Document:

EXHIBIT
      10.40

     

    MODTECH
      HOLDINGS, INC. AND CERTAIN OF ITS SUBSIDIARIES

    MASTER
      SECURITY AGREEMENT

     

    
      	
              To:

            	 	
              Laurus
                Master Fund, Ltd.

              c/o
                M&C Corporate Services Limited

              P.O.
                Box 309 GT

              Ugland
                House

              South
                Church Street

              George
                Town

              Grand
                Cayman, Cayman Islands

            
	 	 	 
	
              Date

            	 	
              October
                31,
                2006

            

    

     

    To
      Whom
      It May Concern:

     

    1. To
      secure
      the payment of all Obligations (as hereafter defined), Modtech Holding, Inc.,
      a
      Delaware corporation (the “Company”),
      each
      of the other undersigned parties (other than Laurus Master Fund, Ltd.,
      (“Laurus”))
      and
      each other entity that is required to enter into this Master Security Agreement
      (each an “Assignor”
and,
      collectively, the “Assignors”)
      hereby
      assigns and grants to Laurus a continuing security interest in all of the
      following property now owned or at any time hereafter acquired by such Assignor,
      or in which such Assignor now has or at any time in the future may acquire
      any
      right, title or interest (the “Collateral”):
      all
      cash, cash equivalents, accounts, accounts receivable, deposit accounts
      (including, without limitation, (x) the Restricted Account (the “Restricted
      Account”)
      maintained at North Fork Bank (Account Name: Modtech Holdings, Inc., Account
      Number: 270-405-8763) referred to in the Restricted Account Agreement) and
      (y)
      Lockbox Deposit Accounts), inventory, equipment, goods, fixtures, documents,
      instruments (including, without limitation, promissory notes), contract rights,
      commercial tort claims set forth on Exhibit B to this Master Security Agreement,
      general intangibles (including, without limitation, payment intangibles and
      an
      absolute right to license on terms no less favorable than those current in
      effect among such Assignor’s affiliates), chattel paper, supporting obligations,
      investment property (including, without limitation, all partnership interests,
      limited liability company membership interests and all other equity interests
      owned by any Assignor), letter-of-credit rights, trademarks, trademark
      applications, tradestyles, patents, patent applications, copyrights, copyright
      applications and other intellectual property in which such Assignor now has
      or
      hereafter may acquire any right, title or interest, all proceeds and products
      thereof (including, without limitation, proceeds of insurance) and all
      additions, accessions and substitutions thereto or therefor. In the event any
      Assignor wishes to finance the acquisition in the ordinary course of business
      of
      any hereafter acquired equipment and has obtained a written commitment from
      an
      unrelated third party financing source to finance such equipment, Laurus shall
      release its security interest on such hereafter acquired equipment so financed
      by such third party financing source. Except as otherwise defined herein, all
      capitalized terms used herein shall have the meanings provided such terms in
      the
      Securities Purchase Agreement referred to below. All items of Collateral which
      are defined in the UCC shall have the meanings set forth in the UCC.  For
      purposes hereof, the term "UCC" 
      means the Uniform Commercial Code as the same may, from time to time, be in
      effect in the State of New York; provided, that in the event that, by reason
      of
      mandatory provisions of law, any or all of the attachment, perfection or
      priority of, or remedies with respect to, Laurus' security interest in any
      Collateral is governed by the Uniform Commercial Code as in effect in a
      jurisdiction other than the State of New York, the term “UCC”
shall
      mean the Uniform Commercial Code as in effect in such other jurisdiction for
      purposes of the provisions of this Agreement relating to such attachment,
      perfection, priority or remedies and for purposes of definitions related to
      such
      provisions; provided further, that to the extent that the UCC is used to define
      any term herein and such term is defined differently in different Articles
      or
      Divisions of the UCC, the definition of such term contained in Article or
      Division 9 shall govern.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2. The
      term
“Obligations”
as
      used
      herein shall mean and include all debts, liabilities and obligations owing
      by
      each Assignor to Laurus arising under, out of, or in connection with: (i) that
      certain Securities Purchase Agreement dated as of the date hereof by and between
      the Company and Laurus (the “Securities
      Purchase Agreement”)
      and
      (ii) the Related Agreements referred to in the Securities Purchase Agreement
      (the Securities Purchase Agreement and each Related Agreement, as each may
      be
      amended, modified, restated or supplemented from time to time, collectively,
      the
“Documents”),
      and
      in connection with any documents, instruments or agreements relating to or
      executed in connection with the Documents or any documents, instruments or
      agreements referred to therein or otherwise, and in connection with any other
      indebtedness, obligations or liabilities of each such Assignor to Laurus,
      whether now existing or hereafter arising, direct or indirect, liquidated or
      unliquidated, absolute or contingent, due or not due and whether under, pursuant
      to or evidenced by a note, agreement, guaranty, instrument or otherwise,
      including, without limitation, obligations and liabilities of each Assignor
      for
      post-petition interest, fees, costs and charges that accrue after the
      commencement of any case by or against such Assignor under any bankruptcy,
      insolvency, reorganization or like proceeding (collectively, the “Debtor
      Relief Laws”)
      in
      each case, irrespective of the genuineness, validity, regularity or
      enforceability of such Obligations, or of any instrument evidencing any of
      the
      Obligations or of any collateral therefor or of the existence or extent of
      such
      collateral, and irrespective of the allowability, allowance or disallowance
      of
      any or all of the Obligations in any case commenced by or against any Assignor
      under any Debtor Relief Law.

     

    3. Each
      Assignor hereby jointly and severally represents, warrants and covenants to
      Laurus that:

     

    (a) it
      is a
      corporation, partnership or limited liability company, as the case may be,
      validly existing, in good standing and formed under the respective laws of
      its
      jurisdiction of formation set forth on Schedule A, and each Assignor will
      provide Laurus thirty (30) days’ prior written notice of any change in any of
      its respective jurisdiction of formation;

     

    (b) its
      legal
      name is as set forth in its Certificate of Incorporation or other organizational
      document (as applicable) as amended through the date hereof and as set forth
      on
      Schedule A, and it will provide Laurus thirty (30) days’ prior written notice of
      any change in its legal name;

     

    
      
        
        

      

      
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    (c) its
      organizational identification number (if applicable) is as set forth on Schedule
      A hereto, and it will provide Laurus thirty (30) days’ prior written notice of
      any change in its organizational identification number;

     

    (d) it
      is the
      lawful owner of its Collateral and it has the sole right to grant a security
      interest therein and will defend the Collateral against all claims and demands
      of all persons and entities;

     

    (e) other
      than Permitted Encumbrances, it will keep its Collateral free and clear of
      all
      attachments, levies, taxes, liens, security interests and encumbrances of every
      kind and nature (“Encumbrances”),
      except (i) Encumbrances securing the Obligations and (ii) Encumbrances securing
      indebtedness of each such Assignor not to exceed $50,000 in the aggregate for
      all such Assignors so long as all such Encumbrances are removed or otherwise
      released to Laurus’ satisfaction within ten (10) days of the creation thereof;
      for the purposes hereof, Permitted Encumbrances shall mean (A) “Permitted
      Encumbrances”
means
      (1) Encumbrances of carriers, warehousemen, artisans, bailees, mechanics and
      materialmen incurred in the ordinary course of business securing sums(x) not
      overdue or (y) being diligently contested in good faith provided that adequate
      reserves with respect thereto are maintained on the books of the applicable
      Company in conformity with GAAP (as defined in the Securities Purchase
      Agreement) and provided, further that the Encumbrance shall have no effect
      on
      the priority of Encumbrances in favor of Laurus or the value of the assets
      in
      which Laurus has any Encumbrance; (2) Encumbrances incurred in the ordinary
      course of business in connection with workmen’s compensation, unemployment
      insurance or other forms of governmental insurance or benefits, relating to
      employees, securing sums (x) not overdue or (y) being diligently contested
      in
      good faith provided that adequate reserves with respect thereto are maintained
      on the books of the applicable Company in conformity with GAAP and provided,
      further that the Encumbrance shall have no effect on the priority of
      Encumbrances in favor of Laurus or the value of the assets in which Laurus
      has
      any Encumbrance; (3) Encumbrances in favor of Laurus; (4) Encumbrances for
      taxes
      (x) not yet due or (y) being diligently contested in good faith by appropriate
      proceedings, provided that adequate reserves with respect thereto are maintained
      on the books of the applicable Company in conformity with GAAP and provided,
      further that the Encumbrance shall have no effect on the priority of
      Encumbrances in favor of Laurus or the value of the assets in which Laurus
      has
      any Encumbrance; and (5) Purchase Money Liens securing Purchase Money
      Indebtedness in an amount not to exceed $200,000; (B) “Purchase Money
      Indebtedness” means (1) any indebtedness incurred for the payment of all or any
      part of the purchase price of any fixed asset, (2) any indebtedness incurred
      for
      the sole purpose of financing or refinancing all or any part of the purchase
      price of any fixed asset, and (3) any renewals, extensions or refinancings
      thereof (but not any increases in the principal amounts thereof outstanding
      at
      that time); and (C) “Purchase Money Liens” means any Encumbrance upon any fixed
      assets that secures the Purchase Money Indebtedness related thereto but only
      if
      such Encumbrance shall at all times be confined solely to the asset the purchase
      price of which was financed or refinanced through the incurrence of the Purchase
      Money Indebtedness secured by such Encumbrance and only if such Encumbrance
      secures only such Purchase Money Indebtedness.

     

    (f) it
      will,
      at its and the other Assignors’ joint and several cost and expense keep the
      Collateral in good state of repair (ordinary wear and tear excepted) and will
      not waste or destroy the same or any part thereof other than ordinary course
      discarding of items no longer used or useful in its or such other Assignors’
business;

     

    
      
        
        

      

      
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    (g) it
      will
      not, without Laurus’ prior written consent, sell, exchange, lease or otherwise
      dispose of any Collateral, whether by sale, lease or otherwise, except for
      the
      sale of inventory in the ordinary course of business, obsolete inventory and
      for
      the disposition or transfer in the ordinary course of business during any fiscal
      year of obsolete and worn-out equipment or equipment no longer necessary for
      its
      ongoing needs, having an aggregate fair market value of not more than $75,000
      and only to the extent that:

     

    (i) the
      proceeds of each such disposition are used to acquire replacement Collateral
      which is subject to Laurus’ first priority perfected security interest, or are
      used to repay the Obligations or to pay general corporate expenses;
      or

     

    (ii) following
      the occurrence of an Event of Default which continues to exist the proceeds
      of
      which are remitted to Laurus to be held as cash collateral for the
      Obligations;

     

    (h) it
      will
      insure or cause the Collateral to be insured in Laurus’ name (as an additional
      insured and loss payee) against loss or damage by fire, theft, burglary,
      pilferage, loss in transit and such other hazards as Laurus shall reasonably
      specify in amounts and under policies by insurers reasonably acceptable to
      Laurus and all premiums thereon shall be paid by such Assignor and the policies
      delivered to Laurus. If any such Assignor fails to do so, Laurus may procure
      such insurance and the cost thereof shall be promptly reimbursed by the
      Assignors, jointly and severally, and shall constitute Obligations;

     

    (i) it
      will
      at all reasonable times allow Laurus or Laurus’ representatives free access to
      and the right of inspection of the Collateral; 

     

    (j) such
      Assignor (jointly and severally with each other Assignor) hereby indemnifies
      and
      saves Laurus harmless from all loss, costs, damage, liability and/or expense,
      including reasonable attorneys’ fees, that Laurus may sustain or incur to
      enforce payment, performance or fulfillment of any of the Obligations and/or
      in
      the enforcement of this Master Security Agreement or in the prosecution or
      defense of any action or proceeding either against Laurus or any Assignor
      concerning any matter growing out of or in connection with this Master Security
      Agreement, and/or any of the Obligations and/or any of the Collateral except
      to
      the extent caused by Laurus’ own gross negligence or willful misconduct (as
      determined by a court of competent jurisdiction in a final and nonappealable
      decision);

     

    (k) all
      commercial tort claims (as defined in the Uniform Commercial Code as in effect
      in the State of New York) held by any Assignor are set forth on Schedule C
      to
      this Master Security Agreement; each Assignor hereby agrees that it shall
      promptly, and in any event within five (5) Business Days after the same is
      acquired by it, notify Laurus of any commercial tort claim acquired by it and
      unless otherwise consented to in writing by Laurus, it shall enter into a
      supplement to this Master Security Agreement granting to Laurus a security
      interest in such commercial tort claim, securing the Obligations;
      and

     

    
      
        
        

      

      
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    (l) On
      or
      prior to the Closing Date (or such later date as may be agreed by Laurus in
      writing), each Assignor will (x) irrevocably direct all of its present and
      future Account Debtors (as defined below) and other persons or entities
      obligated to make payments constituting Collateral to make such payments
      directly to the lockboxes maintained by such Assignor (the “Lockboxes”)
      with
      Bank of America, N.A. or such other financial institution accepted by Laurus
      in
      writing as may be selected by the Company (the “Lockbox
      Bank”)
      (each
      such direction pursuant to this clause (x), a “Direction
      Notice”)
      and
      (y) provide Laurus with copies of each Direction Notice, each of which shall
      be
      agreed to and acknowledged by the respective Account Debtor. The Lockbox Bank
      shall agree to deposit the proceeds of such payments immediately upon receipt
      thereof in that certain deposit account maintained at the Lockbox Bank and
      evidenced by the account name of Modtech Holdings, Inc. and the account number
      of 14962-02541, or such other deposit account accepted by Laurus in writing
      (the
“Lockbox
      Deposit Account”).
      On or
      prior to the Closing Date, the Company shall and shall cause the Lockbox Bank
      to
      enter into all such documentation acceptable to Laurus pursuant to which, among
      other things, the Lockbox Bank agrees to, following notification by Laurus
      (which notification Laurus shall only give following the occurrence and during
      the continuance of an Event of Default), comply only with the instructions
      or
      other directions of Laurus concerning the Lockbox and the Lockbox Deposit
      Account. All of each Assignor’s invoices, account statements and other written
      or oral communications directing, instructing, demanding or requesting payment
      of any Account (as hereinafter defined) of any such Assignor or any other amount
      constituting Collateral shall conspicuously direct that all payments be made
      to
      the Lockbox or such other address as Laurus may direct in writing. If,
      notwithstanding the instructions to Account Debtors, any Assignor receives
      any
      payments, such Assignor shall immediately remit such payments to the Lockbox
      Deposit Account in their original form with all necessary endorsements. Until
      so
      remitted, the Assignors shall hold all such payments in trust for and as the
      property of Laurus and shall not commingle such payments with any of its other
      funds or property. For the purpose of this Master Security Agreement,
      (x) “Accounts”
shall
      mean all “accounts”,
      as
      such term is defined in the UCC as in effect in the State of New York on the
      date hereof, now owned or hereafter acquired by any Assignor and (y)
“Account
      Debtor”
shall
      mean any person or entity who is or may be obligated with respect to, or on
      account of, an Account.

     

    4. The
      occurrence of any of the following events or conditions shall constitute an
      “Event
      of Default”
under
      this Master Security Agreement:

     

    (a) any
      covenant or any other term or condition of this Master Security Agreement is
      breached in any material respect and such breach, to the extent subject to
      cure,
      shall continue without remedy for a period of twenty (20) days after the
      occurrence thereof;

     

    (b) any
      representation or warranty, or statement made or furnished to Laurus under
      this
      Master Security Agreement by any Assignor or on any Assignor’s behalf should
      prove to any time be false or misleading in any material respect on the date
      as
      of which made or deemed made;

     

    
      
        
        

      

      
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    (c) the
      loss,
      theft, substantial damage, destruction, sale or encumbrance to or of any of
      the
      Collateral (except as may be expressly permitted by Section 3(e) and
      Section 3(g) or the making of any levy, seizure or attachment thereof or
      thereon except to the extent:

     

    (i) such
      loss
      is covered by insurance proceeds which are used to replace the item or repay
      Laurus; or

     

    (ii) said
      levy, seizure or attachment does not secure indebtedness in excess of $200,000
      in the aggregate for all Assignors and such levy, seizure or attachment has
      been
      vacated, discharged, stayed or bonded within forty (40) days of the creation
      or
      the assertion thereof;

     

    (d) an
      Event
      of Default shall have occurred under and as defined in any
      Document.

     

    5. Upon
      the
      occurrence of any Event of Default and at any time thereafter, Laurus may
      declare all Obligations immediately due and payable and Laurus shall have the
      remedies of a secured party provided in the UCC as in effect in the State of
      New
      York, this Agreement and other applicable law. Upon the occurrence of any Event
      of Default and at any time thereafter, Laurus will have the right to take
      possession of the Collateral and to maintain such possession on any Assignor’s
      premises or to remove the Collateral or any part thereof to such other premises
      as Laurus may desire. Upon Laurus’ request, each Assignor shall assemble or
      cause the Collateral to be assembled and make it available to Laurus at a place
      designated by Laurus. If any notification of intended disposition of any
      Collateral is required by law, such notification, if mailed, shall be deemed
      properly and reasonably given if mailed at least ten (10) days before such
      disposition, postage prepaid, addressed to the applicable Assignor either at
      such Assignor’s address shown herein or at any address appearing on Laurus’
records for such Assignor. Any proceeds of any disposition of any of the
      Collateral shall be applied by Laurus to the payment of all expenses in
      connection with the sale of the Collateral, including reasonable attorneys’ fees
      and other legal expenses and disbursements and the reasonable expenses of
      retaking, holding, preparing for sale, selling, and the like, and any balance
      of
      such proceeds may be applied by Laurus toward the payment of the Obligations
      in
      such order of application as Laurus may elect, and each Assignor shall be liable
      for any deficiency. For the avoidance of doubt, following the occurrence and
      during the continuance of an Event of Default, Laurus shall have the immediate
      right to withdraw any and all monies contained in any deposit account in the
      name of any Assignor and controlled by Laurus and apply same to the repayment
      of
      the Obligations (in such order of application as Laurus may elect). The parties
      hereto each hereby agree that the exercise by any party hereto of any right
      granted to it or the exercise by any party hereto of any remedy available to
      it
      (including, without limitation, the issuance of a notice of redemption,
      a borrowing request and/or a notice of default), in each
      case, hereunder, under the Securities Purchase Agreement or under any other
      Related Agreement which has been publicly filed with the SEC
      shall not constitute confidential information and no party
      shall have any duty to the other party to maintain such information as
      confidential.

     

    6. If
      any
      Assignor defaults in the performance or fulfillment of any of the terms,
      conditions, promises, covenants, provisions or warranties on such Assignor’s
      part to be performed or fulfilled under or pursuant to this Master Security
      Agreement, Laurus may, at its option without waiving its right to enforce this
      Master Security Agreement according to its terms, immediately or at any time
      thereafter and without notice to any Assignor, perform or fulfill the same
      or
      cause the performance or fulfillment of the same for each Assignor’s joint and
      several account and at each Assignor’s joint and several cost and expense, and
      the cost and expense thereof (including reasonable attorneys’ fees) shall be
      added to the Obligations and shall be payable on demand with interest thereon
      at
      the highest rate permitted by law, or, at Laurus’ option, debited by Laurus from
      any other deposit accounts in the name of any Assignor and controlled by
      Laurus.

     

    
      
        
        

      

      
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    7. Each
      Assignor appoints Laurus, any of Laurus’ officers, employees or any other person
      or entity whom Laurus may designate as such Assignor’s attorney, with power to
      execute such documents in each such Assignor’s behalf and to supply any omitted
      information and correct patent errors in any documents executed by any Assignor
      or on any Assignor’s behalf; to file financing statements against such Assignor
      covering the Collateral (and, in connection with the filing of any such
      financing statements, describe the Collateral as “all
      assets and all personal property, whether now owned and/or hereafter
      acquired”
(or
      any
      substantially similar variation thereof)); to sign such Assignor’s name on
      public records; and to do all other things Laurus deem necessary to carry out
      this Master Security Agreement. Each Assignor hereby ratifies and approves
      all
      acts of the attorney and neither Laurus nor the attorney will be liable for
      any
      acts of commission or omission, nor for any error of judgment or mistake of
      fact
      or law other than gross negligence or willful misconduct (as determined by
      a
      court of competent jurisdiction in a final and non-appealable decision). This
      power being coupled with an interest, is irrevocable so long as any Obligations
      remains unpaid.

     

    8. No
      delay
      or failure on Laurus’ part in exercising any right, privilege or option
      hereunder shall operate as a waiver of such or of any other right, privilege,
      remedy or option, and no waiver whatever shall be valid unless in writing,
      signed by Laurus and then only to the extent therein set forth, and no waiver
      by
      Laurus of any default shall operate as a waiver of any other default or of
      the
      same default on a future occasion. Laurus’ books and records containing entries
      with respect to the Obligations shall be admissible in evidence in any action
      or
      proceeding, shall be binding upon each Assignor for the purpose of establishing
      the items therein set forth and shall constitute prima facie proof thereof.
      Laurus shall have the right to enforce any one or more of the remedies available
      to Laurus, successively, alternately or concurrently. Each Assignor agrees
      to
      join with Laurus in executing such documents or other instruments to the extent
      required by the UCC in form satisfactory to Laurus and in executing such other
      documents or instruments as may be required or deemed necessary by Laurus for
      purposes of affecting or continuing Laurus’ security interest in the
      Collateral.

     

    9. The
      Assignors shall jointly and severally pay all of Laurus’ out-of-pocket costs and
      expenses, including reasonable fees and disbursements of in-house, or outside
      counsel and appraisers, in connection with the preparation, execution and
      delivery of the Documents, and of outside counsel and appraisers in connection
      with the prosecution or defense of any action, contest, dispute, suit or
      proceeding concerning any matter in any way arising out of, related to or
      connected with any Document. The Assignors shall also jointly and severally
      pay
      all of Laurus’ reasonable fees, charges, out-of-pocket costs and expenses,
      including fees and disbursements of counsel and appraisers, in connection with
      (a) the preparation, execution and delivery of any waiver, any amendment thereto
      or consent proposed or executed in connection with the transactions contemplated
      by the Documents, (b) Laurus’ obtaining performance of the Obligations under the
      Documents, including, but not limited to the enforcement or defense of Laurus’
security interests, assignments of rights and liens hereunder as valid perfected
      security interests, (c) any attempt to inspect, verify, protect, collect, sell,
      liquidate or otherwise dispose of any Collateral, (d) not more than one time
      per
      year, any appraisal or re-appraisal of any property (real or personal) pledged
      to Laurus by any Assignor as Collateral for, or any other Person as security
      for, the Obligations hereunder (provided, upon the occurrence of an Event of
      Default, Assignors shall be obligated to pay the costs and expenses of any
      and
      all additional such appraisals and re-appraisals as are deemed necessary by
      Laurus in its reasonable discretion) and (e) any consultations in connection
      with any of the foregoing. The Assignors shall also jointly and severally pay
      Laurus’ customary bank charges for all bank services (including wire transfers)
      performed or caused to be performed by Laurus for any Assignor at any Assignor’s
      request or in connection with any Assignor’s loan account (if any) with Laurus.
      All such costs and expenses together with all filing, recording and search
      fees,
      taxes and interest payable by the Assignors to Laurus shall be payable on demand
      and shall be secured by the Collateral. If any tax by any nation or government,
      any state or other political subdivision thereof, and any agency, department
      or
      other entity exercising executive, legislative, judicial, regulatory or
      administrative functions of or pertaining to government (each, a “Governmental
      Authority”)
      is or
      may be imposed on or as a result of any transaction between any Assignor, on
      the
      one hand, and Laurus on the other hand, which Laurus is or may be required
      to
      withhold or pay (other than (x) any tax based on or measured by net income
      or
      otherwise in the nature of a net income tax, including without limitation any
      franchise tax or any similar tax based on capital, net worth or comparable
      basis
      measurement), the Assignors hereby jointly and severally indemnify and hold
      Laurus harmless in respect of such taxes, and the Assignors will repay to Laurus
      the amount of any such taxes which shall be charged to the Assignors’ account;
      and until the Assignors shall furnish Laurus with indemnity therefor (or supply
      Laurus with evidence satisfactory to it that due provision for the payment
      thereof has been made), Laurus may hold without interest any balance standing
      to
      each Assignor’s credit (if any) and Laurus shall retain its liens in any and all
      Collateral.

     

    
      
        
        

      

      
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    10. THIS
      MASTER SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
      ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
      AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
      All of the rights, remedies, options, privileges and elections given to Laurus
      hereunder shall inure to the benefit of Laurus’ successors and assigns. The term
“Laurus”
as
      herein used shall include Laurus, any parent of Laurus’, any of Laurus’
subsidiaries and any co-subsidiaries of Laurus’ parent, whether now existing or
      hereafter created or acquired, and all of the terms, conditions, promises,
      covenants, provisions and warranties of this Agreement shall inure to the
      benefit of each of the foregoing, and shall bind the representatives, successors
      and assigns of each Assignor.

     

    11. Each
      Assignor hereby consents and agrees that the state of federal courts located
      in
      the County of New York, State of New York shall have exclusive jurisdiction
      to
      hear and determine any claims or disputes between Assignor, on the one hand,
      and
      Laurus, on the other hand, pertaining to this Master Security Agreement or
      to
      any matter arising out of or related to this Master Security Agreement,
      provided, that Laurus and each Assignor acknowledges that any appeals from
      those
      courts may have to be heard by a court located outside of the County of New
      York, State of New York, and further provided, that nothing in this Master
      Security Agreement shall be deemed or operate to preclude Laurus from bringing
      suit or taking other legal action in any other jurisdiction to collect, the
      Obligations, to realize on the Collateral or any other security for the
      Obligations, or to enforce a judgment or other court order in favor of Laurus.
      Each Assignor expressly submits and consents in advance to such jurisdiction
      in
      any action or suit commenced in any such court, and each Assignor hereby waives
      any objection which it may have based upon lack of personal jurisdiction,
      improper venue or forum non conveniens.
      Each
      Assignor hereby waives personal service of the summons, complaint and other
      process issues in any such action or suit and agrees that service of such
      summons, complaint and other process may be made by registered or certified
      mail
      addressed to such assignor at the address set forth on the signature lines
      hereto and that service so made shall be deemed completed upon the earlier
      of
      such Assignor’s actual receipt thereof or three (3) days after deposit in the
      U.S. mails, proper postage prepaid.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    The
      parties desire that their disputes be resolved by a judge applying such
      applicable laws. Therefore, to achieve the best combination of the benefits
      of
      the judicial system and of arbitration, the parties hereto waive all rights
      to
      trial by jury in any action, suite, or proceeding brought to resolve any
      dispute, whether arising in contract, tort, or otherwise between Laurus, and/or
      any Assignor arising out of, connected with, related or incidental to the
      relationship established between them in connection with this Master Security
      Agreement or the transactions related hereto.

     

    12. It
      is
      understood and agreed that any person or entity that desires to become an
      Assignor hereunder, or is required to execute a counterpart of this Master
      Security Agreement after the date hereof pursuant to the requirements of any
      Document, shall become an Assignor hereunder by (x) executing a Joinder
      Agreement in form and substance satisfactory to Laurus, (y) delivering
      supplements to such exhibits and annexes to such Documents as Laurus shall
      reasonably request and (z) taking all actions as specified in this Master
      Security Agreement as would have been taken by such Assignor had it been an
      original party to this Master Security Agreement, in each case with all
      documents required above to be delivered to Laurus and with all documents and
      actions required above to be taken to the reasonable satisfaction of
      Laurus.

     

    [Remainder
      of This Page Intentionally Left Blank]

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    13. All
      notices from Laurus to any Assignor shall be sufficiently given if given in
      accordance with the requirements set forth in Section 11.8 of the Securities
      Purchase Agreement and if mailed or delivered to such Assignor’s address set
      forth below.

     

    
      	 	 	 
	 	
              Very
                truly yours,

              
                MODTECH
                  HOLDING, INC.

              

            
	 
 	 
 	 
 
	
            	By:  	 
	 	
              

              Name:

              
                

              
Title: 
	 	
              
                

              

              
                Address:
                  2830 Barrett Avenue 
                    
                    Perris, California
                    92571

                

              

            

    

     

    
      	 	 	 
	 	ACKNOWLEDGED:
	 	 
	 	
              LAURUS
                MASTER FUND, LTD.

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name:

            
	 	
              Title:

              
                Address:

              

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      A

     

    
      	
              Entity

            	 	
              Jurisdiction
                of 

              Formation

            	 	
              Organization
                Identification Number

            
	
              Modtech
                Holdings, Inc.

            	 	
              Delaware

            	 	
              2949031

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      B

     

    COMMERCIAL
      TORT CLAIMS

     

    None.EXHIBIT
      10.41

     

    REGISTRATION
      RIGHTS AGREEMENT

     

    This
      Registration Rights Agreement (this “Agreement”)
      is
      made and entered into as of October 31, 2006, by and between Modtech Holdings,
      Inc., a Delaware corporation (the “Company”),
      and
      Laurus Master Fund, Ltd. (the “Purchaser”).

     

    This
      Agreement is made pursuant to the Securities Purchase Agreement, dated as of
      the
      date hereof, by and among the Purchaser, the Company (as amended, modified
      or
      supplemented from time to time, the “Purchase
      Agreement”),
      and
      pursuant to the Convertible Note and the Warrants referred to
      therein.

     

    The
      Company and the Purchaser hereby agree as follows:

     

    1. Definitions.
      Capitalized terms used and not otherwise defined herein that are defined in
      the
      Purchase Agreement shall have the meanings given such terms in the Purchase
      Agreement. As used in this Agreement, the following terms shall have the
      following meanings:

     

    “Commission”
      means
      the Securities and Exchange Commission.

     

    “Common
      Stock”
      means
      shares of the Company’s common stock, par value $0.01 per share.

     

    “Convertible
      Note”
      has the
      meaning set forth in the Purchase Agreement.

     

    “Effectiveness
      Date”
      means,
      (i) with respect to the initial Registration Statement required to be filed
      hereunder, a date no later than one hundred eighty (180) days following the
      date
      hereof and (ii) with respect to each additional Registration Statement required
      to be filed hereunder (if any), a date no later than sixty (60) days following
      the applicable Filing Date.

     

    “Effectiveness
      Period”
      has the
      meaning set forth in Section 2(a).

     

    “Exchange
      Act”
      means
      the Securities Exchange Act of 1934, as amended, and any successor
      statute.

     

    “Filing
      Date”
      means,
      with respect to the Registration Statement required to be filed hereunder in
      respect of the shares of Common Stock (a) issuable upon conversion of the
      Convertible Note, a date no later than ninety (90) days following the date
      hereof, (b) issuable upon exercise of any Warrant, the date which is ninety
      (90)
      days after the issuance of such Warrant, and (c) with the shares of Common
      Stock
      issuable to the Holder as a result of adjustments to the Fixed Conversion Price
      or the Exercise Price, as the case may be, made pursuant to the Convertible
      Note
      or such Warrant or otherwise, thirty (30) days after the occurrence of such
      event or the date of the adjustment of the Exercise Price, as the case may
      be.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Holder”
      or
“Holders”
      means
      the Purchaser or any of its affiliates or transferees to the extent any of
      them
      hold Registrable Securities, other than those purchasing Registrable Securities
      in a market transaction.

     

    “Indemnified
      Party”
      has the
      meaning set forth in Section 5(c).

     

    “Indemnifying
      Party”
      has the
      meaning set forth in Section 5(c).

     

    “Proceeding”
      means an
      action, claim, suit, investigation or proceeding (including, without limitation,
      an investigation or partial proceeding, such as a deposition), whether commenced
      or threatened.

     

    “Prospectus”
      means
      the prospectus included in a Registration Statement (including, without
      limitation, a prospectus that includes any information previously omitted from
      a
      prospectus filed as part of an effective registration statement in reliance
      upon
      Rule 430A promulgated under the Securities Act), as amended or supplemented
      by
      any prospectus supplement, with respect to the terms of the offering of any
      portion of the Registrable Securities covered by such Registration Statement,
      and all other amendments and supplements to the Prospectus, including
      post-effective amendments, and all material incorporated by reference or deemed
      to be incorporated by reference in such Prospectus.

     

    “Purchase
      Agreement”
      has the
      meaning given to such term in the Preamble hereto.

     

    “Registrable
      Securities”
      means
      the shares of Common Stock issued upon the conversion of the Convertible Note
      and issuable upon exercise of any Warrants.

     

    “Registration
      Statement”
      means
      each registration statement required to be filed hereunder, including the
      Prospectus therein, amendments and supplements to such registration statement
      or
      Prospectus, including pre- and post-effective amendments, all exhibits thereto,
      and all material incorporated by reference or deemed to be incorporated by
      reference in such registration statement.

     

    “Rule
      144”
      means
      Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

     

    “Rule
      415”
      means
      Rule 415 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

     

    “Securities
      Act”
      means
      the Securities Act of 1933, as amended, and any successor statute.

     

    “Trading
      Market”
      means
      any of the NASD Over The Counter Bulletin Board, NASDAQ Capital Market, the
      NASDAQ National Markets System, the American Stock Exchange or the New York
      Stock Exchange

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    “Warrants”
      means
      the Common Stock purchase warrants issued in connection with the Purchase
      Agreement, whether on the date thereof or thereafter.

     

    2. Registration.

     

    (a) On
      or
      prior to the Filing Date, the Company shall prepare and file with the Commission
      a Registration Statement covering the Registrable Securities for a selling
      stockholder resale offering to be made on a continuous basis pursuant to Rule
      415. The Registration Statement shall be on Form S-3 (except if the Company
      is
      not then eligible to register for resale the Registrable Securities on Form
      S-3,
      in which case such registration shall be on another appropriate form in
      accordance herewith). The Company shall cause each Registration Statement to
      become effective and remain effective as provided herein. The Company shall
      use
      its best efforts to cause each Registration Statement to be declared effective
      under the Securities Act as promptly as possible after the filing thereof,
      but
      in any event no later than the Effectiveness Date. The Company shall use its
      reasonable commercial efforts to keep each Registration Statement continuously
      effective under the Securities Act until the date which is the earlier date
      of
      when (i) all Registrable Securities covered by such Registration Statement
      have
      been sold or (ii) all Registrable Securities covered by such Registration
      Statement may be sold immediately without registration under the Securities
      Act
      and without volume restrictions pursuant to Rule 144(k), as determined by the
      counsel to the Company pursuant to a written opinion letter to such effect,
      addressed and acceptable to the Company’s transfer agent and the affected
      Holders (the “Effectiveness
      Period”).

     

    (b) If:
      (i)
      the Registration Statement is not filed on or prior to the Filing Date; (ii)
      the
      Registration Statement is not declared effective by the Commission by the
      Effectiveness Date; (iii) after the Registration Statement is filed with and
      declared effective by the Commission, the Registration Statement ceases to
      be
      effective (by suspension or otherwise) as to all Registrable Securities to
      which
      it is required to relate at any time prior to the expiration of the
      Effectiveness Period (without being succeeded immediately by an additional
      registration statement filed and declared effective) for a period of time which
      shall exceed thirty (30) days in the aggregate per year (defined as a period
      of
      365 days commencing on the date the Registration Statement is declared
      effective) or more than twenty (20) consecutive calendar days; or (iv) the
      Common Stock is not listed or quoted, or is suspended from trading on any
      Trading Market for a period of three (3) consecutive Trading Days (provided
      the
      Company shall not have been able to cure such trading suspension within thirty
      (30) days of the notice thereof or list the Common Stock on another Trading
      Market); (any such failure or breach being referred to as an “Event,” and for
      purposes of clause (i) or (ii) the date on which such Event occurs, or for
      purposes of clause (iii) the date which such thirty (30) day or twenty (20)
      consecutive day period (as the case may be) is exceeded, or for purposes of
      clause (v) the date on which such three (3) Trading Day period is exceeded,
      being referred to as “Event Date”), then until the applicable Event is cured,
      the Company shall pay to each Holder an amount in cash, as liquidated damages
      and not as a penalty, equal to 1.0% for each thirty (30) day period (prorated
      for partial periods) on a daily basis of the original principal amount of the
      Notes; provided that, the maximum aggregate amount of liquidated damages that
      may be charged to the Company pursuant to this Section 2(b) shall not exceed
      10%
      of the initial principal amount of the Notes. While such Event continues, such
      liquidated damages shall be paid not less often than each thirty (30) days.
      Any
      unpaid liquidated damages as of the date when an Event has been cured by the
      Company shall be paid within three (3) days following the date on which such
      Event has been cured by the Company. At its option, the Company may pay up
      to
      fifty percent (50%) of the liquidated damages (the “Equity Damage Amount”) by
      delivering from time to time to the Holder, which such deliveries shall occur
      simultaneously with delivery to the Holder of the cash portion of the liquidated
      damage amounts as required by this Section 2(b), warrants (the “New Warrants”)
      substantially identical to the Warrants (except that the per share exercise
      price under the New Warrants shall be equal to the par value of the Common
      Stock) to purchase that number of shares of Common Stock whose aggregate Fair
      Market Value (as hereafter defined) equals the Equity Damage Amount. For
      purposes hereof, “Fair Market Value” shall mean the average of the closing price
      of the Common Stock for the ten (10) trading days immediately prior to issuance
      of the applicable New Warrants. The shares of Common Stock issuable upon
      exercise of any New Warrants shall be included within the definition of
      Registrable Securities and shall be included within (I) the initial Registration
      Statement if the liquidated damages arise from an Event occurring prior to
      the
      date such initial Registration Statement is declared effective by the SEC and
      (II) a new Registration Statement to be filed on or prior to the applicable
      Filing Date and declared effective by the SEC on or prior to the applicable
      Effectiveness Date, in the event the liquidated damages arise from an Event
      occurring after the date the initial Registration Statement is declared
      effective by the SEC.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    (c) Within
      three (3) business days of the Effectiveness Date, the Company shall cause
      its
      counsel to issue a blanket opinion in the form attached hereto as Exhibit A,
      to
      the transfer agent stating that the shares are subject to an effective
      registration statement and can be reissued free of restrictive legend upon
      notice of a sale by the Purchaser and confirmation by the Purchaser that it
      has
      complied with the prospectus delivery requirements, provided that the Company
      has not advised the transfer agent orally or in writing that the opinion has
      been withdrawn. Copies of the blanket opinion required by this Section 2(c)
      shall be delivered to the Purchaser within the time frame set forth
      above.

     

    3. Registration
      Procedures.
      If and
      whenever the Company is required by the provisions hereof to effect the
      registration of any Registrable Securities under the Securities Act, the Company
      will, as expeditiously as possible:

     

    (a) prepare
      and file with the Commission a Registration Statement with respect to such
      Registrable Securities, respond as promptly as possible to any comments received
      from the Commission, and use its best efforts to cause the Registration
      Statement to become and remain effective for the Effectiveness Period with
      respect thereto, and promptly provide to the Purchaser copies of all filings
      and
      Commission letters of comment relating thereto;

     

    (b) prepare
      and file with the Commission such amendments and supplements to such
      Registration Statement and the Prospectus used in connection therewith as may
      be
      necessary to comply with the provisions of the Securities Act with respect
      to
      the disposition of all Registrable Securities covered by such Registration
      Statement and to keep such Registration Statement effective until the expiration
      of the Effectiveness Period applicable to such Registration
      Statement;

     

    (c) furnish
      to the Purchaser such number of copies of the Registration Statement and the
      Prospectus included therein (including each preliminary Prospectus) as the
      Purchaser reasonably may request to facilitate the public sale or disposition
      of
      the Registrable Securities covered by the Registration Statement;

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    (d) use
      its
      best efforts to register or qualify the Purchaser’s Registrable Securities
      covered by such Registration Statement under the securities or “blue sky” laws
      of such jurisdictions within the United States as the Purchaser may reasonably
      request, provided, however, that the Company shall not for any such purpose
      be
      required to qualify generally to transact business as a foreign corporation
      in
      any jurisdiction where it is not so qualified or to consent to general service
      of process in any such jurisdiction;

     

    (e) list
      the
      Registrable Securities covered by such Registration Statement with any
      securities exchange on which the Common Stock of the Company is then
      listed;

     

    (f) promptly
      (and in any event within three (3) Business Days following such occurrence)
      notify the Purchaser at any time when a Prospectus relating thereto is required
      to be delivered under the Securities Act, of the happening of any event of
      which
      the Company has knowledge as a result of which the Prospectus contained in
      such
      Registration Statement, as then in effect, includes an untrue statement of
      a
      material fact or omits to state a material fact required to be stated therein
      or
      necessary to make the statements therein not misleading in light of the
      circumstances then existing; and

     

    (g) make
      available for inspection by the Purchaser and any attorney, accountant or other
      agent retained by the Purchaser, all publicly available, non-confidential
      financial and other records, pertinent corporate documents and properties of
      the
      Company, and cause the Company’s officers, directors and employees to supply all
      publicly available, non-confidential information reasonably requested by the
      attorney, accountant or agent of the Purchaser.

     

    4. Registration
      Expenses.
      All
      expenses relating to the Company’s compliance with Sections 2 and 3 hereof,
      including, without limitation, all registration and filing fees, printing
      expenses, fees and disbursements of counsel and independent public accountants
      for the Company, fees and expenses (including reasonable counsel fees) incurred
      in connection with complying with state securities or “blue sky” laws, fees of
      the NASD, transfer taxes, fees of transfer agents and registrars, fees of,
      and
      disbursements incurred by, one counsel for the Holders are called “Registration
      Expenses”. All selling commissions applicable to the sale of Registrable
      Securities, including any fees and disbursements of any special counsel to
      the
      Holders beyond those included in Registration Expenses, are called “Selling
      Expenses.” The Company shall only be responsible for all Registration
      Expenses.

     

    5. Indemnification.

     

    (a) In
      the
      event of a registration of any Registrable Securities under the Securities
      Act
      pursuant to this Agreement, the Company will indemnify and hold harmless the
      Purchaser, and its officers, directors and each other person, if any, who
      controls the Purchaser within the meaning of the Securities Act, against any
      losses, claims, damages or liabilities, joint or several, to which the
      Purchaser, or such persons may become subject under the Securities Act or
      otherwise, insofar as such losses, claims, damages or liabilities (or actions
      in
      respect thereof) arise out of or are based upon any untrue statement or alleged
      untrue statement of any material fact contained in any Registration Statement
      under which such Registrable Securities were registered under the Securities
      Act
      pursuant to this Agreement, any preliminary Prospectus (unless connected in
      the
      final sale prospectus) or final Prospectus contained therein, or any amendment
      or supplement thereof, or arise out of or are based upon the omission or alleged
      omission to state therein a material fact required to be stated therein or
      necessary to make the statements therein not misleading, and will reimburse
      the
      Purchaser, and each such person for any reasonable legal or other expenses
      incurred by them in connection with investigating or defending any such loss,
      claim, damage, liability or action; provided,
      however,
      that
      the Company will not be liable in any such case if and to the extent that any
      such loss, claim, damage or liability arises out of or is based upon an untrue
      statement or alleged untrue statement or omission or alleged omission so made
      in
      conformity with information furnished by or on behalf of the Purchaser or any
      such person in writing specifically for use in any such document.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    (b) In
      the
      event of a registration of the Registrable Securities under the Securities
      Act
      pursuant to this Agreement, the Purchaser will indemnify and hold harmless
      the
      Company, and its officers, directors and each other person, if any, who controls
      the Company within the meaning of the Securities Act, against all losses,
      claims, damages or liabilities, joint or several, to which the Company or such
      persons may become subject under the Securities Act or otherwise, insofar as
      such losses, claims, damages or liabilities (or actions in respect thereof)
      arise out of or are based upon any untrue statement or alleged untrue statement
      of any material fact which was furnished in writing by the Purchaser to the
      Company expressly for use in (and such information is contained in) the
      Registration Statement under which such Registrable Securities were registered
      under the Securities Act pursuant to this Agreement, any preliminary Prospectus
      or final Prospectus contained therein, or any amendment or supplement thereof,
      or arise out of or are based upon the omission or alleged omission to state
      therein a material fact required to be stated therein or necessary to make
      the
      statements therein not misleading, and will reimburse the Company and each
      such
      person for any reasonable legal or other expenses incurred by them in connection
      with investigating or defending any such loss, claim, damage, liability or
      action, provided,
      however,
      that
      the Purchaser will be liable in any such case if and only to the extent that
      any
      such loss, claim, damage or liability arises out of or is based upon an untrue
      statement or alleged untrue statement or omission or alleged omission so made
      in
      conformity with information furnished in writing to the Company by or on behalf
      of the Purchaser specifically for use in any such document. Notwithstanding
      the
      provisions of this paragraph, the Purchaser shall not be required to indemnify
      any person or entity in excess of the amount of the aggregate net proceeds
      received by the Purchaser in respect of Registrable Securities in connection
      with any such registration under the Securities Act.

     

    (c) Promptly
      after receipt by a party entitled to claim indemnification hereunder (an
“Indemnified
      Party”)
      of
      notice of the commencement of any action, such Indemnified Party shall, if
      a
      claim for indemnification in respect thereof is to be made against a party
      hereto obligated to indemnify such Indemnified Party (an “Indemnifying
      Party”),
      notify the Indemnifying Party in writing thereof, but the omission so to notify
      the Indemnifying Party shall not relieve it from any liability which it may
      have
      to such Indemnified Party other than under this Section 5(c) and shall only
      relieve it from any liability which it may have to such Indemnified Party under
      this Section 5(c) if and to the extent the Indemnifying Party is prejudiced
      by
      such omission. In case any such action shall be brought against any Indemnified
      Party and it shall notify the Indemnifying Party of the commencement thereof,
      the Indemnifying Party shall be entitled to participate in and, to the extent
      it
      shall wish, to assume and undertake the defense thereof with counsel
      satisfactory to such Indemnified Party, and, after notice from the Indemnifying
      Party to such Indemnified Party of its election so to assume and undertake
      the
      defense thereof, the Indemnifying Party shall not be liable to such Indemnified
      Party under this Section 5(c) for any legal expenses subsequently incurred
      by
      such Indemnified Party in connection with the defense thereof; if the
      Indemnified Party retains its own counsel, then the Indemnified Party shall
      pay
      all fees, costs and expenses of such counsel, provided,
      however,
      that,
      if the defendants in any such action include both the Indemnified Party and
      the
      Indemnifying Party and counsel for the Indemnified Party shall have reasonably
      concluded that there may be reasonable defenses available to the Indemnified
      Party which are different from or additional to those available to the
      Indemnifying Party or if counsel for the Indemnified Party shall have reasonably
      concluded that the interests of the Indemnified Party may reasonably be deemed
      to conflict with the interests of the Indemnifying Party, the Indemnified Party
      shall have the right to select one separate counsel and to assume such legal
      defenses and otherwise to participate in the defense of such action, with the
      reasonable expenses and fees of such separate counsel and other expenses related
      to such participation to be reimbursed by the Indemnifying Party as
      incurred.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    (d) In
      order
      to provide for just and equitable contribution in the event of joint liability
      under the Securities Act in any case in which either (i) the Purchaser, or
      any
      officer, director or controlling person of the Purchaser, makes a claim for
      indemnification pursuant to this Section 5 but it is judicially determined
      (by
      the entry of a final judgment or decree by a court of competent jurisdiction
      and
      the expiration of time to appeal or the denial of the last right of appeal)
      that
      such indemnification may not be enforced in such case notwithstanding the fact
      that this Section 5 provides for indemnification in such case, or (ii)
      contribution under the Securities Act may be required on the part of the
      Purchaser or such officer, director or controlling person of the Purchaser
      in
      circumstances for which indemnification is provided under this Section 5; then,
      and in each such case, the Company and the Purchaser will contribute to the
      aggregate losses, claims, damages or liabilities to which they may be subject
      (after contribution from others) in such proportion so that the Purchaser is
      responsible only for the portion represented by the percentage that the public
      offering price of its securities offered by the Registration Statement bears
      to
      the public offering price of all securities offered by such Registration
      Statement, provided,
      however,
      that,
      in any such case, (A) the Purchaser will not be required to contribute any
      amount in excess of the public offering price of all such securities offered
      by
      it pursuant to such Registration Statement; and (B) no person or entity guilty
      of fraudulent misrepresentation (within the meaning of Section 10(f) of the
      Act)
      will be entitled to contribution from any person or entity who was not guilty
      of
      such fraudulent misrepresentation.

     

    6. Representations
      and Warranties.

     

    (a) The
      Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange
      Act and, except with respect to certain matters which the Company has disclosed
      to the Purchaser on Schedule
      4.21
      to the
      Purchase Agreement, the Company has filed all proxy statements, reports,
      schedules, forms, statements and other documents required to be filed by it
      under the Exchange Act. The Company has filed (i) its Annual Report on Form
      10-K
      for its fiscal year ended December 31, 2005 and (ii) its Quarterly Report on
      Form 10-Q for the fiscal quarters ended March 31, 2006, and June 30, 2006
      (collectively, the “SEC
      Reports”).
      Each
      SEC Report was, at the time of its filing, in substantial compliance with the
      requirements of its respective form and none of the SEC Reports, nor the
      financial statements (and the notes thereto) included in the SEC Reports, as
      of
      their respective filing dates, contained any untrue statement of a material
      fact
      or omitted to state a material fact required to be stated therein or necessary
      to make the statements therein, in light of the circumstances under which they
      were made, not misleading. The financial statements of the Company included
      in
      the SEC Reports comply as to form in all material respects with applicable
      accounting requirements and the published rules and regulations of the
      Commission or other applicable rules and regulations with respect thereto.
      Such
      financial statements have been prepared in accordance with generally accepted
      accounting principles (“GAAP”)
      applied on a consistent basis during the periods involved (except (i) as may
      be
      otherwise indicated in such financial statements or the notes thereto or (ii)
      in
      the case of unaudited interim statements, to the extent they may not include
      footnotes, customary year-end adjustments, or may be condensed) and fairly
      present in all material respects the financial condition, the results of
      operations and the cash flows of the Company and its subsidiaries, on a
      consolidated basis, as of, and for, the periods presented in each such SEC
      Report.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    (b) The
      Common Stock is listed or quoted, as applicable, for trading on the NASDAQ
      Global Market and satisfies all requirements for the continuation of such
      listing or quotation, as applicable, and the Company shall do all things
      necessary for the continuation of such listing or quotation, as applicable.
      The
      Company has not received any notice that its Common Stock will be delisted
      from
      or no longer be quoted on, as applicable, the NASDAQ Global Market (except
      for
      prior notices which have been fully remedied) or that the Common Stock does
      not
      meet all requirements for the continuation of such listing or quotation, as
      applicable.

     

    (c) Neither
      the Company, nor any of its affiliates, nor any person acting on its or their
      behalf, has directly or indirectly made any offers or sales of any security
      or
      solicited any offers to buy any security under circumstances that would cause
      the offering of the Securities pursuant to the Purchase Agreement to be
      integrated with prior offerings by the Company for purposes of the Securities
      Act which would prevent the Company from selling the Common Stock pursuant
      to
      Rule 506 under the Securities Act, or any applicable exchange-related
      stockholder approval provisions, nor will the Company or any of its affiliates
      or subsidiaries take any action or steps that would cause the offering of the
      Securities to be integrated with other offerings.

     

    (d) The
      Warrants, the Convertible Note and the shares of Common Stock that the Purchaser
      may acquire pursuant to any Warrants and the Convertible Note are all restricted
      securities under the Securities Act as of the date of this Agreement. The
      Company will not issue any stop transfer order or other order impeding the
      sale
      and delivery of any of the Registrable Securities at such time as such
      Registrable Securities are registered for public sale or it has received an
      opinion of counsel that an exemption from registration is available, except
      as
      required by federal or state securities laws.

     

    (e) The
      Company understands the nature of the Registrable Securities issuable upon
      the
      conversion of the Convertible Note the exercise of any Warrants and recognizes
      that the issuance of such Registrable Securities may have a potential dilutive
      effect. The Company specifically acknowledges that its obligation to issue
      the
      Registrable Securities is binding upon the Company and enforceable regardless
      of
      the dilution such issuance may have on the ownership interests of other
      shareholders of the Company.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    (f) Except
      for agreements made in the ordinary course of business, there is no agreement
      that has not been filed with the Commission as an exhibit to a registration
      statement or to a form required to be filed by the Company under the Exchange
      Act, the breach of which could reasonably be expected to have a material and
      adverse effect on the Company and its subsidiaries, or would prohibit or
      otherwise interfere with the ability of the Company to enter into and perform
      any of its obligations under this Agreement in any material
      respect.

     

    (g) The
      Company will at all times have authorized and reserved a sufficient number
      of
      shares of Common Stock for the full conversion of the Convertible Note and
      exercise of the Warrants.

     

    (h) The
      Company shall provide written notice to each Holder of (i) the occurrence of
      each Discontinuation Event (as defined below) and (ii) the declaration of
      effectiveness by the SEC of each Registration Statement required to be filed
      hereunder, in each case within one (1) business day of the date of each such
      occurrence and/or declaration.

     

    7. Miscellaneous.

     

    (a) Remedies.
      In the
      event of a breach by the Company or by a Holder, of any of their respective
      obligations under this Agreement, each Holder or the Company, as the case may
      be, in addition to being entitled to exercise all rights granted by law and
      under this Agreement, including recovery of damages, will be entitled to
      specific performance of its rights under this Agreement.

     

    (b) No
      Piggyback on Registrations.
      Except
      as and to the extent set forth on Schedule 7(b) hereto, neither the Company
      nor
      any of its security holders (other than the Holders in such capacity pursuant
      hereto) may include securities of the Company in any Registration Statement
      other than the Registrable Securities, and the Company shall not after the
      date
      hereof enter into any agreement providing any such right for inclusion of shares
      in the Registration Statement to any of its security holders. Except as and
      to
      the extent specified in Schedule
      7(b)
      hereto,
      the Company has not previously entered into any agreement granting any
      registration rights with respect to any of its securities to any person or
      entity that have not been fully satisfied.

     

    (c) Compliance.
      Each
      Holder covenants and agrees that it will comply with the prospectus delivery
      requirements of the Securities Act as applicable to it in connection with sales
      of Registrable Securities pursuant to each Registration Statement.

     

    (d) Discontinued
      Disposition.
      Each
      Holder agrees by its acquisition of such Registrable Securities that, upon
      receipt of a notice from the Company of the occurrence of a Discontinuation
      Event (as defined below), such Holder will forthwith discontinue disposition
      of
      such Registrable Securities under the applicable Registration Statement until
      such Holder’s receipt of the copies of the supplemented Prospectus and/or
      amended Registration Statement or until it is advised in writing (the
“Advice”)
      by the
      Company that the use of the applicable Prospectus may be resumed, and, in either
      case, has received copies of any additional or supplemental filings that are
      incorporated or deemed to be incorporated by reference in such Prospectus or
      Registration Statement. The Company may provide appropriate stop orders to
      enforce the provisions of this paragraph. For purposes of this Agreement, a
      “Discontinuation
      Event”
shall
      mean (i) when the Commission notifies the Company whether there will be a
“review”
of
      such
      Registration Statement and whenever the Commission comments in writing on such
      Registration Statement (the Company shall provide true and complete copies
      thereof and all written responses thereto to each of the Holders); (ii) any
      request by the Commission or any other Federal or state governmental authority
      for amendments or supplements to such Registration Statement or Prospectus
      or
      for additional information; (iii) the issuance by the Commission of any stop
      order suspending the effectiveness of such Registration Statement covering
      any
      or all of the Registrable Securities or the initiation of any Proceedings for
      that purpose; (iv) the receipt by the Company of any notification with respect
      to the suspension of the qualification or exemption from qualification of any
      of
      the Registrable Securities for sale in any jurisdiction, or the initiation
      or
      threatening of any Proceeding for such purpose; and/or (v) the occurrence of
      any
      event or passage of time that makes the financial statements included in such
      Registration Statement ineligible for inclusion therein or any statement made
      in
      such Registration Statement or Prospectus or any document incorporated or deemed
      to be incorporated therein by reference untrue in any material respect or that
      requires any revisions to such Registration Statement, Prospectus or other
      documents so that, in the case of such Registration Statement or Prospectus,
      as
      the case may be, it will not contain any untrue statement of a material fact
      or
      omit to state any material fact required to be stated therein or necessary
      to
      make the statements therein, in light of the circumstances under which they
      were
      made, not misleading.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    (e) Piggy-Back
      Registrations.
      If at
      any time after the date hereof there is not an effective Registration Statement
      covering all of the Registrable Securities required to be covered hereunder
      and
      the Company shall determine to prepare and file with the Commission a
      registration statement relating to an offering for its own account or the
      account of others under the Securities Act of any of its equity securities,
      other than on Form S-4 or Form S-8 (each as promulgated under the
      Securities Act) or their then equivalents relating to equity securities to
      be
      issued solely in connection with any acquisition of any entity or business
      or
      equity securities issuable in connection with stock option or other employee
      benefit plans, then the Company shall send to each Holder written notice of
      such
      determination and, if within fifteen (15) days after receipt of such notice,
      any
      such Holder shall so request in writing, the Company shall include in such
      registration statement all or any part of such Registrable Securities such
      Holder requests to be registered, to the extent the Company may do so without
      violating registration rights of others which exist as of the date of this
      Agreement, subject to customary underwriter cutbacks applicable to all holders
      of registration rights and subject to obtaining any required consent of any
      selling stockholder(s) to such inclusion under such registration
      statement.

     

    (f) Amendments
      and Waivers.
      The
      provisions of this Agreement, including the provisions of this sentence, may
      not
      be amended, modified or supplemented, and waivers or consents to departures
      from
      the provisions hereof may not be given, unless the same shall be in writing
      and
      signed by the Company and the Holders of the then outstanding Registrable
      Securities. Notwithstanding the foregoing, a waiver or consent to depart from
      the provisions hereof with respect to a matter that relates exclusively to
      the
      rights of certain Holders and that does not directly or indirectly affect the
      rights of other Holders may be given by Holders of at least a majority of the
      Registrable Securities to which such waiver or consent relates; provided,
      however,
      that
      the provisions of this sentence may not be amended, modified, or supplemented
      except in accordance with the provisions of the immediately preceding
      sentence.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    (g) Notices.
      Any
      notice or request hereunder may be given to the Company or the Purchaser at
      the
      respective addresses set forth below or as may hereafter be specified in a
      notice designated as a change of address under this Section 7(g). Any notice
      or
      request hereunder shall be given by registered or certified mail, return receipt
      requested, hand delivery, overnight mail, Federal Express or other national
      overnight next day carrier (collectively, “Courier”)
      or
      telecopy (confirmed by mail). Notices and requests shall be, in the case of
      those by hand delivery, deemed to have been given when delivered to any party
      to
      whom it is addressed, in the case of those by mail or overnight mail, deemed
      to
      have been given three (3) business days after the date when deposited in the
      mail or with the overnight mail carrier, in the case of a Courier, the next
      business day following timely delivery of the package with the Courier, and,
      in
      the case of a telecopy, when confirmed. The address for such notices and
      communications shall be as follows:

     

    
      	
              If
                to the Company:

            	 	
              Modtech
                Holdings, Inc.

              2830
                Barrett Avenue

              Perris,
                California 92571

              Attention: Chief
                Financial Officer

              Facsimile:
                (951) 943-9655

            
	 	 	 
	
              with
                a copy to:

            	 	
              Haddan
                & Zepfel LLP

              500
                Newport Center Drive 

              Suite
                580

              Newport
                Beach, California 92660

              Attention:
                Robert J. Zepfel, Esq.

              Facsimile:
                (949) 706-6060

            
	 	 	 
	
              If
                to a Purchaser:

            	 	
              To
                the address set forth under such Purchaser name on the signature
                pages
                hereto.

            
	 	 	 
	
              If
                to any other Person who is then the registered
                Holder:

            	 	
              To
                the address of such Holder as it appears in the stock transfer books
                of
                the Company

            

    

     

    or
      such
      other address as may be designated in writing hereafter in accordance with
      this
      Section 7(g) by such Person.

     

    (h) Successors
      and Assigns.
      This
      Agreement shall inure to the benefit of and be binding upon the successors
      and
      permitted assigns of each of the parties and shall inure to the benefit of
      each
      Holder. The Company may not assign its rights or obligations hereunder without
      the prior written consent of each Holder. Each Holder may assign their
      respective rights hereunder in the manner and to the persons and entities as
      permitted under the Purchase Agreement.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    (i) Execution
      and Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed shall be deemed to be an original and, all of which taken together
      shall constitute one and the same agreement. In the event that any signature
      is
      delivered by facsimile transmission, such signature shall create a valid binding
      obligation of the party executing (or on whose behalf such signature is
      executed) the same with the same force and effect as if such facsimile signature
      were the original thereof.

     

    (j) Governing
      Law, Jurisdiction and Waiver of Jury Trial.
      THIS
      AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH
      THE
      LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
      SUCH
      STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. The Company hereby
      consents and agrees that the state or federal courts located in the County
      of
      New York, State of New York shall have exclusion jurisdiction to hear and
      determine any Proceeding between the Company, on the one hand, and the
      Purchaser, on the other hand, pertaining to this Agreement or to any matter
      arising out of or related to this Agreement; provided,
      that
      the Purchaser and the Company acknowledge that any appeals from those courts
      may
      have to be heard by a court located outside of the County of New York, State
      of
      New York, and further provided,
      that
      nothing in this Agreement shall be deemed or operate to preclude the Purchaser
      from bringing a Proceeding in any other jurisdiction to collect the obligations,
      to realize on the Collateral or any other security for the obligations, or
      to
      enforce a judgment or other court order in favor of the Purchaser. The Company
      expressly submits and consents in advance to such jurisdiction in any Proceeding
      commenced in any such court, and the Company hereby waives any objection which
      it may have based upon lack of personal jurisdiction, improper venue or
forum
      non conveniens.
      The
      Company hereby waives personal service of the summons, complaint and other
      process issued in any such Proceeding and agrees that service of such summons,
      complaint and other process may be made by registered or certified mail
      addressed to the Company at the address set forth in Section 7(g) and that
      service so made shall be deemed completed upon the earlier of the Company’s
      actual receipt thereof or three (3) days after deposit in the U.S. mails, proper
      postage prepaid. The parties hereto desire that their disputes be resolved
      by a
      judge applying such applicable laws. Therefore, to achieve the best combination
      of the benefits of the judicial system and of arbitration, the parties hereto
      waive all rights to trial by jury in any Proceeding brought to resolve any
      dispute, whether arising in contract, tort, or otherwise between the Purchaser
      and/or the Company arising out of, connected with, related or incidental to
      the
      relationship established between then in connection with this Agreement. If
      either party hereto shall commence a Proceeding to enforce any provisions of
      this Agreement, the Purchase Agreement or any other Related Agreement, then
      the
      prevailing party in such Proceeding shall be reimbursed by the other party
      for
      its reasonable attorneys’ fees and other costs and expenses incurred with the
      investigation, preparation and prosecution of such Proceeding.

     

    (k) Cumulative
      Remedies.
      The
      remedies provided herein are cumulative and not exclusive of any remedies
      provided by law.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    (l) Severability.
      If any
      term, provision, covenant or restriction of this Agreement is held by a court
      of
      competent jurisdiction to be invalid, illegal, void or unenforceable, the
      remainder of the terms, provisions, covenants and restrictions set forth herein
      shall remain in full force and effect and shall in no way be affected, impaired
      or invalidated, and the parties hereto shall use their reasonable efforts to
      find and employ an alternative means to achieve the same or substantially the
      same result as that contemplated by such term, provision, covenant or
      restriction. It is hereby stipulated and declared to be the intention of the
      parties that they would have executed the remaining terms, provisions, covenants
      and restrictions without including any of such that may be hereafter declared
      invalid, illegal, void or unenforceable.

     

    (m) Headings.
      The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

     

    [Balance
      of Page Intentionally Left Blank; Signature Page Follows]

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

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

    
      	 	 	 
	 	
              MODTECH
                HOLDINGS, INC.

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              
Name:
	 	Title:

    

    
      	 	 	 
	 	 
	 	
              LAURUS
                MASTER FUND, LTD.

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name: 

            
	 	Title:

    

    
      	 	        
              	 
	 	
              Address
                for Notices:

            
	 	 
	 	
              Laurus
                Master Fund, Ltd.

              c/o
                M&C Corporate Services Limited

              P.O.
                Box 309 GT

              Ugland
                House 

              George
                Town

              South
                Church Street

              Grand
                Cayman, Cayman Islands

              Facsimile: 345-949-8080

            
	 	 
	 	
              with
                copy to:

            
	 	 
	 	
              Laurus
                Capital Management, LLC

              825
                Third Avenue, 17th
                Floor

              New
                York, NY 10022

              Attention: Portfolio
                Services

              Facsimile: 212-541-4410

            

    

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    EXHIBIT
      A

     

    ____________,
      200___

     

    [Continental
      Stock Transfer

    &
      Trust Company

    Two
      Broadway

    New
      York,
      New York 10004

    Attn:
      William Seegraber]

     

    
      	 	
              Re:

            	
              Modtech
                Holdings, Inc. Registration Statement on Form
                [S-3]

            

    

     

    Ladies
      and Gentlemen:

     

    As
      counsel to Modtech Holdings, Inc., a Delaware corporation (the “Company”),
      we
      have been requested to render our opinion to you in connection with the resale
      by the individuals or entitles listed on Schedule
      A
      attached
      hereto (the “Selling
      Stockholders”),
      of an
      aggregate of __________ shares (the “Shares”)
      of the
      Company’s Common Stock.

     

    A
      Registration Statement on Form [S-3]
      under
      the Securities Act of 1933, as amended (the “Act”),
      with
      respect to the resale of the Shares was declared effective by the Securities
      and
      Exchange Commission on [date].
      Enclosed is the Prospectus dated [date].
      We
      understand that the Shares are to be offered and sold in the manner described
      in
      the Prospectus.

     

    This
      letter shall serve as our notice to you that the Shares are, as of this date,
      freely transferable by the Selling Stockholders pursuant to the Registration
      Statement. Unless you receive separate notice or instructions from us following
      the date hereof, you need not require further letters from us to effect any
      future legend-free issuance or re-issuance of the Shares.

    
      	 	 	 	 
	
            	 	 	
              Very
                truly yours,

            
	
            	 	 	
            
	
            	 	 	
              [Company
                counsel]

            

    

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    Schedule
      A to Exhibit A

     

    
      	
              Selling
                Stockholder

            	 	
              R/N/O

            	 	
              Shares
                Being
                Offered

            
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 

    

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    SCHEDULE
      7(b)

    

    The
      Company is a party to the First Amended and Restated Registration Rights
      Agreement with Amphora Limited, Peninsula Catalyst Fund, L.P., and others,
      dated
      August 5, 2005. The registration statement described therein has been declared
      effective, but there are ongoing obligations under the agreement, including
      indemnification provisions.

    

    The
      Company is also a party to a Registration Rights Agreement with Amphora Limited,
      dated October 31, 2006, with respect to 189,189 shares of common stock. The
      registration statement described therein has not yet been filed. 

     

    
      
         

      

      
        17

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