OPTEX SYSTEMS HOLDINGS, INC. 2009 STOCK OPTION PLAN

1.01 Purpose .  The purpose of the Optex Systems Corporation (“Company”) 2009 Stock Option Plan is to assist the Company (as defined below) in attracting and retaining highly competent employees and to act as an incentive in motivating selected officers and other employees of the Company and its subsidiaries, and directors and consultants of the Company and its subsidiaries, to achieve long-term corporate objectives.

1.02 Adoption and Term .  The Plan has been approved by the Board of Directors and shareholders of the Company. The Plan is effective from the date approved by the shareholders of the Company (the “Effective Date”) and shall remain in effect until terminated by action of the Board; provided , however , that no Option (as defined below) or Stock Purchase Right (as defined below) may be granted hereunder after the tenth anniversary of the Effective Date.

2.01  Applicable Laws means the requirements relating to the administration of stock option plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Options or Stock Purchase Rights are, or will be, granted under the Plan.

2.02 Beneficiary means an individual, trust or estate who or which, by a written designation of the Participant filed with the Company or by operation of law, succeeds to the rights and obligations of the Participant under the Plan and the Option Agreement or Restricted Stock Purchase Agreement upon the Participant’s death.

2.03 Board means the Board of Directors of the Company.

2.04 Code means the Internal Revenue Code of 1986, as amended.  References to a section of the Code shall include that section and any comparable section or sections of any future legislation that amends, supplements or supersedes said section

2.05 Committee means the Committee defined in Section 3.01.

2.06 Company means Optex Systems Corporation., a Delaware corporation, and its successors.

2.07 Common Stock means the Common Stock of the Company, par value $.001 per share.

2.08 Date of Grant means the date designated by the Committee as the date as of which it grants an Option or Stock Purchase Right, which shall not be earlier than the date on which the Committee approves the granting of such Option or Stock Purchase Right.

2.09 Exchange Act means the Securities Exchange Act of 1934, as amended.

2.10 Fair Market Value means, as of any applicable date, the fair market value of the Common Stock as determined by the Board based upon such evidence as it may think necessary or desirable.

2.11 Incentive Stock Option means a stock option within the meaning of Section 422 of the Code.

2.12 Merger means any merger, reorganization, consolidation, exchange, transfer of assets or other transaction having similar effect involving the Company.

2.13 Nonstatutory Stock Option means a stock option which is not an Incentive Stock Option.

2.14 Option Agreement means a written agreement between the Company and a Participant, specifically setting forth the terms and conditions of an Option granted under the Plan, substantially in the form of Exhibit A attached hereto or such other form as shall be determined from time to time by the Committee.

2.15 Option Price , with respect to Options, shall have the meaning set forth in Section 6.01(b).

2.16 Option Term means, with respect to an Option, the period of time set forth in the Option Agreement during which the Option may be exercised.

2.17 Options means all Nonstatutory Stock Options and Incentive Stock Options granted at any time under the Plan.

2.18 Participant means a person designated to receive an Option or Stock Purchase Right under the Plan in accordance with Section 4.03.

2.19 Plan means the Treasure Mountain Holdings, Inc. 2005 Stock Option Plan as described herein, as the same may be amended from time to time.

2.20 Restricted Stock means shares of Common Stock acquired pursuant to a grant of Stock Purchase Rights under Article V of the Plan.

2.21 Restricted Stock Purchase Agreement means a written agreement between the Company and an Optionee evidencing the terms and restrictions applying to stock purchased under a Stock Purchase Right. Each Restricted Stock Purchase Agreement is subject to the terms and conditions of the Plan and shall be substantially in the form of Exhibit B attached hereto or such other form as shall be determined from time to time by the Committee.

2.22 Stock Purchase Right means the right to purchase Common Stock pursuant to Article V of the Plan, as evidenced by a notice of grant included within the applicable Restricted Stock Purchase Agreement (the “Notice of Grant”).

2.23 Ten Percent Shareholder means any individual who, at the time an Option is granted, owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company.

The Plan shall be administered by the Board or, in the discretion of the Board, by a committee of the Board (the “Committee”) comprised of at least two persons.  The Committee or Board shall have exclusive and final authority in each determination, interpretation or other action affecting the Plan and its Participants.  The Board or Committee shall have the sole discretionary authority to interpret the Plan, to establish and modify administrative rules for the plan, to impose such conditions and restrictions on Options and Stock Purchase Rights as it determines appropriate, and to take such steps in connection with the Plan and Options and Stock Purchase Rights granted hereunder as it may deem necessary or advisable.  The Board or Committee may delegate such of its powers and authority under the Plan as it deems appropriate to designated officers or employees of the Company.  In the event of such delegation of authority or exercise of authority by the Board or Committee, references in the Plan to the Committee shall be deemed to refer to the delegate of the Board or the Committee as the case may be.  For purposes of this Plan, references to the Committee shall be deemed references to the Board to the extent that the Board has not appointed a Committee to administer the Plan.

4.01 Number of Shares Issuable.   The total number of shares initially authorized to be issued under the Plan shall be 6,000,000 shares of Common Stock. The number of shares available for issuance under the Plan shall be further subject to adjustment in accordance with Section 7.06.  The shares to be offered under the Plan shall be authorized and unissued Common Stock, or issued Common Stock which shall have been reacquired by the Company,

4.02 Shares Subject to Terminated Options and Stock Purchase Rights .  Common Stock covered by any unexercised portions of terminated Options and Stock Purchase Rights (including canceled Options and Stock Purchase Rights) granted under Articles V and VI of the Plan and Common Stock subject to any Options and Stock Purchase Rights which are otherwise surrendered by a Participant may again be subject to new Options and Stock Purchase Rights under the Plan.

4.03  Participation. Participants in the Plan shall be such consultants, directors, officers and other employees of the Company and its subsidiaries as the Committee, in its sole discretion, may designate from time to time. The Committee’s designation of a Participant in any year shall not require the Committee to designate such person to receive Options, Stock Purchase Rights or grants in any other year.  The Committee shall consider such factors as it deems pertinent in selecting Participants and in determining the type and amount of their respective Options and Stock Purchase Rights.

5.01 Rights to Purchase . Stock Purchase Rights may be issued either alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. After the Committee determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing or electronically, by means of a Restricted Stock Purchase Agreement, of the terms, conditions and restrictions related to the offer, including the number of shares of Common Stock that the offeree shall be entitled to purchase and the price to be paid for such shares. The offer shall be accepted by execution of the Restricted Stock Purchase Agreement.

5.02 Repurchase Option . Unless the Committee determines otherwise, the Restricted Stock Purchase Agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser's service with the Company for any reason (including death or “Permanent Disability” (as defined in Section 6.03)). The purchase price for shares repurchased pursuant to the Restricted Stock Purchase Agreement shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse at a rate determined by the Committee. In the event that the Restricted Stock Purchase Agreement does not provide for a lapsing schedule, the restrictions shall lapse as to (a) one third of the shares subject to the Restricted Stock Purchase Agreement on the first anniversary of the grant of the Stock Purchase Right, (b) one third of the shares subject to the Restricted Stock Purchase Agreement on the second anniversary of the grant of the Stock Purchase Right and (c) one third of the shares subject to the Restricted Stock Purchase Agreement on the third anniversary of the grant of the Stock Purchase Right.

5.03 Other Provisions . The Restricted Stock Purchase Agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Committee in its sole discretion.

5.04 Rights as a Shareholder . Once the Stock Purchase Right is exercised, the purchaser shall have the rights equivalent to those of a shareholder, and shall be a shareholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised; provided , however , that Participants are entitled to share adjustments to reflect capital changes under Section 7.06.

(a)             General.   The Committee may grant, to such Participants as the Committee may select, Options entitling the Participant to purchase shares of Common Stock from the Company in such number, at such price, and on such terms and subject to such conditions, not inconsistent with the terms of this Plan, as may be established by the Committee.  The terms of any Option granted under this Plan shall be set forth in an Option Agreement.

(b)             Purchase Price of Options.   The Option Price of each share of Common Stock which may be purchased upon exercise of any Option granted under the Plan shall be determined by the Committee; provided , however , that (i) with respect to Incentive Stock Options, the Option Price per share shall in all cases be equal to or greater than the Fair Market Value of a share of Common Stock on the Date of Grant as required under Section 422 of the Code, and (ii) with respect to any Incentive Stock Option granted to any Ten Percent Shareholder, the Option Price per share shall in all cases be equal to or greater than 110 percent of the Fair Market Value of a share of Common Stock on the Date of Grant as required under Section 422 of the Code.

(c)             Designation of Options.   Except as otherwise expressly provided in the Plan, the Committee may designate, at the time of the grant of each Option, the Option as an Incentive Stock Option or a Nonstatutory Stock Option.

(d)             Incentive Stock Option Limitations .  No Participant may be granted Incentive Stock Options under the Plan (or any other plans of the Company), which would result in shares with an aggregate Fair Market Value (measured on the Date of Grant) of more than $100,000 first becoming exercisable in any one calendar year. No Participant may be granted Incentive Stock Options under the Plan (or any other plans of the Company) unless the Participant is an employee of the Company or its Subsidiaries. An individual shall not cease to be an employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company and its subsidiaries. For purposes of an Option initially granted as an Incentive Stock Option, if a leave of absence of more than three months precludes such Option from being treated as an Incentive Stock Option under the Code, such Option thereafter shall be treated as a Nonstatutory Stock Option for purposes of this Plan. Neither service as a director nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by the Company.

(e)             Rights as a Shareholder .  A Participant or a transferee of an Option pursuant to Section 7.04 shall have no rights as a shareholder with respect to Common Stock covered by an Option until the Participant or transferee shall have become the holder of record of any such shares, and no adjustment shall be made for dividends in cash or other property or distributions or other rights with respect to any such Common Stock for which the record date is prior to the date on which the Participant or a transferee of the Option shall have become the holder of record of any such shares covered by the Option; provided , however , that Participants are entitled to share adjustments to reflect capital changes under Section 7.06.

(f)            Vesting. In the event that an Option Agreement does not provide for a vesting schedule, the Options covered thereby shall become exercisable as to (a) one third of the shares subject to the Option Agreement on the first anniversary of the grant of the Option, (b) one third of the shares subject to the Option on the second anniversary of the grant of the Option and (c) one third of the shares subject to the Option on the third anniversary of the grant of the Option.

6.02           Terms of Stock Options.

(a)             Conditions on Exercise.   An Option Agreement with respect to Options may contain such waiting periods, exercise dates and restrictions on exercise (