Document:

2007-III EMPLOYEE STOCK INCENTIVE PLAN

    EXHIBIT
      4.0

    

    SUB
      SURFACE WASTE MANAGEMENT OF DELAWARE, INC.

    

    2007-III
      EMPLOYEE STOCK INCENTIVE PLAN

    

    As
      Adopted June 20, 2007

    

    

    1.             PURPOSE.

    

    The
      purpose of this Plan is to provide incentives to attract, retain and motivate
      eligible persons whose present and potential contributions are important to
      the
      success of the Company, its Parent and Subsidiaries, by offering them an
      opportunity to participate in the Company’s future performance through awards of
      Options, Restricted Stock and Stock Bonuses. Capitalized terms not defined
      in
      the text are defined in Section 2.

    

    2.            
      DEFINITIONS.

    

    As
      used
      in this Plan, the following terms will have the following meanings:

    

    “AWARD”
means
      any award under this Plan, including any Option, Restricted Stock or Stock
      Bonus.

    

    “AWARD
      AGREEMENT”
means,
      with respect to each Award, the signed written agreement between the Company
      and
      the Participant setting forth the terms and conditions of the
      Award.

    

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

    

    “CAUSE”
means
      any cause, as defined by applicable law, for the termination of a Participant’s
      employment with the Company or a Parent or Subsidiary of the
      Company.

    

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

    

    “COMPANY”
means
      Sub Surface Waste Management of Delaware, Inc., a Delaware corporation, or
      any
      successor corporation.

    

    “DISABILITY”
means
      a
      disability, whether temporary or permanent, partial or total, as determined
      by
      the Board.

    

    “EXCHANGE
      ACT”
means
      the Securities Exchange Act of 1934, as amended.

    

    “EXERCISE
      PRICE”
means
      the price at which a holder of an Option may purchase the Shares issuable upon
      exercise of the Option.

    

    “FAIR
      MARKET VALUE”
means,
      as of any date, the value of a share of the Company’s Common Stock determined as
      follows:

    
      
        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

    

    
      	 	
              (a)

            	
              if
                such Common Stock is publicly traded and is then listed on a national
                securities exchange, its closing price on the date of determination
                on the
                principal national securities exchange on which the Common Stock
                is listed
                or admitted to trading as reported in The Wall Street
                Journal;

            

    

    

    
      	 	
              (b)

            	
              if
                such Common Stock is quoted on the NASDAQ National Market, its closing
                price on the NASDAQ National Market on the date of determination
                as
                reported in The Wall Street
                Journal;

            

    

    

    
      	 	
              (c)

            	
              if
                such Common Stock is publicly traded but is not listed or admitted
                to
                trading on a national securities exchange, the average of the closing
                bid
                and asked prices on the date of determination as reported by Bloomberg,
                L.P.;

            

    

    

    
      	 	
              (d)

            	
              in
                the case of an Award made on the Effective Date, the price per share
                at
                which shares of the Company’s Common Stock are initially offered for sale
                to the public by the Company’s underwriters in the initial public offering
                of the Company’s Common Stock pursuant to a registration statement filed
                with the SEC under the Securities Act;
                or

            

    

    

    
      	 	
              (e)

            	
              if
                none of the foregoing is applicable, by the Board in good
                faith.

            

    

    

    “INSIDER”
means
      an officer or director of the Company or any other person whose transactions
      in
      the Company’s Common Stock are subject to Section 16 of the Exchange
      Act.

    

    “OPTION”
means
      an award of an option to purchase Shares pursuant to Section 6.

    

    “PARENT”
means
      any corporation (other than the Company) in an unbroken chain of corporations
      ending with the Company if each of such corporations other than the Company
      owns
      stock possessing 50% or more of the total combined voting power of all classes
      of stock in one of the other corporations in such chain.

    

    “PARTICIPANT”
means
      a
      person who receives an Award under this Plan.

    

    “PERFORMANCE
      FACTORS”
means
      the factors selected by the Board, in its sole and absolute discretion, from
      among the following measures to determine whether the performance goals
      applicable to Awards have been satisfied:

    

    
      	 	 	
              (a)

            	
              Net
                revenue and/or net revenue growth;

            

    

    

    
      	 	 	
              (b)

            	
              Earnings
                before income taxes and amortization and/or earnings before income
                taxes
                and amortization growth;

            

    

    

    
      	 	 	
              (c)

            	
              Operating
                income and/or operating income
                growth;

            

    

    

    
      	 	 	
              (d)

            	
              Net
                income and/or net income growth;

            

    

    

    
      	 	 	
              (e)

            	
              Earnings
                per share and/or earnings per share
                growth;

            

    

    

    
      	 	 	
              (f)

            	
              Total
                stockholder return and/or total stockholder return
                growth;

            

    

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    

    
      	 	 	
              (g)

            	
              Return
                on equity;

            

    

    

    
      	 	 	
              (h)

            	
              Operating
                cash flow return on income;

            

    

    

    
      	 	 	
              (i)

            	
              Adjusted
                operating cash flow return on
                income;

            

    

    

    
      	 	 	
              (j)

            	
              Economic
                value added; and

            

    

    

    
      	 	 	
              (k)

            	
              Individual
                confidential business objectives.

            

    

    

    “PERFORMANCE
      PERIOD”
means
      the period of service determined by the Board, not to exceed five years, during
      which years of service or performance is to be measured for Restricted Stock
      Awards or Stock Bonuses.

    

    “PLAN”
means
      this Sub Surface Waste Management of Delaware, Inc. 2007-III Employee Stock
      Incentive Plan, as amended from time to time.

    

    “RESTRICTED
      STOCK AWARD”
means
      an award of Shares pursuant to Section 7.

    

    “SEC”
means
      the Securities and Exchange Commission.

    

    “SECURITIES
      ACT”
means
      the Securities Act of 1933, as amended.

    

    “SHARES”
means
      shares of the Company’s Common Stock reserved for issuance under this Plan, as
      adjusted pursuant to Sections 3 and 19, and any successor security.

    

    “STOCK
      BONUS”
means
      an award of Shares, or cash in lieu of Shares, pursuant to Section
      8.

    

    “SUBSIDIARY”
means
      any corporation (other than the Company) in an unbroken chain of corporations
      beginning with the Company if each of the corporations other than the last
      corporation in the unbroken chain owns stock possessing 50% or more of the
      total
      combined voting power of all classes of stock in one of the other corporations
      in such chain.

    

    “TERMINATION”
or
      “TERMINATED”
means,
      for purposes of this Plan with respect to a Participant, that the Participant
      has for any reason ceased to provide services as an employee, officer, director,
      consultant, independent contractor, or advisor to the Company or a Parent or
      Subsidiary of the Company. An employee will not be deemed to have ceased to
      provide services in the case of (i) sick leave, (ii) military leave, or (iii)
      any other leave of absence approved by the Company, provided that such leave
      is
      for a period of not more than 90 days, unless reemployment upon the expiration
      of such leave is guaranteed by contract or statute or unless provided otherwise
      pursuant to a formal policy adopted from time to time by the Company and issued
      and promulgated to employees in writing. In the case of any employee on an
      approved leave of absence, the Board may make such provisions respecting
      suspension of vesting of the Award while on leave from the employ of the Company
      or a Subsidiary as it may deem appropriate, except that in no event may an
      Option be exercised after the expiration of the term set forth in the Option
      agreement. The Board will have sole discretion to determine whether a
      Participant has ceased to provide services and the effective date on which
      the
      Participant ceased to provide services (the “TERMINATION DATE”).

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    

    “UNVESTED
      SHARES”
means
      “Unvested Shares” as defined in the Award Agreement.

    

    “VESTED
      SHARES”
means
      “Vested Shares” as defined in the Award Agreement.

    

    3.            
      SHARES
      SUBJECT TO THE PLAN.

    

    3.1 Number
      of Shares Available.
      Subject
      to Sections 3.2 and 19, the total aggregate number of Shares reserved and
      available for grant and issuance pursuant to this Plan will be 30,000,000 plus
      Shares that are subject to: (a) issuance upon exercise of an Option but cease
      to
      be subject to such Option for any reason other than exercise of such Option;
      (b)
      an Award granted hereunder but forfeited or repurchased by the Company at the
      original issue price; and (c) an Award that otherwise terminates without Shares
      being issued. At all times the Company shall reserve and keep available a
      sufficient number of Shares as shall be required to satisfy the requirements
      of
      all outstanding Options granted under this Plan and all other outstanding but
      unvested Awards granted under this Plan.

    

    3.2 Adjustment
      of Shares.
      In the
      event that the number of outstanding shares is changed by a stock dividend,
      recapitalization, stock split, reverse stock split, subdivision, combination,
      reclassification or similar change in the capital structure of the Company
      without consideration, then (a) the number of Shares reserved for issuance
      under
      this Plan, (b) the Exercise Prices of and number of Shares subject to
      outstanding Options, and (c) the number of Shares subject to other outstanding
      Awards will be proportionately adjusted, subject to any required action by
      the
      Board or the stockholders of the Company and compliance with applicable
      securities laws; provided, however, that fractions of a Share will not be issued
      but will either be replaced by a cash payment equal to the Fair Market Value
      of
      such fraction of a Share or will be rounded up to the nearest whole Share,
      as
      determined by the Board.

    

    4.            ELIGIBILITY.

    

    ISOs
      (as
      defined in Section 6 below) may be granted only to employees (including officers
      and directors who are also employees) of the Company or of a Parent or
      Subsidiary of the Company. All other Awards may be granted to employees,
      officers, directors, consultants, independent contractors and advisors of the
      Company or any Parent or Subsidiary of the Company; provided such consultants,
      contractors and advisors render bona fide services not in connection with the
      offer and sale of securities in a capital-raising transaction. 

    

    5.            ADMINISTRATION.

    

    5.1 Board
      Authority.
      This
      Plan will be administered by the Board. Subject to the general purposes, terms
      and conditions of this Plan, the Board will have full power to implement and
      carry out this Plan. Without limitation, the Board will have the authority
      to:

    

    
      	 	
              (a)

            	 	
              construe
                and interpret this Plan, any Award Agreement and any other agreement
                or
                document executed pursuant to this
                Plan;

            

    

    

    
      	 	
              (b)

            	
              prescribe,
                amend and rescind rules and regulations relating to this Plan or
                any
                Award;

            

    

    

    
      	 	
              (c)

            	
              select
                persons to receive Awards;

            

    

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    

    
      	 	
              (d)

            	
              determine
                the form and terms of Awards;

            

    

    

    
      	 	
              (e)

            	
              determine
                the number of Shares or other consideration subject to
                Awards;

            

    

    

    
      	 	
              (f)

            	
              determine
                whether Awards will be granted singly, in combination with, in tandem
                with, in replacement of, or as alternatives to, other Awards under
                this
                Plan or any other incentive or compensation plan of the Company or
                any
                Parent or Subsidiary of the
                Company;

            

    

    

    
      	 	
              (g)

            	
              grant
                waivers of Plan or Award
                conditions;

            

    

    

    
      	 	
              (h)

            	
              determine
                the vesting, ability to exercise and payment of
                Awards;

            

    

    

    
      	 	
              (i)

            	
              correct
                any defect, supply any omission or reconcile any inconsistency in
                this
                Plan, any Award or any Award
                Agreement;

            

    

    

    
      	 	
              (j)

            	
              determine
                whether an Award has been earned;
                and

            

    

    

    
      	 	
              (k)

            	
              make
                all other determinations necessary or advisable for the administration
                of
                this Plan.

            

    

    

    5.2 Board
      Discretion.
      Any
      determination made by the Board with respect to any Award will be made at the
      time of grant of the Award or, unless in contravention of any express term
      of
      this Plan or Award, at any later time, and such determination will be final
      and
      binding on the Company and on all persons having an interest in any Award under
      this Plan. The Board may delegate to one or more officers of the Company the
      authority to grant an Award under this Plan to Participants who are not Insiders
      of the Company.

    

    6.             
      OPTIONS.

    

     The
      Board
      may grant Options to eligible persons and will determine whether such Options
      will be Incentive Stock Options within the meaning of the Code (“ISO”) or
      Nonqualified Stock Options (“NQSOS”), the number of Shares subject to the
      Option, the Exercise Price of the Option, the period during which the Option
      may
      be exercised, and all other terms and conditions of the Option, subject to
      the
      following:

    

    6.1 Form
      of Option Grant.
      Each
      Option granted under this Plan will be evidenced by an Award Agreement that
      will
      expressly identify the Option as an ISO or an NQSO (hereinafter referred to
      as
      the “STOCK OPTION AGREEMENT”), and will be in such form and contain such
      provisions (which need not be the same for each Participant) as the Board may
      from time to time approve, and which will comply with and be subject to the
      terms and conditions of this Plan.

    

    6.2 Date
      of Grant.
      The
      date of grant of an Option will be the date on which the Board makes the
      determination to grant such Option, unless otherwise specified by the Board.
      The
      Stock Option Agreement and a copy of this Plan will be delivered to the
      Participant within a reasonable time after the granting of the
      Option.

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

    6.3 Exercise
      Period.
      Options
      may be exercisable within the times or upon the events determined by the Board
      as set forth in the Stock Option Agreement governing such Option; provided,
      however, that no Option will be exercisable after the expiration of ten (10)
      years from the date the Option is granted; and provided further that no ISO
      granted to a person who directly or by attribution owns more than ten percent
      (10%) of the total combined voting power of all classes of stock of the Company
      or of any Parent or Subsidiary of the Company (“TEN PERCENT STOCKHOLDER”) will
      be exercisable after the expiration of five (5) years from the date the ISO
      is
      granted. The Board also may provide for Options to become exercisable at one
      time or from time to time, periodically or otherwise, in such number of Shares
      or percentage of Shares as the Board determines.

    

    6.4 Exercise
      Price.
      The
      Exercise Price of an Option will be determined by the Board when the Option
      is
      granted and may be not less than 85% of the Fair Market Value of the Shares
      on
      the date of grant; provided that: (a) the Exercise Price of an ISO will be
      not
      less than 100% of the Fair Market Value of the Shares on the date of grant;
      and
      (b) the Exercise Price of any ISO granted to a Ten Percent Stockholder will
      not
      be less than 110% of the Fair Market Value of the Shares on the date of grant.
      Payment for the Shares purchased may be made in accordance with Section 9 of
      this Plan.

    

    6.5 Method
      of Exercise.
      Options
      may be exercised only by delivery to the Company of a written stock option
      exercise agreement (the “EXERCISE AGREEMENT”) in a form approved by the Board,
      (which need not be the same for each Participant), stating the number of Shares
      being purchased, the restrictions imposed on the Shares purchased under such
      Exercise Agreement, if any, and such representations and agreements regarding
      Participant’s investment intent and access to information and other matters, if
      any, as may be required or desirable by the Company to comply with applicable
      securities laws, together with payment in full of the Exercise Price for the
      number of Shares being purchased.

    

    6.6 Termination.
      Notwithstanding the exercise periods set forth in the Stock Option Agreement,
      exercise of an Option will always be subject to the following:

    

    (a) If
      the
      Participant’s service is Terminated for any reason except death or Disability,
      then the Participant may exercise such Participant’s Options only to the extent
      that such Options would have been exercisable upon the Termination Date no
      later
      than three (3) months after the Termination Date (or such shorter or longer
      time
      period not exceeding five (5) years as may be determined by the Board, with
      any
      exercise beyond three (3) months after the Termination Date deemed to be an
      NQSO), but in any event, no later than the expiration date of the
      Options.

    

    (b) If
      the
      Participant’s service is Terminated because of Participant’s death or Disability
      (or the Participant dies within three (3) months after a Termination other
      than
      for Cause or because of Participant’s Disability), then Participant’s Options
      may be exercised only to the extent that such Options would have been
      exercisable by Participant on the Termination Date and must be exercised by
      Participant (or Participant’s legal representative or authorized assignee) no
      later than twelve (12) months after the Termination Date (or such shorter or
      longer time period not exceeding five (5) years as may be determined by the
      Board, with any such exercise beyond (i) three (3) months after the Termination
      Date when the Termination is for any reason other than the Participant’s death
      or Disability, or (ii) twelve (12) months after the Termination Date when the
      Termination is for Participant’s death or Disability, deemed to be an NQSO), but
      in any event no later than the expiration date of the
      Options.

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    (c) Notwithstanding
      the provisions in paragraph 6.6(a) above, if a Participant’s service is
      Terminated for Cause, neither the Participant, the Participant’s estate nor such
      other person who may then hold the Option shall be entitled to exercise any
      Option with respect to any Shares whatsoever, after Termination, whether or
      not
      after Termination the Participant may receive payment from the Company or
      Subsidiary for vacation pay, for services rendered prior to Termination, for
      services rendered for the day on which Termination occurs, for salary in lieu
      of
      notice, or for any other benefits. For the purpose of this paragraph,
      Termination shall be deemed to occur on the date when the Company dispatches
      notice or advice to the Participant that his service is Terminated.

    

    6.7 Limitations
      on Exercise.
      The
      Board may specify a reasonable minimum number of Shares that may be purchased
      on
      any exercise of an Option, provided that such minimum number will not prevent
      Participant from exercising the Option for the full number of Shares for which
      it is then exercisable.

    

    6.8 Limitations
      on ISO.
      The
      aggregate Fair Market Value (determined as of the date of grant) of Shares
      with
      respect to which ISO are exercisable for the first time by a Participant during
      any calendar year (under this Plan or under any other incentive stock option
      plan of the Company, Parent or Subsidiary of the Company) will not exceed
      $100,000. If the Fair Market Value of Shares on the date of grant with respect
      to which ISO are exercisable for the first time by a Participant during any
      calendar year exceeds $100,000, then the Options for the first $100,000 worth
      of
      Shares to become exercisable in such calendar year will be ISO and the Options
      for the amount in excess of $100,000 that become exercisable in that calendar
      year will be NQSOs. In the event that the Code or the regulations promulgated
      thereunder are amended after the Effective Date of this Plan to provide for
      a
      different limit on the Fair Market Value of Shares permitted to be subject
      to
      ISO, such different limit will be automatically incorporated herein and will
      apply to any Options granted after the effective date of such
      amendment.

    

    6.9 Modification,
      Extension or Renewal.
      The
      Board may modify, extend or renew outstanding Options and authorize the grant
      of
      new Options in substitution therefor, provided that any such action may not,
      without the written consent of a Participant, impair any of such Participant’s
      rights under any Option previously granted. Any outstanding ISO that is
      modified, extended, renewed or otherwise altered will be treated in accordance
      with Section 424(h) of the Code. The Board may reduce the Exercise Price of
      outstanding Options without the consent of Participants affected by a written
      notice to them; provided, however, that the Exercise Price may not be reduced
      below the minimum Exercise Price that would be permitted under Section 6.4
      of
      this Plan for Options granted on the date the action is taken to reduce the
      Exercise Price.

    

    6.10 No
      Disqualification.
      Notwithstanding any other provision in this Plan, no term of this Plan relating
      to ISO will be interpreted, amended or altered, nor will any discretion or
      authority granted under this Plan be exercised, so as to disqualify this Plan
      under Section 422 of the Code or, without the consent of the Participant
      affected, to disqualify any ISO under Section 422 of the Code.

    

    7.            
      RESTRICTED
      STOCK.

    

    A
      Restricted Stock Award is an offer by the Company to sell to an eligible person
      Shares that are subject to restrictions. The Board will determine to whom an
      offer will be made, the number of Shares the person may purchase, the price
      to
      be paid (the “PURCHASE PRICE”), the restrictions to which the Shares will be
      subject, and all other terms and conditions of the Restricted Stock Award,
      subject to the following:

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    7.1 Form
      of Restricted Stock Award.
      All
      purchases under a Restricted Stock Award made pursuant to this Plan will be
      evidenced by an Award Agreement (the “RESTRICTED STOCK PURCHASE AGREEMENT”) that
      will be in such form (which need not be the same for each Participant) as the
      Board will from time to time approve, and will comply with and be subject to
      the
      terms and conditions of this Plan. The offer of Restricted Stock will be
      accepted by the Participant’s execution and delivery of the Restricted Stock
      Purchase Agreement and full payment for the Shares to the Company within thirty
      (30) days from the date the Restricted Stock Purchase Agreement is delivered
      to
      the person. If such person does not execute and deliver the Restricted Stock
      Purchase Agreement along with full payment for the Shares to the Company within
      thirty (30) days, then the offer will terminate, unless otherwise extended
      by
      the Board.

    

    7.2 Purchase
      Price.
      The
      Purchase Price of Shares sold pursuant to a Restricted Stock Award will be
      determined by the Board on the date the Restricted Stock Award is granted,
      except in the case of a sale to a Ten Percent Stockholder, in which case the
      Purchase Price will be 100% of the Fair Market Value. Payment of the Purchase
      Price must be made in accordance with Section 9 of this Plan.

    

    7.3 Terms
      of Restricted Stock Awards.
      Restricted Stock Awards shall be subject to such restrictions as the Board
      may
      impose. These restrictions may be based upon completion of a specified number
      of
      years of service with the Company or upon completion of the performance goals
      as
      set out in advance in the Participant’s individual Restricted Stock Purchase
      Agreement. Restricted Stock Awards may vary from Participant to Participant
      and
      between groups of Participants. Prior to the grant of a Restricted Stock Award,
      the Board shall: (a) determine the nature, length and starting date of any
      Performance Period for the Restricted Stock Award; (b) select from among the
      Performance Factors to be used to measure performance goals, if any; and (c)
      determine the number of Shares that may be awarded to the Participant. Prior
      to
      the payment of any Restricted Stock Award, the Board shall determine the extent
      to which such Restricted Stock Award has been earned. Performance Periods may
      overlap and Participants may participate simultaneously with respect to
      Restricted Stock Awards that are subject to different Performance Periods and
      have different performance goals and other criteria.

    

    7.4 Termination
      During Performance Period.
      If a
      Participant is Terminated during a Performance Period for any reason, then
      such
      Participant will be entitled to payment (whether in Shares, cash or otherwise)
      with respect to the Restricted Stock Award only to the extent earned as of
      the
      date of Termination in accordance with the Restricted Stock Purchase Agreement,
      unless the Board determines otherwise.

    

    8.            STOCK
      BONUSES.

    

    8.1 Awards
      of Stock Bonuses.
      A Stock
      Bonus is an award of Shares (which may consist of Restricted Stock) for
      extraordinary services rendered to the Company or any Parent or Subsidiary
      of
      the Company. A Stock Bonus will be awarded pursuant to an Award Agreement (the
      “STOCK BONUS AGREEMENT”) that will be in such form (which need not be the same
      for each Participant) as the Board will from time to time approve, and will
      comply with and be subject to the terms and conditions of this Plan. A Stock
      Bonus may be awarded upon satisfaction of such performance goals as are set
      out
      in advance in the Participant’s individual Award Agreement (the “PERFORMANCE
      STOCK BONUS AGREEMENT”) that will be in such form (which need not be the same
      for each Participant) as the Board will from time to time approve, and will
      comply with and be subject to the terms and conditions of this Plan. Stock
      Bonuses may vary from Participant to Participant and between groups of
      Participants, and may be based upon the achievement of the Company, Parent
      or
      Subsidiary and/or individual performance factors or upon such other criteria
      as
      the Board may determine.

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    

    8.2 Terms
      of Stock Bonuses.
      The
      Board will determine the number of Shares to be awarded to the Participant.
      If
      the Stock Bonus is being earned upon the satisfaction of performance goals
      pursuant to a Performance Stock Bonus Agreement, then the Board will: (a)
      determine the nature, length and starting date of any Performance Period for
      each Stock Bonus; (b) select from among the Performance Factors to be used
      to
      measure the performance, if any; and (c) determine the number of Shares that
      may
      be awarded to the Participant. Prior to the payment of any Stock Bonus, the
      Board shall determine the extent to which such Stock Bonuses have been earned.
      Performance Periods may overlap and Participants may participate simultaneously
      with respect to Stock Bonuses that are subject to different Performance Periods
      and different performance goals and other criteria. The number of Shares may
      be
      fixed or may vary in accordance with such performance goals and criteria as
      may
      be determined by the Board. The Board may adjust the performance goals
      applicable to the Stock Bonuses to take into account changes in law and
      accounting or tax rules and to make such adjustments as the Board deems
      necessary or appropriate to reflect the impact of extraordinary or unusual
      items, events or circumstances to avoid windfalls or hardships.

    

    8.3 Form
      of Payment.
      The
      earned portion of a Stock Bonus may be paid to the Participant by the Company
      either currently or on a deferred basis, with such interest or dividend
      equivalent, if any, as the Board may determine. Payment may be made in the
      form
      of cash or whole Shares or a combination thereof, either in a lump sum payment
      or in installments, all as the Board will determine.

    

    9.            
      PAYMENT
      FOR SHARE PURCHASES.

    

    9.1 Payment.
      Payment
      for Shares purchased pursuant to this Plan may be made in cash (by check) or,
      where expressly approved for the Participant by the Board and where permitted
      by
      law:

    

    
      	
            	(a)	
              by
                cancellation of indebtedness of the Company to the
                Participant;

            

    

    

    
      	 	
              (b)

            	
              by
                surrender of shares that either: (1) have been owned by Participant
                for
                more than one year and have been paid for within the meaning of Rule
                144
                of the Securities Act of 1933 (and, if such shares were purchased
                from the
                Company by use of a promissory note, such note has been fully paid
                with
                respect to such shares); or (2) were obtained by Participant in the
                public
                market;

            

    

    

    
      	 	
               

            	
              (c)

            	
              by
                waiver of compensation due or accrued to the Participant for services
                rendered;

            

    

    

    
      	
            	(d)	
              with
                respect only to purchases upon exercise of an Option, and provided
                that a
                public market for the Company’s stock
                exists:

            

    

    

    
      	
               

            	
              (1)

            	
              through
                a “same day sale” commitment from the Participant and a broker-dealer that
                is a member of the National Association of Securities Dealers (an
“NASD
                DEALER”) whereby the Participant irrevocably elects to exercise the Option
                and to sell a portion of the Shares so purchased to pay for the Exercise
                Price, and whereby the NASD Dealer irrevocably commits upon receipt
                of
                such Shares to forward the Exercise Price directly to the Company;
                or

            

    

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    

    
      	
               

            	
              (2)

            	
              through
                a “margin” commitment from the Participant and a NASD Dealer whereby the
                Participant irrevocably elects to exercise the Option and to pledge
                the
                Shares so purchased to the NASD Dealer in a margin account as security
                for
                a loan from the NASD Dealer in the amount of the Exercise Price,
                and
                whereby the NASD Dealer irrevocably commits upon receipt of such
                Shares to
                forward the Exercise Price directly to the Company;
                or

            

    

    

    
      	
            	(e)	
              by
                any combination of the foregoing.

            

    

    

    10.         
      WITHHOLDING
      TAXES.

    

    10.1 Withholding
      Generally.
      Whenever Shares are to be issued in satisfaction of Awards granted under this
      Plan, the Company may require the Participant to remit to the Company an amount
      sufficient to satisfy federal, state and local withholding tax requirements
      prior to the delivery of any certificate or certificates for such Shares.
      Whenever, under this Plan, payments in satisfaction of Awards are to be made
      in
      cash, such payment will be net of an amount sufficient to satisfy federal,
      state, and local withholding tax requirements.

    

    10.2 Stock
      Withholding.
      When,
      under applicable tax laws, a participant incurs tax liability in connection
      with
      the exercise or vesting of any Award that is subject to tax withholding and
      the
      Participant is obligated to pay the Company the amount required to be withheld,
      the Board may allow the Participant to satisfy the minimum withholding tax
      obligation by electing to have the Company withhold from the Shares to be issued
      that number of Shares having a Fair Market Value equal to the minimum amount
      required to be withheld, determined on the date that the amount of tax to be
      withheld is to be determined. All elections by a Participant to have Shares
      withheld for this purpose will be made in accordance with the requirements
      established by the Board and be in writing in a form acceptable to the
      Board.

    

    11.         
      PRIVILEGES
      OF STOCK OWNERSHIP.

    

    11.1 Voting
      and Dividends.
      No
      Participant will have any of the rights of a stockholder with respect to any
      Shares until the Shares are issued to the 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, including the right to
      vote
      and receive all dividends or other distributions made or paid with respect
      to
      such Shares; provided, that if such Shares are Restricted Stock, then any new,
      additional or different securities the Participant may become entitled to
      receive with respect to such Shares by virtue of a stock dividend, stock split
      or any other change in the corporate or capital structure of the Company will
      be
      subject to the same restrictions as the Restricted Stock; provided, further,
      that the Participant will have no right to retain such stock dividends or stock
      distributions with respect to Shares that are repurchased at the Participant’s
      Purchase Price or Exercise Price pursuant to Section 12.

    

    11.2 Financial
      Statements.
      Pursuant to regulation 260.140.46 of the Rules of the California Corporations
      Commissioner, the Company will provide financial statements to each Participant
      prior to such Participant’s purchase of Shares under this Plan, and to each
      Participant annually during the period such Participant has Awards outstanding;
      provided, however, the Company will not be required to provide such financial
      statements to Participants whose services in connection with the Company assure
      them access to equivalent information.

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    

    12.         
      TRANSFERABILITY.

    

    Awards
      granted under this Plan, and any interest therein, will not be transferable
      or
      assignable by Participant, and may not be made subject to execution, attachment
      or similar process, other than by will or by the laws of descent and
      distribution. During the lifetime of the Participant an Award will be
      exercisable only by the Participant. During the lifetime of the Participant,
      any
      elections with respect to an Award may be made only by the Participant unless
      otherwise determined by the Board and set forth in the Award Agreement with
      respect to Awards that are not ISOs.

    

    13.         
      RESTRICTIONS
      ON SHARES.

    

    At
      the
      discretion of the Board, the Company may reserve to itself and/or its
      assignee(s) in the Award Agreement a right to repurchase a portion of or all
      Unvested Shares held by a Participant following such Participant’s Termination
      at any time within ninety (90) days after the later of (a) Participant’s
      Termination Date, or (b) the date Participant purchases Shares under this Plan.
      Such repurchase by the Company shall be for cash and/or cancellation of purchase
      money indebtedness, and the price per share shall be the Participant’s Exercise
      Price or the Purchase Price, as applicable.

    

    14.         
      CERTIFICATES.

    

    All
      certificates for Shares or other securities delivered under this Plan will
      be
      subject to such stock transfer orders, legends and other restrictions as the
      Board may deem necessary or advisable, including restrictions under any
      applicable federal, state or foreign securities law, or any rules, regulations
      and other requirements of the SEC or any stock exchange or automated quotation
      system upon which the Shares may be listed or quoted.

    

    15.         
      ESCROW;
      PLEDGE OF SHARES.

    

    To
      enforce any restrictions on a Participant’s Shares, the Board may require the
      Participant to deposit all certificates representing Shares, together with
      stock
      powers or other instruments of transfer approved by the Board appropriately
      endorsed in blank, with the Company or an agent designated by the Company to
      hold in escrow until such restrictions have lapsed or terminated, and the Board
      may cause a legend or legends referencing such restrictions to be placed on
      the
      certificates. Any Participant who is permitted to execute a promissory note
      as
      partial or full consideration for the purchase of Shares under this Plan will
      be
      required to pledge and deposit with the Company all or part of the Shares so
      purchased as collateral to secure the payment of Participant’s obligation to the
      Company under the promissory note; provided, however, that the Board may require
      or accept other or additional forms of collateral to secure the payment of
      such
      obligation and, in any event, the Company will have full recourse against the
      Participant under the promissory note notwithstanding any pledge of the
      Participant’s Shares or other collateral. In connection with any pledge of the
      Shares, Participant will be required to execute and deliver a written pledge
      agreement in such form as the Board will from time to time approve. The Shares
      purchased with the promissory note may be released from the pledge on a pro
      rata
      basis as the promissory note is paid.

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

    16.          EXCHANGE
      AND BUYOUT OF AWARDS.

    

    The
      Board
      may, at any time or from time to time, authorize the Company, with the consent
      of the respective Participants, to issue new Awards in exchange for the
      surrender and cancellation of any or all outstanding Awards. The Board may
      at
      any time buy from a Participant an Award previously granted with payment in
      cash, Shares (including Restricted Stock) or other consideration, based on
      such
      terms and conditions as the Board and the Participant may agree.

    

    17.          SECURITIES
      LAW AND OTHER REGULATORY COMPLIANCE.

    

    An
      Award
      will not be effective unless such Award is in compliance with all applicable
      federal and state securities laws, rules and regulations of any governmental
      body, and the requirements of any stock exchange or automated quotation system
      upon which the Shares may then be listed or quoted, as they are in effect on
      the
      date of grant of the Award and also on the date of exercise or other issuance.
      Notwithstanding any other provision in this Plan, the Company will have no
      obligation to issue or deliver certificates for Shares under this Plan prior
      to:
      (a) obtaining any approvals from governmental agencies that the Company
      determines are necessary or advisable; and/or (b) completion of any registration
      or other qualification of such Shares under any state or federal law or ruling
      of any governmental body that the Company determines to be necessary or
      advisable. The Company will be under no obligation to register the Shares with
      the SEC or to effect compliance with the registration, qualification or listing
      requirements of any state securities laws, stock exchange or automated quotation
      system, and the Company will have no liability for any inability or failure
      to
      do so.

    

    18.         
      NO
      OBLIGATION TO EMPLOY.

    

    Nothing
      in this Plan or any Award granted under this Plan will confer or be deemed
      to
      confer on any Participant any right to continue in the employ of, or to continue
      any other relationship with, the Company or any Parent or Subsidiary of the
      Company or limit in any way the right of the Company or any Parent or Subsidiary
      of the Company to terminate Participant’s employment or other relationship at
      any time, with or without cause.

    

    19.         
      CORPORATE
      TRANSACTIONS.

    

    19.1 Assumption
      or Replacement of Awards by Successor.
      In the
      event of (a) a dissolution or liquidation of the Company, (b) a merger or
      consolidation in which the Company is not the surviving corporation (other
      than
      a merger or consolidation with a wholly-owned subsidiary, a reincorporation
      of
      the Company in a different jurisdiction, or other transaction in which there
      is
      no substantial change in the stockholders of the Company or their relative
      stock
      holdings and the Awards granted under this Plan are assumed, converted or
      replaced by the successor corporation, which assumption will be binding on
      all
      Participants), (c) a merger in which the Company is the surviving corporation
      but after which the stockholders of the Company immediately prior to such merger
      (other than any stockholder that merges, or which owns or controls another
      corporation that merges, with the Company in such merger) cease to own their
      shares or other equity interest in the Company, (d) the sale of substantially
      all of the assets of the Company, or (e) the acquisition, sale, or transfer
      of
      more than 50% of the outstanding shares of the Company by tender offer or
      similar transaction, any or all outstanding Awards may be assumed, converted
      or
      replaced by the successor corporation (if any), which assumption, conversion
      or
      replacement will be binding on all Participants. In the alternative, the
      successor corporation may substitute equivalent Awards or provide substantially
      similar consideration to Participants as was provided to stockholders (after
      taking into account the existing provisions of the Awards). The successor
      corporation may also issue, in place of outstanding Shares of the Company held
      by the Participant, substantially similar shares or other property subject
      to
      repurchase restrictions no less favorable to the Participant. 

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

    In
      the
      event such successor corporation (if any) refuses to assume or substitute
      Awards, as provided above, pursuant to a transaction described in this
      Subsection 19.1, such Awards will expire on such transaction at such time and
      on
      such conditions as the Board will determine. Notwithstanding anything in this
      Plan to the contrary, the Board may provide that the vesting of any or all
      Awards granted pursuant to this Plan will accelerate upon a transaction
      described in this Section 19. If the Board exercises such discretion with
      respect to Options, such Options will become exercisable in full prior to the
      consummation of such event at such time and on such conditions as the Board
      determines, and if such Options are not exercised prior to the consummation
      of
      the corporate transaction, they shall terminate at such time as determined
      by
      the Board.

    

    19.2 Other
      Treatment of Awards.
      Subject
      to any greater rights granted to Participants under the foregoing provisions
      of
      this Section 19, in the event of the occurrence of any transaction described
      in
      Section 19.1, any outstanding Awards will be treated as provided in the
      applicable agreement or plan of merger, consolidation, dissolution, liquidation,
      or sale of assets.

    

    19.3 Assumption
      of Awards by the Company.
      The
      Company, from time to time, also may substitute or assume outstanding awards
      granted by another company, whether in connection with an acquisition of such
      other company or otherwise, by either: (a) granting an Award under this Plan
      in
      substitution of such other company’s award; or (b) assuming such award as if it
      had been granted under this Plan if the terms of such assumed award could be
      applied to an Award granted under this Plan. Such substitution or assumption
      will be permissible if the holder of the substituted or assumed award would
      have
      been eligible to be granted an Award under this Plan if the other company had
      applied the rules of this Plan to such grant. In the event the Company assumes
      an award granted by another company, the terms and conditions of such award
      will
      remain unchanged (except that the exercise price and the number and nature
      of
      Shares issuable upon exercise of any such option will be adjusted appropriately
      pursuant to Section 424(a) of the Code). In the event the Company elects to
      grant a new Option rather than assuming an existing option, such new Option
      may
      be granted with a similarly adjusted Exercise Price.

    

    20.          ADOPTION
      AND STOCKHOLDER APPROVAL.

    

    This
      Plan
      will become effective on the date on which it is adopted by the Board (the
      “Effective Date”). Upon the Effective Date, the Board may grant Awards pursuant
      to this Plan. The Company intends to seek stockholder approval of the Plan
      within twelve (12) months after the date this Plan is adopted by the Board;
      provided, however, if the Company fails to obtain stockholder approval of the
      Plan during such 12-month period, pursuant to Section 422 of the Code, any
      Option granted as an ISO at any time under the Plan will not qualify as an
      ISO
      within the meaning of the Code and will be deemed to be an NQSO.

    

    21.         
      TERM
      OF PLAN/GOVERNING LAW.

    

    Unless
      earlier terminated as provided herein, this Plan will terminate ten (10) years
      from the date this Plan is adopted by the Board or, if earlier, the date of
      stockholder approval. This Plan and all agreements there under shall be governed
      by and construed in accordance with the laws of the State of
      California.

    

    22.         
      AMENDMENT
      OR TERMINATION OF PLAN.

    

    The
      Board
      may at any time terminate or amend this Plan in any respect, including without
      limitation amendment of any form of Award Agreement or instrument to be executed
      pursuant to this Plan; provided, however, that the Board will not, without
      the
      approval of the stockholders of the Company, amend this Plan in any manner
      that
      requires such stockholder approval.

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

    23.          NONEXCLUSIVITY
      OF THE PLAN.

    

    Neither
      the adoption of this Plan by the Board, the submission of this Plan to the
      stockholders of the Company for approval, nor any provision of this Plan will
      be
      construed as creating any limitations on the power of the Board to adopt such
      additional compensation arrangements as it may deem desirable, including,
      without limitation, the granting of stock options and bonuses otherwise than
      under this Plan, and such arrangements may be either generally applicable or
      applicable only in specific cases.

    

    24.          ACTION
      BY BOARD.

    

    Any
      action permitted or required to be taken by the Board or any decision or
      determination permitted or required to be made by the Board pursuant to this
      Plan shall be taken or made in the Board’s sole and absolute
      discretion.

     

     

    -14-<PAGE>

                                                                     EXHIBIT 4.1

                        UNIVERSAL DETECTION TECHNOLOGY

                           2007 EQUITY INCENTIVE PLAN

<PAGE>

                         UNIVERSAL DETECTION TECHNOLOGY

                           2007 EQUITY INCENTIVE PLAN

         Universal Detection  Technology hereby adopts the 2007 Equity Incentive
Plan, effective as of June 21, 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 June 21, 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 an 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.

         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.

                                       1
<PAGE>

         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 is listed or quoted and the applicable  laws of any foreign
country or jurisdiction where Awards are, or will be, granted under the Plan.

         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.

         2.11  "COMPANY"  means  Universal  Detection  Technology,  a California
corporation, or any successor thereto.

         2.12 "CONSULTANT" means an individual who provides significant services
to the Company and/or an Affiliate, including a Director who is not an Employee.

         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
<PAGE>

         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

                  (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  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.

                                       3
<PAGE>

         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.

         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

                                       4
<PAGE>

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
         twenty-nine million  (29,000,000) Shares. Such shares may be authorized
         but unissued 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.

                                       5
<PAGE>

                  (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.

         5.2  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.

                                       6
<PAGE>

         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.

                  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) 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;

                                       7
<PAGE>

                  (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.

                  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 COMPANY AND SUBSIDIARIES  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.

                                       8
<PAGE>

                                   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.

         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

                                       9
<PAGE>

                  (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:

         "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  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.

                                       10
<PAGE>

         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.

                                   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.

                                       11
<PAGE>

         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.

         11.2 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.

                                       12
<PAGE>

                                   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

                                       13
<PAGE>

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  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

                                       14
<PAGE>

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.

         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.

                                       15
<PAGE>

                                   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.

                                       16

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