Document:

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                                                                    EXHIBIT 10.4

                  AGREEMENT dated as of July 30, 2003, by and between Barr
Laboratories, Inc., a New York corporation (the "Company"), and Martin Zeiger
("Zeiger").

                                   WITNESSETH:

                  WHEREAS, Zeiger has been employed by the Company since 1999 as
a Senior Vice President, has served as its General Counsel and is presently
serving as its Senior Vice President - Strategic Business Development; and

                  WHEREAS, Zeiger wishes to retire as an officer and employee of
the Company, start, among other things, an independent consulting practice and
render consulting services to the Company on a non-exclusive basis; and

                  WHEREAS, Zeiger possesses an intimate knowledge of the
business and affairs of the Company, including but not limited to its legal
affairs and its strategic initiatives and plans; and

                  WHEREAS, the Company wishes to assure itself of Zeiger's
availability to render consulting services after his employment terminates, and
Zeiger is willing to make himself available to the Company on the terms and
subject to the conditions hereinafter stated;

                  NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements herein contained, the parties hereto hereby
agree as follows:

         1.       Termination of Employment

                  Effective at the close of business on August 29, 2003, Zeiger
hereby resigns as an officer and employee of the Company and as an officer,
director or other official of any subsidiary or affiliate of the Company.

         2.       Consulting Services

                  (a)      Zeiger agrees that, during the period commencing on
September 1, 2003 and ending on February 28, 2005 (such period being hereafter
referred to as the "Consulting Period"), he will make himself available to
perform consulting services on behalf of the Company at such time or times as
the Company may reasonably request, on the terms and subject to the conditions
set forth in this Agreement.

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                  (b)      The Company shall not be responsible for providing an
office or support personnel for Zeiger; Zeiger `s consulting activities shall
for clients other than the Company not be conducted at the Company's offices in
Woodcliff Lake, New Jersey or any other Company location; and Zeiger shall have
discretion to determine the location at which he shall perform any services
under this Agreement; provided that Zeiger obtains the Company's consent to any
use of Company facilities.

                  (c)      In no event shall Zeiger be required to render more
than 480 hours of consulting services in the first year of the Consulting
Period, or more than 240 hours during the balance of the Consulting Period
thereafter. If requested by the Company and consented to by Zeiger, Zeiger will
perform consulting services for more than 480 hours or 240 hours, as the case
may be, for an hourly charge of $250 per hour. Zeiger shall be reimbursed for
all reasonable and necessary expenses incurred by him in performing his services
hereunder including, without limitation, travel, meals, lodging, communication
and copying costs upon submission of appropriate documentation therefor. Such
additional charges for consulting services and expense reimbursement, shall be
due and payable by the Company within thirty (30) days after receipt of an
invoice therefor.

                  (d)      The services and assignments which Zeiger may be
called on to perform under this Agreement shall relate to the business and
affairs of the Company, its subsidiaries and affiliates and shall be performed
in a manner and by means determined by Zeiger in the reasonable exercise of his
independent judgment. Such services shall not include legal advice and the
Company shall look to its own counsel for legal advice. Failure of the Company
to call upon Zeiger to render any services or his inability to render any
services for reasons of health, incapacity or death shall not relieve the
Company from making any payments provided for in this Agreement.

                  (e)      At all times during the Consulting Period Zeiger's
status will be that of an independent contractor and not an employee of the
Company. Consequently, Zeiger will not be eligible to participate in any of the
Company's employee benefit plans, and the Company will not deduct any taxes from
the consulting fees payable under this Agreement unless required by law. Zeiger
shall have no authority, nor shall Zeiger represent himself as having any
authority, to bind the Company with respect to any matter unless expressly
authorized in writing by an officer of the Company to do so. Zeiger specifically
agrees to conduct himself strictly as an independent contractor under this
Agreement with respect to the Company, and to comply with all applicable laws,
rules and regulations, including without limitation those governing workmen's
compensation and unemployment insurance and payment of federal and state income
taxes, self-employment taxes, estimated taxes, and all other federal, state,
local and foreign taxes of any nature imposed with respect to any services under
this Agreement or payments for such services, but excluding taxes

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imposed upon the purchaser of services, which taxes shall be paid by the Company
if it is the purchaser.

                  (f)      It is understood and agreed that Zeiger intends to,
among other things, engage in the business of consulting during the Consulting
Period, that his consulting clients may include other pharmaceutical companies,
and that he shall be permitted, during the Consulting Period, to engage in such
consulting business, provided that it does not interfere with the performance of
his duties under this Agreement or violate any of his obligations,
representations or warranties under this Agreement (including but not limited to
Sections 5 and 6 below) or any other legal obligation Zeiger may have to the
Company.

                  (g)      Zeiger hereby represents and warrants that neither
his entering into this Agreement nor his performance thereof will (i) violate
any other agreement, oral or written, to which Zeiger is a party or by which
Zeiger is bound, or (ii) conflict with any relationship Zeiger has with, or
duties Zeiger performs for, other parties. Without limiting the generality of
the foregoing, Zeiger agrees that at no time shall he utilize any trade secrets
or other intellectual property of any third party while performing services
hereunder.

         3.       Consulting Fees

                  In consideration of Zeiger's agreements and covenants set
forth in Section 2 above (relating to consulting) and in Section 6 below
(restrictive covenants), and as full payment for all his consulting services on
behalf of the Company during the Consulting Period, the Company agrees to pay
Zeiger consulting fees in the aggregate amount of $390,000, which shall be paid
as follows: $210,000 shall be paid on or before September 30, 2003 and the
balance of $180,000 shall be paid in 18 monthly installments of $10,000 each of
which shall be paid to Zeiger no later than ten days after the close of each of
the 18 months of the Consulting Period.

         4.       Payment in respect of Unvested Options

                  In consideration of Zeiger's execution and performance of this
Agreement, other than Section 2 hereof (relating to consulting services), the
Company shall pay Zeiger an amount of money equal to the excess (if any) of (a)
over (b) where (a) is the "fair market value" on August 29, 2003 (determined in
accordance with the Company's 1993 Stock Incentive Plan) of the shares of
Company common stock that are subject to the portion of any stock option
heretofore granted to Zeiger by the Company that is outstanding on that date but
expires on or after that date without having become exercisable, and (b) is the
purchase price of such shares under the option. The parties agree that the
outstanding stock options and number of shares which are not scheduled to become
exercisable on or before August 29, 2003, and that

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are thus subject to the preceding sentence (unless they become exercisable
before that date), are as follows (all share amounts and purchase prices shown
below having been adjusted for splits since the grant dates of the options):

<TABLE>
<CAPTION>
                         Purchase Price            Portion of Option             Number of Shares
 Grant Date               Per Share                Not Exercisable               Not Exercisable
 ----------               ---------                ---------------               ---------------
<S>                      <C>                       <C>                           <C>
Aug. 7, 2002                $39.87                    two-thirds                     16,000
</TABLE>

Any amount payable pursuant to this Paragraph 4 shall be subject to the
withholding of such amounts as the Company may determine it is required to
withhold on account of taxes, and shall be paid no later than September 30,
2003.

         5.       Confidential Information

                  Zeiger agrees not to disclose, during the Consulting Period or
at any time thereafter, to any person not employed by the Company, or not
engaged to render services to the Company, except with the prior written consent
of an authorized officer of the Company or as necessary for the performance of
his duties hereunder, any confidential information obtained by him while in the
employ of the Company or in connection with his performance of consulting
services on behalf of the Company during the Consulting Period, whether or not
such information was marked confidential or was in written, oral or other form,
including, without limitation, information relating to the female healthcare
products business or any of the inventions, processes, formulae, research, plans
(including but not limited to operating plans and strategic plans), devices,
compilations of information, information systems, computer hardware, software or
data, methods of distribution, suppliers, partners, customers, client
relationships, marketing strategies, legal strategies or trade secrets of the
Company or any subsidiary or affiliate of the Company; provided, however, that
this provision shall not preclude Zeiger from use or disclosure of information
known generally to the public (other than as a result of unauthorized disclosure
by Zeiger), or from disclosure required by law or court order. Zeiger also
agrees that at the commencement of the Consulting Period, as well as at the
expiration of the Consulting Period, he will not take with him, without the
prior written consent of an authorized officer of the Company, and he will
surrender to the Company, any record, list, drawing, blueprint, specification or
other document or property, together with any copy or reproduction thereof,
mechanical or otherwise, then in his possession or under his custody or control
and which contains confidential information or is of a confidential nature
relating to the Company or any subsidiary thereof, or, without limitation,
relating to its or their methods of distribution, suppliers, customers, client
relationships, marketing strategies, operating plans, strategic plans, computer
hardware, software or data or any description of any formulae or secret
processes or

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information system, or which was obtained by him or entrusted to him during the
course of his employment with the Company or in connection with his performance
of consulting services on behalf of the Company during the Consulting Period.
Zeiger's obligations under this Section 5 shall be in addition to and not in
lieu of his obligations to refrain from use, disclosure and misappropriation of
trade secrets and confidential information of the Company and its subsidiaries
and affiliates under any other agreement or any applicable statutory or common
law or code of professional ethics.

         6.       Restrictive Covenants

                  (a)      In consideration of the payments to be made under
this Agreement to Zeiger, including but not limited to the payment for his
unexercisable stock options pursuant to Section 4 above, Zeiger covenants and
agrees that--

                           (i)      during the Consulting Period, and the six
month period immediately following the Consulting Period he will not, directly
or indirectly, without the express written consent of the Chief Executive
Officer of the Company --

                                    (A)      perform services (other than legal
service with respect to matters that do not involve the Company) on behalf of
any person (including without limitation himself), sole proprietorship,
business, enterprise, entity or venture other than the Company or an affiliate
of the Company (a "Third Party") (I) that relate to the research, development,
formulation, testing, manufacturing, marketing, distribution, sale, licensing or
other commercial exploitation of generic or proprietary female healthcare
pharmaceutical products in the United States or Canada, or (II) that may
reasonably be expected to enable, expedite or aid a Third Party's research,
development, formulation, testing, manufacturing, marketing, distribution, sale,
licensing or other commercial exploitation of generic or proprietary female
healthcare pharmaceutical products in the United States or Canada, or

                                    (B)      have a financial interest in
(whether as owner, partner, officer, director, investor, advisor, consultant,
agent, employee, independent contractor, manager or in any other capacity) any
Third Party which then is or, to the knowledge of Zeiger, intends to be engaged
in the research, development, formulation, testing, manufacturing, marketing,
distribution, sale, licensing or other commercial exploitation of generic or
proprietary female healthcare pharmaceutical products in the United States or
Canada. Ownership of less than 3% of any class of securities that is registered
under the Securities Act of 1933 or the Securities Exchange Act of 1934 shall
not, unto itself, be deemed to violate this clause (B); and

                           (ii)     during the Consulting Period, he will not,
directly or indirectly, without the express written consent of the Chief
Executive Officer of the Company, perform services on behalf of any Third Party
with respect to any matter

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that he theretofore worked on for the Company or brought to the Company (whether
during the Consulting Period or prior thereto), or that he is hereafter engaged
to work on for the Company during the Consulting Period; provided, however, the
foregoing restriction shall not apply to Valera Pharmaceuticals, Inc. formerly
known as Hydro Med Sciences, Inc. or to any business opportunity that the
Company has or in the future decides not to pursue; provided, further, however,
that the foregoing exception shall not be construed as an exception to Zeiger's
obligations under clause (i) above; and

                           (iii)    during the Consulting Period, he will not,
directly or indirectly, induce or attempt to induce any person or business who
at the time Zeiger's employment with the Company terminates either (A) is a
supplier, customer, vendor, distributor or partner of, or investor in, or joint
venturer with, the Company or any of its subsidiaries or affiliates (any such
person or business being hereafter referred to as an "Allied Enterprise"), or
(B) has been specifically targeted as a prospective Allied Enterprise by the
Company or any of its subsidiaries or affiliates and, if initially targeted as
such during the Consulting Period, Zeiger has been or is advised in writing of
the Company's plans, to terminate, reduce, refrain from engaging in, or
otherwise alter to the detriment of the Company, its subsidiaries or affiliates
its actual or prospective business or relationship with the Company, its
subsidiaries or affiliates; and

                           (iv)     during the Consulting Period he will not,
directly or indirectly, without the express written consent of the Chief
Executive Officer of the Company, (A) induce or attempt to persuade any employee
of the Company, its subsidiaries or affiliates, or any other person who performs
services for the Company, its subsidiaries or affiliates at the time Zeiger's
employment terminates or during the Consulting Period, to terminate or reduce or
refrain from engaging in his or her employment or other service relationship
with the Company, its subsidiaries or affiliates, or (B) offer, on behalf of any
Third Party, employment to, or participate in the hiring by any Third Party of,
any employee of the Company, its subsidiaries or affiliates or any other person
who performs services for the Company, its subsidiaries or affiliates at the
time Zeiger's employment terminates or during the Consulting Period; and

                           (v)      during the Consulting Period he will not,
directly or indirectly, make disparaging remarks about the Company, its
subsidiaries or affiliates or any of their officers, directors, employees or
products, unless required by law or reasonably necessary to assert or defend his
position in a bona fide dispute arising out of or relating to this Agreement or
any other obligation owing to him by the Company or the breach thereof.

                  (b)      For purposes of this Agreement, no entity shall be
considered an

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affiliate of the Company unless the Company owns 50% or more of the equity
interests or voting interests of such entity. If Zeiger believes the provisions
of this Section 6 are not applicable to services he intends to perform for a
Third Party, then he shall send a written notice of non-applicability to the CEO
and General Counsel of the Company and if the CEO or General Counsel does not
disagree in writing with Zeiger's contention of non-applicability within ten
(10) business days of receipt, then the Company shall be deemed to have agreed
with Zeiger that the services to be performed by Zeiger do not violate the
provisions of this Agreement.

                  (c)      Zeiger recognizes and agrees that, by reason of his
knowledge, experience, skill and abilities, his services are extraordinary and
unique, that the breach or attempted breach of any of the restrictions set forth
above in this Section 6 will result in immediate and irreparable injury for
which the Company will not have an adequate remedy at law, and that the Company
shall be entitled to a decree of specific performance of those restrictions and
to a temporary and permanent injunction enjoining the breach thereof, and to
seek any and all other remedies to which the Company may be entitled, including,
without limitation, monetary damages, without posting bond or furnishing
security of any kind.

                  (d)      Zeiger specifically and expressly represents and
warrants that (i) he has reviewed and agreed to the restrictive covenants
contained above in this Section 6 and their contemplated operation after
receiving the advice of counsel of his choosing; (ii) he believes, after
receiving such advice, that the restrictive covenants and their contemplated
operation are fair and reasonable; (iii) he will not seek or attempt to seek to
have the restrictive covenants declared invalid, and, after receiving the advice
of counsel, expressly waives any right to do so; and (iv) if the full breadth of
any restrictive covenant and/or its contemplated operation shall be held in any
fashion to be too broad, such covenant or its contemplated operation, as the
case may be, shall be interpreted in a manner as broadly in favor of the
beneficiary of such covenant as is legally permissible. Zeiger recognizes and
agrees that the restrictions on his activities contained above in this Section 6
are required for the reasonable protection of the Company and its investments;
that the Company competes in the United States and Canada with other enterprises
engaged in the commercial exploitation of female healthcare pharmaceutical
products and other pharmaceutical products; that the geographic restriction on
his activities set forth in paragraph 6(a)(i)(A) and (B) is reasonable and
necessary to protect the Company against unfair competition; and that the
restrictions on his activities set forth in paragraph 6(a)(i)(A) and (B) will
not deprive him of the ability to earn a livelihood.

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          7.      Cooperation in Litigation

                  In consideration of the payments to be made under this
Agreement, Zeiger also agrees to cooperate with the Company in any legal action
for which his participation is needed during the Consulting Period or
thereafter. The Company agrees to try to schedule all such participation so that
it does not unduly interfere with Zeiger's pursuits after he is no longer in the
Company's employ. The Company will reimburse Zeiger for reasonable out-of-pocket
expenses he incurs in connection with such participation. Zeiger also hereby
agrees not to communicate with anyone (other than his own attorneys) with
respect to the facts or subject matter of any pending or potential litigation,
or regulatory or administrative proceeding involving the Company, its
subsidiaries or affiliates, other than any litigation or proceeding in which
Zeiger is a party-in-opposition, without giving prior notice to the Company and
its legal counsel, and in the event that any other party attempts to obtain
information or documents from Zeiger with respect to matters possibly related to
such litigation or proceeding, Zeiger shall promptly notify the Company and its
legal counsel.

         8.       Payments Conditional. Zeiger recognizes and agrees that, if he
violates the provisions of section 5 or 6 above, the Company shall not be
obligated to make any payments it would otherwise be obligated to make under
this Agreement on or after the date of such violation (the "Remaining
Payments"), and, if the Company shall pay (or shall have paid) any of the
Remaining Payments to Zeiger on or after the date of such violation, Zeiger
shall be obligated to repay such payments to the Company promptly on demand. If
the Remaining Payments amount to less than $25,000 in the aggregate, Zeiger
shall be obligated to make any repayment required by the preceding sentence and,
in addition, shall promptly repay the Company on demand that amount of the
consulting fees paid pursuant to section 3 above which, when added to the
Remaining Payments, equals $25,000. The foregoing provisions of this section 8
shall be in addition to and not by way of limitation of any other rights and
remedies the Company may have in respect of the violation in question.

         9.       Severability

                  (a)      In the event that any provision of this Agreement
shall be determined to be invalid or unenforceable for any reason, the remaining
provisions of this Agreement not so invalid or unenforceable shall be unaffected
thereby and shall remain in full force and effect to the fullest extent
permitted by law; and

                  (b)      Any provision of this Agreement which may be invalid
or unenforceable in any jurisdiction shall be limited by construction thereof,
to the end that such provision shall be valid and enforceable in such
jurisdiction; and

                  (c)      Any provision of this Agreement which may for any
reason be

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invalid or unenforceable in any jurisdiction shall remain in effect and be
enforceable in any jurisdiction in which such provision shall be valid and
enforceable.

         10.      General Provisions

                  (a)      No right or interest to or in any payments to be made
under this Agreement shall be subject to anticipation, alienation, sale,
assignment, encumbrance, pledge, charge or hypothecation or to execution,
attachment, levy or similar process, or assignment by operation of law;
provided, however, that Zeiger may assign his obligation to perform consulting
services hereunder and his right to receive payment therefor to Martin Zeiger,
LLC, if (and only if) Zeiger will personally perform consulting services
hereunder in his capacity as an employee or other representative of Martin
Zeiger, LLC; provided, further, that no further assignment shall be permitted
without the written consent of the Company. This Agreement shall be binding upon
and inure to the benefit of the Company, its successors and assigns, and Zeiger,
his permitted assign, and his heirs and legal representatives.

                  (b)      To the extent that Zeiger acquires a right to receive
payments from the Company under this Agreement, such right shall be no greater
than the right of an unsecured general creditor of the Company. All payments to
be made hereunder shall be paid from the general funds of the Company and no
special or separate fund shall be established and no segregation of assets shall
be made to assure payment of any amount hereunder.

                  (c)      This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York applicable to
contracts entered into and to be performed in that State.

                  (d)      No provision of the Agreement may be amended,
modified or waived unless such amendment, modification or waiver shall be agreed
to in a writing signed by Zeiger and an officer of the Company authorized to do
so.

                  (e)      This instrument contains the entire agreement of the
parties relating to the subject matter of this Agreement and supersedes and
replaces all prior agreements and understandings with respect to such subject
matter, and the parties have made no agreements, representations or warranties
relating to the subject matter of this Agreement which are not set forth herein.
Without limiting the generality of the foregoing, this Agreement is intended to
and shall supersede any and all employment agreements between the parties,
including the employment agreement between the Company and Zeiger dated December
13, 1999, which shall be null and void and of no further force or effect. Zeiger
hereby releases, waives, and discharges the Company from, any claims arising out
of or relating to any such employment

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agreement or the breach thereof, other than claims for any unpaid compensation
or benefits for his services prior to the termination of his employment.
However, the foregoing release shall not be construed to relieve the Company of
any obligations it may have to defend, indemnify and hold harmless Zeiger as an
officer, director or employee of the Company either pursuant to the terms of
such employment agreement or any other agreement, by law or the certificate of
incorporation of the Company. Zeiger further agrees, to the fullest extent
permitted by law, never to sue or grieve or commence any judicial or
administrative proceeding or participate in any action, suit or proceeding
against the Company with respect to any claim released in this Paragraph.

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

                                            BARR LABORATORIES, INC.

                                            By: /s/ Paul M. Bisaro
                                                --------------------------------

                                                /s/ Martin Zeiger
                                                --------------------------------
                                                              Martin Zeiger

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                                                                    EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT is dated effective as of the 1st day of June,
2003, by and between Prab, Inc., a Michigan corporation (the "Corporation"), of
Kalamazoo, Michigan and Gary A. Herder of Lawton, Michigan (the "Executive").

                                   BACKGROUND

         The Executive desires to provide his service to the Corporation and the
Corporation desires to employ the Executive on the terms which are provided
below. The Executive has provided invaluable services to the Corporation in the
past and is important to the continuing success of the Corporation. The
Corporation wishes to provide the Executive with the assurance of continued
employment and secure from the Executive assurances that he will remain with the
Corporation. Therefore, in consideration of the mutual promises in this
Agreement, the Corporation and the Executive agree as to the following terms and
conditions.

              ARTICLE I - EMPLOYMENT TERM, DUTIES AND RESTRICTIONS

         1.01 Employment and Term. The Corporation hereby employs the Executive,
and the Executive hereby accepts employment with the Corporation. The term of
employment and this Agreement will commence on the effective date hereof and
continue for a term of three (3) years and four (4) months (through October 31,
2006) unless extended as provided below or unless terminated earlier pursuant to
Section 3.03 or Article V. Thereafter, this Agreement will be automatically
renewed for consecutive one-year terms, unless either party gives the other
party at least 90 days prior written notice of his or its intention to terminate
the Agreement prior to the beginning of the final year of the Agreement.

         1.02 Duties. Except for the permitted activities set forth in Section
1.03 below, during the term of employment hereunder, the Executive shall devote
his full time, attention, loyalty, skill and efforts to the performance of the
duties described herein. The position of the Executive shall be President and
Chief Executive Officer with normal duties and responsibilities commensurate
with such position including the duties and responsibilities of the Executive as
President and Chief Executive Officer as of the date of this Agreement. During
the term of the employment the services shall be performed at the Corporation's
executive offices located at 5944 East Kilgore Road, Kalamazoo, Michigan, or at
any relocated executive offices not more than 30 miles from that location.

         1.03 Other Employment. During the term of his employment hereunder, the
Executive may not be an employee, consultant, director or other agent of any
other person, firm or corporation without the prior signed written approval of
the Board of

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Directors of the Corporation. The Executive may engage in passive business
activities which do not interfere with his employment under this Agreement and
which do not conflict with the Corporation's interests. Notwithstanding the
foregoing, during the term of this Agreement, the Executive may: (i) serve on
corporate, civic or charitable boards or committees, (ii) deliver lectures,
fulfill speaking engagements or teach at educational institutions; and (iii)
manage personal investments, so long as such activities do not interfere with
the performance of the Executive's responsibilities and duties in accordance
with this Agreement.

                ARTICLE II - COMPENSATION, BENEFITS AND EXPENSES

         2.01 Compensation. The Corporation shall pay the Executive an annual
base salary in an amount equal to $173,100, payable in approximately equal
installments at such intervals as are consistent with the Corporation's pay
periods for the Corporation's regular salaried employees. The Executive's annual
base salary shall be subject to annual review and adjustment by the Board of
Directors of the Corporation, provided, however, that such annual base salary
shall not be less than $173,100. All compensation shall be subject to all
applicable withholding and similar requirements under applicable law.

         2.02 Annual Bonus. The Executive shall also be entitled to an annual
bonus at the end of each of the Corporation's fiscal years in accordance with
the Corporation's bonus program as approved from time to time by the Board of
Directors. Each annual bonus shall be paid not later than 90 days after the end
of the fiscal year for which such bonus was earned. Provided, however, that the
Executive's bonus for any fiscal year in which the Corporation attains a profit
level specified in the Corporation's Profit Sharing Bonus Plan as of the date of
this Agreement will not be less than the bonus presently called for at such
specified profit level, and the number of individuals who share in the bonus
pool in which the Executive participates will not be increased without the
Executive's consent. If the Executive's employment terminates before the end of
a fiscal year, he will be paid a prorated bonus for the year in an amount equal
to (A) the bonus he would have received if employed through the date required
for payment of a full bonus for the year, multiplied by (B) a fraction the
numerator of which is the number of days elapsed in the fiscal year through the
date on which the Executive's employment terminates and the denominator of which
is 365. The prorated bonus shall be paid to the Executive not later than 90 days
after the end of the fiscal plan year in which the Executive's employment
terminates.

         2.03 Benefits. The Executive shall also be eligible to participate in
any retirement, group, disability, insurance, vacation or other plan or program
("benefit program") made available to other executives of the Corporation.
During the term of this Agreement, the Executive shall be eligible to
participate in and receive all benefits under benefit programs provided by the
Corporation to any other executive position of the Corporation with terms no
less favorable to the Executive than those existing as of the date of this
Agreement. In addition, notwithstanding any other provision of this

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Agreement or any other document, the Executive shall have the right to exercise
outstanding stock options after any termination of his employment for the
greater of (A) the period allowed by the stock option agreement or plan or (B)
90 days after any termination of the employment.

         2.04 Expenses. The Corporation shall promptly pay or reimburse the
Executive for all reasonable travel, entertainment and other expenses incurred
by the Executive in connection with the performance of his duties under this
Agreement upon presentation of expense statements or vouchers and such other
supporting information as it may from time to time request; provided that,
subject to the above, the Executive shall comply with all applicable policies of
the Corporation relating to reimbursement for travel and other expenses.

         2.05 Automobile. The Corporation shall provide the Executive a monthly
automobile allowance in accordance with the plans, policies and practices of the
Corporation, at least equal to that existing as of the effective date of this
Agreement.

         2.06 Severance Pay and Benefits. Subject to Section 2.07 and 2.08, if
the Executive's employment is terminated by the Corporation other than pursuant
to Section 3.03 or for Cause (as defined in Section 5.01); or if the Corporation
materially breaches the Agreement or materially changes his duties; the
Corporation shall provide the Executive: (i) with a severance payment equal to
the sum of (a) two (2) times the Executive's annual salary as then in effect and
(b) an amount equal to two (2) times the Executive's average annual bonus for
the three (3) complete fiscal years of the Corporation immediately prior to the
year in which the Executive's employment is terminated, provided that such
severance payment shall be paid to the Executive in a lump sum within sixty (60)
days of his termination; and (ii) continuation of the Executive in the
Corporation's health and dental (including dependent coverage), disability and
life insurance benefits paid for by the Corporation for a period of two (2)
years after the termination.

         2.07 Release. Prior to receipt of the severance payment and benefits
under Section 2.06, the Executive shall sign and deliver to the Corporation an
agreement in form reasonably acceptable to the Corporation which releases the
Corporation from any and all claims of the Executive except for: (A) claims
under this Agreement and the Deferred and Salary Continuation Agreement dated
September 13, 1976 referred to in Section 6.03 of this Agreement; (B) vested
rights of the Executive under any benefit program arising out of his employment
through the date of employment termination; and (C) any rights of
indemnification under the Corporation's Articles of incorporation or Bylaws and
any indemnification agreement then in effect.

         2.08 Cap on Severance Pay and Benefits. If any the total amount of
severance payment and benefits payable to the Executive under Section 2.06 is an
"Excess

                                      E-5
<PAGE>

Payment" as defined in Section 280G(b)(2) of the United States Internal Revenue
Code ("Code"), such payment or benefit will be modified or reduced to the extent
necessary so that the total payment and benefits payable or to be provided to
the Executive under Section 2.06 that are treated as Excess Payments will not
cause the Corporation to have paid an "Excess Payment" as defined in Section
280G(b)(1) of the Code. In the event that the amount of any "Excess Payment"
that would be payable to or for the benefit of the Executive under Section 2.06
must be modified or reduced to comply with this Section 2.08, the Executive will
direct which "Excess Payments" are to be modified or reduced.

                       ARTICLE III - VACATION AND ABSENCES

         3.01 Vacation. The Executive shall receive vacation days, in accordance
with the Corporation's policy, plan and practices at least equal to the amount
of annual vacation days provided to the Executive as of the date of this
Agreement.

         3.02 Other Absences. The Executive shall be entitled to standard
holidays established by the Corporation, at least as favorable to the Executive
as those existing as of the date of this Agreement.

         3.03 Disability Leave of Absence. In the event the Executive becomes
"totally and permanently disabled" and unable to perform any foreseeable work in
fulfillment of his position, the Corporation shall pay to the Executive an
amount equal to one (1) times the Executive's annual base salary as then in
effect (the "Disability Payment"), and this Agreement shall automatically
terminate and the Corporation shall have no further obligations under this
Agreement but the Executive shall retain the rights set forth in (A) through (C)
in Section 2.07 (including all applicable rights to long term disability
benefits with regard to such disability under the Corporation's long term
disability benefit program).

           In the event the Executive becomes "disabled" (as initially
determined by the Executive's physician, and as defined by the Americans' with
Disabilities Act, provided the Corporation may, if necessary and at the
Corporation's expense, obtain a second physician's opinion; if the second
physician's opinion shall differ with the Executive's physician's opinion, then
the parties shall pick a mutually agreeable third physician, whose opinion will
be determinative and whose cost shall be borne equally by the parties) and
unable to perform some types of work, the Executive shall provide the
Corporation with a comprehensive list and explanation of the Executive's
restrictions. If the Corporation is unable to "reasonably accommodate" the
Executive's restrictions so that the Executive can continue performing the
"essential functions" of the job described in this Agreement, the following will
apply:

         A. Executive shall, upon timely written request, be granted a leave of
absence for up to one hundred eighty (180) calendar days (but not beyond the end
of the term of

                                      E-6
<PAGE>

employment set forth in Section 1.01), which leave shall run concurrently with
any leave applicable under the Family Medical Leave Act. Salary and benefits
shall continue during this leave of absence. All other provisions of this
Agreement shall remain in full force and effect during the approved leave of
absence.

         B. Upon expiration of the leave of absence (not to exceed 180 calendar
days), if the Executive is unable to return to work (he must submit a
physician's release setting forth any and all restrictions) and perform the
"essential functions" of his job, either with or without reasonable
accommodation, this Agreement shall automatically terminate, subject to payment
to the Executive of the Disability Payment as provided in Section 3.03, and the
Corporation shall have no further obligations under this Agreement, but the
Executive shall retain the rights set forth in (A) through (C) in Section 2.07
(including all applicable rights to long term disability benefits with regard to
such disability under the Corporation's long term disability benefit program).

                      ARTICLE IV - CONFIDENTIAL INFORMATION

         4.01 Definition. The term "Confidential Information", as used herein,
shall mean any information concerning the Corporation which is disclosed to or
acquired by the Executive directly or indirectly, in the course of the
Executive's employment with the Corporation. Confidential Information shall also
include, but not be limited to, knowledge of the Corporation's patents,
trademarks, trade-names, intellectual properties, logo, proprietary information,
processes, trade secrets, business plans, business opportunities, business
strategies, pricing, margins, financial information, customers, customer lists
and related information and all memoranda, notes, reports and documents, and all
copies and extracts thereof, obtained by the Executive in connection with his
employment with the Corporation. Confidential Information shall not include
information or other material in the public domain or that is generally known in
the industry.

         4.02 Agreements Regarding Confidential Information. The Executive
covenants, agrees and shall undertake:

                  A. Not to use Confidential Information for any purpose other
than in the employment of the Corporation.

                  B. Not to disclose, directly or indirectly, any Confidential
Information to any third parties, except in the employment of the Corporation
for the benefit of the Corporation.

         4.03 Return of Confidential Information. Upon termination of this
Agreement, the Executive shall promptly return to the Corporation all
Confidential Information supplied to or possessed by him and shall not retain
any copies or other reproductions, or extracts thereof, of the Confidential
Information. The Executive shall also destroy or

                                      E-7
<PAGE>

have destroyed all memoranda, notes, reports and documents, and all copies and
other reproductions, and extracts thereof, prepared by him and containing
Confidential Information. The Executive shall provide a written certificate to
the Corporation that the action required to be taken has been accomplished.

         4.04 Remedies. The Executive recognizes that a breach by him of this
Article IV may give rise to irreparable injury to the Corporation inadequately
compensable in damages and, accordingly, agrees that the Corporation may seek
and obtain injunctive relief against such breach or threatened breach, in
addition to any other legal remedies which may be available, including the
recovery of monetary damages from the Executive.

         4.05 Survival. The terms of this Article IV shall survive termination
of this Agreement.

                             ARTICLE V - TERMINATION

         5.01 Termination by the Corporation for Cause. This Agreement may be
terminated at any time by the Corporation for Cause (as defined in this Section)
and without prior notice. As used herein, "Cause" shall be defined as:

                  (a) if the Executive willfully makes a false or fraudulent
         statement to the Corporation which is materially injurious to the
         Corporation;

                  (b) if the Executive is convicted of a felony (other than
         negligent vehicular homicide);

                  (c) if the Executive willingly converts the Corporation's
         property or funds (not including office supplies and the like with a
         value of less than $100);

                  (d) if the Executive willfully engages in gross misconduct or
         gross dereliction of duties and responsibilities to the Corporation.

         For purposes of this provision, no act or failure to act, on the part
of the Executive, shall be considered "willful" unless it is done, or omitted to
be done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Corporation. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board of Directors or upon the advice of counsel for the
Corporation shall be conclusively presumed to be done, or omitted to be done, by
the Executive in good faith and in the best interests of the Corporation. The
cessation of employment of the Executive shall not be deemed to be for Cause
unless and until there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board of Directors at a meeting of the Board of
Directors called and held for such purpose (after reasonable notice is provided
to the Executive and the Executive is given

                                      E-8
<PAGE>

an opportunity, together with counsel, to be heard before the Board of
Directors), finding that, in the good faith opinion of the Board of Directors,
the Executive is guilty of the conduct described. Any determination of "Cause"
by the Board of Directors shall not be conclusive, but shall be subject to
independent determination by the finder of fact in any legal proceedings
relating to such termination; provided, however, that the Board of Directors
shall have the right to suspend the Executive with pay, pending the
determination by the finder of fact in such legal proceeding.

         5.02 Termination at the Will of the Corporation. This Agreement may be
terminated at any time by the Corporation without cause and without prior
notice; provided, that if such termination is not for Cause (as defined in
Section 5.01), the Executive shall receive the severance payment and benefits
set forth in Section 2.06.

         5.03 Termination at the Will of the Executive. The Executive may
terminate this Agreement and his employment at any time for any reason or no
reason by providing written notice to the Corporation not less than thirty (30)
days prior to the effective date of termination (as stated in the notice). After
it receives written notice, the Corporation may elect to relieve the Executive
of his duties prior to the effective date of termination; provided that the
Corporation shall continue to pay salary and provide benefits to the Executive
up to the effective date of termination.

         5.04 Immediate Termination at the Executive's Death. This Agreement and
the Executive's employment shall terminate upon the death of the Executive,
provided, however, that a separation benefit in an amount equal to the
Disability Payment shall be paid to Executive.

                           ARTICLE VI - MISCELLANEOUS

         6.01 Revocation of Prior Agreements. It is expressly understood and
agreed that this Agreement cancels, revokes and takes precedence over any other
prior oral or written agreements or understandings between the parties
concerning the employment of Executive.

         6.02 Invalidity. The invalidity of any provision of this Agreement
shall not affect the validity of the remainder of any such provision or the
remaining provisions of this Agreement.

         6.03 Entire Agreement and Amendment. Except for a certain Deferred and
Salary Continuation Agreement dated September 13, 1976 by and between the
Executive and the Corporation, this writing contains the entire agreement
between the parties with respect to the matters described herein and is a
complete and exclusive statement as to the terms thereof and supersedes all
previous agreements, including but not limited to, that certain Employment
Agreement by and between the Corporation and the Executive dated

                                      E-9
<PAGE>

June 20, 2003. This Agreement may not be altered or modified except by a writing
signed by the party against whom such alteration or modification is sought.

         6.04 Assignment. The rights and obligations of the Corporation under
this Agreement shall inure to the benefit of and be binding upon its successors
and assigns. The Executive may not assign any interest in this Agreement without
the written consent of the Corporation.

         6.05 Governing Law and Choice of Forum. Michigan law shall govern the
construction and enforceability of this Agreement. Any and all actions
concerning any dispute arising hereunder shall be filed and maintained only in a
state or federal court sitting in the State of Michigan.

         6.06 No Implied Waivers. Failure of either party to insist upon strict
performance of any part of this Agreement shall not be considered a waiver of
such performance and shall not prevent either party from subsequently insisting
upon strict performance.

         6.07 Notices. All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:

If to the Executive:                                Gary A. Herder
                                                    5944 E. Kilgore Road
                                                    P.O. Box 2121
                                                    Kalamazoo, Michigan 49003

If to the Corporation:                              Prab, Inc.
                                                    5944 E. Kilgore Road
                                                    P.O. Box 2121
                                                    Kalamazoo, Michigan 49003
                                                    Attention: Robert W. Klinge

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

                                      E-10
<PAGE>

           IN WITNESS WHEREOF, the parties have signed this Agreement on the 3rd
day of November, 2003.

           The Corporation:              PRAB, INC.

                                         By:   /s/ Eric V. Brown, Jr.
                                               ---------------------------------
                                               Eric V. Brown, Jr.
                                         Its:  Secretary

           The Executive:                /s/ Gary A. Herder
                                         ---------------------------------------
                                         Gary A. Herder

                                      E-11

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