EXHIBIT 4.3

                            MICROPAC INDUSTRIES, INC.

                         2001 EMPLOYEE STOCK OPTION PLAN

                                TABLE OF CONTENTS

ARTICLE 1.
  PLAN.........................................................................2
  1.1. Purpose.................................................................2
  1.2. Term of Plan............................................................2
ARTICLE 2.
  DEFINITIONS..................................................................2
  2.1.  Affiliate..............................................................2
  2.2.  Board..................................................................3
  2.3.  Change of Control......................................................3
  2.4.  Change of Control Value................................................4
  2.5.  Code...................................................................4
  2.6.  Company................................................................4
  2.7.  Corporate Change.......................................................4
  2.8.  Disability.............................................................4
  2.9.  Employee...............................................................5
  2.10. Exchange Act...........................................................5
  2.11. Fair Market value......................................................5
  2.12. Incentive Option.......................................................5
  2.13. Mature Shares..........................................................5
  2.14. Non-Employee Director..................................................5
  2.15. Option.................................................................5
  2.16. Option Agreement.......................................................5
  2.17. Optionee...............................................................5
  2.18. Outside Director.......................................................5
  2.19. Plan...................................................................5
  2.20. Retirement.............................................................5
  2.21. Stock..................................................................5
  2.22. Voting Stock...........................................................6

ARTICLE 3.
  ELIGIBILITY..................................................................6

ARTICLE 4.
  GENERAL PROVISIONS RELATING TO OPTIONS.......................................6
  4.1.  Authority to Grant Options.............................................6
  4.2.  Dedicated Shares; Maximum Options......................................6
  4.3.  Non-Transferability....................................................6


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  4.4.  Requirements of Law....................................................6
  4.5.  Recapitalization or Reorganization of the Company......................7

ARTICLE 5.
  OPTIONS......................................................................8
  5.1.  Exercise Price.........................................................8
  5.2.  Duration of Options....................................................8
  5.3.  Amount Exercisable.....................................................8
  5.4.  Exercise of Options....................................................8
  5.5.  Exercise on Termination of Employment..................................9
  5.6.  Substitution Options..................................................10
  5.7.  No Rights as Stockholder..............................................10

ARTICLE 6.
  ADMINISTRATION..............................................................10

ARTICLE 7.
  AMENDMENT OR TERMINATION OF PLAN............................................11

ARTICLE 8.
  MISCELLANEOUS...............................................................11
  8.1.  No Establishment of a Trust Fund......................................11
  8.2.  No Employment or Affiliation Obligation...............................12
  8.3.  Forfeiture............................................................12
  8.4.  Tax Withholding.......................................................12
  8.5.  Written Agreement.....................................................12
  8.6.  Indemnification of the Board..........................................13
  8.7.  Gender................................................................13
  8.8.  Headings..............................................................13
  8.9.  Other Compensation Plans..............................................13
  8.10. Other Options.........................................................13
  8.11. Governing Law.........................................................13


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                                   ARTICLE 1.
                                      PLAN

         1.1.     Purpose. The Plan is intended to advance the best interests of
the Company and its stockholders by providing those persons who have substantial
responsibility  for the  management and growth of the Company and its Affiliates
with  additional  incentives  and an  opportunity  to obtain or  increase  their
proprietary interest in the Company, thereby encouraging them to continue in the
employ of the Company or any of its Affiliates.

         1.2.     Term of Plan. The Plan is effective January 1, 2001, if within
one year of that date it shall have been approved by at least a majority vote of
stockholders  voting in person or by proxy at a duly held stockholders  meeting,
or if the provisions of the corporate  charter,  bylaws or applicable  state law
prescribes a greater  degree of  stockholders,  approval  for this  action,  the
approval by the  stockholders  of that  percentage,  at a  duly-held  meeting of
stockholders:  No Option shall be granted  under the Plan after January 1, 2011.
The Plan  shall  remain in effect  until  all  Options  under the Plan have been
satisfied or expired.


                                   ARTICLE 2.
                                  DEFINITIONS

         The words and phrases  defined in this  Article  shall have the meaning
set out in these  definitions  throughout the Plan,  unless the context in which
any such word or phrase  appears  reasonably  requires a broader,  narrower,  or
different meaning.

         2.1.     "Affiliate"  means any parent  corporation  and any subsidiary
corporation. The term "parent corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if, at the
time of the action,  or transaction,  each  of  the corporations  other than the
Company owns stock  possessing 50 percent or more of the total  combined  voting
power of all classes of stock in one of the other corporations in the chain. The
term "subsidiary  corporation" means any corporation (other than the Company) in
an unbroken chain of corporations  beginning with the Company if, at the time of
the  action  or  transaction,  each of the  corporations  other  than  the  last
corporation  in the unbroken  chain owns stock  possessing 50 percent or more of
the total  combined  voting  power of all  classes  of stock in one of the other
corporations in the chain.

         2.2.     "Board" means the board of directors of the Company.

         2.3.     "Change  of  Control"  means  the  occurrence  of  any  of the
following after the date on which the applicable Option is granted:

         (i)      a report on Schedule 13D or Schedule  14D-1 (or any  successor
schedule,  form or  report)  shall be filed  with the  Securities  and  Exchange
Commission  pursuant  to the  Exchange  Act and that report  discloses  that any
person (within the meaning of Section 13(d) or Section  14(d)(2) of the Exchange
Act),  other  than the  Company  (or one of its  subsidiaries)  or any  employee
benefit  plan  sponsored  by the  Company (or one of its  subsidiaries),  is the
beneficial owner (as that term is defined in Rule 13d-3 or any successor rule or
regulation  promulgated under the Exchange Act),  directly or indirectly,  of 20
percent or more of the outstanding Voting Stock;

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         (ii)     any person  (within  the  meaning of Section  13(d) or Section
14(d)(2)  of  the  Exchange  Act),  other  than  the  Company  (or  one  of  its
subsidiaries)  or any employee  benefit plan sponsored by the Company (or one of
its  subsidiaries),  shall  purchase  securities  pursuant to a tender  offer or
exchange offer to acquire any Voting Stock (or any securities  convertible  into
voting stock) and, immediately after consummation of that purchase,  that person
is the beneficial  owner (as that term is defined in Rule 13d-3 or any successor
rule or regulation  promulgated under the Exchange Act), directly or indirectly,
of 20 percent or more of the outstanding Voting Stock (such person's  beneficial
ownership  to be  determined,  in the case of rights to  acquire  Voting  Stock,
pursuant to  paragraph  (d) of Rule 13d-3 or any  successor  rule or  regulation
promulgated under the Exchange Act);

         (iii)    the consummation of:

                  (x)      a  merger;  consolidation  or  reorganization  of the
Company  with  or  into  any  other  person  if  as a  result  of  such  merger,
consolidation or reorganization, 50 percent or less of the combined voting power
of the then outstanding  securities of such other person  immediately after such
merger, consolidation or reorganization are held in the aggregate by the holders
of  Voting   stock   immediately   prior  to  such  merger,   consolidation   or
reorganization;

                  (y)      any sale, lease, exchange or other transfer of all or
substantially all the assets of the Company and its consolidated subsidiaries to
any other person if as a result of such sale, lease, exchange or other transfer,
50  percent  or  less  of the  combined  voting  power  of the  then-outstanding
securities of such other person immediately after such sale, lease,  exchange or
other  transfer  are held in the  aggregate  by the  Optionees  of Voting  Stock
immediately prior to such sale, lease, exchange or other transfer; or

                  (z)      a transaction  immediately  after the consummation of
which any person (within the meaning of Section 13(d) or Section  14(dX2) of the
Exchange  Act)  would be the  beneficial  owner (as that term is defined in Rule
13d-3 or any successor rule or regulation  promulgated  under the Exchange Act),
directly or indirectly, of more than 50 percent of the outstanding Voting Stock;

         (iv)     the stockholders of the Company approve the dissolution of the
Company; or

         (v)      during any period of 12 consecutive  months,  the  individuals
who at the  beginning  of that  period  constituted  the  Board  shall  cease to
constitute a majority of the Board,  unless the election,  or the nomination for
election by the  Company's  stockholders,  of each director of the Company first
elected  during  such  period was  approved  by a vote of at least a  two-thirds
majority of the directors of the Company then still in office who were directors
of the Company at the beginning of any such period; or

         (vi)     the consummation of any other  transaction which a majority of
the Board determines to constitute a change in control.



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         2.4.     "Change  of Control  Value"  means the  amount  determined  in
clause (i),(ii) or (iii), whichever is applicable, as follows: (i) the per share
price  offered to  stockholders  of the  Company in the  merger,  consolidation,
reorganization,  sale of assets or dissolution  transaction,  (ii) the price per
share  offered to  stockholders  of the Company in any tender  offer or exchange
offer  whereby a Corporate  Change takes place,  or (iii) if a Corporate  Change
occurs other than pursuant to a tender or exchange offer,  the fair market value
per  share  of  the  shares  into  which  such  options  being  surrendered  are
exercisable,  as  determined  by the  Board  as of the  date  determined  by the
Committee to be the date of cancellation  and surrender of such Options.  If the
consideration  offered  to  stockholders  of  the  Company  in  any  transaction
described  above consists of anything other than cash, the Board shall determine
the fair cash  equivalent of the portion of the  consideration  offered which is
other than cash.

         2.5.     "Code" means the Internal Revenue Code of 1986, as amended.

         2.6.     "Company"   means  Micropac   Industries,   Inc.,  a  Delaware
corporation.

         2.7.     "Corporate  Change" means that any of the following shall have
occurred:  (i) the  Company  shall not be the  surviving  entity in any  merger,
consolidation  or other  reorganization  (or survives only as a subsidiary of an
entity other than a previously wholly owned subsidiary of the Company), (ii) the
Company sells,  leases or exchanges or agrees to sell,  lease or exchange all or
substantially  all of its  assets to any other  person or entity  (other  than a
wholly owned  subsidiary of the Company),  (iii) the ,Company is to be dissolved
and liquidated,  (iv) any person or entity,  including a "group" as contemplated
by Section 13(d)(3) of the Exchange Act,  acquires or gains ownership or control
of more than 50 percent of the shares of the Voting Stock, or (v) as a result of
or in connection  with a contested  election of directors,  the persons who were
directors  of the Company  before such  election  shall  cease to  constitute  a
majority of the Board.

         2.8.     "Disability" means a medically determinable mental or physical
impairment  which,  in the  opinion of a  physician  selected by the Board shall
prevent the Optionee from engaging in any substantial gainful activity and which
can be  expected  to result in death or which has lasted or can be  expected  to
last for a continuous  period of not less than 12 months and which:  (a) was not
contracted,  suffered or incurred  while the Optionee was engaged in, or did not
result from having  engaged in, a  felonious  criminal  enterprise;  (b) did not
result from  alcoholism  or addiction to  narcotics;  (c) did not result from an
injury  incurred  while a member of the Armed  Forces of the  United  States for
which the Optionee receives a military  pension;  and (d) did not result from an
intentionally self-inflicted injury.

         2.9.     "Employee"  means a  person  employed  by the  Company  or any
Affiliate.

         2.10.    "Exchange Act" means the  Securities  Exchange Act of 1934, as
amended.

         2.11.    "Fair  Market  Value"  of the  Stock as of any  date  means an
amount as determined by the Board in its sole discretion.

         2.12.    "Incentive Option" means an Option granted under the Plan that
is designated as an "Incentive Option" and satisfies the requirements of section
422 of the Code.



<PAGE>



         2.13.    "Mature  Shares"  means  shares of Stock that the Optionee has
held for at least six months.

         2.14.    "Non-Employee  Director" means a "non-employee   director"  as
defined in Rule 16b-3 of the Exchange Act.

         2.15.    "Option"  means an Incentive  Option granted under the Plan to
purchase shares of Stock.

         2.16.    "Option  Agreement" means the written agreement which sets out
the terms of an option.

         2.17.    "Optionee"  means a person to whom an Option is granted  under
the Plan.

         2.18.    "Outside  Director" means a member of the Board serving on the
Committee  who  qualifies  as an outside  director as defined in  Department  of
Treasury regulations promulgated under section 162(m) of the Code.

         2.19.    "Plan" means the Micropac Industries, Inc. 2001 Employee Stock
Option Plan, asset forth in this document and  as it may be amended from time to
time.

         2.20.    "Retirement" means the termination of an Employee's employment
relationship with the Company and all Affiliates after attaining the age of 65.

         2.21.    "Stock" means the common stock of the  Company, $.10 par value
or, in the event that the  outstanding  shares of common stock are later changed
into or exchanged for a different class of stock or securities of the Company or
another corporation, that other stock or security.

         2.22.    "Voting  Stock" means  shares of capital  stock of the Company
the holders of which are  entitled to vote for the  election of  directors,  but
excluding  shares  entitled to so vote only upon the occurrence of a contingency
unless that contingency shall have occurred.

                                   ARTICLE 3.
                                   ELIGIBILITY

         The  individuals  who shall be  eligible to receive  Incentive  Options
shall be those  employees of the Company or any of its  Affiliates  as the Board
shall determine from time to time and who have  substantial  responsibility  for
the  management  and growth of the Company or any of its Affiliates as the Board
shall  determine  from  time  to  time.  The  Board  may  designate  one or more
individuals who shall not be eligible to receive an Option under the Plan.

<PAGE>

                                   ARTICLE 4.
                   GENERAL A1. PROVISIONS RELATING TO OPTIONS



         4.1.     Authority  to Grant  Options.  The  Board  may  grant to those
Employees of the Company or any of its Affiliates and other eligible  persons as
it shall from time to time  determine,  Options under the tens and conditions of
the Plan Subject only to any  applicable  limitations  set out in the Plan,  the
number of shares  of Stock to be  covered  by any  Option to be  granted  to any
person shall be as determined by the Board.

         4.2.     Dedicated Shares;  Maximum Options. The total number of shares
of Stock with respect to which  Options may be granted under the Plan is 500,000
The shares of Stock may be treasury  shares or authorized  but unissued  shares.
The total number of shares of Stock with respect to which Incentive  Options may
be  granted  under the Plan is  500,000  shares.  The  maximum  number of shares
subject to Options  which may be issued to any person  under the Plan during any
calendar  year is 150,000  shares.  If an  Optionee's  Option is  canceled,  the
canceled option  continues to be counted against the maximum number of shares of
Stock for which  Options  may be granted  to the  Optionee  under the Plan.  The
number of shares  stated in this Section 4.2 shall be subject to  adjustment  in
accordance  with the  provisions  of Section  4.5.  If any  outstanding.  Option
expires or terminates for any reason or any Option is surrendered, the shares of
Stock allocable to the  unexercised  portion of that Option may again be subject
to an Option under the Plan

         4.3.     Non-Transferability.  Except as  specified  in the  applicable
Option agreements or in domestic  relations court orders,  Nonqualified  Options
shall not be  transferable  by the Optionee other than by will or under the laws
of descent and  distribution,  and shall be  exercisable,  during the Optionee's
lifetime,  only by him.  In' the  discretion  of the  Committee,  any attempt to
transfer  an Option  other than  under the terms of the Plan and the  applicable
Option Agreement may terminate the Option.

         4.4.     Requirements of Law. The Company shall not be required to sell
or issue any Stock under any option if issuing  that Stock would  constitute  or
result in a violation  by the  Optionee or the Company of any  provision  of any
law,  statute,  or regulation of my  governmental  authority.  Specifically,  in
connection   with  any  applicable   statute  or  regulation   relating  to  the
registration of securities,  the Company shall register any Stock covered by the
Plan  pursuant to  applicable  securities  laws of any country or any  political
subdivision.

         4.5.     Recapitalization or Reorganization of the Company.

         (a)      No  Limitations  on Company's  Rights to Effect  Changes.  The
existence of outstanding  Options shall not affect in any way the right or power
of the Company or its  stockholders to make or authorize any or all adjustments,
recapitalizations,  reorganizations  or other changes in the  Company's  capital
structure or its business, or any merger or consolidation of the Company, or any
issue of bonds,  debentures,  preferred  or prior  preference  stock ahead of or
affecting the Stock or its rights,  or the  dissolution  or  liquidation  of the
Company,  or any sale or transfer of all or any part of its assets or  business,
or any other  corporate  act or  proceeding,  whether of a similar  character or
otherwise

<PAGE>


         (b)      Increase or Reduction of Outstanding Shares. If a stock split,
reverse  stock  split,   stock  dividend,   combination,   recapitalization   or
reclassification  of the Stock,  or any other increase or decrease in the number
of shares of the Stock outstanding, is effected without receipt of consideration
by the  Company,  then (a) the number,  class,  and per share price of shares of
Stock  subject to  outstanding  Options  under the Plan  shall be  appropriately
adjusted in such a manner as to entitle an Optionee to receive upon  exercise of
an Option,  for the same aggregate  cash  consideration,  the  equivalent  total
number and class of shares he would have received had he exercised his Option in
full immediately prior to the event requiring the adjustment; and (b) the number
and class of shares of Stock then  reserved to be issued under the Plan shall be
adjusted by substituting  for the total number and class of shares of Stock then
reserved, that number and class of shares of Stock that would have been received
by the owner of an equal number of outstanding  shares of each class of Stock as
the  result  of the  event  requiring  the  adjustment.  The  conversion  of any
convertible  securities of the Company shall not be deemed to have been effected
without receipt of consideration  by the Company.  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 of Stock subject to an Option.


         (c)      Sale or merger of the  Company  Where the  Company  is Not the
Survivor; Dissolution or Liquidation of the Company. In the event of a Corporate
Change, no later than (x) ten days after the approval by the stockholders of the
Company of the  Corporate  Change or (y) thirty days after the  occurrence  of a
Corporate  Change for which no  approval  by the  stockholder  of the Company is
required,  the Committee,  acting in -its sole discretion without the consent or
approval  of any  Optionee,  shall  act to effect  one or more of the  following
alternatives, which may vary among individual Optionees and which may vary among
Options  held by any  individual  optionee:  (1)  accelerate  the  time at which
Options then  outstanding may be exercised so that such Options may be exercised
in full for a limited  period of time on or before a specified  date  (before or
after the Corporate  Change) fixed by the Committee,  after which specified date
all unexercised Options and all rights of Optionees  thereunder shall terminate,
(2) require the mandatory surrender to the Company by selected Optionees of some
or all of the outstanding Options held by such Optionees(irrespective of whether
such  options are then  exercisable  under the  provisions  of the Plan) as of a
date,  before or after such Corporate  Change,  specified by the  Committee,  in
which event the Committee  shall  thereupon  cancel such Options and the Company
shall pay to each  Optionee as amount of cash per share equal to the excess,  if
any, of the Change of Control  Value of the shares  subject to such Options over
the  exercise  price(s)  under  such  options  for  such  shares,  (3)  make any
adjustments to Options then outstanding as the Committee deems  appropriate,  or
(4) provide that the number and class of shares of Stock  covered by an Optionee
theretofore  granted  shall be adjusted so that such Optionee  shall  thereafter
cover the number and class of shares of stock or other  securities  or  property
(including,  without  limitation,  cash) to which the  Optionee  would have been
entitled pursuant to the terms of the agreement of merger, consolidation or sale
of assets and dissolution if, immediately prior to such merger, consolidation or
sale of assets and  dissolution,  the  Optionee had been the holder of record of
the number of shares of Stock then covered by such Option.


<PAGE>

         (d)      Merger of the Company Where the Company is the survivor. After

a merger of one or more  corporations  into the Company or after a consolidation
of the Company and one or more  corporations  in which the Company  shall be the
surviving  corporation,  each  Optionee  shall be  entitled  to have his  Option
appropriately adjusted based on the manner in which the Stock was adjusted under
the terms of the agreement of merger or consolidation.

                                   ARTICLE 5.
                                     OPTIONS

         5.1.     Exercise  Price.  The price at which  Stock  may be  purchased
under an Incentive  Option shall not be less than 100 percent of the Fair Market
Value  of the  shares  of  Stock  on the date  the  Option  is  granted.  In its
discretion,  the  Committee  may provide that the price at which shares of Stock
may be purchased  under an Option shall be more than the minimum price specified
above.

         5.2.     Duration of Options.  No option shall be exercisable after the
expiration of ten years from the date the Option is granted..

         5.3.     Amount Exercisable.  Each option may be exercised at the time,
in the manner and subject to the  conditions  the Board  specifies in the option
Agreement  in its sole  discretion-  If specified  in the option  Agreement,  an
Option will be exercisable in full upon the occurrence of a Change of Control.

         5.4.     Exercise of Options.  Each Option  shall be  exercised  by the
delivery of written  notice to the Board setting  forth the number  of'shares of
Stock with respect to which the option is to be exercised,  together  with:  (a)
cash,  certified check,  bank draft, or postal or express money order payable to
the order of the Company  for an amount  equal to the  exercise  price under the
option, (b) Mature Shares with a Fair Market Value on the date of exercise equal
to the  exercise  price  under the  Option,  (c) an  election to make a cashless
exercise  through a  registered  broker-dealer  (if  approved  in advance by the
Board),  and/or (d) any other form of payment  which is acceptable to the Board,
and  specifying the address to which the  certificates  for the shares are to be
mailed.  As promptly as practicable  after receipt of written  notification  and
payment,  the Company shall deliver to the Optionee  certificates for the number
of shares  with  respect to which the Option has been  exercised,  issued in the
Optionce's  name.  If Mature  shares are used for payment by the  Optionee,  the
aggregate  Fair Market Value of the shares of Stock tendered must be equal to or
less than the  aggregate  exercise  price of the  shares  being  purchased  upon
exercise  of the  Option,  and any  difference  must be paid by cash,  certified
check,  bank draft, or postal or express money order payable to the order of the
Company. Delivery of the shares shall be deemed effected for all purposes when a
stock transfer agent of the Company shall have deposited the certificates in the
United States mail,  addressed to the Optionee,  at the address specified by the
Optionee.

         Whenever an Option is exercised by  exchanging  mature  Shares owned by
the Optionee, the Optionee shall deliver to the Company certificates  registered
in the name of the Optionee representing a number of shares of Stock legally and
beneficially owned by the Optionee,  free of all liens, claims, and encumbrances
of every kind,  accompanied by stock powers duly endorsed in blank by the record
holder of the shares represented by the certificates (with signature guaranteed



<PAGE>


by a commercial bank or trust company or by a brokerage firm having a membership
on a registered national stock exchange).  The delivery of certificates upon the
exercise of options is subject to the condition  that the person  exercising the
Option  provide the Company with the  information  the Company might  reasonably
request  pertaining to exercise,  sale or other  disposition.  The Committee may
permit an Optionee to elect to pay the exercise price upon exercise of an Option
by  authorizing a  third-party  broker to sell all or a portion of the shares of
Stock acquired upon exercise of the Option and remit to the Company a sufficient
portion of the sale proceeds to pay the exercise  price and any  applicable  tax
withholding resulting from such exercise.

         An Option may not be exercised for a fraction of a share of Stock.

                  5.5.     Exercise on Termination of Employment.

         (a)      Termination   of   Employment   Other  Than  As  a  Result  of
Retirement,  Death or Disability.  Unless it is expressly  provided otherwise in
the Option  Agreement,  an Option shall terminate one day less than three months
after the  severance  of  employment  or  affiliation  relationship  between the
Optionee  and the Company  and all  Affiliates  for any reason,  with or without
cause, other than Retirement,  death or Disability.  Whether authorized leave of
absence or absence on military or government service shall constitute  severance
of the employment of an Employee shall be determined by the Board at that time.

         (b)      Retirement.  Unless it is expressly  provided otherwise in the
option Agreement, an Option shall terminate one day less than one year after the
Retirement of the Optionee.

         (c)      Death.  After  the  death  of  the  Optionee,  his  executors,
administrators  or any persons to whom his Option may be  transferred by will or
by the laws of descent and distribution  shall have the right, at any time prior
to the earlier of the  Option's  expiration  or one day less than one year after
the  death of the  Optionee,  to  exercise  it,  to the  extent  to which he was
entitled to exercise it  immediately  prior to his death  unless it is expressly
provided otherwise in the Option Agreement.

         (d)      Disability.  If,  before  the  expiration  of an  Option,  the
optionee shall be severed from the employ of or affiliation with the Company and
all Affiliates due to Disability,  the option shall  terminate on the earlier of
the Optionee's  expiration  date or one day less than one year after the date of
his severance due to Disability,  unless it is expressly  provided  otherwise in
the option  Agreement.  In the event that the Optionee shall be severed from the
employ of or affiliation with the Company and all Affiliates for Disability, the
optionee shall have the right prior to the termination of the Option to exercise
the Option,  to the extent to which he was  entitled to exercise it  immediately
prior to his severance of employment or affiliation due to Disability, unless it
is expressly provided otherwise in the Option Agreement.

         (e)      Employment With an Entity in a Section 424(a) Transaction.  In
determining the employment relationship between the Company and/or any Affiliate
and an Employee,  employment by a corporation issuing or assuming a stock option
in a transaction to which section 424(a) of the Code applies shall be considered
employment by the Company or an Affiliate.



<PAGE>


         5.6.     Substitution  Options.  Options may be granted  under the Plan
from time to time in  substitution  for stock options held by employees of other
corporations who are about to become employees of or affiliated with the Company
or any  Affiliate as the result of a merger or  consolidation  of the  employing
corporation with the Company or any Affiliate, or the acquisition by the Company
or any Affiliate of the assets of the employing corporation,  or the acquisition
by the Company or any  Affiliate of stock of the  employing  corporation  as the
result of which it becomes an Affiliate of the Company. The terms and conditions
of the substitute Options granted may vary from the terns and conditions set out
in the  Plan to the  extent  the  Committee,  at the  time of  grant,  may  deem
appropriate  to conform,  in whole or in part,  to the  provisions  of the stock
options in substitution for which they are granted.

         5.7.     No Rights as Stockholder. No Optionee shall have any rights as
a stockholder with respect to Stock covered by his option until the date a stock
certificate is issued for the Stock.

                                   ARTICLE 6.
                                 ADMINISTRATION

         The  Plan  shall  be  administered  by  the  Board.  All  questions  of
interpretation  and  application of the Plan and Options shall be subject to the
determination  of the  Board.  A  majority  of the  members  of the Board  shall
constitute a quorum. All determinations of the Board shall be made by a majority
of its members. Any decision or determination reduced to writing and signed by a
majority  of the  members  shall be as  effective  as if it had  been  made by a
majority  vote at a  meeting  properly  called  and  head.  The  Plan  shall  be
administered  in such a manner as to permit the Options which are  designated to
be  Incentive  Options to qualify as  Incentive  Options.  In  carrying  out its
authority  under the Plan,  the Board  shall have full and final  authority  and
discretion,  including  but not  limited  to the  following  rights,  powers and
authorities, to:

         (a)      determine  the  persons to whom and the time or times at which
Options will be granted,

         (b)      determine the number of shares and the exercise price of Stock
covered in each option, subject to the terms of the Plan,

         (c)      determine the terms, provisions and conditions of each option,
which need not be identical,

         (d)      accelerate  the time at which any  outstanding  Option  may be
exercised,

         (e)      define  the  effect,  if any,  on an  Optionee  of the  death,
disability, retirement, or termination of employment or affiliation relationship
between the Optionee and the Company and Affiliates,

         (f)      prescribe, amend and rescind rules and regulations relating to
administration of the Plan, and


<PAGE>


         (g)      make all  other  determinations  and take  all  other  actions
deemed necessary, appropriate, or advisable for the proper administration of the
Plan.

         The actions of the Committee in exercising  all of the rights,  powers,
and authorities set out in this Article and all other Articles of the Plan, when
performed in good faith and in its sole judgment, shall be final, conclusive and
binding on all parries.

                                   ARTICLE 7.
                        AMENDMENT OR TERMINATION OF PLAN

         The Board may amend,  terminate or suspend the Plan at any time, in its
sole and absolute discretion;  provided, however, that to the extent required to
maintain the status of airy  Incentive  Option under the Code, no amendment that
would:  (a) change the  aggregate  number of shares of Stock which may be issued
under Incentive  Options,  (b) change the class of employees eligible to receive
Incentive  Options,  or (c) decrease the exercise  price for  Incentive  Options
below the Fair  Market  Value of the Stock at the time it is  granted,  shall be
made  without  the  approval  of  the  Company's  stockholders.  Subject to  the
preceding  sentence,  the Board shall have the  power to make any changes in the
Plan and in the regulations  and  administrative  provisions  under it or in any
outstanding Incentive Option as in the opinion of counsel for the Company may be
necessary  or  appropriate  from time to time to  enable  any  Incentive  Option
granted  under the Plan to continue to qualify as an  incentive  stock option or
such  other  stock  option as may be  defined  under  the Code so as to  receive
preferential federal income tax treatment.

                                   ARTICLE 8.
                                  MISCELLANEOUS

         8.1.     No  Establishment  of a Trust Fund.  No property  shall be set
aside nor shall a trust fund of any kind be  established to secure the rights of
any Optionee under the Plan.  All Optionees  shall at all times rely solely upon
the general  credit of the Company for the payment of any benefit  which becomes
payable under the Plan.

         8.2.     No Employment or Affiliation  Obligation.  The granting of any
option shall not  constitute an  employment  contract,  express or implied,  nor
impose upon the Company or any Affiliate any obligation to employ or continue to
employ,  or utilize the services of, any  optionee.  The right of the Company or
any Affiliate to terminate the  employment of any person shall not be diminished
or affected by reason of the fact that an option has been granted to him.

         8.3.     Forfeiture.  Notwithstanding any other provisions of the Plan,
if the Board finds by a majority vote after full consideration of the facts that
the Optionee,  before or after  termination  of his  employment  or  affiliation
relationship  with the Company or an Affiliate  for any reason (a)  committed or
engaged  in  fraud,  embezzlement,  theft,  commission  of a  felony,  or proven
dishonesty in the course of his employment by the Company or an Affiliate, which
conduct  damaged the Company or  Affiliate,  or disclosed  trade  secrets of the
Company or an  Affiliate,  or (b)  participated,  engaged in or had a  material,
financial  or  other  interest,  whether  as  an  employee,  officer,  director,
consultant,  contractor,  stockholder,  owner,  or otherwise,  in any commercial
endeavor in the United.


<PAGE>

States  which is  competitive  with the  business of the Company or an Affiliate
without the written  consent of the Company or  Affiliate,  the  Optionee  shall
forfeit all outstanding  options,  and including all exercised Options and other
situations  pursuant  to  which  the  Company  has  not  yet  delivered  a stock
certificate.  Clause  (b) shall not be  deemed to have been  violated  solely by
reason of the Optionee's  ownership of stock or securities of any publicly owned
corporation,  if that  ownership  does riot result in  effective  control of the
corporation.

         The decision of the Board as to the cause of the Optionee's  discharge,
the damage done to the Company or an Affiliate, and the extent of the Optionee's
competitive  activity shall be final. No decision of the Board,  however,  shall
affect the  finality  of the  discharge  of the  Optionee  by the  Company or an
Affiliate in any manner.

         8.4.     Tax  Withholding.  The  Company  or  any  Affiliate  shall  be
entitled to deduct from other  compensation  payable to each  Optionee  any sums
required by federal,  state, or local tax law to be withheld with respect to the
grant or exercise of an Option, or lapse of restrictions on Restricted Stock. In
the alternative, the Company may require the Optionee to pay such sums for taxes
directly to the  Company or any  Affiliate  in cash or by check  within ten days
after the date of exercise or lapse of  restrictions.  In the  discretion of the
Committee, an Optionee may use shares of Stock received by the Optionee upon the
exercise of an Option to satisfy any required tax withholding obligations of the
Company or an Affiliate that result from the exercise. The Company shall have no
obligation  upon  exercise of any Option until the Company or an  Affiliate  has
received  payment  sufficient  to cover  all tax  withholding  amounts  due with
respect  to that  exercise.  Neither  the  Company  nor any  Affiliate  shall be
obligated to advise an Optionee of the  existence of the tax or the amount which
it will be required to withhold.

         8.5.     Written Agreement.  Each Option shall be embodied in a written
agreement  which  shall be subject to the terms and  conditions  of the Plan and
shall be signed by the  Optionee  and by a member of the  Committee on behalf of
the Board and the Company or an executive officer of the Company, other than the
Optionee,  on  behalf  of the  Company.  The  agreement  may  contain  any other
provisions  that the Board in its discretion  shall deem advisable which are not
inconsistent with the terms of the Plan.

         8.6.     Indemnification  of the Board.  With respect to administration
of the Plan,  the Company shall  indemnify each present and future member of the
Board against,  and each member of the Board shall be entitled  without  further
act on his part to  indemnity  from the Company  for,  all  expenses  (including
attorney's fees, the amount of judgments and the amount of approved  settlements
made with a view to the  curtailment of costs of litigation,  other than amounts
paid to the Company  itself)  reasonably  incurred by him in connection  with or
arising out of any action,  suit,  or  proceeding in which he may be involved by
reason of his being or having  been a member  of the  Board,  whether  or not he
continues  to be a member of the Board at the time of  incurring  the  expenses,
including, without limitation,  matters as to which he shall be finally adjudged
in any action,  suit or proceeding to have been found to have been  negligent in
the  performance of his duty as a member of the Board.  However,  this indemnity
shall not include any expenses incurred by any member of the Board in respect of
matters  as to which  he  shall  be  finally  adjudged  in any  action,  suit or
proceeding to have been guilty of gross negligence or willful  misconduct in the


<PAGE>


performance  of his duty as a member  of the  Board.  In  addition,  no right of
indemnification  under the Plan  shall be  available  to or  enforceable  by any
member of the Board unless, within 60 days after institution of any action, suit
or proceeding, he shall have offered the Company, in writing, the opportunity to
handle and defend same at its own expense.  This right of indemnification  shall
inure to the benefit of the heirs, executors ox administrators of each member of
the Board and shall be in addition to all other  rights to which a member of the
Board may be entitled as a matter of law, contract, or otherwise.

         8.7.     Gender. If the context requires, words of one gender when used
in the Plan shall  include  the other and words used in the  singular  or plural
shall include the other. .

         8.8.     Headings.  Headings of Articles  and Sections are included for
convenience of reference  only and do not constitute  part of the Plan and shall
not be used in construing the terms of the Plan.

         8.9.     Other  Compensation  Plans. The adoption of the Plan shall not
affect any other stock option,  incentive or other compensation or benefit plans
in effect for the  Company or any  Affiliate,  nor shall the Plan  preclude  the
Company from establishing any other forms of incentive or other compensation for
employees of the Company or any Affiliate.

         8.10.    Other  Options.  The grant of an Option  shall not confer upon
the Optionee the right to receive any future Options under the Plan,  whether or
not  Options may be granted to  similarly  situated  Optionees,  or the right to
receive future Options upon the same terms or conditions as previously granted.

         8.11.    Governing  Law. The provisions of the Plan shall be construed,
administered, and governed under the laws of the State of Texas.