ex10_17.htm


    

    EXHIBIT
10.17

    


    NATIONAL
TECHNICAL SYSTEMS, INC.

    2006
EQUITY INCENTIVE PLAN

    


    1.         
   Purpose of the Plan.  The purpose of this Plan
is to encourage ownership in the Company by key personnel whose long-term
service is considered essential to the Company's continued progress and,
thereby, encourage recipients to act in the stockholders' interest and share in
the Company's success.

    


    2.        
    Definitions.  As used herein, the
following definitions shall apply:

    


    "Act"
shall mean the Securities Act of 1933, as amended.

    


    "Administrator"
shall mean the Board or any Committees or such delegates as shall be
administering the Plan in accordance with Section 4 of the Plan.

    


    "Affiliate"
shall mean any entity that is directly or indirectly controlled by the Company
or any entity in which the Company has a significant ownership interest as
determined by the Administrator.

    


    "Applicable
Laws" shall mean the requirements relating to the administration of stock plans
under federal and state laws; any stock exchange or quotation system on which
the Company has listed or submitted for quotation the Common Stock to the extent
provided under the terms of the Company's agreement with such exchange or
quotation system; and, with respect to Awards subject to the laws of any foreign
jurisdiction where Awards are, or will be, granted under the Plan, to the laws
of such jurisdiction.

    


    "Award"
shall mean, individually or collectively, a grant under the Plan of an Option,
Stock Award, SAR, or Cash Award.

    


    "Awardee"
shall mean a Service Provider who has been granted an Award under the
Plan.

    


    "Award
Agreement" shall mean an Option Agreement, Stock Award Agreement, SAR Agreement,
or Cash Award Agreement, which may be in written or electronic format, in such
form and with such terms as may be specified by the Administrator, evidencing
the terms and conditions of an individual Award.  Each Award Agreement
is subject to the terms and conditions of the Plan.

    


    "Board"
shall mean the Board of Directors of the Company.

    


    "Cash
Award" shall mean a bonus opportunity awarded under Section 13 pursuant to which
a Participant may become entitled to receive an amount based on the satisfaction
of such performance criteria as are specified in the agreement or other
documents evidencing the Award (the "Cash Award Agreement").

    


    "Change
in Control" shall mean any of the following, unless the Administrator provides
otherwise:

    


    any
merger or consolidation in which the Company shall not be the surviving entity
(or survives only as a subsidiary of another entity whose stockholders did not
own all or substantially all of the Common Stock in substantially the same
proportions as immediately before such transaction);

    


    the sale
of all or substantially all of the Company's assets to any other person or
entity (other than a wholly-owned subsidiary of the Company);

    


    the
acquisition of beneficial ownership of a controlling interest (including power
to vote) in the outstanding shares of Common Stock by any person or entity
(including a "group" as defined by or under Section 13(d)(3) of the Exchange
Act);


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    the
dissolution or liquidation of the Company;

    


    a
contested election of Directors, as a result of which or in connection with
which the persons who were Directors before such election or their nominees
cease to constitute a majority of the Board; or

    


    any other
event specified by the Board or a Committee, regardless of whether at the time
an Award is granted or thereafter.

    


    Notwithstanding
the foregoing, the term "Change in Control" shall not include any underwritten
public offering of Shares registered under the Act.

    


    "Code"
shall mean the Internal Revenue Code of 1986, as amended.

    


    "Committee"
shall mean a committee of Directors appointed by the Board in accordance with
Section 4 of the Plan.

    


    "Common
Stock" shall mean the common stock of the Company.

    


    "Company"
shall mean National Technical Systems, Inc., a California corporation, or its
successor.

    


    "Consultant"
shall mean any natural person, other than an Employee or Director, who performs
bona fide services for the Company or an Affiliate as a consultant or
advisor.

    


    "Conversion
Award" has the meaning set forth in Section 4(b)(xii) of the Plan.

    


    "Director"
shall mean a member of the Board.

    


    "Disability"
shall mean permanent and total disability as defined in Section 22(e)(3) of the
Code.

    


    "Employee"
shall mean an employee of the Company or any Affiliate, and may include an
Officer or Director.  Within the limitations of Applicable Law, the
Administrator shall have the discretion to determine the effect upon an Award
and upon an individual's status as an Employee in the case of (i) any individual
who is classified by the Company or its Affiliate as leased from or otherwise
employed by a third party or as intermittent or temporary, even if any such
classification is changed retroactively as a result of an audit, litigation or
otherwise; (ii) any leave of absence approved by the Company or an Affiliate;
(iii) any transfer between locations of employment with the Company or an
Affiliate or between the Company and any Affiliate or between any Affiliates;
(iv) any change in the Awardee's status from an employee to a Consultant or
Director; and (v) an employee who, at the request of the Company or an
Affiliate, becomes employed by any partnership, joint venture or corporation not
meeting the requirements of an Affiliate in which the Company or an Affiliate is
a party.

    


    "Exchange
Act" shall mean the Securities Exchange Act of 1934, as amended.

    


    "Fair
Market Value" shall mean, unless the Administrator determines otherwise, as of
any date, the closing price for such Common Stock as of such date (or if no
sales were reported on such date, the closing price on the last preceding day
for which a sale was reported), as reported in such source as the Administrator
shall determine.

    


    "Grant
Date" shall mean the date upon which an Award is granted to an Awardee pursuant
to this Plan.

    


    "Incentive
Stock Option" shall mean an Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code.


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    "Nonstatutory
Stock Option" shall mean an Option not intended to qualify as an Incentive Stock
Option.

    


    "Officer"
shall mean a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act.

    


    "Option"
shall mean a right granted under Section 8 of the Plan to purchase a certain
number of Shares at such exercise price, at such times, and on such other terms
and conditions as are specified in the agreement or other documents evidencing
the Award (the "Option Agreement").  Both Options intended to qualify
as Incentive Stock Options and Nonstatutory Stock Options may be granted under
the Plan.

    


    "Participant"
shall mean the Awardee or any person (including any estate) to whom an Award has
been assigned or transferred as permitted hereunder.

    


    "Plan"
shall mean this National Technical Systems, Inc. 2006 Equity Incentive
Plan.

    


    "Qualifying
Performance Criteria" shall have the meaning set forth in Section 14(b) of the
Plan.

    


    "Related
Corporation" shall mean any parent or subsidiary (as those terms are defined in
Section 424(e) and (f) of the Code) of the Company.

    


    "Service
Provider" shall mean an Employee, Officer, Director, or Consultant.

    


    "Share"
shall mean a share of the Common Stock, as adjusted in accordance with Section
15 of the Plan.

    


    "Stock
Award" shall mean an award or issuance of Shares or Stock Units made under
Section 11 of the Plan, the grant, issuance, retention, vesting, and
transferability of which is subject during specified periods to such conditions
(including continued service or performance conditions) and terms as are
expressed in the agreement or other documents evidencing the Award (the "Stock
Award Agreement").

    


    "Stock
Appreciation Right" or "SAR" shall mean an Award, granted alone or in connection
with an Option, that pursuant to Section 12 of the Plan is designated as a
SAR.  The terms of the SAR are expressed in the agreement or other
documents evidencing the Award (the "SAR Agreement").

    


    "Stock
Unit" shall mean a bookkeeping entry representing an amount equivalent to the
fair market value of one Share, payable in cash, property or
Shares.  Stock Units represent an unfunded and unsecured obligation of
the Company, except as otherwise provided for by the Administrator.

    


    "Ten-Percent
Stockholder" shall mean the owner of stock (as determined under Section 424(d)
of the Code) possessing more than 10% of the total combined voting power of all
classes of stock of the Company (or any Related Corporation).

    


    "Termination
of Service" shall mean ceasing to be a Service Provider.  However, for
Incentive Stock Option purposes, Termination of Service will occur when the
Awardee ceases to be an employee (as determined in accordance with Section
3401(c) of the Code and the regulations promulgated thereunder) of the Company
or one of its Related Corporations.  The Administrator shall determine
whether any corporate transaction, such as a sale or spin-off of a division or
business unit, or a joint venture, shall be deemed to result in a Termination of
Service.


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    3.          
  Stock Subject to the Plan.

    


    Aggregate
Limits.

    


    The
maximum aggregate number of Shares that may be issued under the Plan through
Awards is 300,000 Shares.  Notwithstanding the foregoing, the maximum
aggregate number of Shares that may be issued under the Plan through Incentive
Stock Options is 300,000 Shares.  The limitations of this Section
3(a)(i) shall be subject to the adjustments provided for in Section 15 of the
Plan.

    


    Upon
payment in Shares pursuant to the exercise of an Award, the number of Shares
available for issuance under the Plan shall be reduced only by the number of
Shares actually issued in such payment.  If any outstanding Award
expires or is terminated or canceled without having been exercised or settled in
full, or if Shares acquired pursuant to an Award subject to forfeiture or
repurchase are forfeited or repurchased by the Company, the Shares allocable to
the terminated portion of such Award or such forfeited or repurchased Shares
shall again be available to grant under the Plan.  Notwithstanding the
foregoing, the aggregate number of shares of Common Stock that may be issued
under the Plan upon the exercise of Incentive Stock Options shall not be
increased for restricted Shares that are forfeited or
repurchased.  Notwithstanding anything in the Plan, or any Award
Agreement to the contrary, Shares attributable to Awards transferred under any
Award transfer program shall not be again available for grant under the
Plan.  The Shares subject to the Plan may be either Shares reacquired
by the Company, including Shares purchased in the open market, or authorized but
unissued Shares.

    


    Code
Section 162(m) Limit.  Subject to the provisions of Section 15 of the
Plan, the aggregate number of Shares subject to Awards granted under this Plan
during any calendar year to any one Awardee shall not exceed 30,000, except that
in connection with his or her initial service, an Awardee may be granted Awards
covering up to an additional 30,000 Shares.  Notwithstanding anything
to the contrary in the Plan, the limitations set forth in this Section 3(b)
shall be subject to adjustment under Section 15 of the Plan only to the extent
that such adjustment will not affect the status of any Award intended to qualify
as "performance-based compensation" under Code Section 162(m).

    


    4.        
   Administration of the Plan.

    


    Procedure.

    


    Multiple Administrative
Bodies.  The Plan shall be administered by the Board or one or
more Committees, including such delegates as may be appointed under paragraph
(a)(iv) of this Section 4.

    


    Section
162(m).  To the extent that the Administrator determines it to
be desirable to qualify Awards granted hereunder as "performance-based
compensation" within the meaning of Section 162(m) of the Code, Awards to
"covered employees" within the meaning of Section 162(m) of the Code or
Employees that the Committee determines may be "covered employees" in the future
shall be made by a Committee of two or more "outside directors" within the
meaning of Section 162(m) of the Code.

    


    Rule
16b-3.  To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3 promulgated under the Exchange Act ("Rule
16b-3"), Awards to Officers and Directors shall be made in such a manner to
satisfy the requirement for exemption under Rule 16b-3.

    


    Other
Administration.  The Board or a Committee may delegate to an
authorized Officer or Officers of the Company the power to approve Awards to
persons eligible to receive Awards under the Plan who are not (A) subject to
Section 16 of the Exchange Act; or (B) at the time of such approval, "covered
employees" under Section 162(m) of the Code.


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Delegation of Authority for
the Day-to-Day Administration of the Plan.  Except to the
extent prohibited by Applicable Law, the Administrator may delegate to one or
more individuals the day-to-day administration of the Plan and any of the
functions assigned to it in this Plan.  Such delegation may be revoked
at any time.

    


    Powers of
the Administrator.  Subject to the provisions of the Plan and, in the
case of a Committee or delegates acting as the Administrator, subject to the
specific duties delegated to such Committee or delegates, the Administrator
shall have the authority, in its discretion:

    


    to select
the Service Providers of the Company or its Affiliates to whom Awards are to be
granted hereunder;

    


    to
determine the number of shares of Common Stock to be covered by each Award
granted hereunder;

    


    to
determine the type of Award to be granted to the selected Service
Provider;

    


    to
approve the forms of Award Agreements for use under the Plan;

    


    to
determine the terms and conditions, consistent with the terms of the Plan, of
any Award granted hereunder.  Such terms and conditions include the
exercise or purchase price, the time or times when an Award may be exercised
(which may or may not be based on performance criteria), the vesting schedule,
any vesting or exercisability acceleration or waiver of forfeiture restrictions,
the acceptable forms of consideration, the term, and any restriction or
limitation regarding any Award or the Shares relating thereto, based in each
case on such factors as the Administrator, in its sole discretion, shall
determine and may be established at the time an Award is granted or
thereafter;

    


    to
correct administrative errors;

    


    to
construe and interpret the terms of the Plan (including sub-plans and Plan
addenda) and Awards granted pursuant to the Plan;

    


    to adopt
rules and procedures relating to the operation and administration of the Plan to
accommodate the specific requirements of local laws and
procedures.  Without limiting the generality of the foregoing, the
Administrator is specifically authorized (A) to adopt the rules and procedures
regarding the conversion of local currency, withholding procedures, and handling
of stock certificates that vary with local requirements; and (B) to adopt
sub-plans and Plan addenda as the Administrator deems desirable, to accommodate
foreign laws, regulations and practice;

    


    to
prescribe, amend and rescind rules and regulations relating to the Plan,
including rules and regulations relating to sub-plans and Plan
addenda;

    


    to modify
or amend each Award, including the acceleration of vesting, exercisability, or
both; provided, however, that any modification or amendment of an Award is
subject to Section 16 of the Plan and may not materially impair any outstanding
Award unless agreed to by the Participant;

    


    to allow
Participants to satisfy withholding tax amounts by electing to have the Company
withhold from the Shares to be issued pursuant to an Award that number of Shares
having a Fair Market Value equal to the amount required to be
withheld.  The Fair Market Value of the Shares to be withheld shall be
determined in such manner and on such date that the Administrator shall
determine or, in the absence of provision otherwise, on the date that the amount
of tax to be withheld is to be determined.  All elections by a
Participant to have Shares withheld for this purpose shall be made in such form
and under such conditions as the Administrator may provide;


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    to
authorize conversion or substitution under the Plan of any or all stock options,
stock appreciation rights, or other stock awards held by service providers of an
entity acquired by the Company (the "Conversion Awards").  Any
conversion or substitution shall be effective as of the close of the merger or
acquisition.  The Conversion Awards may be Nonstatutory Stock Options
or Incentive Stock Options, as determined by the Administrator, with respect to
options granted by the acquired entity.  Unless otherwise determined
by the Administrator at the time of conversion or substitution, all Conversion
Awards shall have the same terms and conditions as Awards generally granted by
the Company under the Plan;

    


    to
authorize any person to execute on behalf of the Company any instrument required
to effect the grant of an Award previously granted by the
Administrator;

    


    to
determine whether to provide for the right to receive dividends or dividend
equivalents;

    


    to
establish a program whereby Service Providers designated by the Administrator
can reduce compensation otherwise payable in cash in exchange for Awards under
the Plan;

    


    to impose
such restrictions, conditions, or limitations as it determines appropriate as to
the timing and manner of any resales by a Participant or other subsequent
transfers by the Participant of any Shares issued as a result of or under an
Award, including (A) restrictions under an insider trading policy, and (B)
restrictions as to the use of a specified brokerage firm for such resales or
other transfers;

    


    to
provide, either at the time an Award is granted or by subsequent action, that an
Award shall contain as a term thereof, a right, either in tandem with the other
rights under the Award or as an alternative thereto, of the Participant to
receive, without payment to the Company, a number of Shares, cash, or both, the
amount of which is determined by reference to the value of the Award;
and

    


    to make
all other determinations deemed necessary or advisable for administering the
Plan and any Award granted hereunder.

    


    Effect of
Administrator's Decision.  All decisions, determinations and
interpretations by the Administrator regarding the Plan, any rules and
regulations under the Plan and the terms and conditions of any Award granted
hereunder, shall be final and binding on all Participants.  The
Administrator shall consider such factors as it deems relevant, in its sole and
absolute discretion, to making such decisions, determinations and
interpretations, including the recommendations or advice of any officer or other
employee of the Company and such attorneys, consultants and accountants as it
may select.

    


    5.        
   Eligibility.  Awards may be granted to
Service Providers of the Company or any of its Affiliates.

    


    6.        
   Effective Date and Term of the Plan.  Subject to stockholder
approval, the Plan shall become effective upon its adoption by the
Board.  Options, SARs, and Cash Awards may be granted immediately
thereafter; provided, that no Option or SAR may be exercised and no Stock Award
may be granted under the Plan until it is approved by the stockholders of the
Company, in the manner and to the extent required by Applicable Law, within 12
months after the date of adoption by the Board.  The Plan shall
continue in effect for a term of ten years from the date of the Plan's adoption
by the Board unless terminated earlier under Section 16
herein.

    


    7.        
   Term of Award.  The term of each Award
shall be determined by the Administrator and stated in the Award
Agreement.  In the case of an Option, the term shall be ten years from
the Grant Date or such shorter term as may be provided in the Award
Agreement.

    


    8.           
Options.  The
Administrator may grant an Option or provide for the grant of an Option, from
time to time in the discretion of the Administrator or automatically upon the
occurrence of specified events, including the achievement of performance goals,
and for the satisfaction of an event or condition within the control of the
Awardee or within the control of others.


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Option
Agreement.  Each Option Agreement shall contain provisions regarding
(i) the number of Shares that may be issued upon exercise of the Option; (ii)
the type of Option; (iii) the exercise price of the Shares and the means of
payment for the Shares; (iv) the term of the Option; (v) such terms and
conditions on the vesting or exercisability of an Option, or both, as may be
determined from time to time by the Administrator; (vi) restrictions on the
transfer of the Option and forfeiture provisions; and (vii) such further terms
and conditions, in each case not inconsistent with this Plan, as may be
determined from time to time by the Administrator.

    


    Exercise
Price.  The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be determined by the Administrator,
subject to the following:

    


    In the
case of an Incentive Stock Option, the per Share exercise price shall be no less
than 100% of the Fair Market Value per Share on the Grant
Date.  Notwithstanding the foregoing, if any Incentive Stock Option is
granted to a Ten-Percent Stockholder, then the exercise price shall not be less
than 110% of the Fair Market Value of a share of Common Stock on the Grant
Date.

    


    In the
case of a Nonstatutory Stock Option, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the Grant
Date.  The per Share exercise price may also vary according to a
predetermined formula; provided, that the exercise price never falls below 100%
of the Fair Market Value per Share on the Grant Date.

    


    Notwithstanding
the foregoing, at the Administrator's discretion, Conversion Awards may be
granted in substitution or conversion of options of an acquired entity, with a
per Share exercise price of less than 100% of the Fair Market Value per Share on
the date of such substitution or conversion.

    


    Vesting
Period and Exercise Dates.  Options granted under this Plan shall
vest, be exercisable, or both, at such times and in such installments during the
Option's term as determined by the Administrator.  The Administrator
shall have the right to make the timing of the ability to exercise any Option
granted under this Plan subject to continued service, the passage of time, or
such performance requirements as deemed appropriate by the
Administrator.  At any time after the grant of an Option, the
Administrator may reduce or eliminate any restrictions surrounding any
Participant's right to exercise all or part of the Option.

    


    Form of
Consideration.  The Administrator shall determine the acceptable form
of consideration for exercising an Option, including the method of payment,
either through the terms of the Option Agreement or at the time of exercise of
an Option.  The consideration, determined by the Administrator (or
pursuant to authority expressly delegated by the Board, a Committee, or other
person), and in the form and amount required by applicable law, shall be
actually received before issuing any Shares pursuant to the Plan; which
consideration shall have a value, as determined by the Board, not less than the
par value of such Shares.  Acceptable forms of consideration may
include:

    


    cash;

    


    check or
wire transfer;

    


    subject
to any conditions or limitations established by the Administrator, other Shares
that have a Fair Market Value on the date of surrender or attestation that does
not exceed the aggregate exercise price of the Shares as to which said Option
shall be exercised;

    


    consideration
received by the Company under a broker-assisted sale and remittance program
acceptable to the Administrator to the extent that this procedure would not
violate Section 402 of the Sarbanes-Oxley Act of 2002, as amended;

    


    cashless
exercise, subject to any conditions or limitations established by the
Administrator;


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    such
other consideration and method of payment for the issuance of Shares to the
extent permitted by Applicable Laws; or

    


    any
combination of the foregoing methods of payment.

    


    9.         
   Incentive Stock Option Limitations.

    


    Eligibility.  Only
employees (as determined in accordance with Section 3401(c) of the Code and the
regulations promulgated thereunder) of the Company or any of its Related
Corporations may be granted Incentive Stock Options.

    


    $100,000
Limitation.  Notwithstanding the designation "Incentive Stock Option"
in an Option Agreement, if the aggregate Fair Market Value of the Shares with
respect to which Incentive Stock Options are exercisable for the first time by
the Awardee during any calendar year (under all plans of the Company and any of
its Related Corporations) exceeds $100,000, then the portion of such Options
that exceeds $100,000 shall be treated as Nonstatutory Stock
Options.  An Incentive Stock Option is considered to be first
exercisable during a calendar year if the Incentive Stock Option will become
exercisable at any time during the year, assuming that any condition on the
Awardee's ability to exercise the Incentive Stock Option related to the
performance of services is satisfied.  If the Awardee's ability to
exercise the Incentive Stock Option in the year is subject to an acceleration
provision, then the Incentive Stock Option is considered first exercisable in
the calendar year in which the acceleration provision is
triggered.  For purposes of this Section 9(b), Incentive Stock Options
shall be taken into account in the order in which they were
granted.  However, because an acceleration provision is not taken into
account before its triggering, an Incentive Stock Option that becomes
exercisable for the first time during a calendar year by operation of such
provision does not affect the application of the $100,000 limitation with
respect to any Incentive Stock Option (or portion thereof) exercised before such
acceleration.  The Fair Market Value of the Shares shall be determined
as of the Grant Date.

    


    Leave of
Absence.  For purposes of Incentive Stock Options, no leave of absence
may exceed three months, unless the right to reemployment upon expiration of
such leave is provided by statute or contract.  If the period of leave
exceeds three months and the Awardee's right to reemployment is not provided by
statute or contract, the Awardee's employment with the Company shall be deemed
to terminate on the first day immediately following such three-month period, and
any Incentive Stock Option granted to the Awardee shall cease to be treated as
an Incentive Stock Option and shall terminate upon the expiration of the
three-month period starting on the date the employment relationship is deemed
terminated.

    


    Transferability.  The
Option Agreement must provide that an Incentive Stock Option cannot be
transferable by the Awardee otherwise than by will or the laws of descent and
distribution, and, during the lifetime of such Awardee, must not be exercisable
by any other person.  Notwithstanding the foregoing, the
Administrator, in its sole discretion, may allow the Awardee to transfer his or
her Incentive Stock Option to a trust where under Section 671 of the Code and
other Applicable Law, the Awardee is considered the sole beneficial owner of the
Option while it is held in the trust. If the terms of an Incentive Stock Option
are amended to permit transferability, the Option will be treated for tax
purposes as a Nonstatutory Stock Option.

    


    Exercise
Price.  The per Share exercise price of an Incentive Stock Option
shall be determined by the Administrator in accordance with Section 8(b)(i) of
the Plan.

    


    Ten-Percent
Stockholder.  If any Incentive Stock Option is granted to a
Ten-Percent Stockholder, then the Option term shall not exceed five years
measured from the date of grant of such Option.

    


    Other
Terms.  Option Agreements evidencing Incentive Stock Options shall
contain such other terms and conditions as may be necessary to qualify, to the
extent determined desirable by the Administrator, as Incentive Stock Options
under the applicable provisions of Section 422 of the Code.


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    10.          Exercise
of Option.

    


    Procedure
for Exercise; Rights as a Stockholder.

    


    Any
Option granted hereunder shall be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the Administrator
and set forth in the respective Award Agreement.

    


    An Option
shall be deemed exercised when the Company receives (A) written or electronic
notice of exercise (in accordance with the Award Agreement) from the person
entitled to exercise the Option; (B) full payment for the Shares with respect to
which the related Option is exercised; and (C) with respect to Nonstatutory
Stock Options, payment of all applicable withholding taxes.

    


    Shares
issued upon exercise of an Option shall be issued in the name of the Participant
or, if requested by the Participant, in the name of the Participant and his or
her spouse.  Unless provided otherwise by the Administrator or
pursuant to this Plan, until the Shares are issued (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company), no right to vote or receive dividends or any other rights
as a stockholder shall exist with respect to the Shares subject to an Option,
notwithstanding the exercise of the Option.

    


    The
Company shall issue (or cause to be issued) such Shares as soon as
administratively practicable after the Option is exercised.  An Option
may not be exercised for a fraction of a Share.

    


    Effect of
Termination of Service on Options.

    


    Generally.  Unless
otherwise provided for by the Administrator, if a Participant ceases to be a
Service Provider, other than upon the Participant's death or Disability, the
Participant may exercise his or her Option within such period as is specified in
the Award Agreement to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in the Award Agreement).  In the absence of a
specified time in the Award Agreement, the vested portion of the Option will
remain exercisable for three months following the Participant's
termination.  Unless otherwise provided by the Administrator, if on
the date of termination the Participant is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option will revert to
the Plan.  If after the Termination of Service the Participant does
not exercise his or her Option within the time specified by the Administrator,
the Option will terminate, and the Shares covered by such Option will revert to
the Plan.

    


    Disability of
Awardee.  Unless otherwise provided for by the Administrator,
if a Participant ceases to be a Service Provider as a result of the
Participant's Disability, the Participant may exercise his or her Option within
such period as is specified in the Award Agreement to the extent the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Award Agreement).  In the
absence of a specified time in the Award Agreement, the Option will remain
exercisable for twelve months following the Participant's
termination.  Unless otherwise provided by the Administrator, if at
the time of Disability the Participant is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option will revert to
the Plan.  If the Option is not so exercised within the time specified
herein, the Option will terminate, and the Shares covered by such Option will
revert to the Plan.

    


    Death of
Awardee.  Unless otherwise provided for by the Administrator,
if a Participant dies while a Service Provider, the Option may be exercised
following the Participant's death within such period as is specified in the
Award Agreement to the extent that the Option is vested on the date of death
(but in no event may the Option be exercised later than the expiration of the
term of such Option as set forth in the Award Agreement), by the Participant's
designated beneficiary, provided such beneficiary


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    has been
designated before the Participant's death in a form acceptable to the
Administrator.  If no such beneficiary has been designated by the
Participant, then such Option may be exercised by the personal representative of
the Participant's estate or by the person or persons to whom the Option is
transferred pursuant to the Participant's will or in accordance with the laws of
descent and distribution.  In the absence of a specified time in the
Award Agreement, the Option will remain exercisable for twelve months following
Participant's death.  Unless otherwise provided by the Administrator,
if at the time of death Participant is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option will revert to
the Plan.  If the Option is not so exercised within the time specified
herein, the Option will terminate, and the Shares covered by such Option will
revert to the Plan.

    


    11.          Stock
Awards.

    


    Stock
Award Agreement.  Each Stock Award Agreement shall contain provisions
regarding (i) the number of Shares subject to such Stock Award or a formula for
determining such number; (ii) the purchase price of the Shares, if any, and the
means of payment for the Shares; (iii) the performance criteria, if any, and
level of achievement versus these criteria that shall determine the number of
Shares granted, issued, retained, or vested, as applicable; (iv) such terms and
conditions on the grant, issuance, vesting, or forfeiture of the Shares, as
applicable, as may be determined from time to time by the Administrator; (v)
restrictions on the transferability of the Stock Award; and (vi) such further
terms and conditions in each case not inconsistent with this Plan as may be
determined from time to time by the Administrator.

    


    Restrictions
and Performance Criteria.  The grant, issuance, retention, and vesting
of each Stock Award may be subject to such performance criteria and level of
achievement versus these criteria as the Administrator shall determine, which
criteria may be based on financial performance, personal performance
evaluations, or completion of service by the Awardee.

    


    Notwithstanding
anything to the contrary herein, the performance criteria for any Stock Award
that is intended to satisfy the requirements for "performance-based
compensation" under Section 162(m) of the Code shall be established by the
Administrator based on one or more Qualifying Performance Criteria selected by
the Administrator and specified in writing.

    


    Forfeiture.  Unless
otherwise provided for by the Administrator, upon the Awardee's Termination of
Service, the unvested Stock Award and the Shares subject thereto shall be
forfeited, provided that to the extent that the Participant purchased any Shares
pursuant to such Stock Award, the Company shall have a right to repurchase the
unvested portion of such Shares at the original price paid by the
Participant.

    


    Rights as
a Stockholder.  Unless otherwise provided by the Administrator, the
Participant shall have the rights equivalent to those of a stockholder and shall
be a stockholder only after Shares are issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company) to the Participant.  Unless otherwise provided by the
Administrator, a Participant holding Stock Units shall be entitled to receive
dividend payments as if he or she were an actual stockholder.

    


    12.          Stock
Appreciation Rights.  Subject to the terms and
conditions of the Plan, a SAR may be granted to a Service Provider at any time
and from time to time as determined by the Administrator in its sole
discretion.

    


    Number of
SARs.  The Administrator shall have complete discretion to determine
the number of SARs granted to any Service Provider.

    


    Exercise
Price and Other Terms.  The per SAR exercise price shall be no less
than 100% of the Fair Market Value per Share on the Grant Date.  The
Administrator, subject to the provisions of the Plan, shall have complete
discretion to determine the other terms and conditions of SARs granted under the
Plan.


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Exercise
of SARs.  SARs shall be exercisable on such terms and conditions as
the Administrator, in its sole discretion, shall determine.

    


    SAR
Agreement.  Each SAR grant shall be evidenced by a SAR Agreement that
will specify the exercise price, the term of the SAR, the conditions of
exercise, and such other terms and conditions as the Administrator, in its sole
discretion, shall determine.

    


    Expiration
of SARs.  A SAR granted under the Plan shall expire upon the date
determined by the Administrator, in its sole discretion, and set forth in the
SAR Agreement.  Notwithstanding the foregoing, the rules of Section
10(b) will also apply to SARs.

    


    Payment
of SAR Amount.  Upon exercise of a SAR, the Participant shall be
entitled to receive a payment from the Company in an amount equal to the
difference between the Fair Market Value of a Share on the date of exercise over
the exercise price of the SAR.  This amount shall be paid in cash,
Shares of equivalent value, or a combination of both, as the Administrator shall
determine.

    


    13.          Cash
Awards.  Each Cash
Award will confer upon the Participant the opportunity to earn a future payment
tied to the level of achievement with respect to one or more performance
criteria established for a performance period.

    


    Cash
Award.  Each Cash Award shall contain provisions regarding (i) the
performance goal or goals and maximum amount payable to the Participant as a
Cash Award; (ii) the performance criteria and level of achievement versus these
criteria that shall determine the amount of such payment; (iii) the period as to
which performance shall be measured for establishing the amount of any payment;
(iv) the timing of any payment earned by virtue of performance; (v) restrictions
on the alienation or transfer of the Cash Award before actual payment; (vi)
forfeiture provisions; and (vii) such further terms and conditions, in each case
not inconsistent with the Plan, as may be determined from time to time by the
Administrator.  The maximum amount payable as a Cash Award that is
settled for cash may be a multiple of the target amount payable, but the maximum
amount payable pursuant to that portion of a Cash Award granted under this Plan
for any fiscal year to any Awardee that is intended to satisfy the requirements
for "performance-based compensation" under Section 162(m) of the Code shall not
exceed $1,000,000.

    


    Performance
Criteria.  The Administrator shall establish the performance criteria
and level of achievement versus these criteria that shall determine the target
and the minimum and maximum amount payable under a Cash Award, which criteria
may be based on financial performance or personal performance evaluations or
both.  The Administrator may specify the percentage of the target Cash
Award that is intended to satisfy the requirements for "performance-based
compensation" under Section 162(m) of the Code.  Notwithstanding
anything to the contrary herein, the performance criteria for any portion of a
Cash Award that is intended to satisfy the requirements for "performance-based
compensation" under Section 162(m) of the Code shall be a measure established by
the Administrator based on one or more Qualifying Performance Criteria selected
by the Administrator and specified in writing.

    


    Timing
and Form of Payment.  The Administrator shall determine the timing of
payment of any Cash Award.  The Administrator may specify the form of
payment of Cash Awards, which may be cash or other property, or may provide for
an Awardee to have the option for his or her Cash Award, or such portion thereof
as the Administrator may specify, to be paid in whole or in part in cash or
other property.

    


    Termination
of Service.  The Administrator shall have the discretion to determine
the effect of a Termination of Service on any Cash Award due to (i) disability,
(ii) retirement, (iii) death, (iv) participation in a voluntary severance
program, or (v) participation in a work force restructuring.


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    14.          Other
Provisions Applicable to Awards.

    


    Non-Transferability
of Awards.  An Award may be exercised, during the lifetime of the
Participant, only by the Participant, and unless determined otherwise by the
Administrator, may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descent and
distribution.  The Administrator may make an Award transferable to an
Awardee's family member or any other person or entity.  If the
Administrator makes an Award transferable, either at the time of grant or
thereafter, such Award shall contain such additional terms and conditions as the
Administrator deems appropriate, and any transferee shall be deemed bound by
such terms upon acceptance of such transfer.

    


    Qualifying
Performance Criteria.  For purposes of this Plan, the term "Qualifying
Performance Criteria" shall mean any one or more of the following performance
criteria, applied to either the Company as a whole or to a business unit,
Affiliate, or business segment, either individually, alternatively, or in any
combination, and measured either annually or cumulatively over a period of
years, on an absolute basis or relative to a pre-established target, to previous
years' results or to a designated comparison group, in each case as specified by
the Committee in the Award:  (i) cash flow, (ii) earnings (including
gross margin, earnings before interest and taxes, earnings before taxes, and net
earnings), (iii) earnings per share, (iv) growth in earnings or earnings per
share, (v) stock price, (vi) return on equity or average stockholders' equity,
(vii) total stockholder return, (viii) return on capital, (ix) return on assets
or net assets, (x) return on investment, (xi) revenue, (xii) income or net
income, (xiii) operating income or net operating income, (xiv) operating profit
or net operating profit, (xv) operating margin, (xvi) return on operating
revenue, (xvii) market share, (xviii) contract awards or backlog, (xix) overhead
or other expense reduction, (xx) growth in stockholder value relative to the
moving average of the S&P 500 Index or a peer group index, (xxi) credit
rating, (xxii) strategic plan development and implementation, (xxiii)
improvement in workforce diversity, and (xxiv) EBITDA.

    


    Certification.  Before
payment of any compensation under an Award intended to qualify as
"performance-based compensation" under Section 162(m) of the Code, the Committee
shall certify the extent to which any Qualifying Performance Criteria and any
other material terms under such Award have been satisfied (other than in cases
where such relate solely to the increase in the value of the Common
Stock).

    


    Discretionary
Adjustments Pursuant to Section 162(m).  Notwithstanding satisfaction
or completion of any Qualifying Performance Criteria, to the extent specified at
the time of grant of an Award to "covered employees" within the meaning of
Section 162(m) of the Code, the number of Shares, Options or other benefits
granted, issued, retained, or vested under an Award on account of satisfaction
of such Qualifying Performance Criteria may be reduced by the Committee on the
basis of such further considerations as the Committee in its sole discretion
shall determine.

    


    Section
409A.  Notwithstanding anything in the Plan to the contrary, it is the
Company's intent that all Awards granted under this Plan comply with Section
409A of the Code, and each Award shall be interpreted in a manner consistent
with that intention.

    


    15.          Adjustments
upon Changes in Capitalization, Dissolution, Merger or Asset Sale.

    


    Changes
in Capitalization.  Subject to any required action by the stockholders
of the Company, (i) the number and kind of Shares covered by each outstanding
Award, and the number and kind of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Awards have yet been
granted or that have been returned to the Plan upon cancellation or expiration
of an Award; (ii) the price per Share subject to each such outstanding Award;
and (iii) the Share limitations set forth in Section 3 of the Plan, may be
appropriately adjusted if any change is made in the Common Stock subject to the
Plan, or subject to any Award, without the receipt of consideration by the
Company through a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, merger, consolidation, reorganization,
recapitalization, reincorporation, spin-off, dividend in property other than
cash, liquidating dividend, extraordinary dividends or distributions,
combination of shares, exchange of shares, change in corporate structure or
other transaction


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." The Administrator shall
make such adjustment in its sole discretion, 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 Common Stock subject to an Award.

    


    Dissolution
or Liquidation.  In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Participant as
soon as practicable before the effective date of such proposed
transaction.  The Administrator in its discretion may provide for an
Option to be fully vested and exercisable until ten days before such proposed
transaction.  In addition, the Administrator may provide that any
restrictions on any Award shall lapse before the proposed transaction, provided
the proposed dissolution or liquidation takes place at the time and in the
manner contemplated.  To the extent it has not been previously
exercised, an Award will terminate immediately before the consummation of such
proposed transaction.

    


    Change in
Control.  If there is a Change in Control of the Company, as
determined by the Board or a Committee, the Board or Committee, or board of
directors of any surviving entity or acquiring entity may, in its discretion,
(i) provide for the assumption, continuation or substitution (including an award
to acquire substantially the same type of consideration paid to the stockholders
in the transaction in which the Change in Control occurs) of, or adjustment to,
all or any part of the Awards; (ii) accelerate the vesting of all or any part of
the Options and SARs and terminate any restrictions on all or any part of the
Stock Awards or Cash Awards; (iii) provide for the cancellation of all or any
part of the Awards for a cash payment to the Participants; and (iv) provide for
the cancellation of all or any part of the Awards as of the closing of the
Change in Control; provided, that the Participants are notified that they must
exercise or redeem their Awards (including, at the discretion of the Board or
Committee, any unvested portion of such Award) at or before the closing of the
Change in Control.

    


    16.          Amendment
and Termination of the Plan.

    


    Amendment
and Termination.  The Administrator may amend, alter, or discontinue
the Plan or any Award Agreement, but any such amendment shall be subject to
approval of the stockholders of the Company in the manner and to the extent
required by Applicable Law.

    


    Effect of
Amendment or Termination.  No amendment, suspension, or termination of
the Plan shall materially impair the rights of any Award, unless agreed
otherwise between the Participant and the Administrator.  Termination
of the Plan shall not affect the Administrator's ability to exercise the powers
granted to it hereunder with respect to Awards granted under the Plan before the
date of such termination.

    


    Effect of
the Plan on Other Arrangements.  Neither the adoption of the Plan by
the Board or a Committee nor the submission of the Plan to the stockholders of
the Company for approval shall be construed as creating any limitations on the
power of the Board or any Committee to adopt such other incentive arrangements
as it or they may deem desirable, including the granting of restricted stock or
stock options otherwise than under the Plan, and such arrangements may be either
generally applicable or applicable only in specific cases.

    


    17.          Designation
of Beneficiary.

    


    An
Awardee may file a written designation of a beneficiary who is to receive the
Awardee's rights pursuant to Awardee's Award or the Awardee may include his or
her Awards in an omnibus beneficiary designation for all benefits under the
Plan.  To the extent that Awardee has completed a designation of
beneficiary such beneficiary designation shall remain in effect with respect to
any Award hereunder until changed by the Awardee to the extent enforceable under
Applicable Law.


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    The
Awardee may change such designation of beneficiary at any time by written
notice.  If an Awardee dies and no beneficiary is validly designated
under the Plan who is living at the time of such Awardee's death, the Company
shall allow the executor or administrator of the estate of the Awardee to
exercise the Award, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may allow the
spouse or one or more dependents or relatives of the Awardee to exercise the
Award to the extent permissible under Applicable Law.

    


    18.          No
Right to Awards or to Service.  No person shall have any
claim or right to be granted an Award and the grant of any Award shall not be
construed as giving an Awardee the right to continue in the service of the
Company or its Affiliates.  Further, the Company and its Affiliates
expressly reserve the right, at any time, to dismiss any Service Provider or
Awardee at any time without liability or any claim under the Plan, except as
provided herein or in any Award Agreement entered into
hereunder.

    


    19.          Preemptive
Rights.  No Shares
will be issued under the Plan in violation of any preemptive rights held by any
stockholder of the Company.

    


    20.          Legal
Compliance.  No Share
will be issued pursuant to an Award under the Plan unless the issuance and
delivery of such Share, as well as the exercise of such Award, if applicable,
will comply with Applicable Laws.  Issuance of Shares under the Plan
shall be subject to the approval of counsel for the Company with respect to such
compliance.  Notwithstanding anything in the Plan to the contrary, the
Plan is intended to comply with the requirements of Section 409A of the Code and
shall be interpreted in a manner consistent with that
intention.

    


    21.          Inability
to Obtain Authority.  To the extent the
Company is unable to or the Administrator deems that it is not feasible to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, the Company shall be relieved of any liability
with respect to the failure to issue or sell such Shares as to which such
requisite authority shall not have been obtained.

    


    22.          Reservation
of Shares.  The
Company, during the term of this Plan, will at all times reserve and keep
available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.

    


    23.          Notice.  Any written notice to
the Company required by any provisions of this Plan shall be addressed to the
Secretary of the Company and shall be effective when
received.

    


    24.          Governing
Law; Interpretation of Plan and Awards.

    


    This Plan
and all determinations made and actions taken pursuant hereto shall be governed
by the substantive laws, but not the choice of law rules, of the state of
California.

    


    If any
provision of the Plan or any Award granted under the Plan is declared to be
illegal, invalid, or otherwise unenforceable by a court of competent
jurisdiction, such provision shall be reformed, if possible, to the extent
necessary to render it legal, valid, and enforceable, or otherwise deleted, and
the remainder of the terms of the Plan and Award shall not be affected except to
the extent necessary to reform or delete such illegal, invalid, or unenforceable
provision.

    


    The
headings preceding the text of the sections hereof are inserted solely for
convenience of reference, and shall not constitute a part of the Plan, nor shall
they affect its meaning, construction or effect.

    


    The terms
of the Plan and any Award shall inure to the benefit of and be binding upon the
parties hereto and their respective permitted heirs, beneficiaries, successors,
and assigns.

    


    All
questions arising under the Plan or under any Award shall be decided by the
Administrator in its total and absolute discretion.  If the
Participant believes that a decision by the Administrator with respect to such
person was arbitrary or capricious, the Participant may request arbitration with
respect to such decision.  The review by the arbitrator shall be
limited to determining whether the Administrator's decision was arbitrary or
capricious.  This arbitration shall be the sole and exclusive review
permitted of the Administrator's decision, and the Awardee shall as a condition
to the receipt of an Award be deemed to waive explicitly any right to judicial
review.


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    25.          Limitation
on Liability.  The
Company and any Affiliate or Related Corporation that is in existence or
hereafter comes into existence shall not be liable to a Participant, an
Employee, an Awardee, or any other persons as to:

    


    The
Non-Issuance of Shares.  The non-issuance or sale of Shares as to
which the Company has been unable to obtain from any regulatory body having
jurisdiction the authority deemed by the Company's counsel to be necessary to
the lawful issuance and sale of any shares hereunder; and

    


    Tax
Consequences.  Any tax consequence expected, but not realized, by any
Participant, Employee, Awardee or other person due to the receipt, exercise or
settlement of any Option or other Award granted hereunder.

    


    26.          Unfunded
Plan.  Insofar as it
provides for Awards, the Plan shall be unfunded.  Although bookkeeping
accounts may be established with respect to Awardees who are granted Stock
Awards under this Plan, any such accounts will be used merely as a bookkeeping
convenience.  The Company shall not be required to segregate any
assets that may at any time be represented by Awards, nor shall this Plan be
construed as providing for such segregation, nor shall the Company or the
Administrator be deemed a trustee of stock or cash to be awarded under the
Plan.  Any liability of the Company to any Participant with respect to
an Award shall be based solely upon any contractual obligations that may be
created by the Plan; no such obligation of the Company shall be deemed secured
by any pledge or other encumbrance on any property of the
Company.  Neither the Company nor the Administrator shall be required
to give any security or bond for the performance of any obligation that may be
created by this Plan.

    


    IN
WITNESS WHEREOF, the Company, by its duly authorized officer, has executed this
Plan, effective as of _____________, 2006.

    


    


    
      	 
      	
              NATIONAL
      TECHNICAL SYSTEMS, INC.

            	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
              By:

            	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
              Its: