Agreement and Plan of Merger By And Among Nest Parent, Inc., Nest MergerSub, Inc., And National Technical Systems, Inc. August 15, 2013

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Agreement and Plan of Merger

By And Among

Nest Parent, Inc.,

Nest MergerSub, Inc.,

And

National Technical Systems, Inc.

August 15, 2013

 

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AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered into as of August 15, 2013 (the "Agreement Date"), by and among Nest Parent, Inc., a Delaware corporation ("Parent"), Nest MergerSub, Inc., a California corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and National Technical Systems, Inc., a California corporation (the "Company").

RECITALS

A.            The parties intend that, pursuant to the terms and subject to the conditions set forth in this Agreement, the California General Corporation Law (the "CGCL") and other Applicable Laws (as defined below), Merger Sub shall merge with and into the Company, with the Company to be the surviving corporation of the Merger.

B.            The Boards of Directors of Parent and Merger Sub have (i) determined that it is in the best interests of their respective entities and shareholders, and declared it advisable, to enter into this Agreement and (ii) have approved the execution, delivery and performance by Parent and Merger Sub of this Agreement and the consummation of the transactions contemplated hereby, including the Merger.

C.             The Board of Directors of the Company (the "Company Board"), acting on the unanimous recommendation of the special committee of the Company Board (the "Special Committee" ), has (i) determined that it is in the best interests of the Company and its shareholders, and declared it advisable, to enter into this Agreement, (ii) approved the execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby, including the Merger, and (iii) resolved and agreed to recommend adoption of this Agreement by the shareholders of the Company.

D.            Concurrently with the execution of this Agreement, and as a condition and inducement to the Company's willingness to enter into this Agreement, each of Aurora Equity Partners IV L.P. and Aurora Overseas Equity Partners IV L.P. (each, a "Guarantor" and, collectively, the "Guarantors") have provided a limited guaranty (the "Limited Guaranty"), on a several, and not joint basis, with respect to certain of Parent's obligations under this Agreement.

E.            Concurrently with the execution of this Agreement, and as a condition and inducement to the willingness of Parent and Merger Sub to enter into this Agreement, certain shareholders of the Company are entering into an agreement pursuant to which each such shareholder has agreed, among other things, to vote the Common Shares held by such Person in favor of the Merger.

F.             Parent, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger and to prescribe various conditions to the Merger.

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NOW, THEREFORE, in consideration of the foregoing and the mutual promises, covenants and conditions contained herein, the parties hereby agree as follows:

ARTICLE I

CERTAIN DEFINITIONS

1.1           Certain Defined Terms. For purposes of this Agreement, the following terms shall have the meanings set forth below. Unless indicated otherwise, all mathematical calculations contemplated hereby shall be made to the fifth decimal place.

"Acquisition Proposal" means any inquiry, proposal or offer from any Person or group of Persons (other than Parent or Merger Sub) relating to, in one or a series of transactions (A) the direct or indirect purchase or acquisition of 15% or more of the Equity Interests in the Company (by vote or by value), (B) any merger, consolidation, business combination, reorganization, share exchange or similar transaction involving the Company that, if consummated, would result in the acquisition of 15% or more of the outstanding Equity Interests in the Company (by vote or value), (C) any sale of assets, recapitalization, equity investment, license, joint venture, liquidation, dissolution, disposition or other similar transaction which would, directly or indirectly, result in any Third Party acquiring an interest in assets representing, directly or indirectly, 15% or more of the net revenues, net income, cash flow or assets of the Company and its Subsidiaries, taken as a whole, (D) the acquisition (whether by merger, consolidation, equity investment, share exchange, joint venture or otherwise) by any Third Party, directly or indirectly, of any Equity Interest in any Person that holds assets generating or representing, directly or indirectly, 15% or more of the net revenues, net income, cash flow or assets of the Company and its Subsidiaries, taken as a whole, (E) any tender offer, self-tender or exchange offer that if consummated would result in any Third Party acquiring of 15% or more of the Equity Interests in the Company (by vote or by value), or (F) any combination of the foregoing.

"Affiliate" has the meaning set forth in Rule 144(a)(1) promulgated under the Securities Act.

"Applicable Law" means, collectively, all foreign, federal, state, local or municipal laws (including common law), statutes, ordinances, regulations, codes, and rules (including rules of any applicable national securities exchange), and all orders, writs, injunctions, awards, judgments and decrees applicable to the assets, properties and business (and any regulations promulgated thereunder) of the applicable company or entity.

"Balance Sheet Date" means April 30, 2013.

"Benefit Plan" means each "employee benefit plan" within the meaning of Section 3(3) of ERISA, and any other stock option, stock appreciation right, phantom stock, stock purchase, change-in-control, bonus, long- or short-term incentive, or deferred compensation, supplemental retirement, health, life, or disability insurance, dependent care, severance and other similar fringe or employee benefit plans, agreements, policies, programs, and arrangements, in effect and that covers any employees of the Company or the beneficiaries or dependents of any such Persons and any current employment or executive compensation or severance agreements, written or otherwise, that are maintained, sponsored, or contributed to by the Company, or under which the Company has or could have any present or future Liabilities.

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"Business Day" means any day, other than Saturday, Sunday or any day on which banking institutions located in Los Angeles, California are authorized or required by Applicable Law or other governmental action to close.

"Certificate of Merger" means the certificate of merger to be filed with the Office of the Secretary of State of the State of California in such appropriate form as shall be required by the CGCL.

"Code" means the Internal Revenue Code of 1986, as amended.

"Company" has the meaning ascribed to it in the preamble.

"Company Balance Sheet" means the Company's unaudited interim balance sheet as of the Balance Sheet Date included in the Company Financial Statements.

"Company Board" has the meaning ascribed to it in the recitals.

"Company Business" means the business of the Company and its Subsidiaries as presently conducted.

"Company Bylaws" means the bylaws of the Company, as amended to date.

"Company Charter" means the Company's Articles of Incorporation, filed with the California Secretary of State on May 29, 1996, as amended to date.

"Company Common Stock" means the common stock, no par value of the Company.

"Company Disclosure Schedule" means the disclosure schedule attached hereto and dated as of this Agreement Date and delivered by the Company to Parent concurrent with the execution of this Agreement.

"Company Financial Statements" means (A) the Company's audited financial statements for the fiscal year ended January 31, 2013; and (B) the Company's unaudited interim financial statements for the quarterly period ended April 30, 2013.

"Company's Knowledge" means, with respect to a particular fact, circumstance, event or other matter in question, (a) the actual knowledge of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ El-▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or (b) which any of the foregoing persons would reasonably be expected to know given their title and responsibilities.

"Company LTIP Plans" means the Company's 2006 Long Term Incentive Plan and 2010 Long Term Incentive Plan, each as amended.

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"Company Material Contract" means any Contract required to be listed on the Company Disclosure Schedule pursuant to Section 4.11.

"Company Options" means options to purchase shares of Company Common Stock issued pursuant to the Company Stock Plans.

"Company Preferred Stock" means the Preferred Stock, no par value of the Company.

"Company Stock Plans" means the 2002 Stock Option Plan of the Company and the 2006 Equity Incentive Plan of the Company, each as amended to date.

"Company Shareholders" means the holders of shares of Company Common Stock.

"Contract" means any written or oral legally binding contract, agreement, instrument, obligation, arrangement, permit, concession, franchise, commitment, understanding or undertaking (including leases, licenses, mortgages, bonds, notes, debenture, guarantees, sublicenses, subcontracts purchase or sale orders).

"Encumbrance" means, with respect to any asset, any mortgage, deed of trust, lien, pledge, charge, security interest, title retention device, collateral assignment, adverse claim, restriction or other encumbrance of any kind in respect of such asset (including any restriction on the voting of any security, any restriction on the transfer of any security or other asset, any restriction on the receipt of any income derived from any asset, any restriction on the use of any asset and any restriction on the possession, exercise or transfer of any other attribute of ownership of any asset).

"Equity Award" means, any Unvested Equity Award and any Vested Equity Award.

"Equity Interest" of any Person means any (a) capital stock, membership, joint venture or partnership interest or other equity or voting interest of or in such Person; (b) securities directly or indirectly convertible into or exchangeable for any of the foregoing; (c) options, warrants or other rights directly or indirectly to purchase or subscribe for any of the foregoing or securities convertible into, exercisable for or exchangeable for any of the foregoing; or (d) Contracts, calls or claims of any kind relating to the issuance of any of the foregoing or giving any Person the right to participate in or receive any payment based on the profits or performance of such Person (including any equity appreciation, phantom equity or similar plan or right).

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.

"ERISA Affiliate" means any entity which is a member of (a) a "controlled group of corporations," as defined in Section 414(b) of the Code; (b) a group of entities under "common control," as defined in Section 414(c) of the Code; or (c) an "affiliated service group," as defined in Section 414(m) of the Code, or treasury regulations promulgated under Section 414(o) of the Code, any of which includes the Company.

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

"Facilities" means the facilities, improvements, buildings, transportation, and storage facilities and other structures owned by the Company that are located on Leased Real Property or Owned Real Property and all fixtures attached or appurtenant thereto or located thereon, and all licenses, privileges and rights relating to the foregoing (other than those included in the Leased Real Property or Owned Real Property), in each case to the extent predominately used in the operation of the Company Business.

"Financing Sources" means the entities that have committed to provide or otherwise entered into agreements in connection with the Financing or other financings in connection with the transactions contemplated hereby, including the parties to the Financing Commitments and any joinder agreements or credit agreements (including the definitive agreements executed in connection with the Debt Financing Commitments) relating thereto.

"GAAP" means United States generally accepted accounting principles consistently applied.

"Governmental Authority" means any federal, state, local or foreign court or tribunal, governmental, judicial, arbitral, legislative, executive or regulatory body (or subdivision thereof), administrative agency, self-regulatory authority, instrumentality, agency commission or other governmental authority or body.

"Government Bid" means any offer made by the Company or any of its Affiliates (including its Subsidiaries) prior to the Closing Date which, if accepted, would result in a Government Contract.

"Government Contract" means any Contract arising out of the operation of the Company Business, including any teaming agreement or arrangement, joint venture, basic ordering agreement, pricing agreement, letter agreement or other similar arrangement of any kind, between the Company or any of its Subsidiaries on the one hand, and (a) the United States. Government, (b) any prime contractor to the United States Government in its capacity as a prime contractor, or (c) any subcontractor with respect to any Contract described in clause (a) or clause (b) above, on the other hand. A task, purchase or delivery order under a Government Contract shall not constitute a separate Government Contract, for purposes of this definition, but shall be part of the Government Contract to which it relates.

"Indebtedness" means, with respect to any Person, (i) all obligations of such Person for borrowed money, or with respect to unearned advances of any kind to such Person, (ii) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (iii) all capitalized lease obligations of such Person, (iv) all obligations of such Person under installment sale contracts, (v) all guarantees and arrangements having the economic effect of a guarantee of such Person of any Indebtedness of any other Person, and (vi) all obligations or undertakings of such Person to maintain or cause to be maintained the financial position of others or to purchase the obligations of others.

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"Independent Accounting Firm" means Ernst & Young, LLP.

"Intellectual Property" means, collectively, whether protected, created or arising under any Applicable Law, all industrial and intellectual property rights arising anywhere in the world, including patents, utility models, patent applications, patent rights, trademarks, trademark registrations and applications therefor, trade dress rights, trade names, service marks, service ▇▇▇▇ registrations and applications therefor, Internet domain names, Internet and World Wide Web URLs or addresses, copyrights, copyright registrations and applications therefor, mask work rights, mask work registrations and applications therefor, inventions, trade secrets, know-how, customer lists, supplier lists, proprietary processes and formulae, technology, software source code and object code, algorithms, net lists, architectures, structures, screen displays, photographs, images, layouts, development tools, designs, blueprints, specifications, technical drawings (or similar information in electronic format) and all documentation and media constituting, describing or relating to the foregoing, including manuals, memoranda and records, and together with the goodwill associated with any of the foregoing.

"Intervening Event" means a material event or circumstances that was not known to the Company Board prior to the execution of this Agreement (or if known, the consequences of which were not known or reasonably foreseeable), which event or circumstance, or any material consequence thereof, becomes known to the Company Board prior to obtaining the Requisite Company Vote; provided, that in no event shall the receipt, existence or terms of an Acquisition Proposal or any matter relating thereto or consequence thereof constitute an Intervening Event.

"Lease" means all written or oral leases, subleases and other agreements under which the Company or any Subsidiary leases, subleases or otherwise uses or occupies, or has the right to lease, use or occupy, any real property, including all amendments, extensions, renewals, guaranties and other agreements with respect thereto).

"Leased Real Property" means all real property that the Company or any Subsidiary leases, subleases or otherwise uses or occupies, or has the right to lease, use or occupy, pursuant to a Lease.

"Liabilities" means debts, liabilities and obligations of any nature, whether accrued or fixed, absolute or contingent, matured or unmatured, determined or determinable, known or unknown, including those arising under any Applicable Law, Action or order issued or promulgated by a Governmental Authority and those arising under any Contract.

"License Agreement" means any Contract that provides for the grant of a license or other right with respect to or otherwise involving any Company IP Rights, except for commercially available off-the-shelf software licensed to the Company or any Subsidiary in object code form solely for internal use for an aggregate license fee of less than $50,000 or non-exclusive internal use licenses granted to customers or end users in the ordinary course of business based on the Company's standard form agreements.

"Material Adverse Effect" means any change, event, circumstance, occurrence, condition, state of facts or effect that (A) is, individually or in the aggregate, materially adverse in relation to the condition (financial or otherwise), business, assets, liabilities, operations or results of operations of the Company and its Subsidiaries, taken as a whole or (B) materially impairs the ability of that entity to consummate, or prevents or materially delays, the Merger; provided, however, that in the case of clause (A) above only, Material Adverse Effect shall not include any change, event, circumstance, occurrence, condition, state of facts or effect to the extent resulting from (1) actions by such entity required to be taken in accordance with the terms of this Agreement or taken at the direction or request of another party to this Agreement; (2) changes in general economic or political conditions globally, political systems, currencies, securities, or financial markets; (3) changes generally affecting the industry in which such entity operates; (4) acts of God, earthquakes, acts of terrorism or military actions whether or not pursuant to the declaration of a national emergency or war; (5) any change in the Company's stock price or trading volume, in and of itself; (6) any failure to meet internal projections, forecasts or revenue or earnings projections of industry analysts for any period; or, (7) changes in Applicable Laws or accounting rules; provided, that with respect to subclause (5) or subclause (6) the facts or occurrences giving rise to or contributing to such change that are not otherwise excluded from the definition of "Material Adverse Effect" may be taken into account in determining whether there has been a Material Adverse Effect).

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"Merger Consideration" means the product of (i) the Per Share Consideration, multiplied by (ii) the number of Common Shares issued and outstanding immediately prior to the Effective Time (excluding the shares of Company Common Stock owned by Parent, Merger Sub or the Company or any of their respective Subsidiaries, and, subject to Section 3.3, also excluding Dissenting Shares).

"Merger Sub" has the meaning ascribed to it in the preamble.

"NDA" means the Confidentiality Agreement entered into between Aurora Management Partners LLC and the Company on June 5, 2013.

"Occupation Safety and Health Law" means any Applicable Law of any Governmental Authority enacted or promulgated which requires or relates to Occupational Safety and Health Matters.

"Occupational Safety and Health Liabilities" means cost, damage, expense, liability, obligation, duty to indemnify, defend or reimburse, or other responsibility consisting of or relating to (a) fines, penalties, judgments, awards, settlements, legal or administrative proceedings, damages, losses, claims, remedial costs, and expenses arising under Occupational Safety and Health Law; (b) financial responsibility for corrective action, including without limitation any investigation, or abatement action including but not limited to engineering or administrative controls, or the use of required personal protective equipment, required by any applicable Occupational Safety and Health Law, or by any final order, writ, judgment, injunction or decree of any applicable federal or state Occupational Safety and Health authority; and (c) any other compliance, corrective, or remedial measures required under Occupational Safety and Health Law.

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"Occupational Safety and Health Matters" means all matters related to health and safety of employees, temporary employees, independent contractors or employees of independent contractors at the Facilities.

"Owned Real Property" means all real property that the Company or any Subsidiary owns.

"Parent Disclosure Schedule" means the disclosure schedule attached hereto and dated as of this Agreement Date and delivered by Parent and Merger Sub to the Company concurrent with the execution of this Agreement.

"Parent Material Adverse Effect" means any event, change, circumstance, occurrence, effect or state of acts that materially impairs the ability of Parent and Merger Sub to consummate, or prevents or materially delays, the Merger.

"Parent Parties" collectively, (i) Parent, Merger Sub, the Guarantors, the Financing Sources and any of their respective current, former or future Affiliates and (ii) the current, former or future directors, officers, general or limited partners, shareholders, members, managers, controlling persons, employees, representatives or agents if any of the Persons listed in the foregoing clause (i).

"Permitted Encumbrances" means (a) statutory liens for taxes that are not yet due and payable and water, sewer and other assessments not yet due and payable; (b) statutory liens to secure obligations to landlords under leases or rental agreements incurred in the ordinary course of business relating to obligations as to which there is no default and the payment of which is not yet due; (c) deposits or pledges made in connection with, or to secure payment of, workers' compensation, unemployment insurance or similar programs mandated by Applicable Law; (d) statutory liens in favor of carriers, warehousemen, mechanics and materialmen, to secure claims for labor, materials or supplies and other like liens incurred in the ordinary course of business relating to obligations as to which there is no default and the payment of which is not yet due; (e) Encumbrances, matters of record, including easements, rights-of-way, covenants, restrictions, conditions, setbacks, encroachments, gaps and gores, and other imperfections of title that are typical for the applicable property type and locality, none of which, individually or in the aggregate, materially impairs the use, value or operations of the affected property or materially interferes with the use of such property in the conduct of the Company Business (excluding, however, any mortgage lien or other similar security interest securing any financing relating directly to the Owned Real Property or any Company's leasehold estate in any Leased Real Property, which mortgage liens and other similar security interests shall be released and which financings shall be satisfied in full at Closing, and (f) any minor imperfection of title or similar liens, charges or encumbrances which individually or in the aggregate with other such liens, charges and encumbrances does not impair the value of the property subject to such lien, charge or encumbrance or the use of such property in the conduct of the Company Business.

"Person" means any individual, corporation, company, limited liability company, partnership, limited liability partnership, trust, estate, proprietorship, joint venture, association, organization, entity or Governmental Authority.

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"Real Property" means, collectively, the Owned Real Property and the Leased Real Property.

"Representatives" means any director, officer, employee, investment banker, financial advisor, attorney, accountant or other advisor or representative.

"Santa Clarita Property" means the property comprising approximately 118 acres of undeveloped land and located at the northeast corner of Golden Valley Road and Via Princessa, Santa Clarita, California, or as otherwise included in any portion of the parcels of land comprising Los Angeles County Assessors Parcel Numbers ▇▇▇▇-▇▇▇-▇▇▇ and ▇▇▇▇-▇▇▇-▇▇▇.

"SEC" means the United States Securities and Exchange Commission.

"Securities Act" means the Securities Act of 1933, as amended.

"Special Committee" has the meaning ascribed to it in the recitals.

"Subsidiary" of a Person means a corporation or other Person in which such first Person owns, directly or indirectly, at least a 50% interest or that is otherwise, directly or indirectly, controlled by such Person (which shall be deemed the case if such first Person has the power to elect more than 50% of the board of directors or other governing body of such Person), or is or would be consolidated in such party's financial statements pursuant to GAAP.

"Superior Proposal" means any unsolicited bona fide binding written Acquisition Proposal not resulting from any violation or breach of any obligation of the Company set forth in Section 6.5, that is not subject to any financing condition or, if financing is required, such financing is then fully committed or reasonably determined to be available by the Company Board, which the Company Board determines in good faith, upon the recommendation of the Special Committee (after consultation with an independent financial advisor and outside legal counsel), and taking into consideration, among other things, all of the terms, conditions, impact and all legal, financial, regulatory and other aspects of such Acquisition Proposal and this Agreement (in each case taking into account any revisions to this Agreement made or proposed in writing by Parent prior to the time of determination), including financing, regulatory approvals, equityholder litigation, identity of the Person or group making the Acquisition Proposal, breakup fee and expense reimbursement provisions and other events or circumstances, (A) is reasonably likely to be consummated in accordance with its terms and (B) is more favorable to the Company Shareholders from a financial point of view than the Merger and the other transactions contemplated by this Agreement; provided, that for purposes of this definition of "Superior Proposal," (i) all references in the term "Acquisition Proposal" to "15%" shall be deemed to be references to the lesser of (a) "80%" and (b) 100% minus the number of Equity Interests held by officers of the Company and proposed to be rolled over into the acquirer.

"Tax" (and, with correlative meaning, "Taxes") means (A) any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, lease, service, ad valorem, transfer, recording, escheat, franchise, profits, net worth, gains, license, withholding, payroll, employment, unemployment, social security, retirement, estimated, excise, severance, stamp, occupation, premium, real or personal property, environmental or windfall profit tax, custom duty or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount imposed by any Governmental Authority responsible for the imposition of any such tax (domestic or foreign); (B) any liability for the payment of any amounts of the type described in clause (A) of this sentence as a result of being a member of an affiliated, consolidated, combined, unitary or aggregate group for any taxable period (including pursuant to Treasury Regulations § 1.1502-6 or comparable provisions of state, local or foreign tax law); and (C) any liability for the payment of any amounts of the type described in clause (A) or (B) of this sentence as a result of being a transferee of or successor to any Person or as a result of any express or implied obligation to indemnify any other Person.

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"Tax Return" means any report, return, election, notice, estimate, declaration, information statement, claim for refund or other form or document (including all schedules, exhibits and other attachments thereto) relating to and filed or required to be filed with a Governmental Authority in connection with any Tax, and shall include any amendment to any of the foregoing.

"Taxable Period" means any taxable year (or portion thereof) or any other period that is treated as a taxable year (or other period, or portion thereof, in the case of a Tax imposed with respect to such other period) with respect to which any Tax may be imposed under any Applicable Law.

"Third Party" shall mean any Person or group other than the Company, the Subsidiaries, Parent or any Affiliate of Parent.

"Vested Equity Award" means each option to acquire shares of Company Common Stock and restricted stock units then outstanding and vested and/or exercisable.

Other capitalized terms defined elsewhere in this Agreement and not defined in this Article I shall have the meanings assigned to such terms in this Agreement.

1.2            Table of Definitions. The following terms have the meanings set forth in the Sections referenced below.

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ARTICLE II

THE MERGER

2.1           The Merger. On the terms and subject to the satisfaction or waiver of the conditions set forth in this Agreement, and in accordance with the CGCL, at the Effective Time, Merger Sub will be merged with and into the Company (the "Merger"). As a result of the Merger, the separate corporate existence of Merger Sub will cease and the Company will continue its corporate existence under the CGCL as the surviving corporation in the Merger (the "Surviving Corporation").

2.2           Closing. Upon the terms and subject to the conditions set forth herein, the closing of the Merger (the "Closing") will take place at 7:00 AM Pacific time on the second Business Day after satisfaction or, to the extent permitted hereunder, waiver of all conditions to the Merger set forth in Article VIII (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permitted hereunder, waiver of all such conditions), unless this Agreement has been terminated pursuant to and in accordance with Article IX or another date and time is agreed to in writing by Parent and the Company. The Closing shall be held at the offices of Sheppard, Mullin, ▇▇▇▇▇▇▇ & Hampton LLP located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, unless another place is agreed to in writing by the parties hereto. The actual date of the Closing is hereinafter referred to as the "Closing Date."

2.3           Effective Time. Subject to the provisions of this Agreement, as soon as practicable on the Closing Date, the Company, Parent and Merger Sub will cause the Certificate of Merger to be executed, acknowledged and filed with the Secretary of State of the State of California in accordance with the relevant provisions of the CGCL. The parties hereto shall make all other filings, recordings or publications required by the CGCL in connection with the Merger. The Merger will become effective at the time the Certificate of Merger is duly filed with the Secretary of the State of California or at such other time as Parent and the Company shall agree and specify in the Certificate of Merger (the time at which the Merger becomes effective being hereinafter referred to as the "Effective Time").

2.4           Effects of the Merger. The Merger shall have the effects set forth herein and in the applicable provisions of the CGCL, including Section 1107 of the CGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all property, rights, privileges, immunities, powers, franchises, licenses and authority of each of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions and duties of each of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions and duties of the Surviving Corporation.

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2.5           Articles of Incorporation; Bylaws. At the Effective Time, (a) the articles of incorporation of the Surviving Corporation shall be amended and restated to be identical to the articles of incorporation of Merger Sub immediately prior to the Effective Time, except that Article I of the articles of incorporation of the Surviving Corporation shall read as follows: "The name of this corporation is National Technical Systems, Inc."; and (b) the bylaws of the Surviving Corporation shall be amended and restated to be identical to the bylaws of Merger Sub immediately prior to the Effective Time, except that all references to Merger Sub in the bylaws of the Surviving Corporation shall be changed to refer to "National Technical Systems, Inc."

2.6           Directors. The directors of Merger Sub immediately prior to the Effective Time shall, from and after the Effective Time, be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the certificate of incorporation and bylaws of the Surviving Corporation.

2.7           Officers. The officers of the Company immediately prior to the Effective Time shall, from and after the Effective Time, be the officers of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the certificate of incorporation and bylaws of the Surviving Corporation.

ARTICLE III

EFFECT OF THE MERGER ON CAPITAL STOCK

3.1           Effect of the Merger on Capital Stock. At the Effective Time, as a result of the Merger and without any action on the part of Parent, Merger Sub or the Company or the holder of any capital stock of Parent, Merger Sub or the Company, the following shall occur:

(a)            Cancellation of Certain Company Common Stock. Each share of Company Common Stock (each, a "Common Share" and collectively, the "Common Shares") that is held by Parent, Merger Sub or the Company (as treasury stock or otherwise) or any of their respective direct or indirect Subsidiaries will automatically be cancelled and will cease to exist without any conversion thereof, and no consideration will be delivered in exchange therefor.

(b)           Conversion of Company Common Stock. Each Common Share issued and outstanding immediately prior to the Effective Time (other than (i) Common Shares to be cancelled in accordance with Section 3.1(a), and (ii) Dissenting Shares) will be converted, subject to Section 3.2(g), into the right to receive in cash $23.00 per Common Share, payable to the holder thereof, without interest and less any applicable withholding taxes (the "Per Share Consideration").

(c)            Cancellation of Common Shares. At the Effective Time, all Common Shares will no longer be outstanding and all Common Shares will automatically be cancelled and will cease to exist, and, subject to Section 3.3, each holder of a certificate formerly representing any such Common Shares (each, a "Certificate") and book-entry shares which immediately prior to the Effective Time represented Common Shares (the "Book-Entry Shares") will cease to have any rights with respect thereto, except only the right to receive the Merger Consideration allocable thereto in accordance with this Article III.

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(d)            Conversion of Merger Sub Capital Stock. Each share of common stock, no par value per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one newly and validly issued, fully paid and non-assessable share of common stock of the Surviving Corporation.

3.2            Surrender and Payment.

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3.3           Dissenting Shares. Notwithstanding any provision of this Agreement to the contrary, including Section 3.1, Common Shares which were outstanding on the date for the determination of shareholders entitled to vote on the Merger (other than Common Shares cancelled in accordance with Section 3.1(a)), which were not voted in favor of the Merger, and the holders of which (i) have demanded that the Company purchase such Common Shares at their fair market value in accordance with Section 1301 of CGCL (ii) have submitted such Common Shares for endorsement in accordance with Section 1302 of CGCL and (iii) have not otherwise failed to perfect or shall not have effectively withdrawn or lost their rights to be entitled to require the corporation to purchase their shares under CGCL (such Common Shares being referred to collectively as the "Dissenting Shares") shall not be converted into a right to receive the Merger Consideration allocable to such Dissenting Shares, but instead shall be entitled to only such rights as are granted by Section 1300 et. seq. of the CGCL; provided, however, that if, after the Effective Time, such holder fails to perfect, withdraws or loses such holder's right to appraisal pursuant to Section 1300 et. seq. of the CGCL or if a court of competent jurisdiction shall determine that such holder is not entitled to the relief provided by Section 1300 et. seq. of the CGCL, such Common Shares shall be treated as if they had been converted as of the Effective Time into the right to receive the Merger Consideration allocable thereto in accordance with Section 3.1(b), without interest thereon but subject to any applicable withholdings, upon surrender of such Certificate formerly representing such Common Share or transfer of such Book-Entry Share, as the case may be. The Company shall provide Parent prompt written notice (and in any event within three (3) Business Days) of any demands received by the Company for appraisal of Common Shares, any withdrawal of any such demand and any other demand, notice or instrument delivered to the Company prior to the Effective Time pursuant to the CGCL that relates to such demand; provided, however, that commencing ten (10) Business Days prior to the Shareholders Meeting, the Company shall provide Parent with the aforementioned written notice within two (2) days of receipt by the Company of any such demand (or demand withdrawal), notice or instrument and in any event the Company shall provide to Parent all such demands, withdrawals, notices and/or instruments that it is in receipt of on the day prior to the Shareholders Meeting and for which notice has not already been provided to Parent, to Parent on the day prior to the Shareholders Meeting and shall provide notice of any such demand, withdrawal, notice or instrument received on the day of the Shareholders Meeting to Parent immediately following receipt. Parent shall have the opportunity and right to direct all negotiations, petitions and proceedings with respect to any such demands. Prior to the Effective Time, the Company shall not, without the prior written consent of Parent (which may be given or withheld in Parent's sole discretion), make any payment with respect to, or settle or offer to settle, any such demands, or agree to do any of the foregoing.

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3.4           Adjustments. Without limiting the other provisions of this Agreement, if, at any time during the period between the Agreement Date and the Effective Time, any change in the outstanding shares of capital stock of the Company shall occur (other than the issuance of additional shares of capital stock of the Company as expressly permitted by this Agreement) by reason of any reclassification, recapitalization, stock split (including reverse stock split) or combination, exchange or readjustment of shares, or any stock dividend or distribution paid in stock, the Per Share Consideration and any other amounts payable pursuant to this Agreement shall be appropriately adjusted to reflect such reclassification, recapitalization, stock split (including reverse stock split) or combination, exchange or readjustment of shares, or any stock dividend or distribution paid in stock and to provide to the holders of Common Shares the same economic effect as contemplated by this Agreement prior to such action; provided, however, that nothing in this Section 3.4 shall be construed to permit the Company to take any action with respect to its securities that is prohibited by the terms of this Agreement.

3.5           Withholding Rights. Notwithstanding anything herein to the contrary, each of the Exchange Agent, Parent, Merger Sub and the Surviving Corporation shall be entitled to deduct and withhold, or cause to be deducted and withheld, from the consideration otherwise payable to any Person pursuant to this Article III such amounts as may be required to be deducted and withheld with respect to the making of such payment under any provision of any applicable Tax law. To the extent that amounts are so deducted and withheld, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of whom such deduction and withholding was made.

3.6            Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit, in form and substance reasonably acceptable to Parent, of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent or the Exchange Agent, the posting by such Person of a bond in such amount as Parent or the Exchange Agent may determine is reasonably necessary as indemnity against any claim that may be made against it or the Surviving Corporation with respect to such Certificate, the Exchange Agent will issue, in exchange for such lost, stolen or destroyed Certificate, the allocable Merger Consideration to be paid in respect of the Common Shares formerly represented by such Certificate as contemplated under this Article III, without any interest thereon but subject to any applicable withholdings.

3.7            Treatment of Equity Awards.

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3.8           Warrants. At the Effective Time, each warrant exercisable for shares of Company Common Stock ("Warrant"), shall by virtue of the Merger be terminated and shall be converted solely into the right to receive from Parent and the Surviving Corporation, as promptly as reasonably practicable after the Effective Time (and in any case, within five (5) Business Days), an amount in cash, without interest, equal to the product of (i) the excess, if any, of the Per Share Consideration over the then effective exercise price per share under the Warrant, and (ii) the number of shares of Company Common Stock for which the Warrant is then exercisable, provided that if the then exercise price per share under the Warrant is equal to or greater than the Per Share Consideration, then any such Warrant shall be canceled without any cash payment being made in respect thereof.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the corresponding section or subsection of the Company Disclosure Schedule (it being agreed that the disclosure of any information in a particular section or subsection of the Company Disclosure Schedule shall be deemed disclosure of such information with respect to any other section or subsection of this Agreement to which the relevance of such information is readily apparent on its face), the Company hereby makes to Parent and Merger Sub the representations and warranties contained in this Article IV.

4.1            Organization and Good Standing. The Company is a corporation, duly organized, validly existing, and in good standing under the laws of the jurisdiction of its organization and has the requisite corporate power and authority to own, lease, and operate its properties and to carry on its business as it is now being conducted. Each Subsidiary of the Company (i) is a corporation, limited partnership or limited liability company (as applicable), duly organized, validly subsisting or existing, (ii) in good standing under the laws of the jurisdiction of its organization, except where the failure to be in good standing would not be material to the Company as a whole, and (iii) has the requisite corporate power and authority to own, lease, and operate its properties and to carry on its business as it is now being conducted in all material respects. Each of the Company and each of its Subsidiary is duly qualified or licensed as a foreign corporation, limited partnership, or limited liability company (as applicable) to do business, and is in good standing in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary (each such jurisdiction is set forth on Section 4.1 of the Company Disclosure Schedule) except where the failure to be so qualified or licensed and in good standing, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect. The Company has made available to Parent true and complete copies of the currently effective Company Charter and Company Bylaws and the articles of incorporation and bylaws (or comparable organizational documents) of each of its Subsidiaries listed on Section 4.2 of the Company Disclosure Schedule, each as amended to date. The Company is not in violation of any provision of the Company Charter or Company Bylaws. No Subsidiary of the Company is in violation of its respective organizational documents, each as amended to date, in any material respect. The Company has made available to Parent true and complete copies of the minutes (or, in the case of draft minutes, the most recent drafts thereof as of the Agreement Date) of all meetings of the Company Board and each committee of the Company Board for the past five years.

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4.2            Subsidiaries.

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4.3            Power, Authority and Consents.

(a)            Power and Authority. The Company has all requisite corporate power and authority to enter into, execute, deliver and to perform its obligations under this Agreement and, subject to, in the case of the consummation of the Merger, adoption of this Agreement by the Requisite Company Vote (as defined below) and the filing of the Certificate of Merger, to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby has been duly and validly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company and no other shareholder votes are necessary to authorize the execution and delivery of this Agreement or to consummate the Merger and the other transactions contemplated hereby, subject only, in the case of consummation of the Merger, to the receipt of the Requisite Company Vote (and the filing of the Certificate of Merger and any other merger documents required by the CGCL and the filing of certain documents with the SEC and The NASDAQ Stock Market in order to delist and deregister the Company Common Stock). The affirmative vote or consent of the holders of at least a majority of the Common Shares outstanding on the record date of the Shareholders Meeting, voting together as a single class, to adopt this Agreement and approve the Merger (the "Requisite Company Vote") is the only vote or consent of the holders of any class or series of the Company's capital stock necessary to adopt this Agreement, approve the Merger and consummate the Merger and the other transactions contemplated hereby. This Agreement has been duly executed and delivered by the Company and, assuming due execution and delivery by Parent and Merger Sub, constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency (including all Applicable Laws related to fraudulent transfers), reorganization, moratorium and other similar Applicable Laws affecting creditors' rights generally and by general principles of equity.

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(b)            No Consents. Subject to the receipt of the Requisite Company Vote, no consent, approval, waiver, order or authorization of, or registration, notice, declaration, or filing with (any of the foregoing being a "Consent") (i) any Governmental Authority; or (ii) any other Person is necessary or required to be made or obtained by the Company to enable the Company to lawfully execute and deliver, enter into, and perform its obligations under this Agreement or to consummate the Merger, except for (v) the filing and recordation of the Certificate of Merger with the Office of the Secretary of State of the State of California, (w) the filing of the Company Proxy Statement with the SEC in accordance with the Exchange Act, and such other documents under the Exchange Act or the Securities Act as may be required in connection with this Agreement, the Merger and the other transactions contemplated by this Agreement, (x) such Consents as may be required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR Act")(y) such Consents as may be required under applicable state securities or "blue sky" laws and the securities laws of any foreign country or the rules and regulations of The NASDAQ Stock Market, and (z), such other Consents the failure of which to be obtained or made, individually or in the aggregate, have not had and would reasonably be expected to have Material Adverse Effect.

4.4           No Conflict. The execution, delivery and performance of this Agreement by the Company does not, and the consummation of the Merger and the other transactions contemplated hereby will not conflict with, or (with or without notice or lapse of time, or both) result in or give rise to a right of a termination, cancellation, modification or acceleration of any obligation or the loss of a material benefit under, breach, impairment or violation of, constitute a default under, or result in the creation of any Encumbrance in or upon any of the properties, assets or rights of the Company under, or give rise to any increased, additional, accelerated or guaranteed rights or entitled under, or require any Consent of any Person pursuant to: (a) any provision of the Company Charter or Company Bylaws (or similar organizational documents of any Subsidiary of the Company), each as currently in effect, (b) subject to the governmental filings and other matters referred to in Section 4.3 any Applicable Law or any rule or regulation of The NASDAQ Stock Market applicable to the Company, any of its Subsidiaries any of their respective material assets or properties; or (c) any Company Material Contract.

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4.5            Capitalization of the Company.

(a)            Authorized and Outstanding Capital Stock of the Company. The authorized capital stock of the Company consists solely of 20,000,000 shares of Company Common Stock and 2,000,000 shares of preferred stock. A total of 11,697,729 shares of Company Common Stock and no shares of preferred stock are issued and outstanding as of the Agreement Date. As of the Agreement Date, no shares of Company Common Stock were held by the Company in treasury. The shares of preferred stock previously designated as Series A Junior Participating Preferred Stock that were reserved for issuance upon the exercise of the preferred stock purchase rights issuable pursuant to the Rights Agreement dated September 21, 2010 between the Company and Computershare Trust Company, N.A. are no longer so designated or reserved following the expiration of the Rights Agreement on August 24, 2012. All issued and outstanding shares of Company Common Stock have been duly authorized and validly issued, are fully paid and nonassessable, were not issued in violation of and are not subject to any right of rescission, right of first refusal or preemptive right, and have been offered, issued, sold and delivered by the Company in material compliance with all requirements of Applicable Law. No shares of capital stock of the Company are owned by any Subsidiary of the Company.

(b)            Company Options.

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(c)            Phantom Stock Appreciation Rights.

(d)            Debt. Except as set forth on Section 4.5(d) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries have any Indebtedness.

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4.6            Company SEC Filings; Financial Statements; ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act Compliance.

(a)            Company SEC Filings. The Company has timely filed with or furnished to, as applicable, all of the forms, reports (including reports on Forms 8-K, 10-Q and 10-K), statements (including proxy statements), schedules and registration statements of the Company, and other documents required to be filed or furnished by the Company with the SEC since January 31, 2011 together with all exhibits and schedules to the foregoing materials and all information incorporated therein by reference (collectively, the "Company SEC Reports"). As of their respective filing dates (or, if amended or superseded by a subsequent filing, as of the date of the last such amendment or superseding filing prior to the Agreement Date), each Company SEC Report complied in all material respects with the applicable requirements of the Securities Act, the Exchange Act, the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, as amended ("▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act") and the rules and regulations of the SEC thereunder applicable to such Company SEC Report. None of the Company SEC Reports, including any financial statements, schedules or exhibits included or incorporated by reference therein at the time they were filed (or, if amended or superseded by a subsequent filing, as of the date of the last such amendment or superseding filing prior to the Agreement Date), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the Company's Subsidiaries is required to file or furnish any forms, reports or other documents with the SEC. As of the Agreement Date, there are no outstanding or unresolved comments in comment letters from the SEC staff with respect to any of the Company SEC Reports. To the Company's Knowledge, none of the Company SEC Reports is the subject of ongoing SEC review or outstanding SEC investigation.

(b)            Financial Statements. Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in or incorporated by reference into the Company SEC Reports: (i) have been prepared in a manner consistent with the books and records of the Company and its Subsidiaries; (ii) complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto as of their respective dates; (iii) was prepared in accordance with GAAP (except as may be indicated in the notes thereto and, in the case of unaudited interim financial statements, as may be permitted by the SEC for Quarterly Reports on Form 10-Q) applied on a consistent basis during the period involved; and (iv) fairly presented in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries at the respective dates thereof and the consolidated results of the Company's and its consolidated Subsidiaries' operations and cash flows for the periods indicated therein, subject, in the case of unaudited interim financial statements, to normal and recurring year-end audit adjustments that were not, or are not expected to be, material in amount, all in accordance with GAAP and the applicable rules and regulations of the SEC. Except as set forth on Section 4.6(b) of the Company Disclosure Schedule, since January 1, 2012, the Company has not made any change in the accounting practices or policies applied in the preparation of its financial statements except as required by GAAP, SEC rule or policy or Applicable Law. The books and records of the Company and the Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions. Ernst & Young, LLP has not resigned or been dismissed as independent public accountants of the Company as a result of or in connection with any disagreements with the Company or any Subsidiary on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.

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(c)            ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act Compliance. Each of the principal executive officer and the principal financial officer of the Company (or each former principal executive officer and each former principal financial officer of the Company, as applicable) has made all certifications required by Rule 13a-14 or 15d-14 under the Exchange Act and Sections 302 and 906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act, with respect to the Company SEC Reports, and the statements contained in such certifications were true and accurate in all respects as of the date they were made.

(d)           Disclosure Controls. The Company has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act). Such disclosure controls and procedures are designed to ensure that information relating to the Company, including its consolidated Subsidiaries, required to be disclosed in the Company's periodic and current reports under the Exchange Act, is made known to the Company's chief executive officer and its chief financial officer by others within those entities to allow timely decisions regarding required disclosures as required under the Exchange Act. The chief executive officer and chief financial officer of the Company have evaluated the effectiveness of the Company's disclosure controls and procedures and, to the extent required by applicable Law, presented in any applicable Company SEC Report that is a report on Form 10‑K or Form 10‑Q, or any amendment thereto, its conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by such report or amendment based on such evaluation.

(e)            Internal Controls. The Company and its Subsidiaries have established and maintain a system of internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) which is designed to provide, and as of January 31, 2013, was effective in providing, reasonable assurance regarding the reliability of the Company's and its consolidated Subsidiaries' financial reporting and the preparation of their financial statements for external purposes in accordance with GAAP. There are no, and no disclosure has been made prior to the Agreement Date to the Independent Accounting Firm or Audit Committee of the Company Board of any, (i) significant deficiencies or material weaknesses in the design or operation of the Company's internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial data or (ii) instances of fraud, whether or not material, that involves management or other employees who have a role in the Company's internal control over financial reporting.

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(f)            Off-balance Sheet Arrangements. Neither the Company nor any Subsidiary is a party to, or has any commitment to become a party to, any off balance sheet partnership or any similar Contract (including any Contract or arrangement relating to any transaction or relationship between or among the Company and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose entity or Person, on the other hand, or any "off balance sheet arrangements" (as defined in Item 303(a) of Regulation S-K under the Exchange Act),) where the result, purpose or intended effect of such Contract or arrangement is to avoid disclosure of any material transaction involving, or material liabilities of, the Company or any of its Subsidiaries in the Company SEC Reports or in the Company's or such Subsidiary's published financial statements.

(g)            Auditing Complaints. Since January 1, 2010, (i) neither the Company nor any of its Subsidiaries nor, to the Company's Knowledge, any director, officer, employee, auditor, accountant or representative of the Company or any of its Subsidiaries has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that the Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices and (ii) no attorney representing the Company or any of its Subsidiaries, whether or not employed by the Company or any of its Subsidiaries, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by the Company or any of its Subsidiaries or any of their respective officers, directors, employees or agents to the Company Board or any committee thereof or to any director or officer of the Company or any of its Subsidiaries.

(h)            SEC Comment Letters. As of the Agreement Date, there are no outstanding or unresolved comments in the comment letters received from the SEC staff with respect to the Company SEC Reports. To the knowledge of the Company, none of the Company SEC Reports is subject to ongoing review or outstanding SEC comment or investigation. The Company has made available to Parent true, correct and complete copies of all written correspondence between the SEC, on the one hand, and the Company and any of its Subsidiaries, on the other hand, occurring since January 1, 2010.

(i)              Subsidiary SEC Filings. No Subsidiary of the Company any is required to file any form, report, schedule, statement or other document with the SEC.

4.7            Litigation.

There is no litigation, action, suit, proceeding, claim, arbitration, inquiry, grievance or investigation (each, an "Action") (or basis therefor) pending or, to the Company's Knowledge, threatened against or affecting the Company or any of its Subsidiaries, any of their respective properties, assets, products or services, or any present or former officer, director or employee of the Company or any of its Subsidiaries in such individuals capacity as such, other than any Action that (a) does not involve an amount in controversy in excess of $150,000, (b) does not seek material injunctive or other non-monetary relief and (c) individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect. Neither the Company, nor any of its Subsidiaries nor any of their respective properties, assets, products or services is subject to any outstanding order, writ, judgment, injunction or decree of any Governmental Authority. There is no Action pending or, to the Company's Knowledge, threatened seeking to prevent, hinder, modify, delay or challenge the Merger or any of the other transactions contemplated by this Agreement.

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4.8            Taxes.

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All references to the Company and any of its Subsidiaries shall include references to any Person which merged with and into or liquidated into the Company or such Company Subsidiary, as applicable.

4.9           No Undisclosed Liabilities. Neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, known or unknown, whether due or to become due and whether or not required to be recorded or reflected on a balance sheet under GAAP, except (a) to the extent accrued or reserved against in the Company Balance Sheet and (b) for liabilities and obligations incurred in the ordinary course of business consistent with past practice since the Balance Sheet Date that are not material to the Company and its Subsidiaries, taken as a whole.

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4.10         Real Property and Personal Property Matters.

(a)            Owned Real Property. Section 4.10(a) of the Company Disclosure Schedule contains a true and correct list of each parcel of Owned Real Property, including the street address of each parcel of Owned Real Property. With respect to each parcel of Owned Real Property:

(b)            Leased Real Property. Section 4.10(b) of the Company Disclosure Schedule contains a true and correct list of each parcel of Leased Real Property, including the street address and unit/suite # of each parcel of Leased Real Property and the identity of the lessor, lessee and current occupant (if different from lessee) of each such parcel of Leased Real Property. The Company has delivered to Parent a true and correct copy of each Lease for each parcel of Lease Property. With respect to each parcel of Leased Real Property:

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(c)            Real Property. With respect to each parcel of Real Property:

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(e)            Personal Property.

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4.11          Contracts, Agreements, Arrangements, Commitments and Undertakings. Section 4.11 of the Company Disclosure Schedule sets forth a list of each of the following Contracts to which the Company or any of its Subsidiaries is a party or by which any of their respective assets or properties is bound:

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All Company Material Contracts are in written form. Each Company Material Contract is valid and binding on the Company and any of its Subsidiaries to the extent such Subsidiary is a party thereto, as applicable, and to the Company's Knowledge, each other party thereto, and is in full force and effect and enforceable in accordance with its terms. The Company and each of its Subsidiaries, and, to the Company's Knowledge, each other party thereto, has performed all material obligations required to be performed by it under each Company Material Contract. There exists no default or event of default or event, occurrence, condition or act, with respect to the Company or any of its Subsidiaries or, to the Company's Knowledge, with respect to any other contracting party, which, with the giving of notice, the lapse of time or the happening of any other event or conditions, would reasonably be expected to (i) become a default or event of default under any Company Material Contract; or (ii) give any Third Party (1) the right to accelerate the maturity or performance of any obligation of the Company under any Company Material Contract, or (2) the right to cancel or terminate any Company Material Contract, nor has the Company or any of its Subsidiaries received any notice or any such default, event, occurrence, condition or act. The Company has made available to Parent true and complete copies of all Company Material Contracts including all amendments thereto.

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4.12          Intellectual Property.

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4.13          Compliance with Laws; Permits.

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4.14          Employees, ERISA and Other Compliance.

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4.15         Environmental Compliance and Conditions. Except as set forth on Section 4.15 of the Company Disclosure Schedule:

As used herein, "Hazardous Substance" means any substance listed, defined, designated, classified or regulated as a waste, pollutant or contaminant or as hazardous, toxic, radioactive or dangerous or any other term of similar import under any Environmental and Safety Requirements, including petroleum.

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4.16         Government Contracts and Government Bids.

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4.17          Merger Expenses. The Company is not obligated for the payment of any fees, commissions or expenses of any investment banker, broker, financial advisor, finder or other Person in connection with the origin, negotiation or execution of this Agreement or in connection with the Merger or any other transactions contemplated by this Agreement other than as set forth on Section 4.17 of the Company Disclosure Schedule. The Company has furnished to Parent a true and complete copy of any Contract among the Special Committee, the Company and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Capital, Inc. pursuant to which ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Capital, Inc. could be entitled to any payment from the Company or any of its Subsidiaries relating to the transactions contemplated hereby.

4.18          Insurance. The Company and each of its Subsidiaries is covered by valid and currently effective insurance policies issued in favor of the Company or one or more of its Subsidiaries that are customary and adequate for companies of similar size in the industries and locations in which the Company operates. Section 4.18 of the Company Disclosure Schedule sets forth, as of the Agreement Date, a true and complete list of all insurance policies issued in favor of the Company or any of its Subsidiaries, or pursuant to which the Company or any of its Subsidiaries is a named insured or otherwise a beneficiary, as well as any historic incurrence-based policies still in force (the "Insurance Policies"). With respect to each such Insurance Policy, (a) such policy is in full force and effect and all premiums due and payable under all such policies have been timely paid, (b) neither the Company nor any of its Subsidiaries is in breach or default, and has not taken any action or failed to take any action which (with or without notice or lapse of time, or both) would constitute such a breach or default, or would permit termination or modification of, any such policy and (c) to the Company's Knowledge, no insurer issuing any such policy has been declared insolvent or placed in receivership, conservatorship or liquidation. No notice of cancellation or termination has been received with respect to any Insurance Policy, nor will any such cancellation or termination result from the consummation of the transactions contemplated hereby. Except as disclosed on Section 4.18 of the Company Disclosure Schedule, there is no material claim pending under any of such policies.

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4.19          Related Party Transactions. Except as disclosed in Section 4.19 of the Company Disclosure Schedule, (a) no present officer, director or employee of the Company or any of its Subsidiaries or any Person owning 5% or more of the shares of Company Common Stock (or any of such Person's immediate family members or Affiliates) is a party to any Contract with or binding upon the Company or any of its Subsidiaries or any of their respective assets, rights or properties or has any interest in any property or assets owned or leased by the Company or any of its Subsidiaries or has engaged in any transaction with any of the foregoing within the last twelve (12) months and (b) no former officer or director of the Company is a party to any Contract described in clause (a) above that is material to the Company and its Subsidiaries, considered as a whole.

4.20          Product Liability and Warranty.

4.21         Company Proxy Statement. The Company Proxy Statement will not, at the time it is first mailed to the Company Shareholders, at the time of any amendments or supplements thereto and at the time of the Shareholders Meeting, contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading. Notwithstanding the foregoing, no representation or warranty is made by the Company with respect to statements made or incorporated by reference therein based on information supplied by Parent or Merger Sub expressly for inclusion or incorporation by reference in the Company Proxy Statement. The Company Proxy Statement will comply as to form in all material respects with the provisions of the Exchange Act. For purposes of this Agreement, the letter to shareholders, notice of meeting, proxy statement and form of proxy and any other soliciting material to be distributed to stockholders in connection with the Merger (including any amendments or supplements) and any schedule required to be filed with the SEC in connection therewith are collectively referred to as the "Company Proxy Statement."

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4.22          Absence of Certain Changes or Events. Since the Balance Sheet Date, (a) the Company and its Subsidiaries have conducted their businesses only in the ordinary course consistent with past practice; (b) there has not been any change, event or development or prospective change, event or development that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect; (c) neither the Company nor any of its Subsidiaries has suffered any loss, damage, destruction or other casualty affecting any of its material properties or assets, whether or not covered by insurance; and (d) none of the Company or any of its Subsidiaries has taken any action that, if taken after the Agreement Date, would constitute a breach of any of the covenants set forth in Section 6.2.

4.23         Anti-Takeover Provisions. The Company Board has taken all necessary actions so that no takeover, anti-takeover, moratorium, "fair price," "control share," or similar Applicable Law will apply to this Agreement, the Merger or the other transactions contemplated hereby.

4.25         Occupational Safety and Health Matters. Except as set forth on Section 4.25 of the Company Disclosure Schedule:

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4.26          Standstill. As of the date hereof, all Persons who are currently party to a confidentiality, nondisclosure or similar agreement with the Company, any of its Subsidiaries and/or its Representatives with respect to a potential Acquisition Proposal are subject to standstill provision (which such provision is currently in effect and has not been waived, modified or amended in any respect) similar in scope and duration to the standstill provision included in the NDA.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

Except as set forth in the corresponding section or subsection of the Parent Disclosure Schedule (it being agreed that the disclosure of any information in a particular section or subsection of the Parent Disclosure Schedule shall be deemed disclosure of such information with respect to any other section or subsection of this Agreement to which the relevance of such information is readily apparent on its face), Parent and Merger Sub hereby make to the Company the representations and warranties contained in this Article V.

5.1           Organization and Good Standing. Parent (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and (b) has the requisite corporate power and authority to own, operate and lease its properties and to carry on its business as now conducted, except in the case of clause (b) above as individually or in the aggregate, has not had and would not reasonably be executed to have a Parent Material Adverse Effect. Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of California. Parent has made available to the Company true and complete copies of the currently effective certificate of incorporation and bylaws of Parent and articles of incorporation and bylaws of Merger Sub. Neither Parent nor Merger Sub is in violation of its respective certificate of incorporation (or, articles of incorporation, in the case of Merger Sub) or bylaws.

5.2            Power, Authority and Consents.

(a)            Power and Authority. Parent has all requisite corporate power and authority to enter into, execute, deliver and perform its obligations under this Agreement and to consummate the Merger. The execution, delivery and performance by Parent of this Agreement and all other agreements, transactions and actions contemplated hereby or thereby have been duly and validly approved and authorized by all necessary corporate action on the part of Parent and no other corporate proceedings on the part of Parent are necessary to authorize the execution and delivery of this Agreement or to consummate the Merger and the other transactions contemplated hereby. Merger Sub has all requisite corporate power and authority to enter into, execute, deliver and perform its obligations under this Agreement and to consummate the Merger. The execution, delivery and performance by Merger Sub of this Agreement and all other agreements, transactions and actions contemplated hereby or thereby have been duly and validly approved and authorized by all necessary corporate action on the part of Merger Sub and no other corporate proceedings on the part of the Merger Sub are necessary to authorize the execution and delivery of this Agreement or to consummate the Merger and the other transactions contemplated hereby.

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(b)            No Consents. No Consent of any Governmental Authority is necessary or required to be made or obtained by Parent or Merger Sub to enable Parent and Merger Sub to lawfully execute and deliver, enter into, and perform its obligations under this Agreement or to consummate the Merger, except for (i) such Consents, if any, that if not made or obtained by Parent or Merger Sub would not be material to Parent's or Merger Sub's ability to consummate the Merger or to perform their respective obligations under this Agreement, (ii) the filing and recordation of the Certificate of Merger with the Office of the Secretary of State of the State of California, (iii) the filing of the Company Proxy Statement with the SEC in accordance with the Exchange Act, and such other documents under the Exchange Act or the Securities Act as may be required in connection with this Agreement, the Merger and the other transactions contemplated by this Agreement, (iv) such Consents as may be required under any Antitrust Laws, or (v) such Consents as may be required under applicable state securities or "blue sky" laws and the securities laws of any foreign country or the rules and regulations of The NASDAQ Stock Market.

(c)            Enforceability. This Agreement has been duly executed and delivered by Parent and Merger Sub and assuming due execution and delivery by the Company, constitute the legal, valid and binding obligation of Parent and Merger Sub, enforceable against Parent and Merger Sub in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency (including all Applicable Laws related to fraudulent transfers), reorganization, moratorium and other similar Applicable Laws affecting creditors' rights generally and by general principles of equity.

5.3           No Conflict. The execution and delivery of this Agreement by Parent or Merger Sub, does not, and the consummation of the Merger or any other transaction contemplated hereby, will not conflict with, or (with or without notice or lapse of time, or both) result in or give rise to a right of a termination, cancellation, modification or acceleration of any obligation or the loss of a material benefit under, breach, impairment or violation of, constitute a default under, or result in the creation of any Encumbrance in or upon any of the properties, assets or rights of Parent or Merger Sub under, or give rise to any increased, additional, accelerated or guaranteed rights or entitled under, or require any Consent of any Person pursuant to: (a) any provision of the Certificate of Incorporation or Bylaws of Parent or Merger Sub, each as currently in effect; (b) subject to the governmental filings and other matters referred to in Section 5.2(b), any Applicable Law or any rule or regulation of The NASDAQ Stock Market applicable to Parent, Merger Sub or any of their respective material assets or properties; or (c) any material Contract to which Parent or Merger Sub is a party or by which Parent or Merger Sub or any of their respective material assets or properties are bound.

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5.4            Interim Operations of Merger Sub. Merger Sub was formed by Parent solely for the purpose of engaging in the transactions contemplated by this Agreement, and has engaged in no business activities other than the transactions contemplated by this Agreement. All of the issued and outstanding capital stock of Merger Sub is owned directly or indirectly by Parent.

5.5            Shareholders Consent. No consent or approval of the shareholders of Parent is required or necessary for Parent to enter into this Agreement or to consummate the transactions contemplated hereby.

5.6            Merger Expenses. Neither Parent, Merger Sub nor any Affiliate of Parent or Merger Sub is obligated for the payment of any fees, commission or expenses of any investment banker, broker, finder, financial advisor or similar Person in connection with the origin, negotiation or execution of this Agreement or in connection with the Merger or any other transaction contemplated by this Agreement.

5.7           Financing. Parent has delivered to the Company true and complete copies of (a) the commitment letter, dated as of August 15, 2013, between Parent and Merger Sub and GCI Capital Markets LLC (the "Debt Financing Commitments"), pursuant to which GCI Capital Markets LLC has committed to lend, subject only to the terms and conditions set forth therein, the amounts set forth therein (the "Debt Financing") for the purpose of funding the transactions contemplated by this Agreement and (b) the equity commitment letter, dated as of August 15, 2013 between Parent and Aurora Pacific Equity Partners. Inc. (the "Equity Financing Commitments" and together with the Debt Financing Commitments, the "Financing Commitments"), pursuant to which Aurora Pacific Equity Partners, Inc. has committed to invest, subject solely to the terms and conditions set forth therein, the amount set forth therein (the "Equity Financing" and, together with the Debt Financing, the "Financing"). The aggregate proceeds to be disbursed pursuant to the agreements contemplated by the Financing Commitments, together with cash and cash equivalents available to Parent, will, in the aggregate, be sufficient for Parent to consummate the Merger, to pay the total Merger Consideration, to repay or refinance in full existing Indebtedness of the Company and its Subsidiaries in accordance with the Payoff Letters, to pay the fees and expenses incurred in connection with the transactions contemplated hereby, and to provide for the working capital needs of the Surviving Corporation following the Effective Time. The Financing Commitments, in the forms provided to the Company, are legal, valid, binding and enforceable obligations of Parent and, to the knowledge of Parent, the other parties thereto, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and general equitable principles (whether considered in a proceeding in equity or at law). None of the Financing Commitments has been amended or modified prior to the Agreement Date, except as consistent with Section 7.3. As of the Agreement Date, the Financing Commitments are in full force and effect and have not been withdrawn or rescinded in any respect. There are no conditions precedent or contingencies, whether oral or written, related to the funding of the full amount of the Financing, other than as expressly set forth in the Financing Commitments. As of the Agreement Date, no event has occurred which would result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both would become a default) by Parent under the Financing Commitments, and, assuming the satisfaction of the conditions set forth in Sections 8.1 and 8.2, as of the Agreement Date, Parent does not have any reason to believe that any of the conditions to the Financing will not be satisfied or that the Financing will not be available to Parent on the Closing Date.

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5.8           Solvency. Assuming the accuracy of the representations and warranties contained in Article IV and compliance with the Company's obligations in this Agreement, at the Effective Time, the Surviving Corporation and each of its Subsidiaries, considered as a whole, after taking into account consummation of the Merger, the transactions contemplated by this Agreement, and the way Merger Sub intends that the businesses of the Company and its Subsidiaries be operated after the Effective Time, (a) will be able to pay its debts, including its stated and contingent liabilities as they mature, (b) will not have unreasonably small capital for the business in which it is and will be engaged, and (c) will be solvent.

5.9           Proxy Statement. None of the information included or incorporated by reference in the Company Proxy Statement supplied by Parent or Merger Sub in writing expressly for inclusion or incorporation therein and expressly identified as such will, at the date it is first mailed to the Company Shareholders or at the time of the Shareholders Meeting or at the time of any amendment or supplement thereof, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. Notwithstanding the foregoing, neither Parent nor Merger Sub makes any representation or warranty with respect to any statements included or incorporated by reference in the Company Proxy Statement based on information supplied by or on behalf of the Company specifically for inclusion or incorporation by reference therein.

5.10         Limited Guaranty. Concurrently with the execution of this Agreement, each Guarantor has delivered to the Company the Limited Guaranty, dated as of the Agreement Date, in favor of the Company, a true and complete copy of which has been made available by Parent to the Company. The Limited Guaranty is in full force and effect as of the Agreement Date.

ARTICLE VI

COMPANY COVENANTS

Except as set forth specifically in this Article VI, during the time period from the Agreement Date until the earlier to occur of (a) the Effective Time and (b) the termination of this Agreement in accordance with the provisions of Article IX, the Company covenants and agrees with Parent as follows:

6.1           Advice of Changes. The Company shall promptly advise Parent in writing of (a) any event occurring subsequent to the Agreement Date that would render any representation or warranty of the Company contained in Article IV to be untrue or inaccurate such that the condition set forth in Section 8.2(a) would not be satisfied; (b) any material breach of any covenant or obligation of the Company pursuant to this Agreement such that the condition set forth in Section 8.2(b) would not be satisfied; (c) any Material Adverse Effect; or (d) any change, event, circumstance, condition or effect that would reasonably be expected to result in a Material Adverse Effect or cause any of the conditions set forth in Section 8.2 not to be satisfied.

6.2           Maintenance of Business.

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6.3           Conduct of Business. Without limiting the generality of Section 6.2, except as set forth on Section 6.3 of the Company Disclosure Schedule, the Company shall not, and shall cause its Subsidiaries not to, without Parent's prior written consent (not to be unreasonably withheld, conditioned or delayed:

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6.4            Reasonable Best Efforts; Regulatory Approvals.

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6.5            Acquisition Proposals.

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provided, however, that the Company may take the action set forth in the preceding clause (y) or make a Change in Board Recommendation in response to a Superior Proposal if and only if:

provided, further, that the Company Board may not effect a Change in Board Recommendation in response to an Intervening Event unless:

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6.6            Preparation of Company Proxy Statement; Approval of Company Shareholders.

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6.7           Litigation. The Company shall notify Parent in writing promptly but in any event no later than three (3) Business Days after learning of any material Action or mediation by or before any court, arbitrator or arbitration panel, board or governmental agency, initiated by or against it, or known by the Company to be threatened against the Company or any of its officers or directors in their capacity as such.

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6.8           Access to Information. The Company shall, and shall cause each of its Subsidiaries to, afford Parent, Merger Sub and their respective Representatives access during regular business hours, so long as 24 hour advance notice is provided, to all of their respective files, books, records, Contracts, personnel, properties, assets and offices of the Company, including without limitation any and all information relating to the Company's taxes, Contracts, Liabilities, financial condition and real, personal and intangible property (which such access shall expressly exclude the right for Parent, Merger Sub and their respective Representatives to conduct environmental testing of the Company's and its Subsidiaries' properties), and the Company shall, and shall cause each of its Subsidiaries to, furnish promptly to Parent: (a) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal or state securities laws and (b) all other information concerning its business, properties and personnel as Parent or Merger Sub may reasonably request (including Tax Returns filed and those in preparation and the workpapers of its auditors). All such information shall be held subject to the terms of the NDA. Notwithstanding the foregoing, the Company in its sole discretion may restrict Parent's access to (i) documents that are attorney-client privileged or confidential, or (ii) documents that relate to the Company Board's consideration of this Agreement or alternatives thereto. No investigation pursuant to this Section 6.8 or information provided, made available or delivered to Parent pursuant to this Agreement shall affect any of the representations, warranties, covenants, rights or remedies, or the conditions to the obligations of, the parties hereunder.

6.9           Company Cooperation with Debt Financing Efforts. From the Agreement Date through the Closing Date or the termination of this Agreement, the Company shall, and shall cause its Subsidiaries to and its and their respective Representatives to, use reasonable best efforts to, provide to Parent such cooperation (including with respect to timeliness) reasonably requested by Parent in connection with the Debt Financing (provided that such requested cooperation is consistent with Applicable Law and does not unreasonably interfere with the operations of the Company or any of its Subsidiaries) including providing reasonable assistance in the preparation of customary disclosure documents and customary representation letters reasonably required in connection with the Debt Financing. The Company hereby consents to the use of its and its Subsidiary's names, logos and trademarks solely in connection with the Debt Financing. Neither the Company nor the Subsidiaries shall be required, under the provisions of this Section 6.9 or otherwise in connection with the Debt Financing, (x) to pay any commitment or other similar fee prior to the Closing Date that is not advanced or substantially simultaneously reimbursed by Parent or (y) to incur any out of pocket cost or expense unless such expense is reimbursed by Parent on the earlier of the Closing Date or termination of this Agreement in accordance with Article IX. Nothing contained in this Section 6.9 shall require the Company or its Subsidiaries to be an issuer or other obligor with respect to the Debt Financing or to authorize or approve the Debt Financing prior to the Closing. All material, non-public information regarding the Company and the Subsidiaries provided to Parent or its Representatives pursuant to this Section 6.9 shall be kept confidential by them in accordance with the NDA except for disclosure to potential lenders and investors as required in connection with the Debt Financing subject to customary confidentiality protections.

6.10         Discharge of Company Funded Indebtedness and Release of Encumbrances. Prior to the Closing Date, the Company shall obtain from each lender or holder of Indebtedness set forth on Schedule 4.5(d) a letter, in form and substance reasonably satisfactory to Parent, (i) specifying the amount of such indebtedness owed to such lender or holder, and (ii) agreeing that, upon such lender's or holder's receipt of the applicable payoff amount, (A) all outstanding obligations of the Company and its Subsidiaries arising under or related to the applicable indebtedness shall be repaid and discharged in full and (B) any Encumbrance's such lender or holder may have in connection therewith shall be released (collectively, the "Payoff Letters").

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6.11          Satisfaction of Condition`s Precedent. The Company shall use commercially reasonable efforts to satisfy or cause to be satisfied all the conditions precedent set forth in Sections 8.1 and 8.2, and the Company shall use commercially reasonable efforts to cause the Merger and the other transactions contemplated by this Agreement to be consummated in accordance with the terms of this Agreement.

6.12         Section 16 Matters. Prior to the Effective Time, the Company Board shall take all such steps as may be necessary or appropriate to cause the transactions contemplated by this Agreement, including any dispositions of shares of Company Common Stock (including derivative securities with respect to such shares) resulting from the transactions contemplated by this Agreement by each individual who is or will be subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Company, to be exempt under Rule 16b-3 promulgated under the Exchange Act.

6.13          Directors. Prior to the Effective Time, the Company shall cause each member of the Company Board to execute a letter effectuating his or her resignation as a director of the Company Board effective immediately prior to the Effective Time.

6.14          Public Announcements. The Company shall consult with Parent before issuing, and give Parent a reasonable opportunity to review and comment upon, any employee communication, press release or other public statements with respect to this Agreement, the Merger and the other transactions contemplated hereby and shall not issue any such communication, press release or make any public announcement without the prior consent of Parent, which consent shall not be unreasonably withheld, except as may be required by Applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system.

ARTICLE VII

PARENT COVENANTS

During the time period from the Agreement Date until the earlier to occur of (a) the Effective Time and (b) the termination of this Agreement in accordance with the provisions of Article IX, Parent covenants and agrees with the Company as follows:

7.1            Advice of Changes. Parent shall promptly advise the Company in writing of (a) any event occurring subsequent to the Agreement Date that would render any representation or warranty of Parent or Merger Sub contained in Article V untrue or inaccurate such that the condition set forth in Section 8.3(a) would not be satisfied, or (b) any breach of any covenant or obligation of Parent or Merger Sub pursuant to this Agreement such that the condition set forth in Section 8.3(b) would not be satisfied.

7.2            Regulatory Approvals; Reasonable Best Efforts.

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7.3            Parent Financing.

(a)            Debt Financing. Parent shall, and shall cause Merger Sub to, use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to arrange and obtain the Debt Financing on the terms and conditions described in the Debt Financing Commitments, including using reasonable best efforts to (i) maintain in effect the Debt Financing Commitments, (ii) satisfy on a timely basis all conditions applicable to Parent or Merger Sub to obtaining the Debt Financing (including by consummating the Equity Financing at or prior to Closing), (iii) enter into definitive agreements with respect thereto on terms and conditions contained in the Debt Financing Commitments or consistent in all material respects with the Debt Financing Commitments, or on other terms that would not materially and adversely impact the ability of Parent to timely consummate the transactions contemplated hereby, and (iv) draw down on the Debt Financing if the conditions to the availability of the Debt Financing have been satisfied or waived. Parent shall not, and shall cause Merger Sub to not, agree to or permit any amendment, supplement or other modification of, or waive any of its rights under, any Debt Financing Commitment or any definitive agreements related to the Debt Financing, if such amendment, supplement, modification or waiver would (A) reduce the aggregate amount of the Debt Financing, or (B) impose new or additional conditions, or otherwise amend, modify or expand any conditions to the receipt of the Debt Financing, in the case of either clause (A) or (B) above in a manner that would reasonably be expected to (1) materially delay or prevent the Closing Date, (2) make the funding of the Debt Financing (or the satisfaction of the conditions to obtaining the Debt Financing) materially less likely to occur or (C) materially adversely impact the ability of Parent or Merger Sub to enforce their rights against the other parties to the Debt Financing Commitments or the definitive agreements with respect thereto, the ability of Parent and Merger Sub to consummate the Closing or the likelihood of consummation of the Closing, in each case, without the Company's prior written consent; provided, however, that Parent and Merger Sub may amend the Debt Financing Commitments or any definitive agreements related to the Debt Financing to add lenders, lead arrangers, bookrunners, syndication agents, other funding sources, additional equity financiers or similar entities who had not executed the Debt Financing Commitments as of the Agreement Date. Upon any such amendment, supplement or modification of the Debt Financing Commitments in accordance with this Section 7.3(a), Parent shall provide a copy thereof to the Company and the term "Debt Financing Commitments" shall mean the Debt Financing Commitments as so amended, supplemented or modified. Parent shall keep the Company reasonably apprised of developments relating to the Debt Financing and will provide prompt notice of any material breach or default by any party to the Debt Financing Commitment of which Parent becomes aware or any written communication from any Person with respect to any actual or purported material breach, termination or repudiation by any party to the Debt Financing Commitment.

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(b)            Substitute Financing. As an alternative to the Debt Financing, Parent and Merger Sub may obtain substitute financing consistent with the section in the Debt Financing Commitments entitled "Alternative Financing Structure" (the "Substitute Financing") so long as the replacement of the Debt Financing Commitments with commitments for the Substitute Financing (the "Substitute Financing Commitments") would not be adverse in any material respect to the Company, taking the Debt Financing Commitments and the Substitute Financing Commitments as a whole. In the event the Debt Financing is so replaced, the term "Debt Financing Commitments" shall mean the Substitute Financing Commitments and the term "Debt Financing" shall mean the "Substitute Financing".

(c)            Alternative Financing. In the event all or any portion of the Debt Financing becomes unavailable on the terms and conditions described in or contemplated by the Debt Financing Commitments for any reason, Parent shall use its reasonable best efforts to arrange to obtain, as promptly as practicable following the occurrence of such event, alternative financing (the "Alternative Financing") in an amount sufficient to consummate the transactions contemplated by this Agreement which would not reasonably be expected to prevent, materially impede or materially delay the consummation of the Debt Financing or the transactions contemplated by this Agreement. To the extent the Debt Financing is so replaced, the term "Debt Financing Commitments" shall mean the Debt Financing Commitments, if any, and the commitments for the Alternative Financing, together, and the term "Debt Financing" shall mean the Debt Financing, if any, and the Alternative Financing, in the aggregate.

7.4            Indemnification of Company Directors and Officers.

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7.5            Employees; Benefit Plans.

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7.6           Public Announcements. Parent shall consult with Company before issuing, and give the Company a reasonable opportunity to review and comment upon, any employee communication, press release or other public statements with respect to this Agreement, the Merger and the other transactions contemplated hereby and shall not issue any such communication, press release or make any public announcement without the prior consent of the Company, which consent shall not be unreasonably withheld, except as may be required by Applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system. For the avoidance of doubt, this Section shall not restrict Parent's disclosure of information regarding the transactions contemplated hereby, including any information related to Parent's determination to enter into this Agreement, to investors or prospective investors in Parent so long as such disclosures are made pursuant to a confidentiality agreement containing customary terms.

ARTICLE VIII

CONDITIONS TO CLOSING OF MERGER

8.1           Conditions to Each Party's Obligation to Effect the Merger. The respective obligations of each party to this Agreement to effect the Merger shall be subject to the satisfaction on or prior to the Effective Time of the following conditions:

(a)            Governmental Approvals. Any applicable waiting period (and any extension thereof) under the HSR Act relating to the transactions contemplated by this Agreement shall have expired or been terminated.

(b)            Requisite Company Vote. The Requisite Company Vote shall have been obtained and shall be in full force and effect.

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(c)            No Injunctions or Restraints; Illegality. No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition preventing the consummation of the Merger shall be in effect, nor shall there be any statute, rule, regulation, law or order enacted, entered, promulgated enforced or deemed applicable to the Merger which prohibits or makes the consummation of the Merger illegal.

8.2            Additional Conditions to Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to effect the Merger are subject to the satisfaction of each of the following conditions at or prior to the Effective Time, any of which may be waived in writing exclusively by Parent and Merger Sub:

(a)            Representations and Warranties. Each of (i) the representations and warranties of the Company set forth in the first sentence of Section 4.1 (Organization and Good Standing), Sections 4.2(a) and (b)(i) (Subsidiaries), Section 4.3(a) (Power, Authority and Consents), and Sections 4.5(a), (b)(i), (iii) and (iv)(A)-(D), (c)(i), (c)(iii) and (c)(v) (Capitalization of the Company), shall be true and correct in each case as of the Agreement Date and as of the Closing Date as though made on and as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date); provided, however, in the case of Sections 4.5(a), (b)(i), (b)(iii), (b)(iv)(A)-(D), (c)(i), (c)(iii) and (c)(v), subject to any changes that are de minimis in amount or significance; and (ii) the remaining representations and warranties of the Company set forth in this Agreement that are qualified by materiality or "Material Adverse Effect" shall be true and correct (as so qualified) and each of the remaining representations and warranties of the Company set forth in this Agreement that are not so qualified shall be true and correct in all material respects, in each case as of the Agreement Date and as of the Closing Date as though made on and as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date); and Parent shall have received a certificate signed on behalf of the Company by an authorized representative of the Company to such effect.

(b)            Performance of Obligations of the Company. The Company shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Effective Time; and Parent shall have received a certificate signed on behalf of the Company by an authorized representative of the Company to such effect.

(c)             Litigation. There shall not be pending any Action by any Governmental Authority, or by any other Person (i) having a reasonable likelihood of success, and that (ii) if successful would result in a Material Adverse Effect.

(d)            FIRPTA Certificate. The Company shall have furnished to Parent a certification in accordance with Treasury Regulation § 1.1445-2(c), and otherwise in form and substance reasonably satisfactory to Parent, certifying that an interest in the Company is not a real property interest because the Company is not and has not been a United States real property holding corporation (as defined in Section 897(c)(2) of the Code) during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code, and an associated form of notice to the Internal Revenue Service prepared in accordance with the requirements of Treasury Regulation Section 1.897-2(h)(2) and otherwise in form and substance reasonably satisfactory to Parent.

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(e)            Payoff Letters/Encumbrance Releases. The Company shall have delivered to Parent duly executed copies of the Payoff Letters with respect to all outstanding Indebtedness set forth on Section 4.5(d) of the Company Disclosure Schedule and providing a mechanism for obtaining and/or filing any necessary UCC termination statements, authorizations or other releases as may be reasonably required to evidence the satisfaction of such indebtedness.

(f)            Absence of Material Adverse Effect. Since the Agreement Date there shall not have occurred any event, change, circumstance, occurrence, effect or state of facts that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect.

8.3           Additional Conditions to Obligations of the Company. The obligation of the Company to effect the Merger is subject to the satisfaction of each of the following conditions at or prior to the Effective Time, any of which may be waived, in writing, exclusively by the Company:

(a)            Representations and Warranties. The representations and warranties of Parent and Merger Sub set forth in this Agreement that are qualified by materiality or "Parent Material Adverse Effect" shall be true and correct (as so qualified), and the representations and warranties of Parent and Merger Sub set forth in this Agreement that are not so qualified shall be true and correct in all material respects, in each case as of the Agreement Date and as of the Closing Date as though made on and as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date); and the Company shall have received a certificate signed on behalf of Parent by an authorized officer of Parent to such effect.

(b)            Performance of Obligations of Parent and Merger Sub. Parent and Merger Sub shall have performed all obligations required to be performed by them under this Agreement at or prior to the Effective Time except for such obligations which individually or in the aggregate do not constitute a Parent Material Adverse Effect; and the Company shall have received a certificate signed on behalf of Parent by an authorized officer of Parent to such effect.

8.4            Frustration of Closing Conditions. None of Parent, Merger Sub or the Company may rely on the failure of any condition set forth in this Article VIII to be satisfied if such failure was caused by such party's breach of this Agreement.

ARTICLE IX

TERMINATION OF AGREEMENT

9.1           Termination by Mutual Consent. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after the Requisite Company Vote shall have been obtained, by mutual written consent of the Company and Parent.

9.2           Termination by Either Parent or the Company. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after (except as otherwise provided below) the Requisite Company Vote shall have been obtained, by action taken or authorized by Parent or the Company if:

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9.3            Termination by the Company. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after (except as otherwise provided below) the Requisite Company Vote shall have been obtained, by the Company if:

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9.4            Termination by Parent. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after the Requisite Company Vote shall have been obtained, by Parent if:

9.5            Notice of Termination; Effect of Termination and Abandonment. The party hereto desiring to terminate this Agreement pursuant to this Article IX shall give written notice of such termination to the other parties hereto specifying the provision or provisions of this Article IX pursuant to which such termination is purportedly effected and including reasonable detail of the circumstances giving rise to such termination. If this Agreement is terminated pursuant to this Article IX, this Agreement shall become void and of no effect, without any liability on the part of any party hereto or any of their respective representatives; provided that, (i) the NDA, the Limited Guaranty (only to the extent reflected therein) and the provisions of Section 4.17 and 5.6 (Merger Expenses), Sections 6.14 and 7.6 (Public Announcements), Section 9.8 (Limitation on Liability), this Section 9.5, Section 10.10 (Expenses), Section 10.12 (Notices), Section 10.15 (Entire Agreement), Section 10.14 (Third Party Beneficiaries), Section 10.2 (Governing Law), Section 10.3 (Submission to Jurisdiction; Limitation on Suits Against Financing Sources), Section 10.5 (Assignment; Binding Upon Successors and Assigns), Section10.8 (Remedies; Specific Performance), Section 10.4 (Waiver of Jury Trial), Section 10.6 (Severability) and Section 10.13 (Interpretation; Rules of Construction) shall survive the termination hereof, (ii) the Company or Parent shall have such liability as provided for in Sections 9.6 below and 10.10 (Expenses), and (iii) subject to Section 9.8, (including the limitation on liability set forth therein), no such termination shall relieve any party from any liability or damages resulting from a willful and material breach of any of its representations, warranties, covenants or agreements set forth in this Agreement or fraud, in which case the non-breaching party shall be entitled to all rights and remedies available at law or in equity. Notwithstanding the forgoing, in no event shall any party hereto be liable for punitive damages.

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9.6            Termination Fee and Expenses.

In the event that:

then, in any such event, the Company shall pay to Parent a fee of $11.0 million (the "Termination Fee") less the amount of Parent Expenses previously paid to Parent (if any) pursuant to Section 9.6(b), it being understood that in no event shall the Company be required to pay the Termination Fee on more than one occasion; provided, that the payment by the Company of the Termination Fee pursuant to this Section 9.6 shall not relieve the Company from any liability or damage resulting from a willful and material breach of any of its representations, warranties, covenants or agreements set forth in this Agreement or fraud. Payment of the Termination Fee shall be made by wire transfer of same day funds to the account designated by Parent (i) promptly after (and, in any event, within fifteen (15) Business Days of) the earliest to occur of any of the events requiring the payment of the Termination Fee pursuant to Section 9.6(a), (ii) promptly (and, in any event, within fifteen (15) Business Days of termination), in the case of termination by Parent pursuant to Section 9.4(a), or (iii) at the time required by Section 9.3(b), in the case of a termination by the Company pursuant to Section 9.3(b).

(d)            In the event that this Agreement is terminated by the Company or Parent pursuant to Section 9.2(b) or by Parent pursuant to Section 9.4(b) under circumstances in which the Termination Fee is not then payable pursuant to Section 9.6(a), then the Company shall reimburse Parent and its Affiliates for all of their reasonable out of pocket fees and expenses (including all fees and expenses of Financing Sources, counsel, accountants, investment bankers, experts and consultants to Parent and Merger Sub and their Affiliates) incurred by Parent or Merger Sub or on their behalf in connection with or related to the authorization, preparation, investigation, negotiation, execution and performance of this Agreement and the transactions contemplated hereby (the "Parent Expenses"), up to a maximum amount of $7.5 million; provided, that the payment by the Company of the Parent Expenses pursuant to this Section 9.6(d), (i) shall not relieve the Company of any subsequent obligation to pay the Termination Fee pursuant to Section 9.6(a) except to the extent indicated in such Section, and (ii) shall not relieve the Company from any liability or damage resulting from a willful and material breach of any of its representations, warranties, covenants or agreements set forth in this Agreement or fraud. Payment of the Parent Expenses shall be made by wire transfer of same day funds to the account designated by Parent promptly (and, in any event, within fifteen (15) Business Days) after the Company has been notified of the amounts thereof by Parent.

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9.7           Acknowledgement. Each Party acknowledges that (a) the agreements contained in this Article IX are an integral part of the transactions contemplated by this Agreement, and (b) without the agreements contained in this Article IX, neither Parent nor the Company would have entered into this Agreement. Accordingly, if the Company or Parent, as the case may be, fails to promptly pay any amount due pursuant to Section 9.6 or and, in order to obtain such payment, the Company, Parent and/or Merger Sub commences a suit that results in a judgment against the Company or Parent, as the case may be, for the amount set forth in Section 9.6 or any portion thereof, the prevailing party in such suit shall pay to the other party its costs and expenses (including reasonable attorneys' fees and expenses) incurred by it and its Affiliates in connection with such suit, together with interest on such amount or portion thereof until the date of payment at the prime lending rate as published in The Wall Street Journal in effect on the date such payment was required to be made.

9.8            Limitation on Liability. Notwithstanding anything to the contrary in this Agreement:

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ARTICLE X

MISCELLANEOUS

10.1          Survival. None of the representations and warranties contained in this Agreement or in any instrument delivered under this Agreement will survive the Effective Time. None of the covenants or agreements of the parties in this Agreement shall survive the Effective Time, other than those covenants and agreements contained herein which by their terms apply, or that are to be performed in whole or in part, after the Effective Date, which shall survive the consummation of the Merger until fully performed.

10.2          Governing Law. The internal laws of the State of California, irrespective of its conflicts of law principles, shall govern the validity of this Agreement, the construction of its terms, and the interpretation and enforcement of the rights and duties of the parties hereto.

10.3          Submission to Jurisdiction; Limitation on Suits Against Financing Sources. Each of the parties hereto (i) irrevocably submits itself to the personal jurisdiction of any court of proper subject matter jurisdiction in the State of California in the event any dispute arises out of this Agreement or the Merger, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and (iii) agrees that it will not bring any Action relating to this Agreement or the Merger in any court other than a court in the State of California, other than Actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court. Each of the parties hereto further agrees that notice as provided herein shall constitute sufficient service of process and waives any argument that such service is insufficient. Each of the parties hereto hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any Action related to or arising out of this Agreement or the Merger, that (i) the Action in any such court is brought in an inconvenient forum, (ii) the venue of such Action is improper or (iii) this Agreement or the subject matter hereof may not be enforced in or by such courts. Notwithstanding the foregoing or anything else to the contrary and without limiting the generality of Section 9.8(a), each of the parties hereto agrees that it will not bring or support any Action of any kind or description, whether in law or in equity, whether in contract or in tort or otherwise, against any Financing Source in any way relating to this Agreement or the transactions contemplated by this Agreement, including without limitation any dispute arising out of or relating to the Equity Commitment, Debt Financing Commitment, the Alternative Financing or the performance thereof, in any forum other than the United States District Court for the Southern District of New York or any New York State Court sitting in New York City, and that the provisions of Section 10.4 relating to the waiver of jury trial shall apply to any such Action.

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10.4          Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

10.5          Assignment; Binding Upon Successors and Assigns. This Agreement shall inure to the benefit of the successors and assigns of Parent, including any successor to, or assignee of, all or substantially all of the business and assets of Parent. Except as set forth in the preceding sentence, no party hereto may assign or delegate, in whole or in part, any of its rights or obligations hereunder without the prior written consent of the other parties hereto. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Any assignment in violation of this provision shall be void.

10.6          Severability. If any provision of this Agreement, or the application thereof, shall for any reason and to any extent be invalid or unenforceable under any Applicable Law or jurisdiction, then (a) such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and the (b) remainder of this Agreement and the application of such provision to other Persons or circumstances shall be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that shall achieve, to the extent possible, the economic, business and other purposes of the void or unenforceable provision.

10.7          Counterparts. This Agreement may be executed in any number of original, facsimile or .PDF counterparts, each of which shall be an original as regards any party whose signature appears thereon and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all parties reflected hereon as signatories.

10.8          Remedies; Specific Performance.

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10.9          Amendments and Waivers. Any term or provision of this Agreement may be amended, modified or supplemented, and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only by a writing signed by the party to be bound thereby. The waiver by a party of any breach hereof or default in the performance hereof shall not be deemed to constitute a waiver of any other default or any succeeding breach or default. This Agreement may be amended by the parties hereto as provided in this Section 10.9 at any time before or after adoption of this Agreement by the Requisite Company Vote, but, after such adoption, no amendment shall be made which by Applicable Law requires the further approval of the Company Shareholders without obtaining such further approval. Notwithstanding anything to the contrary contained herein, Sections 9.5, 9.8, 10.1, 10.3, 10.4, 10.14(a) and this Section 10.9 (and any provision of this Agreement to the extent a modification, waiver or termination of such provision would modify the substance of Section 9.5, 9.8, 10.1, 10.3, 10.4, 10.14(a) and this Section 10.9) may not be modified, waived or terminated in a manner that impacts or is adverse in any respect to the Financing Sources without the prior written consent of the Financing Sources. At any time prior to the Effective Time, each of Company and Parent, may, to the extent authorized by their respective Board of Directors and to the extent permitted by Applicable Law, (a) extend the time for the performance of any of the obligations or other acts of the other, (b) waive any inaccuracies in the representations and warranties made to it contained herein or in any document delivered pursuant hereto, and (c) waive compliance with any of the agreements or conditions for its benefit contained herein; provided, however, that after the Requisite Company Vote has been obtained, no waiver may be made that pursuant to Applicable Law requires further approval or adoption by the stockholders of the Company without such further approval or adoption. No such waiver or extension shall be effective unless signed in writing by the party against whom such waiver or extension is asserted. The failure or delay of any party to enforce any of the provisions hereof shall not be construed to be a waiver of the right of such party thereafter to enforce such provisions, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the parties hereunder are cumulative and are not exclusive of any rights or remedies which they would otherwise have hereunder.

10.10        Expenses. Except as otherwise provided in Section 9.6, each party shall bear its respective legal, accountants, and financial advisory fees and other expenses incurred with respect to this Agreement, the Merger and the transactions contemplated hereby, whether or not the Merger is consummated. Notwithstanding the foregoing, (a) Parent and the Company shall share equally all filing fees required in connection with filings made under the HSR Act, and (b) in the event this Agreement is terminated for any reason other than by the Company pursuant to Section 9.3(b), or Parent pursuant to 9.4(a) or 9.4(b), Parent shall reimburse the Company for half of the aggregate fees (other than attorneys' fees) and expenses incurred in connection with filing the Company Proxy Statement and calling the Shareholders Meeting.

10.11       Attorneys' Fees. Should suit be brought to enforce or interpret any part of this Agreement, the prevailing party shall be entitled to recover, as an element of the costs of suit and not as damages, reasonable attorneys' fees to be fixed by the court (including costs, expenses and fees on any appeal). The prevailing party shall be entitled to recover its costs of suit, regardless of whether such suit proceeds to final judgment.

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10.12        Notices. All notices and other communications required or permitted under this Agreement shall be in writing and shall be either hand delivered in person, sent by facsimile or email, sent by certified or registered first-class mail, postage pre-paid, or sent by nationally recognized express courier service. Such notices and other communications shall be deemed duly given (a) upon receipt, if hand delivered, (b) upon written confirmation of receipt by facsimile or email, if delivered by facsimile or email, (c) three (3) Business Days after mailing if sent by mail, and (d) one (1) Business Day after dispatch if sent by express courier, to the following addresses, or such other addresses as any party may notify the other parties in accordance with this Section 10.12:

If to Parent or Merger Sub:

Nest Parent, Inc.

c/o Aurora Capital Group

▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇^▇▇ ▇▇▇▇▇

▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇

Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇

Email address: ▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇

with a copy (which shall not constitute notice pursuant to this Section 10.12) to:

▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP

▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇

▇▇^▇▇ ▇▇▇▇▇

▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇

Attention: ▇▇▇ ▇. ▇▇▇▇▇

Email address: ▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇

Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇

If to the Company:

National Technical Systems, Inc.

▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇

▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇

Attention: Chief Executive Officer

Email: ▇▇▇▇.▇▇▇▇▇▇▇▇@▇▇▇.▇▇▇

with a copy (which shall not constitute notice pursuant to this Section 10.12) to:

Sheppard, Mullin, ▇▇▇▇▇▇▇ & Hampton LLP

▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇

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▇▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇

▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇

Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III, Esq.

Email: ▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇; ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇

10.13        Interpretation; Rules of Construction. When a reference is made in this Agreement to Exhibits, Sections or Articles, such reference shall be to an Exhibit to, Section of or Article of this Agreement, respectively, unless otherwise indicated. The words "include", "includes" and "including" when used herein shall be deemed in each case to be followed by the words "without limitation". The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to the Agreement as a whole and not to any particular provision in this Agreement. The term "or" is not exclusive. The word "will" shall be construed to have the same meaning and effect as the word "shall." References to days mean calendar days unless otherwise specified. All references to "dollars" or "$" or "US$" in this Agreement refer to United States dollars, which is the currency used for all purposes in this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. The headings and table of contents contained in this Agreement or in any Exhibit or Schedule hereto are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth herein. The parties hereto agree that they have been represented by legal counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document shall be construed against the party drafting such agreement or document.

10.14       Third Party Beneficiary Rights.

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10.15        Entire Agreement. This Agreement, the exhibits and schedules hereto, the NDA, and the Limited Guaranty constitute the entire understanding and agreement of the parties hereto with respect to the subject matter hereof and supersede all prior and contemporaneous agreements or understandings, inducements or conditions, express or implied, written or oral, between the parties with respect hereto other than the NDA, which Parent and the Company agree shall continue to be in full force and effect following the execution of this Agreement; provided, however, the parties agree that no provision of the NDA shall limit in any respect the rights of Parent, the Guarantors or any of their Affiliates to assign or syndicate any portion of their Equity Financing, subject to the terms of the Equity Financing Commitment Letter. In the event of any conflict between the terms of this Agreement and the terms of the NDA, the terms of this Agreement shall control. The express terms hereof control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

[Signature Page to Agreement and Plan of Merger]

 

 

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