurance coverage, if any, substantially identical to the
coverage maintained by the Bank for Executive prior to his/her termination,
provided, however, such medical coverage shall cease upon the earlier of (i)
twenty-four (24) months from the Date of Termination or (ii) the date
Executive becomes eligible for Medicare coverage, provided further, that if
Executive is covered by family coverage or coverage for herself and a spouse,
then the Executive’s family or spouse shall continue to be covered for the
remainder of the twenty-four (24) month period or, in the case of the spouse,
until the spouse becomes eligible for Medicare coverage or obtains healthcare
coverage elsewhere, whichever period is less.

          (d)
Within thirty (30) days of Executive’s Separation from Service in connection
with an Event of Termination (provided, however, that, to the extent Executive
is a “Specified Employee” as defined in Code Section 409A, and such earlier
payment would trigger penalties under Code Section 409A, then such payment
shall be made on the first day of the seventh month following Executive’s
Separation from Service), the Bank shall pay Executive a lump sum equal to the
present value of the Bank’s contributions that would have been made on his/her
behalf under each of the Bank’s 401(k) Plan and Employee Stock Ownership Plan
(and any other defined contribution plan maintained by the Bank in which
Executive participates) as if she had continued working for the Bank for a
twenty-four (24) month period following his/her Separation from Service
earning his/her actual final rate of Base Salary as of the Date of Termination
and as if she had made the maximum amount of employee contributions permitted,
if any, under such plan or plans. Such present values are to be determined
using a discount rate equal to the short-term Internal Revenue Service’s
“applicable federal rate” for the month before the date of the Separation from
Service, compounded annually.

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          (e)
Notwithstanding anything to the contrary herein, Executive’s resignation for
any reason other than those set forth in clauses 6(a)(ii)(A), (B), (C), (D),(E)
or (F) shall not entitle Executive to any payments under Section 6 of this
agreement.

	
 

	
 

	
7.

	
TERMINATION UPON RETIREMENT, DISABILITY OR DEATH

          For
purposes of this Agreement, termination by the Bank of Executive’s employment
based on “Retirement” shall mean termination of Executive’s employment by the
President and Chief Executive Officer upon Executive’s attainment of age 62, or
such later date as determined by the President and Chief Executive Officer.
Upon termination of Executive’s employment because of Retirement, Executive
shall be entitled to all benefits under any retirement plan of the Bank and
other plans to which Executive is a party, but Executive shall not be entitled
to the Termination Benefits specified in Section 6. 

          In
the event Executive is unable to perform his/her duties under this Agreement on
a full-time basis for a period of six (6) consecutive months by reason of
“Disability” within the meaning of Code Section 409A, the Bank may terminate
this Agreement, provided that the Bank shall continue to be obligated to pay
Executive his/her Base Salary at the rate in effect at the Date of Termination
for the remaining term of the Agreement, or one year, whichever is the longer
period of time, and provided further that any amounts actually paid to
Executive pursuant to any disability insurance or other similar such program
which the Bank has provided or may provide on behalf of its employees or
pursuant to any workman’s or Social Security disability program shall reduce
the Base Salary to be paid to Executive pursuant to this paragraph. 

          In
the event of Executive’s death during the term of the Agreement, his/her
estate, legal representatives or named beneficiaries (as directed by Executive
in writing) shall be paid Executive’s Base Salary at the rate in effect at the
time Executive’s death for a period of one (1) year from the date of
Executive’s death, and the Bank will continue to provide non-taxable medical
and dental and other benefits normally provided for an Executive’s family for
one (1) year after Executive’s death.

	
 

	
 

	
8.

	
TERMINATION FOR CAUSE

          The
term “Termination for Cause” shall mean termination because of Executive’s
personal dishonesty, incompetence, willful misconduct, any breach of fiduciary
duty involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule, or regulation (other than minor traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement. In determining incompetence, the
acts or omissions shall be measured against standards generally prevailing in
the savings institutions industry. Executive shall not have the right to
receive Base Salary or other compensation for any period after Termination for
Cause. Any stock options or other incentives granted to Executive under any
plan of the Bank, the Company or any subsidiary or affiliate thereof (whether
vested or unvested), shall become null and void effective upon Executive’s
receipt of Notice of Termination for Cause pursuant to Section 9 hereof. 

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9.

	
NOTICE

          (a)
Any purported termination by the Bank or by Executive shall be communicated by
Notice of Termination to the other party hereto. For purposes of this
Agreement, a “Notice of Termination” shall mean a written notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive’s employment under the provision
so indicated.

          (b)
“Date of Termination” shall mean (A) if Executive’s employment is terminated
for Disability, thirty (30) days after a Notice of Termination is given
(provided that he/she shall not have returned to the performance of his/her
duties on a full-time basis during such thirty (30) day period), and (B) if
his/her employment is terminated for any other reason, the date specified in
the Notice of Termination.

          (c)
If the party receiving a Notice of Termination desires to dispute or contest
the basis or reasons for termination, the party receiving the Notice of
Termination must notify the other party within thirty (30) days after receiving
the Notice of Termination that such a dispute exists, and shall pursue the
resolution of such dispute in good faith and with reasonable diligence pursuant
to Section 20 of this Agreement. During the pendency of any such dispute,
neither the Company nor the Bank shall be obligated to pay Executive Base
Salary or other compensation beyond the Date of Termination. Any amounts paid
to Executive upon resolution of such dispute under this Section shall be offset
against or reduce any other amounts due under this Agreement.

	
 

	
 

	
10.

	
POST-TERMINATION OBLIGATIONS

          (a)
All payments and benefits to Executive under this Agreement shall be subject to
Executive’s compliance with paragraph (b) of this Section and Section 11 during
the term of this Agreement and for one (1) full year after the expiration or
termination hereof.

          (b)
Executive shall, upon reasonable notice, furnish such information and
assistance to the Bank as may reasonably be required by the Bank in connection
with any litigation in which it or any of its subsidiaries or affiliates is, or
may become, a party.

	
 

	
 

	
11.

	
NON-COMPETITION

          (a)
Upon any termination of Executive’s employment hereunder, other than a
termination, (whether voluntary or involuntary) in connection with a Change in
Control, as a result of which the Bank is paying Executive benefits under
Section 6 of this Agreement, Executive agrees not to compete with the Bank
and/or the Company for a period of one (1) year following such termination
within twenty-five (25) miles of any existing branch of the Bank or any
subsidiary of the Company or within twenty-five (25) miles of any office for
which the Bank, the Company or a Bank subsidiary of the Company has filed an
application for regulatory approval to establish an office, determined as of
the effective date of such termination, except as agreed to pursuant to a
resolution duly adopted by the Board. Executive agrees that during such period
and within said area, cities, towns and counties, Executive shall not work for
or advise, consult or otherwise serve with, directly or indirectly, any entity
whose business materially competes with the depository, lending or other
business activities of the Bank and/or the

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Company. The
parties hereto, recognizing that irreparable injury will result to the Bank
and/or the Company, its business and property in the event of Executive’s
breach of this Subsection 11(a) agree that in the event of any such breach
by Executive, the Bank and/or the Company will be entitled, in addition to any
other remedies and damages available, to an injunction to restrain the
violation hereof by Executive, Executive’s partners, agents, servants,
employers, employees and all persons acting for or with Executive. Executive
represents and admits that Executive’s experience and capabilities are such
that Executive can obtain employment in a business engaged in other lines
and/or of a different nature than the Bank and/or the Company, and that the
enforcement of a remedy by way of injunction will not prevent Executive from
earning a livelihood. Nothing herein will be construed as prohibiting the Bank
and/or the Company from pursuing any other remedies available to the Bank
and/or the Company for such breach or threatened breach, including the recovery
of damages from Executive. 

          (b)
Executive recognizes and acknowledges that the knowledge of the business
activities and plans for business activities of the Bank and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the Bank. Executive will not, during or after the term
of his/her employment, disclose any knowledge of the past, present, planned or
considered business activities of the Bank or affiliates thereof to any person,
firm, corporation, or other entity for any reason or purpose whatsoever (except
for such disclosure as may be required to be provided to any federal banking
agency with jurisdiction over the Bank or Executive). Notwithstanding the
foregoing, Executive may disclose any knowledge of banking, financial and/or
economic principles, concepts or ideas which are not solely and exclusively derived
from the business plans and activities of the Bank, and Executive may disclose
any information regarding the Bank or the Company which is otherwise publicly
available. In the event of a breach or threatened breach by Executive of the
provisions of this Section, the Bank will be entitled to an injunction
restraining Executive from disclosing, in whole or in part, the knowledge of
the past, present, planned or considered business activities of the Bank or
affiliates thereof, or from rendering any services to any person, firm,
corporation, other entity to whom such knowledge, in whole or in part, has been
disclosed or is threatened to be disclosed. Nothing herein will be construed as
prohibiting the Bank from pursuing any other remedies available to the Bank for
such breach or threatened breach, including the recovery of damages from
Executive.

	
 

	
 

	
12.

	
SOURCE OF PAYMENTS

          All
payments provided in this Agreement shall be timely paid in cash or check from
the general funds of the Bank. The Company, however, guarantees payment and
provision of all amounts and benefits due hereunder to Executive and, if such
amounts and benefits due from the Bank are not timely paid or provided by the
Bank, such amounts and benefits shall be paid or provided by the Company.

	
 

	
 

	
13.

	
NO EFFECT ON EMPLOYEE BENEFITS PLANS OR PROGRAMS

          The
Board may terminate Executive’s employment at any time, but, any termination of
Executive’s employment, other than Termination for Cause shall have no effect
on or prejudice

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the vested
rights of Executive under the Company’s or the Bank’s qualified or
non-qualified retirement, pension, savings, thrift, profit-sharing or stock
bonus plans, group life, health (including hospitalization, medical and major
medical), dental, accident and long term disability insurance plans or other
employee benefit plans or programs, or compensation plans or programs in which
Executive was a participant. Executive shall not have the right to receive any
Base Salary or other compensation for any period after Termination for Cause as
defined in Section 8, except as otherwise required by applicable law.

	
 

	
 

	
14.

	
REQUIRED REGULATORY PROVISIONS

          (a)
If Executive is suspended from office and/or temporarily prohibited from
participating in the conduct of the Bank’s affairs by a notice served under
Section 8(e)(3) (12 USC §1818(e)(3)) or 8(g)(1) (12 USC §1818(g)(1))
of the Federal Deposit Insurance Act (“FDIA”), as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, the Bank’s
obligations under this Agreement shall be suspended as of the date of service,
unless stayed by appropriate proceedings. If the charges in the notice are
dismissed, the Bank may in its discretion (i) pay Executive all or part of the
Base Salary or other compensation withheld while its contract obligations were
suspended and (ii) reinstate (in whole or in part) any of its obligations which
were suspended.

          (b)
If Executive is removed and/or permanently prohibited from participating in the
conduct of the Bank’s affairs by an order issued under Section 8(e)(4) (12
U.S.C. §1818(e)(4)) or 8(g)(1) (12 U.S.C. §1818(g)(1)) of the FDIA, all
obligations of the Bank under this Agreement shall terminate as of the
effective date of the order, but vested rights of the contracting parties shall
not be affected.

          (c)
If the Bank is in default as defined in Section 3(x)(1) (12 U.S.C. §1813(x)(1))
of the FDIA, all obligations under this Agreement shall terminate as of the
date of default, but this paragraph shall not affect any vested rights of the
contracting parties.

          (d)
All obligations under this Agreement shall be terminated, except to the extent
determined that continuation of this Agreement is necessary for the continued
operation of the Bank, (i) by the Director of OTS or a designee, at the time
the FDIC enters into an agreement to provide assistance to or on behalf of the
Bank under the authority contained in Section 13(c) (12 U.S.C. §1823(c)) of the
FDIA; or (ii) by the Director of OTS or his/her or his/her designee at the
time the Director of OTS or a designee approves a supervisory merger to resolve
problems related to operations of the Bank or when the Bank is determined by
the Director of OTS or a designee to be in an unsafe or unsound condition. Any
rights of the parties that have already vested, however, shall not be affected
by such action.

          (e)
Notwithstanding anything herein contained to the contrary, any payments to
Executive by the Company, whether pursuant to this Agreement or otherwise, are
subject to and conditioned upon their compliance with Section 18(k) of the
FDIA, 12 U.S.C. § 1828(k), and the regulations promulgated thereunder in
12 C.F.R. Part 359.

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15.

	
NO ATTACHMENT 

          (a) Except
as required by law, no right to receive payments under this Agreement shall be
subject to anticipation, commutation, alienation, sale, assignment,
encumbrance, charge, pledge, or hypothecation, or to execution, attachment,
levy, or similar process or assignment by operation of law, and any attempt,
voluntary or involuntary, to affect any such action shall be null, void, and of
no effect. 

          (b) This
Agreement shall be binding upon, and inure to the benefit of, Executive, the
Bank and the Company and their respective successors and assigns. 

	
 

	
 

	
16.

	
ENTIRE AGREEMENT; MODIFICATION AND WAIVER 

          (a) This
instrument contains the entire agreement of the parties relating to the subject
matter hereof, and supercedes in its entirety any and all prior agreements,
understandings or representations relating to the subject matter hereof, except
that the parties acknowledge that this Agreement shall not affect any of the
rights and obligations of the parties under any agreement or plan entered into
with or by the Bank or the Company pursuant to which the Executive may receive
Base Salary or other compensation except as set forth in Section 12 hereof. No
modifications of this Agreement shall be valid unless made in writing and
signed by the parties hereto. 

          (b) This
Agreement may not be modified or amended except by an instrument in writing
signed by the parties hereto. 

          (c) No term
or condition of this Agreement shall be deemed to have been waived, nor shall
there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument of the party charged with such waiver
or estoppel. No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a waiver of such
term or condition for the future as to any act other than that specifically
waived. 

	
 

	
 

	
17.

	
SEVERABILITY 

          If, for any
reason, any provision of this Agreement, or any part of any provision, is held
invalid, such invalidity shall not affect any other provision of this Agreement
or any part of such provision not held so invalid, and each such other provision
and part thereof shall to the full extent consistent with law continue in full
force and effect. 

	
 

	
 

	
18.

	
HEADINGS FOR REFERENCE ONLY 

          The
headings of sections and paragraphs herein are included solely for convenience
of reference and shall not control the meaning or interpretation of any of the
provisions of this Agreement. 

10

	
 

	
 

	
19.

	
GOVERNING LAW 

          This
Agreement shall be governed by the laws of the State of California but only to
the extent not superseded by federal law. 

	
 

	
 

	
20.

	
ARBITRATION

          Any dispute
or controversy arising under or in connection with this Agreement shall be
settled exclusively by arbitration, conducted before a panel of three
arbitrators, one of whom shall be selected by the Bank, one of whom shall be
selected by Executive and the third of whom shall be selected by the other two
arbitrators. The panel shall sit in a location within fifty (50) miles from the
location of the Bank, in accordance with the rules of the Judicial Mediation
and Arbitration Systems (JAMS) then in effect. Judgment may be entered on the
arbitrators award in any court having jurisdiction; provided, however, that
Executive shall be entitled to seek specific performance of his/her right to be
paid Base Salary and other compensation until the Date of Termination during
the pendency of any dispute or controversy arising under or in connection with
this Agreement. 

	
 

	
 

	
21.

	
PAYMENT OF LEGAL FEES 

          All
reasonable legal fees paid or incurred by Executive pursuant to any dispute or
question of interpretation relating to this Agreement shall be paid or
reimbursed by the Bank, provided that the dispute or interpretation has been
settled by Executive and the Bank or resolved in Executive’s favor and provided
that such payment or reimbursement shall be made not later than two and
one-half (2 1⁄2) months after the end of the taxable year in which such fees were
incurred. 

	
 

	
 

	
22.

	
INDEMNIFICATION 

          The Bank
shall provide Executive (including his/her heirs, executors and administrators)
with coverage under a standard directors and officers liability insurance
policy at its expense. Subject to 12 C.F.R. §545.121, the Bank or the Company,
shall indemnify Executive (and his/her heirs, executors and administrators) to
the fullest extent permitted under federal law against all expenses and
liabilities reasonably incurred by herein connection with or arising out of any
action, suit or proceeding in which he/she may be involved by reason of having
been a director or officer of the Bank or the Company (whether or not he/she
continues to be a director or officer at the time of incurring such expenses or
liabilities), such expenses and liabilities to include, but not be limited to,
judgments, court costs and attorneys fees and the cost of reasonable settlements
(such settlements must be approved by the Board of Directors of the Bank or the
Company). If such action, suit or proceeding is brought against Executive in
his/her capacity as an officer or director of the Bank, however, such
indemnification shall not extend to matters as to which Executive is finally
adjudged to be liable for willful misconduct in the performance of her duties. 

	
 

	
 

	
23.

	
SUCCESSORS AND ASSIGNS 

          The Bank
and/or the Company shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank or the Company, expressly
and unconditionally to assume and agree to 

11

perform the Bank’s and the Company’s obligations under this Agreement,
in the same manner and to the same extent that the Bank and/or the Company
would be required to perform if no such succession or assignment had taken
place. 

[Signature Page Follows]

12

SIGNATURES

          IN WITNESS
WHEREOF, the Bank and the Company have caused this Agreement to be executed and
their seals to be affixed hereunto by their duly authorized officers, and
Executive has signed this Agreement, as of the day and date first above
written. 

	
 

	
 

	
 

	
 

	
ATTEST:

	
 

	
KAISER FEDERAL BANK

	
 

	
 

	
 

	
 

	
 

	
 

	
By: 

	
 

	

	
 

	
 

	

	
 

	
 

	
 

	
 

	
ATTEST:

	
 

	
KAISER FEDERAL FINANCIAL GROUP, 

 INC.

	
 

	
 

	
 

	
 

	
 

	
 

	
By: 

	
 

	

	
 

	
 

	

	
 

	
 

	
 

	
 

	
WITNESS:

	
 

	
EXECUTIVE

	
 

	
 

	
 

	
 

	

	
 

	

	
 

	
 

	
Jeanne R.
 Thompson

13<PAGE>
Exhibit 4.1

                         UNIVERSAL DETECTION TECHNOLOGY

                          2007-4 EQUITY INCENTIVE PLAN

<PAGE>

                         UNIVERSAL DETECTION TECHNOLOGY
                          2007-4 EQUITY INCENTIVE PLAN

      Universal Detection Technology, Inc. hereby adopts the 2007-4 Equity
Incentive Plan, effective as of November 1, 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 November 1, 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-
<PAGE>

      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-
<PAGE>

          (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 2007-4 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-
<PAGE>

      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.

          4.1.1 MAXIMUM SHARES AVAILABLE UNDER PLAN. The aggregate number of
Shares available for issuance under the Plan may not exceed one hundred fifty
million (150,000,000) Shares.

                                      -4-
<PAGE>

          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.

                                   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-
<PAGE>

      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

                (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.

                                      -6-
<PAGE>

          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.

      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.

                                      -7-
<PAGE>

          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.

      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.

                                      -8-
<PAGE>

      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.

      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:

                                      -9-
<PAGE>

      "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 2007-3 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.

                                   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".

                                      -10-
<PAGE>

      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.

                                   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-
<PAGE>

      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.

                                   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,

                                      -12-
<PAGE>

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 consummation 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.

      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:

                                      -13-
<PAGE>

          (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.

      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.

                                * * * * * * * * *

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