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EXHIBITS 10.1
 
2002 STOCK OPTION PLAN
 
        The Company currently has one employee incentive stock option plan, the
1994 Stock Option Plan (the "1994 Plan"). Under the 1994 Plan, officers, key
employees, non-employee directors and consultants may be granted options to
purchase shares of the Company's authorized but unissued common stock.
 
        At May 16, 2002, options outstanding under the 1994 Plan and previous
option plans covered 1,792,036 shares at an average exercise price of $3.31
(range $1.45 to $7.00), of which 831,362 were exercisable. There are 61,272
shares available for future grant under the 1994 Plan, which will be eliminated
if the 2002 Stock Option Plan is approved by the shareholders and no further
options will be granted under the 1994 Plan.
 
        On April 12, 2002, the Board of Directors adopted, subject to approval
by the shareholders, the National Technical Systems, Inc. 2002 Stock Option
Plan, hereinafter referred to as the "2002 Plan." The 2002 Plan provides for the
issuance of incentive stock options (i.e., options under Section 422 of the
Internal Revenue Code) and non-qualified stock options to selected directors,
officers, key employees of and consultants to the Company. The Board of
Directors believes the establishment of a new stock option plan to be a
necessary adjunct to the existing compensation package designed to attract and
retain directors, officers, key employees and consultants of ability and
experience.
 
Administration.
 
        The 2002 Plan is to be administered by the Board of Directors, or a
committee of the Board ("Committee"). The Board or Committee shall, in its sole
discretion, determine the directors, officers, key employees and consultants to
whom options are to be granted, the type of stock options to be granted, the
number of shares to be optioned, the time of exercise and other terms and
provisions of each option. The Board is to be empowered to interpret the 2002
Plan, prescribe, amend, and rescind the rules and regulations relating to the
Plan, amend the Plan, subject to certain limitations, and make all other
determinations necessary or advisable for the administration of the 2002 Plan.
 
Option Terms.
 
        The exercise price for shares to be covered by an incentive stock option
granted under the 2002 Plan shall be no less than 100% of the fair market value
of the shares (or 110% if the optionee at the time the option is granted owns
stock representing more than 10% of the total combined voting power of all
classes of stock of the Company) on the date the option is granted, as
determined by the Board or the Committee. The exercise price for shares to be
covered by a non-qualified stock option shall be not less than 100% of the fair
market value of the shares on the date the option is granted, as determined by
the Board or the Committee. On May 16, 2002 the closing price of the common
Stock of the Company, as reported on the Nasdaq National Market, was $1.85 per
share.
 
        The price of any shares purchased upon exercise of an option is to be
paid in full at the time of the purchase. Payment for any number of shares
purchased upon exercise of options granted under the 2002 Plan may, subject to
certain limitations, be made by delivery to the Company of shares of the Common
Stock of the Company having a fair market value equal to the exercise price of
the option shares. Options shall be exercisable at such times and for such
periods as may be fixed by the Board or the Committee, provided that no options
shall be exercisable after ten years from the date of grant. Expect as otherwise
provided for in the optionee's option agreement, in the event of a change in
control, the Company and the successor corporation, if any, may agree:
 
        (i)    that subject to the limitation provided for below, all options
that are outstanding shall become exercisable;
 
 
 

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        (ii)   to terminate the 2002 Plan and cancel all outstanding options
without the payment of any consideration, provided, however, the Company shall
notify the optionees of the cancellation of their options at least 21 days prior
to the date of the change in control so that the optionees may exercise their
options that are otherwise exercisable before they are cancelled;
 
        (iii)  that the successor corporation or its parent shall assume the
2002 Plan and all outstanding options;
 
        (iv)  to terminate the 2002 Plan and cancel all outstanding options and
replace such options with comparable options in the successor corporation or
parent thereof;
 
        (v)  to terminate the 2002 Plan and cancel all outstanding options and,
subject to the limitation below, deliver to the optionee in lieu thereof the
difference in cash between the fair market value of a share on the date of the
change in control and the exercise price of the optionee's option, multiplied by
the number of shares to which the option relates; or
 
        (vi)  to terminate the 2002 Plan and cancel all outstanding options and
deliver to the optionee in lieu thereof the difference in cash between the fair
market value of a share on the date of the change in control and the exercise
price of the optionee's option, multiplied by the number of vested shares that
the optionee would have received had he or she exercised the option.
 
        Notwithstanding the foregoing, no acceleration of exercisability or
payment shall occur to the extent that such acceleration or payment would, after
taking into account any other payments in the nature of compensation to which
the optionee would have a right to receive from the Company and any other person
contingent upon the occurrence of such change in control, result in a "parachute
payment" as defined in Section 280G(b)(2) of the Internal Revenue Code. In the
event of the dissolution or liquidation of the Company, the Company may provide
for an optionee to fully vest in his or her option.
 
Stock Subject to Plan.
 
        The total number of shares of the Company's Common Stock, no par value,
to be reserved for options under the 2002 Plan will be 1,000,000, which is
equivalent to approximately 11.5% of the Company's currently outstanding shares.
Of the total number of shares reserved for issuance under the 2002 Plan, 61,272
shares are equal to the number of shares in the aggregate eliminated from the
1994 Plan. Therefore, the 2002 Plan includes a 938,728 share increase in the
number of shares reserved for issuance upon exercise of stock options over the
number of shares previously available for grant in the aggregate under the 1994
Plan, which increase is equivalent to approximately 10.8% of the Company's
currently outstanding shares. Provision is made for adjustment in the number of
option shares and exercise prices in the event of recapitalization.
 
Eligibility.
 
        Incentive stock options may be granted only to key employees of the
Company. Non-qualified stock options may be granted to officers, key employees,
directors of and consultants to the Company, including those who have been
granted options under other stock options plans of the Company.
 
Termination of Options.
 
        If the optionee's employment is terminated for any reason other than
death or disability, the options may be exercised at any time within three
months after the date of termination, but not beyond the period such options are
exercisable, on the date of termination. If an optionee dies or becomes disabled
while in the employ of the Company, the optionee or his or her estate may
exercise the options within 12 months from such date, but not beyond the option
period. Options shall not be affected by authorized leaves of absence or by a
change of employment so long as the optionee continues to be a director,
officer, employee of or consultant to the Company. In no case may an option be
exercised more than ten years after it is granted. Options granted under the
2002 Plan are not transferable except to the executor or administrator of the
optionee's duly appointed and acting guardian or conservator, and shall be
exercisable during the optionee's lifetime only by the optionee or by such
guardian or conservator for the benefit of the optionee.
 
 
 

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Amendment and Termination of the Plan.
 
        The 2002 Plan may at any time, or from time to time, be terminated,
suspended, modified or amended by the Board. No amendment, suspension or
termination of the 2002 Plan shall, without the consent of the optionee, alter
or impair any rights or obligations under any options granted under the 2002
Plan. In addition, no such modification or amendment shall, without shareholder
approval, increase the number of shares authorized for issuance upon the
exercise of options, provide for the grant of options with an exercise price per
share less than the amount set forth above or postpone the date of the
expiration of the 2002 Plan beyond the expiration date set forth below.
 
Non-Qualified Stock Options.
 
        There will be no federal income tax consequences to an optionee upon the
grant of a non-qualified stock option. Upon the exercise of a non-qualified
option, the optionee will recognize taxable income in an amount equal to the
fair market value of the shares on the date of exercise less the exercise price
paid, and the Company will be allowed a corresponding tax deduction for
compensation expense in an amount equal to the taxable income recognized by the
optionee. Upon the subsequent sale of shares acquired upon the exercise of a
non-qualified stock option, the optionee generally will recognize additional
gain or loss in an amount equal to the difference between the proceeds received
upon sale and the fair market value of such shares on the date of exercise.
 
Incentive Stock Options.
 
        An optionee who exercises an incentive stock option, both at the time of
the initial grant of the option and at the time of its exercise will, except as
discussed below, recognize no income for federal income tax purposes. The
difference between the fair market value of the shares on the date of exercise
and the exercise price paid will be included in the employee's income for
alternative minimum tax purposes. The Company will generally not be entitled to
a tax deduction for compensation expense at the time of exercise of an incentive
stock option, except upon a disqualifying disposition as described below. If an
optionee holds shares acquired through exercise of an incentive stock option for
more than two years from the date on which the option is granted and more than
one year from the date on which the shares are transferred to the optionee upon
exercise of the option, all gain or loss will be recognized at long-term capital
gains rates at the time of the disposition of the shares. Generally, if the
optionee disposes of the shares before the expiration of either of these holding
periods (a "disqualifying disposition"), at the time of disqualifying
disposition the optionee will realize ordinary income equal to the lesser of
(i) the excess of the fair market value of the shares on the date of exercise
over the exercise price or (ii) the optionee's actual gain, if any, resulting
from the purchase and sale. To the extent the optionee recognizes income by
reason of a disqualifying disposition, the Company will be entitled (subject to
the satisfaction of any withholding obligation) to the corresponding business
expense deduction in the tax year in which the disqualifying disposition occurs.
 
        The foregoing summary of the effects of current federal income taxation
upon an optionee and the Company with respect to shares issued under the 2002
Plan does not purport to be complete, and reference is made to the applicable
provisions of the Internal Revenue Code.
 
 
 

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Effective Date and Termination of Plan.
 
        Unless sooner terminated, the 2002 Plan's authority to grant options
shall expire on April 12, 2012 ("Expiration Date"), but the 2002 Plan shall
remain in full force and effect beyond the Expiration Date for all options
granted prior to the Expiration Date.
 
No options have yet been authorized for issuance under the 2002 Plan.
 
        The following table shows outstanding options, their weighted exercise
price, and options remaining available for issuance under the Company's existing
compensation plans (excluding the 2002 Plan).
 
EQUITY COMPENSATION PLAN INFORMATION
 

   
a
   
b
   
c
 
Plan Category(1)
 
Number of Securities to be
Issued Upon Exercise of
Outstanding Options,
Warrants and Rights
   
Weighted Average
Exercise Price
   
Number of Securities
Remaining available for future
issuance under Equity
Compensation Plans (excluding
securities reflected in column
(a))
 
Plans Approved by Shareholders
    1,792,036     $ 3.31       61,272 (2)

___________________
(1)
All equity compensation plans of the Company have been approved by the
shareholders.

 
(2)
The shares remaining available for future issuance are available under the
Company's 1994 Plan. The 1994 Plan will be terminated and no further options
will be granted under it if the 2002 Plan is approved by the shareholders.

 
 

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