Document:

Exhibit 10.5

                      Compensation for Aaron P. Hollander

     On  August  3,  2005,  the   Compensation   Committee  (the   "Compensation
Committee")  of the Board of Directors of First  Aviation  Services,  Inc.  (the
"Company") approved an employment arrangement with Aaron P. Hollander,  Chairman
of the Board of  Directors  of the Company  ("Chairman"),  pursuant to which Mr.
Hollander  will  receive  compensation  for certain  duties to be  performed  as
Chairman.  Effective as of June 1, 2005,  Mr.  Hollander  will receive an annual
base salary of $150,000,  as well as standard benefits provided to all employees
of the Company.  Mr. Hollander may receive a bonus and/or additional benefits at
the discretion of the  Compensation  Committee.  Mr.  Hollander's  employment as
Chairman may be terminated at-will.

     In consideration of the compensation granted to Mr. Hollander in connection
with his duties as Chairman,  Mr. Hollander,  effective as of June 1, 2005, will
no longer be  entitled  to  receive  any fees or  additional  compensation  with
respect to his duties as a member of the Board of Directors of the Company.EXHIBIT 10.8 

          AMENDMENT
NUMBER FIVE TO REVOLVING CREDIT AGREEMENT 

          This
AMENDMENT NUMBER FIVE TO REVOLVING CREDIT AGREEMENT (this “Amendment”),
 dated as of July 1, 2005, is entered into among NATIONAL TECHNICAL SYSTEMS,
INC., a California corporation (“Parent”), NTS TECHNICAL SYSTEMS, a
California corporation, dba National Technical Systems (“NTS”), XXCAL,
INC., a California corporation (“XXCAL”), APPROVED ENGINEERING TEST
LABORATORIES, INC., a California corporation (“AETL”), ETCR, INC., a
California corporation (“ETCR”), ACTON ENVIRONMENTAL TESTING
CORPORATION, a Massachusetts corporation (“Acton”), PHASE SEVEN
LABORATORIES, INC., a California corporation (“Phase Seven”), and one or
more Subsidiaries of Parent, whether now existing or hereafter acquired or
formed, which become party to the Agreement (as defined below) by executing an
Addendum in the form of Exhibit 1 of the Agreement (NTS, XXCAL, AETL, ETCR,
Acton, Phase Seven and such other Subsidiaries are sometimes individually referred
to herein as a “Subsidiary Borrower” and collectively referred to herein
as “Subsidiary Borrowers”, and Subsidiary Borrowers and Parent are
sometimes individually referred to herein as a “Borrower” and collectively
referred to herein as “Borrowers”), the financial institutions from time
to time parties hereto as Lenders, whether by execution hereof or an Assignment
and Acceptance in accordance with Section 11.5(c) of the Agreement, and
Comerica Bank, in its capacity as contractual representative for itself and the
other Lenders (“Agent”), with reference to the following facts: 

          A.          Borrowers
(other than Phase Seven), Agent and Lenders previously entered into that
certain Revolving Credit Agreement, dated as of November 21, 2001, as amended
by that certain Amendment Number One to Revolving Credit Agreement, dated as of
July 17, 2002, that certain Amendment Number Two to Revolving Credit Agreement,
dated as of November 25, 2002, that certain Amendment Number Three to Revolving
Credit Agreement, dated as of July 21, 2003, and that certain Amendment Number
Four to Revolving Credit Agreement, dated as of July 30, 2004 (as amended, the “Agreement”);

          B.          Borrowers
(other than Phase Seven) and Agent, in its capacity as Agent for the Lenders,
entered into that certain Security Agreement, dated as of November 21, 2001
(the “Security Agreement”);

          C.          Concurrent
herewith, Phase Seven is executing and delivering an Addendum to Revolving
Credit Agreement and an Addendum to Security Agreement in order to become a
Borrower under the Agreement and the Security Agreement; and 

          D
          Borrowers, Agent
and Lenders desire to further amend the Agreement in accordance with the terms
of this Amendment. 

          NOW, THEREFORE,
in consideration of the foregoing, the parties hereto hereby agree as follows: 

          1.          Defined
Terms. All initially capitalized terms used but not defined herein shall
have the meanings assigned to such terms in the Agreement. 

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          2
          Amendments to
the Agreement.

          2.1          Borrowers.
All references to “Borrowers” in the Agreement shall include Phase Seven.

          2.2
          Definitions.

          (a)
          The following
definitions set forth in Section 1.1 of the Agreement are hereby amended in
their entirety as follows: 

	
   

  	
   

  
	
   

  	
            “Borrowing”
  means a borrowing of Revolving Loans or Equipment Loans from the Revolving
  Loan Lenders or Equipment Loan Lenders, as applicable, pursuant to the terms
  and conditions hereof. 

  
	
   

  	
   

  
	
   

  	
            “Commitment”
  means a Lender’s Revolving Credit Commitment, Term Loan Commitment, and/or
  Equipment Loan Commitment, as the context requires.

  
	
   

  	
   

  
	
   

  	
            “Consolidated
  Adjusted Net Income” means, with respect to any period, the consolidated
  net income of Borrowers and the Subsidiaries after all federal, state and
  local income taxes reflected on Borrowers’ Financial Statement for such
  period, calculated in accordance with GAAP plus (x) any non-cash
  compensation paid to Borrowers’ and the Subsidiaries’ officers, directors and
  employees, including non-cash stock option expense determined in accordance
  with FAS 123R and (y) the write-off of goodwill, if any, as required by FASB
  142. 

  
	
   

  	
   

  
	
   

  	
            “Debt
  Service Coverage Ratio” means, with the exception of test dates July 31,
  2005 and October 31, 2005, for the rolling four fiscal quarter period ending
  on the date of determination, the ratio of (i) the sum of: (1) Consolidated
  Adjusted Net Income for such period, plus (2) each Borrower’s and the
  Subsidiaries’ consolidated depreciation and amortization expense for such
  period (including any non-cash compensation paid to Borrowers’ and the
  Subsidiaries’ officers, directors, employees, and agents), minus (3)
  any Distributions paid or Capital Stock of each Borrower acquired or any
  other action taken under Section 7.10 during such period, plus or minus
  (4) any change in Borrowers’ deferred federal or state taxes during such
  period, minus (5) unfunded cash Capital Expenditures during such
  period (including any fixed assets acquired pursuant to a Permitted
  Acquisition), to (ii) the sum of: (1) the current portion of Borrowers’ long
  term Debt that came due during such period, plus (2) the current
  portion of Borrowers’ Capital Lease Obligations that came due during such
  period. For test dates July 31, 2005 and October 31, 2005, the calculations
  of Debt Service Coverage Ratio shall be based on the annualized year to date
  numbers. 

  
	
   

  	
   

  
	
   

  	
            “Fees”
  means the Closing Fee, the Facility Fee, the Equipment Fee, the Late Payment
  Fee, the Letter of Credit Fees and the Audit Fees. 

  

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                        “Interest
Payment Date” means: 

	
   

  	
   

  
	
   

  	
                      (i)          
  with respect to each Prime Lending Rate Portion, the last day of each and
  every month commencing the last such day after the making of such Loan, and
  the Equipment Loans Maturity Date (in the case of the Equipment Loans), the
  Revolving Loans Maturity Date (in the case of the Revolving Loans), and the
  Term Loans Maturity Date (in the case of the Term Loans);

  
	
   

  	
   

  
	
   

  	
                      (ii)          
  with respect to each LIBOR Lending Rate Portion, the earlier of: (1) the last
  day of the Interest Period with respect thereto, or (2) if the Interest
  Period has a duration of more than three months, every LIBOR Business Day
  that occurs during such Interest Period every three months from the first day
  of such Interest Period; and 

  
	
   

  	
   

  
	
   

  	
                      (iii)          
  with respect to the COF Lending Rate Loans, the last day of each and every
  month, and the Equipment Loans Maturity Date.” 

  
	
   

  	
   

  
	
   

  	
                      “Loans”
  means the Revolving Loans, the Term Loans and the Equipment Loans (each, a “Loan”).
  

  
	
   

  	
   

  
	
   

  	
                      “Notes”
  means, collectively, the Revolving Notes, the Term Notes and the Equipment
  Loans Notes (each, a “Note”). 

  
	
   

  	
   

  
	
   

  	
                      “Revolving
  Loans Maturity Date” means August 1, 2007. 

  
	
   

  	
   

  
	
   

  	
                      “Total
  Commitment Percentage” means, with respect to any Lender, the percentage
  equal to sum of such Lender’s Revolving Loan Commitment, Term Loan
  Commitment, and Equipment Loan Commitment, divided by the Total Credit.” 

  
	
   

  	
   

  
	
                            (b)          
  The definition of “Interest Period” in Section 1.1 of the Agreement is
  hereby amended to amend clause (iii) to read as follows: 

  
	
   

  	
   

  
	
   

  	
                      (iii)          
  no Interest Period respecting a Revolving Loan may extend beyond the
  Revolving Loans Maturity Date, and no Interest Period respecting the Term
  Loans may extend beyond the Term Loans Maturity Date. 

  
	
   

  	
   

  
	
                             (c)          The
  following definitions are hereby added to Section 1.1 of the Agreement in
  alphabetical order: 

  
	
   

  	
   

  
	
   

  	
                      “Amendment
  Date” means the date when all of the conditions set forth in Section 4 of
  Amendment No. 5 have been fulfilled to satisfaction of Agent and counsel. 

  
	
   

  	
   

  
	
   

  	
                      “Amendment
  No. 5” means that certain Amendment Number Five to Revolving Credit
  Agreement, dated as of July 1, 2006, among Borrowers, Agent and Lenders. 

  

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            “COF”
  means the ratedetermined by Agent, in its sole discretion, from time to time
  as its cost of funds, as such rate may change from time to time. 

  

“COF Lending Rate” means the sum of the COF
(as of the date the Equipment Loans have been converted to COF Lending Rate
Loans pursuant to Borrowers’ exercise of their option under Section
2.4(a)(iii)) plus two and one half percentage points (250 basis points). 

          “COF
Lending Rate Loans” means the Equipment Loans if the Borrower has elected
to convert all of such Loans to bear interest at the COF Lending Rate pursuant
to Section 2.4(a)(iii). 

          “Equipment”
has the meaning given to such term in the Security Agreement. 

          “Equipment
Fee” has the meaning given to such term in Section 2.15(e). 

          “Equipment
Loan Commitment” means, with respect to any Equipment Loan Lender, the
amount indicated under such Lender’s name on Schedule 1.1 C under the heading
Equipment Loan Commitment or, in the case of any Lender that is an assignee
Lender pursuant to Section 11.5(c), the amount of the assigning Lender’s
Equipment Loan Commitment assigned to such assignee Lender (collectively, the
“Equipment Loan Commitments”). 

          “Equipment
Loan Commitment Percentage” means, with respect to any Equipment Loan
Lender, the percentage indicated on Schedule 1.1 C under the heading Equipment
Loan Commitment Percentage or, in the case of any Lender that is an assignee
Lender pursuant to Section 11.5(c), the percentage of the assigning Lender’s
Equipment Loan Commitment assigned to such assignee Lender. 

          “Equipment
Loan Lender” means each of the Lenders indicated on Schedule 1.1 C under
the heading Equipment Loan Lenders, and also means any assignee of such Lender
pursuant to Section 11.5(c). 

          “Equipment
Loans” has the meaning given to such term in Section 2.3(a). “Equipment 

          Loans
Conversion Date” means June 30, 2006. 

          “Equipment
Loans Maturity Date” means June 30, 2010. 

          “Equipment
Loans Notes” means, collectively, the promissory notes executed by each
Borrower to the order of each Lender pursuant to Section 2.11(a) to evidence
such Lender’s Equipment Loans. 

          “Prepaid
Principal Amount” means the principal balance of the COF Lending Rate Loans
that Borrowers have elected to prepay, or the amount of the principal balance
of the COF Lending Rate Loans that Borrowers must prepay because of
acceleration, as the case may be. 

          “Prepayment
Amount” means: 

                    (i)          If
the Prepaid Principal Amount exceeds Seven Hundred Fifty Thousand Dollars
($750,000), then the Prepayment Amount is the sum of: (x) the Prepaid Principal

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Amount; (y) interest accruing on the Prepaid Principal Amount up to, but
not including, the Prepayment Date; (z) Five Hundred Dollars ($500.00); plus
the present value, discounted at the Reinvestment Rates of the positive amount
by which (A) the interest the Equipment Loan Lenders would have earned had the
Prepaid Principal Amount not been paid prior to the Equipment Loans Maturity
Date at the COF Lending Rate, exceeds (B) the interest the Equipment Loan
Lenders would earn by reinvesting the Prepaid Principal Amount at the
Reinvestment Rates. 

                    (ii)
          If the Prepaid
Principal Amount is Seven Hundred Fifty Thousand Dollars ($750,000) or less,
then the Prepayment Amount is the sum of: (x) the Prepaid Principal Amount; (y)
interest accruing on the Prepaid Principal Amount up to, but not including, the
Prepayment Date; plus (z) an amount equal to two percent (2%) of the Prepaid
Principal Amount. 

          “Prepayment
Date” means the date of any prepayment of the COF Lending Rate Loans
pursuant to Section 2.16(c). 

          “Reinvestment
Rates” mean the per annum rates of interest equal to one half percent
(1/2%) above the rates of interest reasonably determined by Agent to be in
effect not more than seven (7) days prior to the Prepayment Date in the
secondary market for United States Treasury Obligations in amount(s) and with
maturity(ies) which correspond (as closely as possible) to the COF Lending Rate
Loans being prepaid. 

          “Term
Loan Commitment” means, with respect to any Term Loan Lender, the amount
indicated opposite such Lender’s name on Schedule 1.1 C under the heading Term
Loan Commitment or, in the case of any Lender that is an assignee Lender
pursuant to Section 11.5(c), the amount of the assigning Lender’s Term Loan
Commitment assigned to such assignee Lender (collectively, the “Term Loan
Commitments”).

          “Term
Loan Commitment Percentage” means, with respect to any Term Loan Lender,
the percentage indicated on Schedule 1.1 C under the heading Term Loan
Commitment Percentage or, in the case of any Lender that is an assignee Lender
pursuant to Section 11.5(c), the percentage the assigning Lender’s Term Loan
Commitment assigned to such assignee Lender. 

          “Term
Loan Lender” means each of the Lenders indicated on Schedule 1.1 C under
the heading Term Loan Lenders, and also means any assignee of such Lender
pursuant to Section 11.5(c). 

          “Term
Loans Maturity Date” means June 30, 2010. 

26

“Term Notes” means, collectively, the
promissory notes executed by each Borrower to the order of each Lender pursuant
to Section 2.11(a) to evidence such 
Lender’s Term Loan.

          “Total
Credit” means $21,000,000.

2.3     Term Loans. Section
2.2 of the Agreement is hereby amended as follows:

          2.2          The
Term Loans.

          (a)          Several
Term Loans. Subject to the terms and conditions hereof, each Term Loan
Lender severally agrees to make a term loan (each a “Term Loan” and collectively
the “Term Loans”) to Borrowers on the Amendment Date, in an amount equal
to each such Term Loan Lender’s Term Loan Commitment, the proceeds of which
shall only be used for the purposes allowed in Section 7.1(c). Each Term Loan
Lender shall make the amount of such Lender’s Term Loan available to Agent in
same day funds, not later than 9:00 a.m. (Pacific time), on the Amendment Date.
After Agent’s receipt of the proceeds of such Term Loans, upon the
effectiveness of Amendment No. 5, Agent shall apply the proceeds of such Term
Loans to repay $2,500,000 of Revolving Loans outstanding on the Amendment Date.

          (b)          Amortization.
 Borrowers shall pay sixty monthly principal reduction payments on the Term
Loans, each in the aggregate amount of $41,667. Each such payment shall be due
and payable on the last day of each month commencing July 31, 2005 and
continuing on the last day of each succeeding month. On the Term Loans Maturity
Date, the outstanding principal balance, and all accrued and unpaid interest
under the Term Loans shall be due and payable in full. Borrowers may prepay the
Term Loans at any time, in whole or in part, without penalty or premium except
as otherwise required by Section 2.7(a) with respect to repayments of LIBOR
Lending Rate Portions. All principal amounts so repaid or prepaid may not be
reborrowed. Borrowers shall give Agent at least two (2) LIBOR Business Days’
prior written notice of any prepayment of a LIBOR Lending Rate Portion, upon
receipt of which, Agent shall promptly give notice to each Term Loan Lender.
Upon receipt of any such notice of a prepayment, Agent shall promptly notify
each Term Loan Lender thereof. Agent shall, promptly following its receipt of
any payment or prepayment of the Term Loans, distribute to each Term Loan
Lender its pro rata share (based upon the principal amounts outstanding) of all
amounts received by Agent pursuant to this Section 2.2 for each such Term Loan
Lender’s respective account. All prepayments shall be applied toward scheduled
principal reductions payments owing under this Section 2.2 in inverse order of
maturity.

27

2.4      Equipment
Loans. Section 2.3 of the Agreement is hereby amended as follows:

          2.3          Equipment
Loans.

          (a)          
Several Equipment Loans. Subject to the terms and conditions hereof, from
the Amendment Date up to but not including the Equipment Loans Conversion Date,
each Equipment Loan Lender severally agrees to make a series of term loans
(each, an “Equipment Loan” and collectively the “Equipment Loans”)
to or for the benefit of Borrowers, in an amount equal to such Equipment Loan
Lender’s Equipment Loan Percentage of each Borrowing of Equipment Loans, up to
an aggregate amount not to exceed such Equipment Loan Lender’s Equipment Loan
Commitment. Each Borrowing consisting of Equipment Loans shall be advanced
directly to the applicable vendor or Borrower, as Borrowers may request. The
foregoing to the contrary notwithstanding, (i) each Borrowing consisting of
Equipment Loans shall be in an amount, as determined by the Equipment Loan
Lenders, not to exceed 100% of Borrowers’ invoice cost (net of shipping,
freight, installation, and other so-called “soft costs”) of new Equipment that
is to be purchased by Borrowers with the proceeds of such Borrowing, or new
Equipment that has been purchased and accepted by Borrowers within 30 days
prior to the date of such Borrowing, (ii) the Equipment that is to be acquired
or that has been purchased by Borrowers must be acceptable to the Equipment
Loan Lenders in all respects, and, except for any Equipment that is or will be
installed on any Real Property Collateral upon delivery to Borrowers, not be a
fixture, and not be intended to be affixed to real property or to become
installed in or affixed to other goods unless waivers or fixture filings
acceptable to the Equipment Loan Lenders and Agent have been obtained, and
(iii) the Equipment Loan Lenders shall have no obligation to fund any Equipment
Loans hereunder to the extent that the making thereof would cause the then
outstanding amount of all Equipment Loans to exceed the aggregate Equipment
Loan Commitments. On the Equipment Loans Conversion Date, each Equipment Loan
Lender’s obligations to make Equipment Loans to Borrowers shall cease. Each Borrowing
of Equipment Loans shall be in a minimum amount of $100,000.

          (b)          Payments.
 From the Amendment Date until the Equipment Loans Conversion Date, no principal
payments shall be due on the outstanding Equipment Loans; provided that Borrowers
shall make interest payments thereon during such period in accordance with
Section 2.4. The aggregate amount of all Equipment Loans outstanding on the
Equipment Loans Conversion Date shall be repayable in equal monthly
installments of principal, each such installment in an amount equal to 1/48th
of the aggregate principal amount of Equipment Loans outstanding on the
Equipment Loans Conversion Date, and such installments to be due and payable on
the last day of each month commencing July 31, 2006 and continuing on the last
day of each succeeding month until the Equipment Loans Maturity Date, whereupon
the entire remaining unpaid principal balance of the Equipment Loans together
with all accrued but unpaid interest thereon shall be due and payable.

          (c)          Prepayment.
 Borrowers may prepay the Equipment Loans at any time, in whole or in part,
without penalty or premium except as otherwise required by Section 2.16 with
respect to prepayments of COF Lending Rate Loans. All principal amounts so
repaid or prepaid may not be reborrowed. Agent shall, promptly following its
receipt of any payment or prepayment of the Equipment Loans, distribute to each
Equipment Loan Lender, its pro rata share (based upon the principal amounts
outstanding) of all amounts received by Agent

28

	
   

  	
   

  
	
   

  	
  pursuant to this Section 2.3 for each such Lender’s respective
  account. All prepayments shall be applied toward scheduled principal
  reductions payments owing under Section 2.3(b) in inverse order of maturity.

  
	
   

  	
   

  
	
   

  	
  2.5          Interest
  Rates. Section 2.4(a) of the Agreement is hereby amended as follows:

  
	
   

  	
   

  
	
   

  	
                 (a)          Interest
  Rate Options.

  
	
   

  	
   

  
	
   

  	
                                (i)          Revolving
  Loans. Subject to the terms and conditions hereof, all Revolving Loans,
  or portions thereof, may be outstanding as either Prime Lending Rate Portions
  or LIBOR Lending Rate Portions, by designating, in accordance with Sections
  2.5(b) and 2.6(b), either the Prime Lending Rate or the LIBOR Lending Rate to
  apply to all or any portion of the unpaid principal balance of the Revolving
  Loans; provided, however, there shall be no more than three (3)
  LIBOR Lending Rate Portions of Revolving Loans outstanding at any time. LIBOR
  Lending Rate Portions shall be in minimum amounts each of One Million Dollars
  ($1,000,000).

  
	
   

  	
   

  
	
   

  	
                                (ii)          Term
  Loans. Subject to the terms and conditions hereof, the Term Loans, or
  portions thereof, may be outstanding as either Prime Lending Rate Portions or
  LIBOR Lending Rate Portions, by designating, in accordance with Sections
  2.5(b) and 2.6(b), either the Prime Lending Rate, or the LIBOR Lending Rate
  to apply to all or any portion of the unpaid principal balance of the Term
  Loans; provided, however, there shall be no more than two (2)
  LIBOR Lending Rate Portions of Term Loans outstanding at any time. LIBOR
  Lending Rate Portions of Term Loans shall be in minimum amounts each of One
  Million Dollars ($1,000,000).

  
	
   

  	
   

  
	
   

  	
                                
  (iii)          Equipment
  Loans. Subject to the terms and conditions hereof, all Equipment Loans shall
  be outstanding as Prime Lending Rate Portions; provided, however,
   at any time from and after the Equipment Loans Conversion Date, Borrowers
  shall have the option to convert the entire outstanding balance of Equipment
  Loans to COF Lending Rate Loans upon three (3) Business Days’ prior written
  notice to Agent.. If Borrowers fail to exercise such option, the Equipment
  Loans shall continue to be outstanding as Prime Lending Rate Portions from
  and after the Equipment Loans Conversion Date. Once the Equipment Loans have
  been converted to COF Lending Rate Loans pursuant to this clause (iii), such
  COF Lending Rate Loans may not be converted back to Prime Lending Rate
  Portions.

  
	
   

  	
   

  

          2.6          Notice
of Borrowing Requirements. Section 2.5 of the Agreement is hereby amended
as follows:

                         2.5          Notice
of Borrowing Requirements.

	
   

  	
   

  
	
   

  	
                                (a)          
  Each Borrowing of a Prime Lending Rate Portion shall be made on a Business
  Day, and each Borrowing of a LIBOR Lending Rate Portion shall be made on a
  LIBOR Business Day.

  

29

	
   

  	
   

  
	
   

  	
                                (b)          Each
  Borrowing shall be made upon telephonic notice given by a Responsible Officer of Borrowers, followed by a Notice of
  Borrowing, given by facsimile or personal service, delivered to Agent
  at the address set forth in the Notice of Borrowing. If for a Prime Lending
  Rate Portion, Agent shall be given such notice no later than 11:00 a.m.,
  Pacific time, one (1) Business Day prior to the day on which such Borrowing
  is to be made, and, if for a LIBOR Lending Rate Portion, Agent shall be given
  notice no later than 9:00 a.m., Pacific time,
  three (3) LIBOR Business Days prior to the day on which such Borrowing is
  to be made, and such notice shall state the amount and purpose thereof
  (subject to the provisions of Section 2.1). Upon receipt of any Notice of
  Borrowing from Borrowers, (x) Agent shall promptly notify each Revolving Loan
  Lender or Equipment Loan Lender, as applicable, thereof, (y) each Revolving
  Loan Lender or Equipment Loan Lender, as applicable, will make the amount of
  its pro rata share of each Borrowing available to Agent for the account of
  Borrowers at Agent’s Lending Office for such Loans prior to 10:00 a.m.,
  Pacific time, on the date requested by
  Borrowers in funds immediately available to Agent and (z) such
  Borrowing will then be made available to Borrowers by Agent crediting the
  account of Borrowers on the books of such Lending Office with the aggregate
  of the amounts made available to Agent by Revolving Loan Lenders and
  Equipment Loan Lenders, as applicable, and in like funds as received by the
  Agent.

  
	
   

  	
   

  
	
   

  	
                                (c)          Neither
  Agent nor any Lender shall incur any liability to Borrowers in acting upon
  any telephonic notice which Agent believes in good faith to have been given
  by a Responsible Officer of Borrowers, or for otherwise acting in good faith
  under this Section 2.5, and in making any Loans pursuant to telephonic
  notice.

  
	
   

  	
   

  
	
   

  	
                                (d)          So
  long as all of the conditions for a Borrowing of a Loan set forth herein have
  been satisfied, Agent shall make the proceeds of such Loan available to Borrowers on the applicable
  Borrowing date by transferring same day funds, equal to the amount of such Loan, in accordance with written
  disbursement instructions given by Borrowers to Agent, in form and
  substance satisfactory to Agent and otherwise consistent with Section 7.1

  

         2.7          Conversion
or Continuation Requirements. Section 2.6(a) of the Agreement is hereby
amended to add the following sentence at the end thereof as follows:

	
   

  	
   

  
	
   

  	
  If Borrowers elect to convert the entire balance of the Equipment
  Loans to COF Lending Rate Loans after the Equipment Loans Conversion Date
  pursuant to Section 2.4(a)(iii), such COF
  Lending Rate Loans may not be converted back into Prime Lending Rate
  Portions.

  
	
   

  	
   

  
	
   

  	
  2.8          Notes.
  Sections 2.11(a) and (b) of the Agreement are hereby amended as follows:

  
	
   

  	
   

  
	
   

  	
                              (a)          
  Borrowers agree that, upon the request to Agent by any Lender made on or
  prior to the Amendment Date if and to the extent that such Lender has a
  Commitment as of the Amendment Date, or in connection with any

  

30

	
   

  	
   

  
	
   

  	
  assignment pursuant to Section 11.5(c), to evidence such Lender’s
  Loans, each Borrower will execute and deliver to such Lender a Revolving
  Note, Term Note, and/or Equipment Loans Note, as applicable, substantially in
  the forms of Exhibit 2.11(a), with appropriate insertions as to payee, date
  and principal amount (each, as amended, supplemented, replaced or otherwise
  modified from time to time, a “Note” and, collectively, the “Notes”),
  payable to the order of such Lender and in a principal amount equal to the
  sum of such Lender’s Revolving Credit Commitment, Term Loan Commitment,
  and/or Equipment Loan Commitment, as applicable. Each Note shall (x) be dated
  the Amendment Date, (y) be payable as provided herein and (z) provide for the
  payment of interest in accordance with Section 2.4.

  
	
   

  	
   

  
	
   

  	
                                (b)
           The Revolving Loans and
  Borrowers’ obligation to repay the same shall be evidenced by the Revolving
  Notes, this Agreement and the books and records of Agent and the Revolving
  Loan Lenders. The Term Loans and Borrowers’ obligation to repay the same
  shall be evidenced by the Term Loan Notes, this Agreement and the books and
  records of Agent and the Term Loan Lenders. The Equipment Loans and
  Borrowers’ obligation to repay the same shall be evidenced by the Equipment
  Loans Notes, this Agreement and the books and records of Agent and the
  Equipment Loan Lenders. Agent shall maintain the Register pursuant to Section
  10.13, and a subaccount therein for each Lender, in which shall be recorded
  (i) the amount of each Loan made hereunder, whether each such Loan is a LIBOR
  Lending Rate Portion, a Prime Lending Rate Portion or COF Lending Rate Loans,
  and each Interest Period, if any, applicable thereto, (ii) the amount of any
  principal or interest due and payable or to become due and payable from
  Borrowers to each Lender hereunder and (iii) both the amount of any sum
  received by Agent hereunder from Borrowers and each Lender’s share thereof;
  provided, however, any failure by Agent to maintain the Register
  or any such subaccount with respect to any Loan or continuation, conversion
  or payment thereof shall not limit or otherwise affect Borrowers’ obligations
  hereunder or under the Notes.

  
	
   

  	
   

  
	
   

  	
  2.9           Fees.
  Section 2.15(e) is hereby added to the Agreement as follows:

  
	
   

  	
   

  
	
   

  	
                               (e)         
  Borrowers shall pay to Agent for the ratable account of the Equipment Loan
  Lenders a fee (the “Equipment Fee”) in the amount of $5000. The
  Equipment Fee shall be fully earned and non-refundable, and shall be due and
  payable in advance on the Amendment Date.

  
	
   

  	
   

  

          2.10
COF Lending Rate Loans. Article 2 of the Agreement is hereby amended to
add Section 2.16 as follows:

	
   

  	
   

  
	
   

  	
               2.16
  Prepayments of COF Lending Rate Loans.

  
	
   

  	
   

  
	
   

  	
                                                    (i)
  Agent and Lenders are not under any obligation to accept any prepayment of
  the COF Lending Rate Loans except as described below or as required under applicable
  law. Borrowers may prepay the COF

  

31

	
   

  	
   

  	
   

  
	
   

  	
  Lending Rate Loans in increments of Five Hundred Dollars ($500.00)
  prior to the Equipment Loans Maturity Date as long as (i) Agent is provided
  written notice of such prepayment at least five (5) Business Days prior to
  the Prepayment Date; and (ii) Borrowers pays the Prepayment Amount on the
  Prepayment Date. The notice of prepayment shall contain the Prepayment Date. 

  
	
   

  	
   

  
	
   

  	
            (ii) The
  Prepayment Amount shall be due and payable on the Prepayment Date, and
  Borrowers shall pay to Agent, for the account of the Equipment Loan Lenders,
  as applicable, in addition to any other amount that may then be due
  hereunder, the Prepayment Amount on the Prepayment Date. Agent, in its sole
  discretion, may accept any prepayment of the COF Lending Rate Loans even if not
  required to do so hereunder and may deduct from the amount to be applied
  against the COF Lending Rate Loans any other amounts required to be paid as
  part of the Prepayment Amount. Agent’s determination of the Prepayment Amount
  will be conclusive, absent manifest error. If requested in writing by
  Borrowers, Agent will provide Borrowers a written statement specifying the
  Prepayment Amount. 

  
	
   

  	
   

  
	
   

  	
                      (iii)          BY
  INITIALING BELOW, BORROWERS ACKNOWLEDGE(S) AND AGREE(S) THAT: (A) THERE IS NO
  RIGHT TO PREPAY THE COF LENDING RATE LOANS, IN WHOLE OR IN PART, WITHOUT
  PAYING THE PREPAYMENT AMOUNT, EXCEPT AS OTHERWISE REQUIRED UNDER APPLICABLE
  LAW; (B) BORROWERS SHALL BE LIABLE FOR PAYMENT OF THE PREPAYMENT AMOUNT IF
  AGENT AND LENDERS EXERCISE THEIR RIGHT TO ACCELERATE PAYMENT OF THE
  OBLIGATIONS, INCLUDING WITHOUT LIMIT, ACCELERATION UNDER A DUE-ON-SALE
  PROVISION; (C) BORROWERS WAIVES(S) ANY RIGHTS UNDER SECTION 2954.10 OF THE
  CALIFORNIA CIVIL CODE, OR ANY SUCCESSOR STATUTE; AND (D) AGENT AND LENDERS
  HAVE MADE THE LOANS EVIDENCED BY THIS AGREEMENT AND THE NOTES IN RELIANCE ON
  THESE AGREEMENTS. 

  
	
   

  	
   

  
	
   

  	
  BORROWERS’ INITIALS

  
	
   

  	
   

  	
  

  
	
   

  	
   

  
	
            2.11 Use of Funds. Section 7.1 (c) and (d) of the Agreement
  are hereby added to the Agreement as follows:

  
	
   

  	
   

  
	
   

  	
                 (c)          Use
  any proceeds of the Term Loans for any purpose other than to refinance
  $2,500,000 of Revolving Loans outstanding on the Amendment Date; or 

  
	
   

  	
   

  
	
   

  	
                 (d)          Use
  any proceeds of the Equipment Loans for any purpose other than as provided in
  Section 2.3. 

  
	
   

  	
   

  
	
   

  	
  2.12 Financial
  Condition. Section 7.15 (c) of the Agreement is hereby amended to
  follows: 

  

32

	
   

  	
   

  
	
   

  	
                 (c)          the
  Quick Ratio, measured as of the end of each month, at any time to be less
  than 0.90:1.00. 

  
	
   

  	
   

  
	
   

  	
  2.13 Capital Expenditures. Section 7.12 of the Agreement is
  hereby amended as follows: 

  
	
   

  	
   

  
	
   

  	
            7.12 Capital
  Expenditures. Make, or permit any Subsidiary (other than an Excluded
  Subsidiary) to make, any Capital Expenditures, or any commitments therefor,
  in excess of Five Million Dollars ($5,000,000) in the aggregate, on a
  consolidated basis, in any fiscal year; provided, that, if Agent and
  Lenders shall consent to an acquisition of all or substantially all of the
  Assets or the business of any other Person (a “Permitted Acquisition”),
   the fixed assets acquired by Borrowers from such Permitted Acquisition shall
  be excluded from the calculation of Capital Expenditures for the purposes
  hereof; provided, further, that Agent and Lender are under no
  obligation to consent to any such acquisition and Borrowers acknowledge and
  agree that such consent may be withheld in Agent and Lenders sole and
  absolute discretion. Without in any way limiting or qualifying the foregoing,
  any such consent to a Permitted Acquisition by Agent and Lenders shall be
  based, in part, on Borrowers’ agreement to revise the Debt Service Coverage
  Ratio and Capital Expenditures covenants giving effect to such Permitted
  Acquisition and otherwise in form and substance satisfactory to Agent and
  Lenders in their sole and absolute discretion. 

  
	
   

  	
   

  
	
   

  	
  2.14 Remedies. Clause (i) of Section 8.2 of the Agreement is
  hereby amended as follows: 

  
	
   

  	
   

  
	
   

  	
  (i) with the consent of the Majority Lenders, Agent may or upon the
  request of the Majority Lenders, Agent shall, without notice of its election
  and without demand, immediately terminate the Revolving Credit Commitments
  and the Equipment Loan Commitments, whereupon Lenders’ obligation to make
  Loans to Borrowers and Issuing Lender’s obligation to issue Letters of Credit
  shall immediately cease; 

  
	
   

  	
   

  
	
   

  	
  2.15 Replacement of Affected Lenders. The first paragraph of
  Section 10.16 of the Agreement is amended as follows: 

  
	
   

  	
   

  
	
   

  	
            10.16 Replacement
  of Affected Lenders. If any Lender (other than Agent) (x) is owed a
  material amount of increased costs under Section 2.7 or ceases to be
  obligated to make LIBOR Lending Rate Loans as a result of the operation of
  Sections 2.8 or 2.9, (y) refuses to consent to certain proposed changes,
  waivers, discharges or terminations with respect to this Agreement which have
  been approved pursuant to Section 11.4 by the Majority Lenders, the Revolving
  Loan Lenders the Revolving Credit Commitment Percentage of which aggregate
  more than 66.67%, the Term Loan Lenders the Term Loans Commitment Percentage
  of which aggregate more than 6 6.67% or the Equipment Loan Lenders the
  Equipment Loans Commitment Percentage of which aggregate more than 66.67%; or
  (z) is in default of its obligations hereunder, then Agent shall have the
  right, but not the obligation, to replace such Lender (the “Replaced 

  

33

	
   

  	
   

  
	
   

  	
  Lender”) with one or more Eligible Assignees
  (collectively, the “Replacement Lender”) provided, that: 

  
	
   

  	
   

  
	
   

  	
  2.16 Expenses. Sections 11.3(c) of the Agreement is amended to
  read as follows: 

  
	
   

  	
   

  
	
   

  	
                 (c)
  each Borrower shall and hereby agrees to indemnify, protect, defend and hold
  harmless Agent, Issuing Lender and each Lender and their respective
  directors, officers, agents, employees and attorneys (collectively, the “Indemnified
  Persons” and individually, an “Indemnified Person”) from and
  against (i) any and all losses, claims, damages, liabilities, deficiencies,
  judgments, costs and expenses (including attorneys’ fees and attorneys’ fees
  incurred pursuant to proceedings arising under the Bankruptcy Code) incurred
  by any Indemnified Person (except to the extent that it is finally judicially
  determined to have resulted from the gross negligence or willful misconduct
  of any Indemnified Person) arising out of or by reason of any litigations,
  investigations, claims or proceedings (whether administrative, judicial or
  otherwise), including discovery, whether or not Agent, Is suing Lender or any
  Lender is designated a party thereto, which arise out of or are in any way
  related to (1) this Agreement, the Loan Documents or the transactions
  contemplated hereby or thereby, (2) any actual or proposed use by Borrowers
  of the proceeds of the Loans, or (3) Agent’s, Issuing Lender’s and Lenders’
  entering into this Agreement, the Loan Documents or any other agreements and
  documents relating hereto; (ii) any such losses, claims, damages,
  liabilities, deficiencies, judgments, costs and expenses arising out of or by
  reason of the use, generation, manufacture, production, storage, release,
  threatened release, discharge, disposal or presence on, under or about any
  Borrower’s operations or property or property leased by any Borrower of any
  material, substance or waste which is or becomes designated as Hazardous
  Materials; (iii) any such losses, claims, damages, liabilities, deficiencies,
  judgments, costs and expenses incurred in connection with any remedial or
  other action taken by any Borrower or Agent, Issuing Lender or any Lender in
  connection with compliance by any Borrower with any federal, state or local
  environmental laws, acts, rules, regulations, orders, directions, ordinances,
  criteria or guidelines (except to the extent that it is finally judicially
  determined to have resulted from the gross negligence or willful misconduct
  of any Indemnified Person); and (iv) all losses and expenses which any
  Indemnified Person sustains or incurs as a result of (x) any prepayment of
  the COF Lending Rate Loans prior to the Equipment Loans Maturity Date, for
  any reason, including termination of this Agreement or pursuant to Section
  8.2, or (y) any failure by Borrowers, for any reason, to borrow any LIBOR
  Lending Rate Portion in accordance with the terms hereof. The indemnification
  set forth herein shall include, without limitation, all losses and expenses
  arising from interest and fees that any Lender pays to lenders of funds it
  obtained in order to fund the Loans to Borrowers at the LIBOR Lending Rate,
  and all losses incurred in liquidating or re-deploying deposits from which
  such funds were obtained and loss of profit for the period after termination.
  If and to the extent that the obligations of Borrowers hereunder are
  unenforceable for any reason, Borrowers hereby agree to make the maximum
  contribution to the payment and satisfaction of such obligations to Agent and
  

  

34

	
   

  	
   

  
	
   

  	
  Lenders which is permissible under applicable law. 

  
	
   

  	
   

  
	
            2.17 Amendments and Waivers. Sections 11.4 (iv) and (v) of the
  agreement are hereby amended as follows: 

  
	
   

  	
   

  
	
   

  	
                 (iv)     amend,
  modify or waive any provision of this Agreement regarding the allocation of
  prepayment amounts to the Term Loans or the application of such prepayment
  amounts to the respective installments of principal under the respective Term
  Loans without the written consent of the Term Loan Lenders the Term Loan
  Commitment Percentages of which aggregate more than 66.67%; or amend, modify
  or waive any provision of this Agreement regarding the allocation of
  prepayment amounts to the Revolving Loans or the application of such
  prepayment amounts to the respective installments of principal under the
  respective Revolving Loans without the written consent of the Revolving Loan
  Lenders the Revolving Loan Commitment Percentages of which aggregate more
  than 66.67%; or amend, modify or waive any provision of this Agreement regarding
  the allocation of prepayment amounts to the Equipment Loans or the
  application of such prepayment amounts to the respective installments of
  principal under the respective Equipment Loans without the written consent of
  the Equipment Loan Lenders the Equipment Loan Commitment Percentages of which
  aggregate more than 66.67%; or 

  
	
   

  	
   

  
	
   

  	
                 (v)     subject
  to clause (i) of this Section 11.4 as it relates to reducing the amount or
  extending the scheduled date of maturity of any Loan or any installment
  thereof, amend, modify or waive any provision of (x) Section 2.1 or Section
  2.11 (to the extent it relates to Revolving Loans) without the written
  consent of Revolving Loan Lenders the Revolving Loan Commitment Percentages
  of which aggregate more than 66.67%; or (y) Section 2.2 or Section 2.11 (to
  the extent it relates to Term Loans) without the written consent of Term Loan
  Lenders the Term Loan Commitment Percentages of which aggregate more than
  66.67%; or (z) Section 2.3 or Section 2.11 (to the extent it relates to
  Equipment Loans) without the written consent of Equipment Loan Lenders the
  Equipment Loan Commitment Percentages of which aggregate more than 66.67%; or
  

  
	
   

  	
   

  
	
   

  	
  2.18 Reference Provision. Section 11.10 of the Agreement is
  hereby added as follows:

  
	
   

  	
   

  
	
   

  	
            11.10 Reference
  Provision.

  
	
   

  	
   

  
	
   

  	
                 (a)
  The parties prefer that any dispute between them be resolved in litigation
  subject to a Jury Trial Waiver as set forth in this Agreement, the Notes or
  the other Loan Documents, but the availability of that process is in doubt
  because of the opinion of the California Court of Appeal in Grafton Partners
  LP v. Superior Court, 9 Cal.Rptr.3d 511. This Reference Provision will be
  applicable until the California Supreme Court completes its review of that
  case, and will continue to be applicable if either that court or a California
  Court of Appeal publishes a decision holding that a pre-dispute Jury Trial
  Waiver 

  

35

	
   

  	
   

  
	
   

  	
  provision similar to that contained in this Agreement, the Notes or
  the other Loan Documents is invalid or unenforceable. Delay in requesting
  appointment of a referee pending review of any such decision, or
  participation in litigation pending review, will not be deemed a waiver of
  this Reference Provision. 

  
	
   

  	
   

  
	
   

  	
                 (b)          
  Other than (i) nonjudicial foreclosure of security interests in real or
  personal property, (ii) the appointment of a receiver or (iii) the exercise
  of other provisional remedies (any of which may be initiated pursuant to
  applicable law), any controversy, dispute or claim (each, a “Claim”)
   between the parties arising out of or relating to this Agreement, the Note or
  the other Loan Documents, will be resolved by a reference proceeding in
  California in accordance with the provisions of Section 638 et seq. of the
  California Code of Civil Procedure (“CCP”), or their successor
  sections, which shall constitute the exclusive remedy for the resolution of
  any Claim, including whether the Claim is subject to the reference
  proceeding. Except as otherwise provided in this Agreement, the Notes or the
  other Loan Documents, venue for the reference proceeding will be in the
  Superior Court or Federal District Court in the County or District where
  venue is otherwise appropriate under applicable law (the “Court”). 

  
	
   

  	
   

  
	
   

  	
                 (c)          The
  referee shall be a retired Judge or Justice selected by mutual written
  agreement of the parties. If the parties do not agree, the referee shall be
  selected by the Presiding Judge of the Court (or his or her representative).
  A request for appointment of a referee may be heard on an ex parte or
  expedited basis, and the parties agree that irreparable harm would result if
  ex parte relief is not granted. The referee shall be appointed to sit with
  all the powers provided by law. Each party shall have one peremptory
  challenge pursuant to CCP § 170.6. Pending appointment of the referee, the
  Court has power to issue temporary or provisional remedies. 

  
	
   

  	
   

  
	
   

  	
                 (d)          The
  parties agree that time is of the essence in conducting the reference
  proceedings. Accordingly, the referee shall be requested to (a) set the
  matter for a status and trial- setting conference within fifteen (15) days
  after the date of selection of the referee, (b) if practicable, try all issues
  of law or fact within ninety (90) days after the date of the conference and
  (c) report a statement of decision within twenty (20) days after the matter
  has been submitted for decision. Any decision rendered by the referee will be
  final, binding and conclusive, and judgment shall be entered pursuant to CCP
  §644. 

  
	
   

  	
   

  
	
   

  	
                 (e)
            The referee will
  have power to expand or limit the amount and duration of discovery. The
  referee may set or extend discovery deadlines or cutoffs for good cause, including
  a party’s failure to provide requested discovery for any reason whatsoever.
  Unless otherwise ordered, no party shall be entitled to “priority” in
  conducting discovery, depositions may be taken by either party upon seven (7)
  days written notice, and all other discovery shall be responded to within
  fifteen (15) days after service. All disputes relating to discovery which
  cannot be resolved by the parties shall be submitted to the referee whose
  decision shall be 

  

36

	
   

  	
   

  
	
   

  	
  final and binding. 

  
	
   

  	
   

  
	
   

  	
                 (f)          
  Except as expressly set forth in this Agreement, the referee shall determine
  the manner in which the reference proceeding is conducted including the time
  and place of hearings, the order of presentation of evidence, and all other questions
  that arise with respect to the course of the reference proceeding. All
  proceedings and hearings conducted before the referee, except for trial,
  shall be conducted without a court reporter, except that when any party so
  requests, a court reporter will be used at any hearing conducted before the
  referee, and the referee will be provided a courtesy copy of the transcript.
  The party making such a request shall have the obligation to arrange for and
  pay the court reporter. Subject to the referee’s power to award costs to the
  prevailing party, the parties will equally share the cost of the referee and
  the court reporter at trial. 

  
	
   

  	
   

  
	
   

  	
                 (g)          
  The referee shall be required to determine all issues in accordance with
  existing case law and the statutory laws of the State of California. The
  rules of evidence applicable to proceedings at law in the State of California
  will be applicable to the reference proceeding. The referee shall be
  empowered to enter equitable as well as legal relief, provide all temporary
  or provisional remedies, enter equitable orders that will be binding on the
  parties and rule on any motion which would be authorized in a trial,
  including without limitation motions for summary judgment or summary
  adjudication. The referee shall issue a decision at the close of the
  reference proceeding which disposes of all claims of the parties that are the
  subject of the reference. The referee’s decision shall be entered by the
  Court as a judgment or an order in the same manner as if the action had been
  tried by the Court. The parties reserve the right to appeal from the final
  judgment or order or from any appealable decision or order entered by the
  referee. The parties reserve the right to findings of fact, conclusions of
  laws, a written statement of decision, and the right to move for a new trial
  or a different judgment, which new trial, if granted, is also to be a
  reference proceeding under this provision. 

  
	
   

  	
   

  
	
   

  	
                 (h)          
  If the enabling legislation which provides for appointment of a referee is
  repealed (and no successor statute is enacted), any dispute between the
  parties that would otherwise be determined by reference procedure will be
  resolved and determined by arbitration. The arbitration will be conducted by a
  retired judge or Justice, in accordance with the California Arbitration Act §
  1280 through § 1294.2 of the CCP as amended from time to time. The
  limitations with respect to discovery set forth above shall apply to any such
  arbitration proceeding. 

  
	
   

  	
   

  
	
   

  	
                 (i)          
  THE PARTIES RECOGNIZE AND AGREE THAT ALL DISPUTES RESOLVED UNDER THIS
  REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND NOT BY A JURY, AND THAT
  THEY ARE IN EFFECT WAIVING THEIR RIGHT TO TRIAL BY JURY IN AGREEING TO THIS
  REFERENCE PROVISION. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO
  CONSULT) WITH COUNSEL OF THEIR 

  

37

	
   

  	
   

  
	
   

  	
  OWN CHOICE, EACH PARTY KNOWINGLY AND VOLUNTARILY AND FOR THEIR MUTUAL
  BENEFIT AGREES THAT THIS REFERENCE PROVISION WILL APPLY TO ANY DISPUTE BETWEEN
  THEM WHICH ARISES OUT OF OR IS RELATED TO THIS AGREEMENT, THE NOTE OR THE
  OTHER LOAN DOCUMENTS. 

  

          2.19
Amendment to Schedule 1.1C. Schedule 1.1C of the Agreement is hereby
amended and restated in its entirety and replaced with the Schedule 1.1 C
attached hereto. 

          2.20
Amendment to Exhibit 2.11(a). Exhibit 2.11(a) to the Agreement is hereby
amended and restated in its entirety and replaced with the Exhibit 2.11(a)
attached hereto. 

          3.
Conditions Precedent to Effectiveness of Amendment. The effectiveness of
this Amendment is subject to and contingent upon the fulfillment of each and
every one of the following conditions: 

                    (a)          Agent
shall have received this Amendment, duly executed by Borrowers, Lenders and
Agent; 

                    (b)          Agent
shall have received an Addendum to Revolving Credit Agreement and an Addendum
to Security Agreement, duly executed by Phase Seven, together with all
Schedules thereto, in form and substance satisfactory to Agent and Lenders; 

                    (c)          Agent
shall have received the Notes payable to each Lender in the amount of such
Lender’s respective Commitments, duly executed by Borrowers; 

                    (d)          Agent
shall have received a Stock Pledge Agreement, duly executed by Parent, together
with receipt by Agent for the ratable benefit of Lenders of the original
certificates evidencing one hundred percent (100%) of the issued and
outstanding Capital Stock of Phase Seven, together with undated stock powers
with respect thereto, duly executed; 

                    (e)          Agent
shall have received, for the pro rata account of Lenders, (i) a term loan fee
of $6,250, which shall be fully earned and nonrefundable, (ii) the Equipment
Fee, which shall be fully earned and nonrefundable and (iii) all Expenses owing
on the Amendment Date;

                    (f)          No
Material Adverse Effect shall have occurred, as determined by Agent in its
reasonable discretion;

                    (g)          No
Event of Default, Unmatured Event of Default or Material Adverse Effect shall
have occurred;

                    (h)          All
of the representations and warranties set forth herein, in the Loan Documents
and in the Agreement shall be true, complete and accurate in all respects as of
the date hereof (except for representations and warranties which are expressly
stated to be true and correct as of the Closing Date); 

                    (i)          With
respect to Phase Seven: 

38

                         (i)          
receipt by Agent of a Certificate of the Secretary of Phase Seven, dated as of
the Amendment Date, certifying (1) the incumbency and signatures of the
Responsible Officers of Phase Seven who are executing this Agreement and the
Loan Documents on behalf of Phase Seven; (2) the By-Laws of Phase Seven and all
amendments thereto as being true and correct and in full force and effect; and
(3) the resolutions of the Board of Directors of Phase Seven as being true and
correct and in full force and effect, authorizing the execution and delivery of
this Agreement and the Loan Documents, and authorizing the transactions
contemplated hereunder and thereunder, and authorizing the Responsible Officers
of Phase Seven to execute the same on behalf of Phase Seven; 

                         (ii)          
receipt by Agent of Phase Seven’s Articles of Incorporation and all amendments
thereto, certified by the Secretary of State of its state of organization and
dated a recent date prior to the Amendment Date; 

                         (iii)          
receipt by Agent of a certificate of status and good standing for Phase Seven,
dated a recent date prior to the Amendment Date, showing that Phase Seven is in
good standing under the laws of the state of its state of organization; 

                         (iv)          
receipt by Agent of a certificate signed by the President or a Vice President
and/or Chief Financial Officer of Phase Seven, dated as of the Amendment Date,
certifying that (1) both immediately before and immediately after giving effect
to the transactions contemplated by this Agreement and the Loan Documents,
Phase Seven is and will be Solvent; (2) to the best of their knowledge after
due and diligent inquiry, the representations and warranties of Phase Seven
contained in this Agreement and the Loan Documents are true and correct in all
material respects, and (3) to the best of their knowledge after due and
diligent inquiry, both immediately before and immediately after giving effect
to the transactions contemplated by this Agreement and the Loan Documents, no
Event of Default is continuing or shall occur; 

                         (v)          
receipt by Agent of Uniform Commercial Code and other public record searches
with respect to Phase Seven, in each case reasonably satisfactory to Agent; and

                         (vi)          
receipt by Agent of copies of insurance binders or insurance certificates for
Phase Seven; and 

                    (j)
          receipt by Agent of
such other documents, instruments and agreements as Agent may reasonably
request in connection with the transactions contemplated hereunder or to
perfect or protect the liens and security interests granted to Agent for the
ratable benefit of Lenders in connection herewith. 

          4.          Representations
and Warranties. In order to induce Agent and Lenders to enter into this
Amendment, each Borrower hereby represents and warrants to Agent and Lenders
that: 

                    (a)          
No Event of Default or Unmatured Event of Default is continuing; 

                    (b)          
All of the representations and warranties set forth in the Agreement and the
Loan Documents are true, complete and accurate in all respects (except for
representations and warranties which are expressly stated to be true and
correct as of the Closing Date); and 

39

                    (c)          
This Amendment has been duly executed and delivered by Borrowers, and after
giving effect to this Amendment, the Agreement and the Loan Documents continue
to constitute the legal, valid and binding agreements and obligations of
Borrowers, enforceable in accordance with their terms, except as enforceability
may be limited by bankruptcy, insolvency, and similar laws and equitable
principles affecting the enforcement of creditors’ rights generally. 

          5.          
Counterparts; Telefacsimile Execution. This Amendment may be executed in
any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Amendment. Delivery of an executed counterpart of this Amendment by
telefacsimile shall be equally as effective as delivery of a manually executed
counterpart of this Amendment. Any party delivering an executed counterpart of
this Amendment by telefacsimile also shall deliver a manually executed
counterpart of this Amendment but the failure to deliver a manually executed
counterpart shall not affect the validity, enforceability, and binding effect
of this Amendment. 

          6.          
Integration. The Agreement as amended by this Amendment constitutes the
entire agreement and understanding between the parties hereto with respect to
the subject matter hereof and thereof, and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof and thereof. 

          7.          Reaffirmation
of the Agreement. The Agreement as amended hereby and the other Loan
Documents remain in full force and effect. 

[Remainder of page intentionally left blank.]

40

           IN WITNESS
WHEREOF, the parties hereto have duly executed and delivered this Amendment as
of the date first hereinabove written. 

	
   

  	
   

  	
   

  
	
   

  	
  NATIONAL
  TECHNICAL SYSTEMS, INC. 

  
	
   

  	
   

  
	
   

  	
  By:

  	
  // Lloyd
  Blonder, Senior Vice President,

  Chief Financial Officer, Treasurer and

  Assistant Secretary

  
	
   

  	
   

  
	
   

  	
  NTS
  TECHNICAL SYSTEMS dba NATIONAL

  TECHNICAL SYSTEMS 

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  // Lloyd
  Blonder, Senior Vice President,

  Chief Financial Officer, Treasurer and

  Assistant Secretary

  
	
   

  	
   

  
	
   

  	
  XXCAL, INC. 

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  // Lloyd
  Blonder, Vice President, Treasurer

  and Assistant Secretary

  
	
   

  	
   

  
	
   

  	
  APPROVED
  ENGINEERING TEST

  LABORATORIES, INC. 

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  // Lloyd
  Blonder, Vice President, Treasurer

  and Assistant Secretary

  
	
   

  	
   

  
	
   

  	
  ETCR, INC. 

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  // Lloyd
  Blonder, Vice President, Treasurer

  and Assistant Secretary

  

41

	
   

  	
   

  	
   

  
	
   

  	
  ACTON
  ENVIRONMENTAL TESTING

  CORPORATION 

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  // Lloyd
  Blonder, Vice President, Treasurer

  and Assistant Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  PHASE SEVEN
  LABORATORIES, INC. 

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  // Lloyd
  Blonder, Vice President, Treasurer

  and Assistant Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  COMERICA
  BANK, in its capacities as Agent,

  Issuing Lender and a Lender 

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  // James
  Ilrang Kim, Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  FIRST BANK
  & TRUST, in its capacity as a

  Lender 

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  // Pociano
  F. Oizoh, Vice President

  

42

Schedule 1.1C

Schedule of Commitments

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Revolving
  Loan Lender

  	
   

  	
  Revolving
  Credit
Commitment

  	
   

  	
  Revolving
  Credit
Commitment Percentage

  	
   

  
	
  

  	
   

  	
  

  	
   

  	
  

  	
   

  
	
  Comerica

  	
   

  	
   

  	
  $

  	
  9,900,000

  	
   

  	
   

  	
   

  	
   

  	
  60

  	
  %

  	
   

  
	
  First Bank & Trust

  	
   

  	
   

  	
  $

  	
  6,600,000

  	
   

  	
   

  	
   

  	
   

  	
  40

  	
  %

  	
   

  

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Term Loan Lender

  	
   

  	
  Term Loan Commitment

  	
   

  	
  Term Loan Commitment

  Percentage

  	
   

  
	
  

  	
   

  	
  

  	
   

  	
  

  	
   

  
	
  Comerica

  	
   

  	
   

  	
  $

  	
  1,500,000

  	
   

  	
   

  	
   

  	
   

  	
  60

  	
  %

  	
   

  
	
  First Bank & Trust

  	
   

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
   

  	
   

  	
   

  	
  40

  	
  %

  	
   

  

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equipment Loan Lender

  	
   

  	
  Equipment Loan

  Commitment

  	
   

  	
  Equipment Loan

  Commitment Percentage

  	
   

  
	
  

  	
   

  	
  

  	
   

  	
  

  	
   

  
	
  Comerica

  	
   

  	
   

  	
  $

  	
  1,200,000

  	
   

  	
   

  	
   

  	
   

  	
  60

  	
  %

  	
   

  
	
  First Bank & Trust

  	
   

  	
   

  	
  $

  	
  800,000

  	
   

  	
   

  	
   

  	
   

  	
  40

  	
  %

  	
   

  

43

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}]]