Document:

EXHIBIT 4.2

                                    BYLAWS OF

                            MICROPAC INDUSTRIES, INC.

                                    ARTICLE I

                                     OFFICES

         1.1  Registered  Office.  The registered  office of the  corporation is
located at 905 Fast Walnut, Garland, Texas 75040.

         1.2  Registered  Agent.  The  name  of  the  registered  agent  of  the
corporation at such address is James K. Murphey.

         1.3 Other Offices.  The corporation may also have offices at such other
places, within or without the State of Texas, where the corporation is qualified
to do business,  as the Board of Directors may from time to time  designate,  or
business of the corporation may require.

                                   ARTICLE II

                             SHAREHOLDERS' MEETINGS

         2.1 Place-Of  Meeting.  Meetings of  Shareholders  shall be held at any
place within or without the State of Texas  designated by the Board of Directors
pursuant to authority hereinafter granted to the Board, or by written consent of
all persons entitled to vote thereat. Any meeting is valid wherever held if held
by the written consent of all the persons entitled to vote thereat, given either
before or after the meeting and filed with the Secretary of the corporation.

         2.2 Time of Annual Meeting-Business  Transacted.  The annual meeting of
Shareholders  shall  be held on or  before  a date  designated  by the  Board of
Directors  after  January 1 of each year and prior to April 30 of such year.  At
such meeting Directors shall be elected and any other business may be transacted
which is within the powers of the shareholders.

         2.3 Notice of Meeting.  Notice of all meetings of Shareholders shall be
given in writing to  Shareholders  entitled to vote by the  President,  any Vice
President,  Secretary or Assistant Secretary.  The notice shall be given to each
Shareholder,  either personally or by prepaid mail, addressed to the Shareholder
at his address appearing on the transfer books of the corporation.

         2.4 Time and  Notice.  Notice of any meeting of  Shareholders  shall be
sent to each  Shareholder  entitled thereto not less than ten (10) days nor more
than fifty (50) days before the meeting, except in the case of a meeting for the
purpose of  approving  a merger or  consolidation  agreement,  in which case the
notice  must be given not less than  twenty  (20) days  prior to the date of the
meeting.

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         2.5  Contents of Notice.  Notice of any meeting of  Shareholders  shall
specify the place,  date and hour of the meeting.  The notice shall also specify
the place,  date and hour of the  meeting.  The notice  shall also  specify  the
purpose of the meeting if it is a special meeting,  or if its purpose, or one of
its  purposes,  will be  to  consider  a proposed  amendment  of the Articles of
Incorporation,  to consider a proposed  merger of  consolidation,  to consider a
proposed reduction of stated capital without amendment,  to consider a voluntary
dissolution  or the  revocation  of a  voluntary  dissolution  by the act of the
corporation, or to consider a proposed disposition of all, or substantially all,
of the assets of the corporation outside of the ordinary course of business.

         2.6  Notice of  Adjourned  Meeting.  When a  Shareholders'  meeting  is
adjourned for thirty (30) days or more, notice of the adjourned meeting shall be
given as in the case of an original  meeting.  When a meeting is  adjourned  for
less than thirty (30) days,  it is not  necessary to give any notice of the time
and place of the adjourned meeting or of the business to be transacted  thereat,
other than by announcement at the meeting at which the adjournment is taken.

         2.7 Call of Special Meetings. Upon request in writing to the President,
Vice-President,  or  Secretary,  sent   by  registered  mail or delivered to the
officer in person,  by any persons  entitled to call a meeting of  Shareholders,
the  forthwith  shall cause notice to be given to the  Shareholders  entitled to
vote, that a meeting will be held at a time fixed by the officer,  not less than
ten (10) days  after the  receipt  of the  request.  If the  notice is not given
within seven (7) days after the date of delivery,  or the date of mailing of the
request, the person calling the meeting may fix the time of the meeting and give
the notice in the manner  provided in these  Bylaws.  Nothing  contained in this
section  shall be construed as limiting,  fixing,  or affecting the time or date
when a meeting of  Shareholders  called by action  of the Board of Directors may
be held.

         2.8  Persons Entitled to Call Special Meetings. Special meetings of the
Shareholders,  for any purpose  whatsoever,  may be called at any time by any of
the following:  (1) the President;  (2) the Board of Directors;  (3) one or more
shareholders  holding not less than one tenth of all the shares entitled to vote
at meetings.

         2.9 Quorum of  Shareholders.  The presence in person or by proxy of the
persons  entitled to vote  fifty-one  percent  (51%) of the voting shares of any
meeting constitutes a quorum for the transaction of business.

         2.10 Adjournment for Lack or Loss of Quorum. In the absence of a quorum
or the withdrawal of enough  Shareholders to leave less than quorum, any meeting
of Shareholders  may be adjourned from time to time by the vote of a majority of
the shares,  the holders of which are either present in person or represented by
proxy thereat, but no other business may be transacted.

         2.11  Closing   Transfer   Books.   For  the  purpose  of   determining
Shareholders  entitled to notice of or to vote at any meeting of Shareholders or
any adjournment  thereof, or entitled to receive payment of any dividend,  or in
order to make a determination of Shareholders for any other proper purpose,  the
Board of Directors may provide that the share transfer books shall be closed for
a stated period not to exceed in any case fifty (50) days. If the transfer books
shall be closed for the purpose of determining  Shareholders  entitled to notice
of or to vote at a meeting of  Shareholders,  such books  shall be closed for at
least ten (10) days immediately preceding such meeting.

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         2.12 Record Date for Determination of Shareholders.  In lieu of closing
the share  transfer  books,  the Board of Directors may fix in advance a date as
the record date for any such  determination  of  shareholders,  such date in any
case  to be no  more  than  fifty  (50)  days  and,  in  case  of a  meeting  of
Shareholders,  not  less  than  ten (10)  days  prior  to the date on which  the
particular action requiring such determination of Shareholders is to be taken.

         2.13 Date of Notice or Resolution for Determination of Shareholders. If
the share  transfer  books are not  closed  and no record  date is fixed for the
determination  of Shareholders  entitled to notice of or to vote at a meeting of
Shareholders,  the date on which  notice of the meeting is mailed or the date on
which the  resolution  of the Board of  Directors  declaring  such  dividend  is
adopted,  as the case may be,  is the  record  date  for such  determination  of
Shareholders.

         2.14 Adjourned Meeting. When any determination of Shareholders entitled
to vote at any  meeting  of  Shareholders  has  been  made as  provided  in this
Article,  such determination shall apply to any adjournment thereof except where
the  determination  has been made through  closing of the transfer books and the
stated period of closing has expired, in which case the Board of Directors shall
make a new determination as hereinbefore provided.

         2.15  Voting  List.  At least  ten (10) days  before  each  meeting  of
shareholders,  the  officer or agent  having  charge of a  complete  list of the
Shareholders  entitled  to vote  at such  meeting  or any  adjournment  thereof,
arranged in alphabetical order, with the address of and number of shares held by
each, which shall, for a period of ten (10) days prior to such meeting, shall be
kept on file at the registered office of the corporation and shall be subject to
inspection of any shareholder during the whole time of the meeting. The original
share  transfer  books  shall  be  prima  facie  evidence  as  to  who  are  the
Shareholders  entitled to examine such list. However,  failure to prepare and to
make  available  such list in the  manner  provided  above  shall not affect the
validity of any action taken at the meeting.

         2.16 Votes per Share.  Each  outstanding  share,  regardless  of class,
shall be entitled to one vote on each matter submitted to a vote at a meeting of
the  Shareholders,  except to the extent that the voting rights of shares of any
class or classes are limited by the Articles of Incorporation.

         2.17 Cumulative Voting. Directors shall be elected by a plurality vote.
Cumulative voting shall not be permitted.

         2.18 Voting by Voice and Ballot. Elections for Directors need not be by
ballot  unless a  Shareholder  demands  election by ballot at the  election  and
before the voting begins.

         2.19  Proxies.  A  Shareholder  may vote  either  in person or by proxy
executed in writing by a shareholder or by his  authorized  attorney in fact. No
proxy  shall be valid after  eleven  (11) months from the date of its  execution
unless  otherwise  provided in the proxy.  Each proxy shall be revocable  unless
expressly provided therein to be irrevocable.

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         2.20 Waiver of Notice.  Any notice  required by law or these Bylaws may
be waived by the  execution  by the person  entitled  to the notice of a written
waiver of such  notice,  which may be signed  before or after the time stated in
the notice.

         2.21 Action Without Meeting.  Any action which,  under any provision of
the  Delaware  Business  Corporation  Act,  may be  taken  at a  meeting  of the
Shareholders,  may be taken without a meeting if authorized by a writing  signed
by all of the persons who would be entitled to vote on such action at a meeting,
and filed with the Secretary of the corporation.  Any such signed consent,  or a
signed copy thereof, shall be placed in the minute book of the corporation.

         2.22 Conduct of Meetings.  At every  meeting of the  Shareholders,  the
President,  or in his absence, the Vice-President,  designated by the President,
or if! the absence of any such designation,  a chairman (who shall be one of the
Vice-Presidents,  if any is  present)  chosen by  majority  in  interest  of the
Shareholders of the corporation  present or by proxy and entitled to vote, shall
act as  Chairman.  The  Secretary  of the  corporation,  or in  his  absence,  M
Assistant Secretary, shall act as Secretary of all meetings of the Shareholders.
In the absence at such  meeting of the  Secretary or  Assistant  Secretary,  the
Chairman may appoint another person to act as Secretary of the meeting.

                                   ARTICLE III

                                    DIRECTORS

         3.1 Directors  Defined.  "Directors" when used in relation to any power
or duty requiring collective action, means "Board of Directors".

         3.2  Powers.  The  business  and  affairs  of the  corporation  and all
corporate  powers  shall be  exercised  by or under  authority  of the  Board of
Directors,  subject to limitation  imposed by the Delaware Business  Corporation
Act, the Articles of Incorporation,  or these Bylaws as to action which requires
authorization or approval by the Shareholders.

         3.3 Number of  Directors.  The number of Directors of this  corporation
shall be  established  from time to time by the Board of Directors not to exceed
nine (9)  directors.  The number of Directors may be increased or decreased from
time to time by the Board of Directors, but no decrease shall have the effect of
shortening the terms of any incumbent Director.

         3.4 Term of Office.  Directors  shall hold office until the next annual
meeting of Shareholders and until their successors are elected and qualified.

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         3.5 Vacant,.  Vacancies  in the Board of  Directors  shall exist in the
case of the happening of any of the following events: (a) the death, resignation
or  removal  of any  Directors;  (b)  the  authorized  number  of  Directors  is
increased;  or (c) at an annual,  regular, or special meeting of Shareholders at
which  arty  Director  is  elected,  the  shareholders  fail to  elect  the full
authorized number of Directors to be voted for at that meeting.

         3.6  Declaration of Vacancy.  The Board of Directors may declare vacant
the office of a Director in either of the following cases: (a) if he is adjudged
incompetent by an order of Court,  or finally  convicted of a felony;  or (b) if
within  sixty (60) days  after  notice of his  election,  he does not accept the
office either in writing or by attending a meeting of the Board of Directors.

         3.7  Filling  Vacancies  by  Directors.  Vacancies  may be  filled by a
majority of the  remaining  Directors,  though less than a quorum,  or by a sole
remaining  Director.  Each  Director  so  elected  shall hold  office  until his
successor  is  elected  at  any  annual,  regular  or  special  meeting  of  the
shareholders.

         3.8 Filling  Vacancies by Shareholders - Reduction of Authorized Number
of  Directors.  The  Shareholders  may elect a Director  at any time to fill any
vacancy  not filled by the  Directors.  If the Board of  Directors  accepts  the
resignation  of a Director  tendered to take effect at a future time,  the Board
failing to fill the vacancy  within ten (10) days of the  effective  date of the
resignation,  the Shareholders may elect a successor to take office. A reduction
of the authorized  number of Directors does not remove any Director prior to the
expiration of his term of office.

         3.9  Removal  of  Directors.  The  entire  Board  of  Directors  or any
individual Director may be removed from office by a vote of Shareholders holding
sixty-six and two thirds percent (66 2/3 %) of the  outstanding  shares entitled
to vote at an election of Directors. If any or all Directors are so removed, new
Directors may be elected at the same meeting.

         3.10 Place of  Meetings.  Regular  meetings  of the Board of  Directors
shall be held at any  place  which  has  been  designated  from  time to time by
resolution  of the Board or by written  consent of all members of the Board.  In
the  absence  of  such  designation,  regular  meetings  shall  be  held  at the
Registered Office of the corporation.  Special meetings of the Board may be held
either at a place so  designated  or at the  Registered  office.  Any regular or
special  meeting is valid,  wherever  held,  if held on  written  consent of all
members of the Board given either before or after the meeting and filed with the
Secretary of the Corporation.

         3.11  Regular and Special  Meetings.  Regular  meetings of the Board of
Directors  shall be held at such  time and  place as shall  from time to time be
determined  by the Board.  Special  meetings of the Board of Directors  shall be
called by the  President  or if he is absent or is unable or refuses to act,  by
the Vice-President or by any two Directors.

         3.12 Notice of  Meetings.  Written  notice of the time and place of the
regular  or  special  meetings  of the  Board of  Directors  shall be  delivered
personally to each  Director,  or sent to each Director by mail or by other form
of written  communication  at least  seven (7) days before the  meeting.  If the
address  of a  Director  is  not  shown  on  the  records  and  is  not  readily
ascertainable,  notice  shall be  addressed to him at the city of place in which
the meetings of the Directors are regularly  held.  Notice of the time and place
of holding an  adjourned  meeting  need not be given to absent  Directors if the
time and place are fixed at the meeting adjourned.

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         3.13 Call of Regular  Meetings.  All  regular  meetings of the Board of
Directors of this  corporation  shall be called by the  President,  or, if he is
absent or is unable  or  refuses  to act,  by any  Vice-President  or by any two
Directors.

         3.14  Validation  of  Meeting   Defectively  Called  or  Noticed.   The
transactions  of any  meeting  of the Board of  Directors,  however  called  and
noticed or  wherever  held,  are as valid as though  had at a meeting  duly held
after regular call and notice, if a quorum is present,  and if, either before or
after the meeting,  each of Directors  not present  signs a waiver of notice,  a
consent to holding the meeting, or an approval of the minutes thereof.  All such
waivers, consents, or approval shall be filed with the corporate records or made
a part of the  minutes of the  meeting.  Attendance  by a Director  at a meeting
shall  constitute a waiver of notice of the meeting,  unless the express purpose
for such attendance is to present the objection that the meeting is not lawfully
called or convened.

         3.15  Quorum.  A  majority  of  the  authorized   number  of  Directors
constitutes a quorum of the Board for the transaction of business.

         3.16 Majority Action.  Every act or decision done or made by a majority
of the  Directors  present at any meeting duly held at which a quorum is present
is the act of the Board of  Directors,  unless an action of a greater  number is
required by the Articles of Incorporation of these Bylaws.  Each Director who is
present at a meeting will be deemed to have assented to any action taken at such
meeting  unless his  dissent  to the  action is  entered  in the  minutes of the
meeting,  or unless he shall file his written dissent thereto with the Secretary
of the meeting or shall forward such dissent by registered mail to the Secretary
of the corporation immediately after such meeting.

         3.17 Action by  Consent of Board Without  Meeting.  Any action required
or permitted to be taken by the Board of  Directors  under any  provision of the
Delaware  Business  Corporation  shall  individually or collectively  consent in
writing to such action. Such written consent or consents shall be filed with the
minutes of the  proceedings of the Board.  Such action by written  consent shall
have the same  force  and  effect as a  unanimous  vote of such  Directors.  Any
certificate or other document filed under any provision of the Delaware Business
Corporation Act which related to action so taken shall state that the action was
taken by unanimous  written consent of the Board of Directors  without a meeting
and that these Bylaws  authorize the  Directors to so act,  arid such  statement
shall be prima facie evidence of such authority.

         3.18  Adjournment.  In  the  absence  of a  quorum  a  majority  of the
Directors  present  may  adjourn  from time to time until the time fixed for the
next regular meeting of the Board.

         3.19 Conduct of Meetings.  At every  meeting of the Board of Directors,
the Chairman of the Board of Directors,  if there shall be such an officer,  and
if not, the President,  or in his absence the Vice-President  designated by him,
or in the absence of such  designation,  a chairman  chosen by a majority of the
Directors present,  shall preside. The Secretary of the corporation shall act as
Secretary of the Board of Directors.  In case the Secretary shall be absent from
any  meeting,  the  chairman  may appoint any person to act as  Secretary of the
meeting.

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         3.20 Indemnification and Insurance

                  a. Definitions For purposes of this Section 3.20 only:

                           i.  "Enterprise"  means a foreign or domestic limited
                  partnership,  corporation, general partnership, joint venture,
                  sole proprietorship,  trust, employee benefit plan, or similar
                  entity.

                           ii.  "Expenses"  include  court costs and  attorney's
                  fees.

                           iii.  "Proceeding"  means any threatened,  pending or
                  completed   action,   suit,  or  proceeding,   whether  civil,
                  criminal,  administrative,  arbitrative, or investigative, any
                  appeal. in such an action, suit or proceeding, and any inquiry
                  or  investigation  that could lead to such an action,  suit or
                  proceeding.

                           iv.  "Representative"  means a  Person  serving  as a
                  partner,  director,  officer, venturer,  proprietor,  trustee,
                  employee,  or agent of an  enterprise  or  serving  a  similar
                  function for an enterprise.

                  b.  Indemnification.  The  corporation  shall be  required  to
         indemnify a Person against reasonable expenses incurred.  by the Person
         in  connection  with a  proceeding  in  which  the  Person  is a  named
         defendant  or  respondent  because  the  Person is or was an officer or
         director of the Corporation.

                  c. Advance Payment of Expenses.  Reasonable  expenses incurred
         by an officer or director with respect to a proceeding in which he was,
         is, or is threatened to be made a named  defendant or respondent  shall
         be paid or  reimbursed  by the  corporation  in  advance  of the  final
         disposition of the proceeding.

                  d.  Reimbursement  of Expenses  and Witness.  The  corporation
         shall pay or reimburse  expenses  incurred by an officer or director in
         connection  with such officer or directors  appearance  as a witness or
         other  participation  in  a  proceeding   involving  or  affecting  the
         corporation at a time when the  corporation is not a named defendant or
         respondent in the proceeding.

                  e.  Insurance  and  Other   Arrangements   for  Payment.   The
         corporation may purchase and maintain insurance or another  arrangement
         on behalf of any Person who is or was an  officer or  director,  of the
         corporation, or who is or was serving at the request of the corporation
         as a  representative  of  another  enterprise,  against  any  liability
         asserted against the Person and incurred by the Person in that capacity
         or arising out of the Person's  status in that capacity,  regardless of
         whether the  Corporation  would have the power to indemnify  the Person
         against that liability  under this Section 3.20.  Without  limiting the
         power of the  corporation  to procure or maintain any kind of insurance
         or other  arrangement,  the corporation may, for the benefit of Persons
         indemnified by the corporation, create a trust fund, establish any form
         of self  interest  or other lien on the assets of the  corporation,  or
         establish  a letter of credit,  guaranty,  or surety  arrangement.  The
         insurance  or  other  arrangement  may  be  procured,   maintained,  or
         established  within the  corporation or with an insurer or other Person
         considered  appropriate by the corporation regardless of whether all or
         part of the stock or other  securities  of the insurer or other  Person
         are  owned in whole or ,part  by the  corporation.  In the  absence  of
         actual  fraud,  the  judgment of the Board of Directors as to the terms
         and conditions of the insurance or other  arrangement  and the identity
         of the insurer or other arrangement is not voidable.

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         3.21 Interested  Directors.  Any contract or other transaction  between
the  corporation  and any of its Directors (or any  corporation or firm in which
any of its  Directors is directly or indirectly  interested)  shall be valid for
all  purposes  notwithstanding  the  presence  of such  Director  at the meeting
authorizing such contract or transaction,  or his participation in such meeting.
The foregoing shall,  however,  apply only if the interest of each such Director
is known  or  disclosed  to the  Board of  Directors  and it shall  nevertheless
authorize or ratify such contract or  transaction by a majority of the Directors
present,  each such interested  Director to be counted in determining  whether a
quorum is present,  but not in calculating the majority  necessary to carry such
vote.  This  section  shall not be  construed  to  invalidate  any  contract  or
transaction which would be valid in the absence of this paragraph.

         3.22  Committees.  The Board of Directors,  by an affirmative vote of a
majority of the members  constituting  the Board of Directors,  may appoint such
committees  which shall have and may exercise  such powers as shall be conferred
or authorized by resolution of the Board.  A majority of any such  committee may
determine its action and fix the time and place of its meetings unless the Board
of Directors shall otherwise provide. The Board of Directors by such affirmative
vote,  shall have  power= at any time to change  the powers and  members of such
committee.

                                   ARTICLE IV

                                    OFFICERS

         4.1  Number  and  Titles The  officers  of the  corporation  shall be a
President, a VicePresident,  a Secretary,  and a Treasurer.  The corporation may
also have, at the discretion of the Board of Directors, a Chairman of the Board,
one or more additional Vice-Presidents,  one or more Assistant Secretaries,  one
or more  Assistant  Treasurers,  and such other  officers as may be appointed in
accordance with the provisions of Paragraph 4.3 of this Article.  One person may
hold two or more offices.

         4.2 Election. The officers of the corporation,  except such officers as
may be appointed in accordance with the provisions of Paragraph 4.3 or Paragraph
4.5 of this Article,  shall be chosen  annually by the Board of  Directors,  and
each  shall  hold his  office  until  he shall  resign  or shall be  removed  or
otherwise  disqualified  to  serve,  or  his  successor  shall  be  elected  and
qualified.

         4.3 Subordinate  Officers The Board of Directors may appoint such other
officers or agents as the business of the corporation may require,  each of whom
shall hold office for such period, have such authority,  and perform such duties
as are provided in these Bylaws or as the Board of Directors may delegate to any
officer  or  committee  the  power to  appoint  any such  subordinate  officers,
committees  or  agents,   to  specify  their  duties  and  to  determine   their
compensation.

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         4.4 Removal and Resignation. Any officer may be removed, either with or
without  cause,  by a majority of the Directors,  at the time in office,  at any
regular or special meeting of the Board, or, except in case of an officer chosen
by the Board of  Directors,  by any committee or officer upon whom such power of
removal may be conferred by the Board of Directors; provided, however, that such
removal shall not be without  prejudice to the contract  rights,  if any, of the
person  removed:  Any officer may resign at any time by giving written notice to
the Board of Directors or to the President, or the Secretary of the Corporation.
Any such resignation shall take effect at the date of the receipt of such notice
or at any later time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.

         4.5  Vacancies.  If  the  office  of  the  President,   Vice-President,
Secretary,  Treasurer,  Assistant  Secretary (if any) or Assistant Treasurer (if
any), becomes vacant by reason of death, resignation, removal, or otherwise, the
Board of Directors shall elect a successor who shall elect a successor who shall
hold office for the unexpired term, and until his successor is elected.

         4.6 Chairman of the Board. The Chairman of the Board, if there shall be
such an  officer,  shall,  if present,  preside at all  meetings of the Board of
Directors and at all meetings of the shareholders, shall have the responsibility
of directing and consulting  with the President and supervising the President in
the  discharge  of all of his  duties  hereafter  specified  in  Paragraph  4.7.
Further,  the Chairman of the Board is hereby  authorized  to  exercise,  in the
absence of the  President,  the same  authority  and  powers as are  hereinafter
vested in the President.

          4.7 President. Subject to the direction of the Board of Directors, and
 subject to the powers vested in the Chairman of the Board by these Bylaws, if
 there shall be such an officer, the President shall be the Chief Executive
 Officer of the corporation and as such, shall be responsible for the general
 supervision, direction, and control of the business and officers of the
 corporation, and shall have the general powers and duties ox management usually
 vested in the office of President of a corporation, by the Board of Directors
 or the Bylaws. Within this authority and in the course of his duties he shall:

                  a.   Conduct   Meetings.   Preside  at  all  meetings  of  the
         shareholders  and in the absence of the  Chairman of the Board,  at all
         meetings of the Board of Directors  and shall be ex officio a member of
         all the standing committees, including the executive committee, if any.

                  b. Sign Share Certificates.  Sign all certificates of stock of
         the  corporation,  in  conjunction  with  the  Secretary  or  Assistant
         Secretary, unless otherwise ordered by the Board of Directors.

                  c.  Execute  Instruments.  When  authorized  by the  Board  of
         Directors,  execute in the name of the corporation deeds,  conveyances,
         notices,   leases,  checks,   drafts,  bills  of  exchange,   warrants,
         promissory notes, bonds,  debentures,  contracts,  and other papers and
         instruments in writing.

BYLAWS OF MICROPAC INDUSTRIES, INC. - Page 9

<PAGE>

                  d. Hire and Fire Employees.  Subject to the  authorization  of
         the Board of Directors,  appoint and remove, employ and discharge,  and
         prescribe the duties and fix the compensation of all agents, employees,
         and clerks of the corporation other than the duly appointed officers of
         the corporation.

                  e. Meeting of Other Corporations. Unless otherwise directed by
         the Board of Directors,  attend in person or by substitute appointed by
         him or the Vice-President and the Secretary or the Assistant Secretary,
         and act and vote on behalf of the  corporation,  at all meetings of the
         Shareholders of any corporation in which this corporation holds stock.

         4.8 Vice-President.  In the absence or disability of the President, the
Vice-Presidents,  in order of their rank as fixed by the Board of Directors, or,
if not ranked,  the Vice-President  designated by the Board of Directors,  shall
perform all the duties of the  President,  and when so acting shall have all the
powers of the President,  and when so acting shall have all the powers of and be
subject to, all the restrictions on the President. The Vice-President shall have
such other powers and perform such respectively by the Board of Directors or the
Bylaws.

         4.9 Secretary. The Secretary shall:

                  a. Sign Share  Certificates.  Sign,  with the  President  or a
         Vice-President, certificates for shares of the corporation.

                  b. Attest Bylaws.  Attest and keep at the principal  office of
         the  corporation  the  original  or a copy of its  Bylaws as amended or
         otherwise altered to date.

                  c. Minutes of Meetings.   Keep at the principal  office of the
         corporation  or such other place as the Board of Directors may order, a
         book of minutes of all  meetings  of its  Directors  and  Shareholders,
         executive  committee,  if any, and other committees,  with the time and
         place of  holding,  whether  regular or special,  and if  special,  how
         authorized,  the Notice  thereof  given,  the names of those present at
         Directors'  meetings,  the number of shares  present or  represented at
         Shareholders meetings, and the proceedings thereof.

                  d. Sign or Attest  Documents  and Affix  Seal.  Sign or attest
         such  documents  as may be  required  by  law  or the  business  of the
         corporation,  and to keep  the  corporate  seal  and  affix  it to such
         instruments as may be necessary or proper.

                  e. Notices.  See that all notices are duly given in accordance
         with the  provisions  of these Bylaws or as required by law. In case of
         the  absence  or  disability  of the  Secretary,  or his  refusal to or
         neglect to act, notice may be given and served by  Vice-President or by
         the Board of Directors.

                  f.  Custodian of Records and Seal. Be custodian of the records
         and of the  seal  of the  corporation  and  see  that  it is  engraved,
         lithographed,  printed,  stamped,  impressed  upon  or  affixed  to all
         certificates  for shares prior to their  issuance and to all documents,
         the execution of which on behalf of the  corporation  under its seal is
         duly authorized in accordance with the provisions of these Bylaws.

BYLAWS OF MCROPAC INDUSTRIES, INC. - Page 10

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                  g.  Share  Register.  Keep  at  the  principal  office  of the
         corporation a share register or duplicate  share  register  showing the
         names of the shareholders and their addresses; the number date of issue
         and class of shares  represented by each outstanding share certificate;
         and the number and date of cancellation of each certificate surrendered
         for cancellation.

                  h.  Reports  and  Statements.  See  that the  books,  reports,
         statements,  certificates  and all other documents and records required
         by law are properly kept and filed.

                  i. Exhibit  Records.  Exhibit at all  reasonable  times to any
         Director,  on  application,  or on written  demand  stating the purpose
         thereof by any person who has been a Shareholder of record for at least
         six (6) months immediately preceding his demand or who is the holder of
         record of at least five (5 %O) percent of all of the outstanding shares
         of the corporation,  upon application,  the Bylaws, the share register,
         and minutes of  proceedings  of the  Shareholders  and Directors of the
         Corporation.

                  j. Other Duties.  In general,  perform all duties  incident to
         the office of Secretary, and such other duties as from time to time may
         be assigned to him by the Board of Directors.

                  k.  Absence  of  Secretary.  In the  case  of the  absence  or
         disability  of the  Secretary  or his  refusal or  neglect to act,  the
         Assistant  Secretary,  or if there be none,  the  Treasurer,  acting as
         Assistant Secretary, may perfonn all of the functions of the Secretary.
         In the  absence or  inability  to act,  or refusal or neglect to act of
         both the Secretary,  the Assistant Secretary and Treasurer,  any person
         thereunto authorized by the President or Vice-President or by the Board
         of Directors may perform the functions of the Secretary.

         4.10  Assistant  Secretary.  At the request of the  Secretary or in his
absence  or  disability,  the  Assistant.Secretary,  designated  as set forth in
preceding  Subparagraph 4.9(k) of these Bylaws,  shall perform all the duties of
the Secretary. The Assistant Secretary shall perform such other duties from time
to time assigned to him by the Board of Directors, or the Secretary.

         4.11 Treasurer. The Treasurer shall:

                  a. Funds - Custody  and  Deposit.  Have charge and custody of,
         and be responsible  for, all funds and  securities of the  corporation,
         and  deposit  all such  funds in the  name of the  corporation  in such
         banks,  trust companies,  or other depositories as shall be selected by
         the Board of Directors.

                  b. Funds - Disbursements. Receive, and give receipt for monies
         due and payable to the corporation from any source whatsoever.

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                  c. Funds -  Disbursements.  Disburse or cause to be disbursed,
         the  funds  of the  corporation  as may be  directed  by the  Board  of
         Directors, taking proper vouchers for such disbursements.

                  d. Maintain  Accounts.  Keep and maintain adequate and correct
         accounts for the  corporation's  properties  and business  transactions
         including accounts of its assts, liabilities,  receipts, disbursements,
         gains,  losses,  capital surplus,  and shares.  Any surplus,  including
         earned surplus,  paid-in surplus,  and surplus arising from a reduction
         of stated capital shad be classified according to source and shown in a
         separate account.

                  e. Exhibit Records.  Exhibit at all reasonable times the books
         of account and records to any Director on application, or to any person
         who has  been a  Shareholder  of  record  for at least  six (6)  months
         immediately  preceding  his demand or who is the holder of record of at
         least five (5%) percent of all outstanding shares of the corporation on
         written demand stating the purpose  thereof,  during  business hours at
         the office of the corporation where such books and records are kept.

                  f. Reports to President and Directors. Render to the President
         and  Directors,  whenever  they  request  it,  an  account  of all  his
         transactions  as  Treasurer  and  of  the  financial  condition  of the
         corporation.

                  g. Financial Report to Shareholders.  Prepare,  or cause to be
         prepared,  and certify the  financial  statements to be included in the
         annual  report to  shareholders  and  statements  of the affairs of the
         corporation when requested by Shareholders holding at least ten (10 % )
         percent of the number of outstanding shares of the corporation.

                  h. Bond.  Give to the  corporation  a bond, if required by the
         Board of Directors or by the President,  in a sum, and with one or more
         sureties,  or a  surety  company  satisfactory  to the  Board,  for the
         faithful   performance  of  the  duties  of  his  office  and  for  the
         restoration  to the  corporation,  in case of his  death,  resignation,
         retirement,  or removal from office,  of all books,  papers,  vouchers,
         money and other  property of whatever  kind in his  possession or under
         his control belonging to the corporation.

                  i. Other Duties.  In general,  perform all the duties incident
         to the office of  Treasurer  and such other duties as from time to time
         may be assigned to him by the Board of Directors.

                  j. Absence of Treasurer.  In case of the absence or disability
         of the  Treasurer  or his  refusal  or neglect  to act,  the  Assistant
         Treasurer or the Secretary acting as Assistant  Treasurer,  may perform
         all of the functions of the  Treasurer.  In the absence or inability to
         act,  or refusal or neglect to act,  of the  Treasurer,  the  Assistant
         Treasurer,  and the Secretary,  any person thereunto  authorized by the
         President of Vice-President  or by the Board of Directors,  may perform
         the functions of the Treasurer.

BYLAWS OF MICROPAC INDUSTRIES, INC. - Page 12

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         4.12 Assistant Treasurer. The Assistant Treasurer, if required to do so
by the Board of  Directors,  shall give bond for the  faithful  discharge of his
duties,  in such sum,  and with such  sureties as the Board of  Directors  shall
require. At the request of the Treasurer,  or in his absence or disability,  the
Assistant Treasurer designates as set forth in the preceding Subparagraph 4.110)
of these Bylaws shall  perform all of the duties of the  Treasurer,  and when so
acting,  he shall have all the powers of, and be subject to all the restrictions
on, the  Treasurer.  He shall perform such other duties as from time to time may
be assigned to him by the Board of Directors or the Treasurer.

                                    ARTICLE V

                  EXECUTION OF INSTRUMENTS AND DEPOSIT OF FUNDS

         5.1  Authority for  Execution of  Instruments.  The Board of Directors,
except as  otherwise  provided in these  Bylaws,  may  authorize  any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name and on behalf of the corporation,  and such authority may
be general or confined  to  specific  instances;  and unless so  authorized,  no
officer,  agent or  employee  shall  have any  power  or  authority  to bind the
corporation  by any contract or  engagement or to pledge its credit or to render
it liable pecuniarily for any purpose or in any amount.

         5.2 Execution of Instruments.  Unless otherwise specifically determined
by the Board of Directors or otherwise  required by law,  formal contract of the
corporation,  promissory notes, deeds of trust, mortgages, and other evidence of
indebtedness of the corporation, and other corporate instruments or documents, -
and  certificates  of  -shares  of  stock  owned  by the  corporation,  shall be
executed,  signed or  endorsed by the  President  or  Vice-President  and by the
Secretary or the Treasurer,  or any Assistant Secretary or Assistant  Treasurer,
and may have the corporate seal affixed thereto.

         5.3 Bank Accounts and Deposits.  All funds of the corporation  shall be
deposited  from time to time to the credit of the  corporation  with such banks,
trust companies,  or other  depositories as the Board of Directors may select or
as may  be  selected  by  any  officer  or  officers,  agent  or  agents  of the
corporation  to whom such power may be delegated  from time to time by the Board
of Directors.

         5.4 Endorsements WithoutCountersignature..  Endorsements for deposit to
the credit of the corporation in any of its duly authorized  depositories may be
made without  countersignature  by the President or any  Vice-President,  or the
Treasurer or any  Assistant  Treasurer,  or by any other officer or agent of the
corporation to whom the Board of Directors, by resolution,  shall have delegated
the power, or by hand stamped impression in the name of the corporation.

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<PAGE>

         5.5 Signing of Checks,  Drafts, etc. All checks, drafts or other orders
for payment of money,  notes or other evidences of  indebtedness,  issued in the
name of or payable to the corporation shall be signed or endorsed by such person
or  persons  and in such  manner  as shall be  determined  from  time to time by
resolution of the Board of Directors.

                                   ARTICLE VI

                         ISSUANCE AND TRANSFER OF SHARES

         6.1 Classes and Series of Shares. The corporation shall issue one class
of shares, which shall have a par value of $.01 with full voting rights and with
such other  preferences,  rights or privileges and restrictions as stated in the
Articles of Incorporation.

         6.2 Certificates for Fully Paid Shares. Neither shares nor certificates
representing such shares may be issues! by the corporation until the full amount
of the consideration has been paid. When such consideration has been paid to the
corporation,  the shares shall be deemed to have been issued and the certificate
representing such shares shall be issued to the Shareholder.

         6.3 Consideration for Shares.  The consideration  paid for the issuance
of shares  shall  consist  of money  paid,  labor  done,  or  property  actually
received;  and  neither  promissory  notes nor the  promise  of future  services
shall constitute payment of part payment for shares of the corporation.

         6.4 Contents of Share Certificates. Certificates for shares shall be of
such  form and  style,  printed  or  otherwise,  as the Board of  Directors  may
designate.

         6.5  Restriction  on  Transfer.   Any   restrictions   imposed  by  the
corporation  on the sale or other  disposition of its shares and on the transfer
thereof  must be  copied  at  length  or in  summary  form  on the  face of each
certificate   representing  shares  to  which  the  restriction   applies.   The
certificate  may  however,  state on the face or back  that  such a  restriction
exists pursuant to a specified  document and that the corporation will furnish a
copy of the  document  to the  holder of the  certificate  without  charge  upon
written request to the corporation at its principal place of business.

         6.6 Signing Certificates - Facsimile Signatures.  All such certificates
shall be signed by the  President or a  Vice-President  and the  Secretary or an
Assistant  Secretary.   The  signatures  of  the  President  or  Vice-President,
Secretary  or Assistant  Secretary  may tie  facsimiles  if the  certificate  is
countersigned  by a transfer agent or registered by a registrar  either of which
is not the corporation itself or an employee of the corporation.  If the officer
who has signed or whose  facsimile  signature has been placed on the certificate
has ceased to be such officer before the certificate is issued,  the certificate
may be issued by the corporation with the same effect as if he were such officer
at the date of its issuance.

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<PAGE>

         6.7 Transfer,  of Lost or Destroyed  Shares.  Where a share certificate
has been lost, apparently destroyed, or wrongfully taken, and the owner fails to
notify the corporation of that fact within a reasonable time after he has notice
of it, and the corporation  registers a transfer of the share represented by the
certificate before receiving such a.  notification,  the owner is precluded from
asserting  against the corporation any claim for registering the transfer or any
claim to a crew certificate.

         6.8 Replacement of Lost or Destroyed Certificates.  Where the holder of
a share  certificate  claims that the certificate has been lost,  destroyed,  or
wrongfully taken the corporation  shall issue a new certifiicate in place of the
original  certificate if the owner so requests before the corporation has notice
that the share has been  acquired by a bona fide  purchaser,  and files with the
corporation a sufficient  indemnity  bond;  and  satisfied any other  reasonable
requirements imposed by the Board of Directors.

         6.9 Transfer After Replacement.  If, after the issue of a new  security
as a replacement for a lost,  destroyed or wrongfully taken certificate,  a bona
fide  purchaser  or the original  certificate  presents it for  registration  or
transfer,  the corporation must register the-transfer unless registration would.
result in  overissue.  In  addition  to any rights on the  indemnity  bond,  the
corporation  may recover the new security  from the person to whom it was issued
or any person taken under him except a bona fide purchaser.

         6.10 Transfer Agents and Registrars. The Board of Directors may appoint
one or more transfer agents or transfer clerks, and one or more registrars which
shall be an incorporated bank or trust company,  either domestic or foreign, who
shall  be  appointed  at  such  times  and  places  as the  requirements  of the
corporation may necessitate and the Board of Directors may designate.

         6.11  Condition  of  Transfer.  A person in whose name  shares of stock
stand on the books of the  corporation  shall be deemed  the  owner  thereof  as
regards the corporation.

         6.12  Reasonable  Doubts as to Right to  Transfer.  When a transfer  of
shares is requested and there is reasonable  doubt as to the right of the person
seeking the transfer,  the corporation or its transfer agent,  before  recording
the transfer of the shares on its books or issuing any certificate  thereof, may
require from the person  seeking the transfer  reasonable  proof of his right to
the transfer.  If there remains a reasonable doubt of the right of the transfer,
the corporation may refuse a transfer unless the person gives adequate  security
or a bond or  indemnity  executed  by a  corporate  surety or by two  individual
sureties  satisfactory to the corporation as to form, amount, and responsibility
of  sureties.  The bond shall be  conditioned  to protect the  corporation,  its
officers,  transfer agents,  and registrars,  or any of them,  against any loss,
damage,  expenses,  or other  liability  to the owner of the  issuance  of a new
certificate for shares.

BYLAWS OF MICROPAC INDUSTRIES, INC. - Page 15

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                                   ARTICLE VII

                      CORPORATE RECORDS, REPORTS, AND SEAL

         7.1 Minutes of Corporate  Meetings.  The corporation  shall keep at the
registered  office,  or such other place as the Board of Directors may order,  a
book of minutes of all  meetings of its  Directors  and of its  Shareholders  or
members with the time and place of holding,  whether regular or special, and, if
special, how authorized,  the notice thereof given the names of those present or
represented at Shareholders' or members' meetings, and the proceedings thereof.

         7.2 Books of Account.  The corporation shall keep and maintain adequate
and correct  accounts of its  properties  and business  transactions,  including
accounts of its assets,  liabilities,  receipts,  disbursements,  gains, losses,
capital,  surplus and shares.  Any surplus,  including  earned surplus,  paid-in
surplus  and  surplus  arising  from a  reduction  of stated  capital,  shall be
classified according to source and shown in a separate account.

         7.3  Share  Register.  The  corporation  shall  keep at the  registered
office,  or at the office of the transfer agent, a share  register,  showing the
names of the  Shareholders  and their  addresses,  and the number and classes of
shares held at each and the number and date of  certificates  issued for shares,
and the number and date or  cancellation  of every  certificate  surrendered for
cancellation.  The above specified information may be kept by the corporation on
punch cards,  magnetic tape, or other  information  storage  devices  related to
electronic  data  processing  equipment  provided that such card,  tape or other
equipment is capable of reproducing  the information in clearly legible form for
the purposes of inspection as provided in Section 7.4 and 7.5 of these Bylaws.

         7.4  Inspection of Records by  Shareholders.  Any person who shall have
been a shareholder of record for at least six (6) months  immediately  preceding
his demand, or who is the holder of record of at least five (5 %) percent of all
of the  outstanding  shares of the  corporation,  on written  demand stating the
purpose thereof,  has the right to examine, in person, or by agent,  accountant,
or attorney,  at any reasonable time or times, for any proper purpose, its books
and records of account, minutes, and record of Shareholders,  and is entitled to
make extracts therefrom.

         7.5  Inspection of Records by Directors.  Every Director shall have the
absolute right at any reasonable time to inspect all books,  records,  documents
of every kind, and the physical  properties of the corporation,  and also of its
subsidiary corporations,  domestic or foreign. Such inspection by a Director may
be made in person or by agent or attorney,  and the right of inspection includes
the right to make extracts.

         7.6 Annual Report to  Shareholders.  The Board of Directors shall cause
an annual  report to be sent to the  Shareholders  not  later  than one  hundred
twenty (120) days after the close of the fiscal or calendar year.

         7.7 Contents of Annual  Reports.  The annual  report shall  include the
following financial statements:

BYLAWS OF MICROPAC INDUSTRIES, INC. - Page 16

<PAGE>

                  a. A balance sheet as of such closing date;

                  b. a statement of income or profit and loss for the year ended
         on such closing date;

                  c. Such other information as the Directors shall determine.

         7.8 Preparation of Financial Statements. The financial statements shall
be prepared from the books and shall be in accordance therewith.

         7.9 Fiscal Year. The fiscal year of the corporation shall be determined
by the Board of Directors.

         7.10  Corporate  Seal.  The Board of  Directors  may  adopt,  use,  and
thereafter alter, the corporate seal.

                                  ARTICLE VIII

                               AMENDMENT OF BYLAWS

         8.1  Adoption,  Amendment,  Repeal of Bylaws  by Direct  Bylaws  may be
altered,  amended, or repealed,  and new Bylaws may be adopted by the Directors,
subject to repeal or change by action of the Shareholders.

                                   ART1CLE IX

                                      RULES

         9.1 The rules  contained  in the current  edition of Robert's  Rules of
Order Newly Revised shall govern the  corporation in all cases to which they are
applicable  and in which they are not  inconsistent  with  these  Bylaws and any
special rules of order the corporation may adopt.

          EXECUTED this the _____ day of May, 1993.

                                                  /S/:
                                                  ------------------------------
                                                        President

BYLAWS OF MICROPAC INDUSTRIES, INC. Page 17EXHIBIT 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

<PAGE>

  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

<PAGE>

                                   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;

<PAGE>

         (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.

<PAGE>

         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.

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