Document:

Modtech Holdings, Inc. 2002 Stock Option Plan

 Exhibit 10.4 
  
 MODTECH HOLDINGS, INC. 
  
 2002 NONSTATUTORY STOCK OPTION PLAN 
  
 1. Purpose. The purpose of this Plan is to provide incentives to attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent and Subsidiaries, by offering them an opportunity to participate in the Company’s future performance through awards of Options. Capitalized terms not defined in the text are
defined in Section 19. 
  
 2. Shares Subject to the Plan

  
 2.1 Number of Shares Available. Subject to Sections
2.2 and 14, (a) the total number of Shares reserved and available for grant and issuance pursuant to this Plan will be One Million (1,000,000) Shares, and (b) Shares that are subject to issuance upon exercise of an Option but cease to be subject to
such Option for any reason other than exercise of such Option will again be available for grant and issuance in connection with future Awards under this Plan. At all times the Company shall reserve and keep available a sufficient number of Shares as
shall be required to satisfy the requirements of all outstanding Options granted under this Plan. 
  
 2.2 Adjustment of Shares. In the event that the number of outstanding Shares is changed by a stock dividend, recapitalization, stock split, reverse
stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration, then (a) the number of Shares reserved for issuance under this Plan, and (b) the Exercise Prices of and number
of Shares subject to outstanding Options will be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and compliance with applicable securities laws; provide, however, that fractions of a Share
will not be issued but will either be replaced by a cash payment equal to the Fair Market Value of such fraction of a Share or will be rounded up to the nearest whole Share, as determined by the Committee. 
  
 3. Eligibility. Awards may be granted to employees, officers,
directors, consultants, independent contractors and advisors of the Company or any Parent or Subsidiary of the Company; provided such consultants, contractors, and advisors render bona fide services not in connection with the offer and sale of
securities in a capital raising transaction. 

 4. Administration. 
  
 4.1 Committee Authority. This Plan will be administered by the Committee or by the Board acting as the Committee.
Subject to the general purposes, terms and conditions of this Plan, and to the direction of the Board, the Committee will have full power to implement and carry out this Plan. Without limitation, the Committee will have the authority to: 

 

	 	(a)	construe and interpret this Plan, any Award Agreement and any other agreement or document executed pursuant to this Plan; 

  

	 	(b)	prescribe, amend and rescind rules and regulations relating to this Plan; 

  

	 	(c)	select persons to receive Awards; 

  

	 	(d)	determine the form and terms of Awards; 

  

	 	(e)	grant waivers of Plan or Award conditions; 

  

	 	(f)	determine the vesting and exercisability of Awards; 

  

	 	(g)	correct any defect, supply any omission or reconcile any inconsistency in this Plan, any Award or any Award Agreement; and 

  

	 	(h)	make all other determinations necessary or advisable for the administration of this Plan. 

  
 4.2 Discretion. Any determination made by the Board or Committee with respect to any Award will be made in its sole
discretion at the time of grant of the Award or, unless in contravention of any express term of this Plan or Award, at any later time, and such determination will be final and binding on the Company and on all persons having an interest in any Award
under this Plan. 

 5. Options. All Options granted will be nonstatutory stock options, which are options not intended
to satisfy the requirements of incentive stock options under Section 422 of the Code, or comply with the requirements for employee stock purchase plans under Section 423 of the Code. No other form of Award may be made under this Plan. The Committee
will have the discretion to determine, the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may be exercised, and all other terms and conditions of the Option, subject to the following:

  
 5.1 Form of Option Grant. Each Option granted under
this Plan will be evidenced by a written Award Agreement, which will be in such form and contain such provisions (which need not be the same for each Participant) as the Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan. 
  
 5.2 Date
of Grant. The date of grant of an Option will be the date on which the Committee makes the determination to grant such Option, unless otherwise specified by the Committee. The Award Agreement and a copy of this Plan will be delivered to the
Participant within a reasonable time after the granting of the Option. 
  
 5.3 Exercise Period. Options will be exercisable within the times or upon the events determined by the Committee as set forth in the Award Agreement governing such Option. The Committee may provide for the exercise of Options to
become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Committee determines. 
  
 5.4 Exercise Price. The Exercise Price of an Option will be determined by the Committee when the Option is granted and may be not less than 100% of
the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased may be made in accordance with Section 6 of this Plan. 
  
 5.5 Method of Exercise. Options may be exercised only by delivery to the Company of a written stock option exercise agreement (the
“Exercise Agreement”) in a form approved by the Committee (which need not be the same for each Participant), stating the number of Shares being purchased, the restrictions imposed on the Shares purchased under such Exercise
Agreement, if any, and such representations and agreements regarding the Participant’s investment intent and access to information and other matters, if any, as may be required or desirable by the Company to comply with applicable securities
laws, together with payment in full of the Exercise Price for the number of Shares being purchased. 

 5.6 Termination. Except as otherwise determined by the Committee and set forth in the Award
Agreement, exercise of an Option is subject to the following: 
  

	 	(a)	If the Participant is Terminated for any reason except death or Disability, then the Participant may exercise such Participant’s Options no later than three (3) months after
the Termination Date, but only to the extent that such Options would have been exercisable upon the Termination Date, and in any event, no later than the expiration date of the Options. 

  

	 	(b)	If the Participant is Terminated because of the Participant’s death or Disability (or the Participant dies within three (3) months after a Termination other than because of the
Participant’s death or disability), then the Participant’s Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the Termination Date and must be exercised by the Participant (or
the Participant’s legal representative or authorized assignee) no later than twelve (12) months after the Termination Date, but in any event no later than the expiration date of the Options. 

  

	 	(c)	Notwithstanding (a) and (b) above, if the Participant is Terminated for cause (as defined in the applicable Award Agreement) any Option not exercised in full prior to such
termination will be deemed automatically canceled and may not be exercised on or after the Termination Date. 

  
 5.7 Limitations on Exercise. The Committee may specify a reasonable minimum number of Shares that must be purchased on any exercise of an Option,
provided that such minimum number will not prevent the Participant from exercising the Option for the full number of Shares for which it is then exercisable. 
  
 5.8 Modification. Extension or Renewal. The Committee may modify, extend or renew outstanding Options and authorize the grant of new Options in
substitution therefor, provided that any such action may not, without the written consent of a Participant, impair any of such Participant’s rights under any Option previously granted. The Committee may reduce the Exercise Price of outstanding
Options without the consent of the Participants affected by a written notice to them; provided, however that the Exercise Price may not be reduced below the minimum Exercise Price that would be permitted under Section 5.4 of this Plan for Options
granted on the date the action is taken to reduce the Exercise Price. 

 6. Payment for Share Purchases. 
  
 6.1 Payment. Payment for Shares purchased pursuant to this Plan may be made in cash (by check) or, where expressly
approved for the Participant by the Committee and where permitted by law: 
  

	 	(a)	by cancellation of indebtedness of the Company to the Participant; 

  

	 	(b)	by surrender of shares of common stock of the Company that are acceptable to the Committee; 

  

	 	(c)	by tender of a full recourse promissory note having such terms, including security for the note, as the Committee may determine, or as may be required by law;

  

	 	(d)	by waiver of compensation due or accrued to the Participant for services rendered; 

  

	 	(e)	provided that a public market for the Company’s stock exists: 

  

	 	(1)	through a “same day sale” commitment from the Participant and a broker-dealer that is a member of the National Association of Securities Dealers (an “NASD
Dealer”) whereby the Participant irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased to pay for the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company; or 

  

	 	(2)	through a “margin” commitment from the Participant and a NASD Dealer whereby the Participant irrevocably elects to exercise the Option and to pledge the Shares so
purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to
the Company; or 

 (f) by any combination of the foregoing, or by such other method as is approved by the Committee and
otherwise permitted by law. 
  
 6.2 Loan Guarantees. The
Committee may help the Participant pay for Shares purchased under this Plan by authorizing a guarantee by the Company of a third-party loan to the Participant. 
  

7. Withholding Taxes. 
  
 7.1 Withholding Generally. Whenever Shares are to be issued in satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal, state, and local withholding tax requirements prior to the delivery of any certificate or certificates for such Shares. 
  
 7.2 Stock Withholding. When, under applicable tax laws, a Participant
incurs tax liability in connection with the exercise or vesting of any Award that is subject to tax withholding and the Participant is obligated to pay the Company the amount required to be withheld, the Committee may allow the Participant to
satisfy the minimum withholding tax obligation by electing to have the Company withhold from the Shares to be issued that number of Shares having a Fair Market Value equal to the minimum amount required to be withheld, determined on the date that
the amount of tax to be withheld is to be determined. All elections by a Participant to have Shares withheld for this purpose will be made in writing in a form acceptable to the Committee and will be subject to such additional restrictions as the
Committee may elect to impose. 
  
 8. Rights as a
Stockholder. No Participant will have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Participant. No adjustment shall be made for dividends or distributions or other rights for which the record
date is prior to the date such certificate or certificates are issued, except as provided in Section 2.2 above. 
  
 9. Transferability. Awards granted under this Plan, and any interest therein, will not be transferable or assignable by any Participant, and may
not be made subject to execution, attachment or similar process, otherwise than by will or by the laws of descent and distribution or as consistent with the specific Plan and Award Agreement provisions relating thereto. During the lifetime of a
Participant, the Award will be exercisable only by the Participant, and any elections with respect to the Award, may be made only by the Participant. 

 10. Certificates. All certificates for Shares delivered under this Plan will be subject to such
stock transfer orders, legends and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable federal, state or foreign securities law, or any rules, regulations and other requirements of the SEC
or any stock exchange or automated quotation system upon which the Shares may be listed or quoted. 
  
 11. Exchange of Awards. The Committee may, at any time or from time to time with the consent of the respective Participants issue new Awards in
exchange for the surrender and cancellation of existing Awards. The Committee may at any time buy from a Participant an Award previously granted with payment in cash, Shares or other consideration, based on such terms and conditions as the Committee
and the Participant may agree. 
  
 12. Securities Law and Other
Regulatory Compliance. An Award will not be effective unless such Award is in compliance with all applicable federal and state securities laws, rules and regulations of any governmental body, and the requirements of any stock exchange or
automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company
will have no obligation to issue or deliver certificates for Shares under this Plan prior to: (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and/or (b) completion of any registration or
other qualification of such Shares under any state or federal law or ruling of any governmental body that the Company determines to be necessary or advisable. 
  

13. No Obligation to Employ. Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any
right to continue in the employ of, or to continue any other relationship with, the Company or any Parent or Subsidiary of the Company or limit in any way the right of the Company or any Parent or Subsidiary of the Company to terminate any
Participant’s employment or other relationship at any time, with or without cause. 
  
 14. Corporate Transactions. 
  
 14.1 Acceleration; Assumption or Replacement of Awards by Successor. Unless assumed, converted or replaced as provided for below, each Option outstanding at the time of a Corporate Transaction that is not otherwise fully vested shall
automatically accelerate so that each such Option shall, immediately prior to the effective date of the Corporate Transaction, become exercisable for all of the Shares at the time subject to that Option. An outstanding Option shall not so accelerate
if and to 

 the extent: (i) such Option is, in connection with the Corporate Transaction, assumed, converted or replaced or otherwise
continued in full force and effect by the successor corporation (or parent thereof) pursuant to the terms of the Corporate Transaction, (ii) such Option is replaced with a cash incentive program of the successor corporation which preserves the
spread existing at the time of the Corporate Transaction on the Shares for which the Option is not otherwise at that time exercisable and provides for subsequent payout in accordance with the same vesting schedule applicable to those Shares or (iii)
the acceleration of such Option is subject to other limitations imposed by the Committee at the time of it was granted. Immediately following the consummation of the Corporate Transaction, all outstanding Options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or parent thereof) or otherwise expressly continued in full force and effect pursuant to the terms of the Corporate Transaction. Each Option which is assumed in connection with
a Corporate Transaction shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and class of securities which would have been issuable to the Participant in consummation of such Corporate Transaction had
the Option been exercised immediately prior to such Corporate Transaction. Appropriate adjustments to reflect such Corporate Transaction shall also be made to (i) the Exercise Price payable per Share under each outstanding Option, provided the
aggregate Exercise Price payable for such securities shall remain the same, and (ii) the maximum number and/or class of securities available for issuance over the remaining term of the Plan. The Committee may at any time provide that one or more
Options will automatically accelerate in connection with a Corporate Transaction, whether or not those Options are assumed or otherwise continued in full force and effect pursuant to the terms of the Corporate Transaction. Any such Option shall
accordingly become exercisable, immediately prior to the effective date of such Corporate Transaction, for all of the Shares at the time subject to that Option. 
  

14.2 Other Treatment of Awards. Subject to any greater rights granted to the Participants under the foregoing provisions of this Section 14, in
the event of the occurrence of any transaction described in Section 14.1, any outstanding Awards will be treated as provided in the applicable agreement or plan of merger, consolidation, dissolution, liquidation, sale of assets or other
“corporate transaction.” 
  
 14.3 Assumption of
Awards by the Company. The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either; (a) granting an Award
under this Plan in substitution of such other company’s award; or (b) assuming such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan. Such substitution or
assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other company had applied the rules of this Plan to such grant. In the event the Company assumes
an award granted by another company, the terms and conditions of such award will remain unchanged (except that the exercise price and the number and nature of Shares issuable upon exercise of any such option will be adjusted appropriately). In the
event the Company elects to grant a new Option rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price. 

 15. Adoption and Stockholder Approval. This Plan was adopted by the Board effective as of March 5,
2002. The Board may at its discretion seek stockholder approval of this Plan, if it determines that such approval is required by law, The Nasdaq Stock Market Marketplace Rules, or is otherwise necessary or desirable. 
  
 16. Term of Plan. The Plan shall be unlimited in duration and, in the
event of Plan termination, shall remain in effect as long as any Awards under it are outstanding. 
  
 17. Amendment or Termination of Plan. The Board may at any time terminate or amend the Plan without the approval of the stockholders of the
Company, unless such approval is required by law (including Section 16(b) of the Exchange Act), The Nasdaq Market Marketplace Rules, or otherwise. Notwithstanding the foregoing, no amendment or termination may, in the absence of written consent by
the affected Participant (or, if the Participant is not then living, the affected beneficiary), adversely affect the rights of any Participant or beneficiary under any Award granted under the Plan prior to the date such amendment or termination is
adopted by the Board; provided that adjustments pursuant to Section 2.2 and 14 shall not require the consent of any Participant. 
  
 18. Nonexclusivity of the Plan. Neither the adoption of this Plan by the Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock
options and bonuses otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases. 
  
 19. Definitions. 
  
 “Award” means any award of Options under this Plan. 
  
 “Award Agreement” means, with respect to each Award, the signed written agreement between the
Company and the Participant setting forth the terms and conditions of the Award. 
  
 “Board” means the Board of Directors of the Company. 

 “Code” means the Internal Revenue Code of 1986, as amended. 
  
 “Committee” means a committee of the Board comprised
of two or more “non-employee directors” within the meaning of Rule 16b-3 of the Exchange Act appointed to administer this Plan, or if no such committee is appointed, the Board. The Committee may consist of persons who are not
“non-employee directors” within the meaning of Rule 16b-3 if the Awards are approved by the 
  
 Board or stockholders, or if the Awards may not be exercised for at least 6 months from the date of grant. During all times that the Company is subject to
Section 16 of the Exchange Act, the Company will take appropriate steps to comply with the administration requirements of Section 16(b) of the Exchange Act. 
  
 “Company” means Modtech Holdings, Inc., a Delaware corporation, or any successor corporation. 
  
 “Corporate Transaction” means: 
  

	 	(a)	a merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the outstanding securities of the Company are
transferred to a person or persons different from the person or persons holding those securities immediately prior to such transaction, or 

  

	 	(b)	the sale, transfer or other disposition of all or substantially all of the assets of the Company in complete liquidation or dissolution of the Company. 

  
 “Disability” means a disability, whether temporary or
permanent, partial or total, within the meaning of Section 22(e)(3) of the Code, as determined by the Committee. 
  
 “Exchange Act” means the Securities Exchange Act of 1934, as amended. 
  
 “Exercise Price” means the price at which a holder of
an Option may purchase the Shares issuable upon exercise of the Option. 

 “Fair Market Value” means, as of any date, the value of a share of the
Company’s Common Stock determined as follows: 
  

	 	(a)	if such Common Stock is then quoted on the Nasdaq National Market, its closing price on the Nasdaq National Market on the date of determination (if such day is a trading day), and,
if such date of determination is not a trading day, then on the last trading day prior to the date of determination; 

  

	 	(b)	if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the last trading day prior to the date of determination on the
principal national securities exchange on which the Common Stock is listed or admitted to trading; 

  

	 	(c)	if such Common Stock is publicly traded but is not quoted on the Nasdaq National Market nor listed or admitted to trading on a national securities exchange, the average of the
closing bid and asked prices on the last trading day prior to the date of determination; or 

  

	 	(d)	if none of the foregoing is applicable, by the Committee in good faith. 

 “Option” means an award of an option to purchase Shares pursuant to Section 5.

  
 “Parent” means any corporation (other
than the Company) in an unbroken chain of corporations ending with the Company, if at the time of the granting of an Award under this Plan, each of such corporations other than the Company owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such chain. 
  
 “Participant” means a person who receives an Award under this Plan. 
  
 “Plan” means this Modtech Holdings, Inc. 1999 Nonstatutory Stock Option Plan, as amended from time to time. 
  
 “SEC” means the Securities and Exchange Commission.

  
 “Securities Act” means the Securities
Act of 1933, as amended. 
  
 “Shares”
means shares of the Company’s Common Stock and any successor security. 
  
 “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of granting of the Award, each of the corporations
other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 
  
 “Termination” or “Terminated”
means, for purposes of this Plan with respect to a Participant, that the Participant has for any reason ceased to provide services as an employee, director, consultant, independent contractor or advisor to the Company or a Parent or Subsidiary of
the Company, except in the case of sick leave, military leave, or any other leave of absence approved by the Committee, provided that such leave is for a period of not more than ninety (90) days, or reinstatement upon the expiration of such leave is
guaranteed by contract or statute. The Committee will have sole discretion to determine whether a Participant has ceased to provide services and the effective date on which the Participant ceased to provide services (the “Termination
Date”). 

 MODTECH HOLDINGS, INC. 
 2002 NONSTATUTORY STOCK OPTION PLAN 
  
 STOCK OPTION AWARD AGREEMENT 
 (NONSTATUTORY STOCK OPTION) 
  
 This Agreement is made and entered into effective as of
                            , by and between MODTECH HOLDINGS, INC., a Delaware Company (the
“Company”), and                              (the “Optionee”). 
  
 R E C I T A L S 
  
 A. The Board of Directors of the Company (the “Board”) has adopted
the Modtech Holdings, Inc. 2002 Nonstatutory Stock Option Plan (the “Plan”) in order to provide key employees and directors of, and key consultants, vendors, customers, and others expected to provide significant services to, the Company,
with a favorable opportunity to acquire shares of the Company’s common stock (the “Stock”). 
  
 B. The Board has by resolution duly adopted that it is in the best interests of the Company and its shareholders to grant to Optionee, as an employee of
the Company, the option to purchase shares of Stock on the terms and conditions provided for in this Agreement, as an inducement to Optionee to continue to remain in the service of the Company and to provide Optionee with additional incentive for
increasing his or her efforts and contributions to the success of the Company during such service. 
  
 NOW THEREFORE, it is agreed as follows: 
  
 1. Definitions and Incorporation. The terms used in this Agreement shall have the meanings given to such terms in the Plan. The Plan is hereby
incorporated in and made a part of this Agreement as if fully set forth herein. The Optionee hereby acknowledges receipt of a copy of the Plan. 
  
 2. Grant of Option. The Company hereby grants to Optionee as of the date hereof the right and option to purchase, on the terms and conditions
hereinafter set forth, all or any part of an aggregate of                  shares of Stock (the “Option”), subject to adjustment in accordance with
Section 2.2 of the Plan. It is understood and acknowledged that the Option will be a Nonstatutory Stock Option which will not qualify as an Incentive Stock Option under Section 422A of the Code. 
  
 3. Option Price. The price to be paid for Stock upon exercise of the
Option or any part thereof shall be $             per share (the “Purchase Price”), which is equal to or greater than 100% of the Fair Market Value of one share of Stock as
of the date hereof. 

 4. Right to Exercise. Subject to the conditions set forth in this Agreement, the right to exercise
the Option shall accrue in accordance with Schedule 1 attached hereto and hereby incorporated in and made a part hereof. The Optionee hereby accepts and agrees to be bound by each and every provision contained in Schedule 1. 
  
 5. Securities Law Requirements. No part of the Option shall be
exercised if counsel to the Company determines that any applicable registration requirement under the Securities Act of 1933, as amended, or any other applicable requirement of Federal or state law has not been met. 
  
 6. Term of Option. The Option shall terminate in any event on the
earliest of (a) the 10th anniversary of the date of this Agreement first set forth above, at 11:59 P.M., (b) the expiration of the period described in Paragraph 7 below, or (c) the expiration of the period described in Paragraph 8 below. 

 
 7. Exercise Following Termination of Service. If the
Optionee’s service with the Company terminates for any reason other than death or Disability, the Option may be exercised no later than three (3) months after the Termination Date, but only to the extent that such Option would have been
exercisable upon the Termination Date, and in any event, no later than the expiration date of the Option. The foregoing notwithstanding, the Option shall cease to be exercisable on the Termination Date if the termination is for cause or if following
termination with or without cause the Optionee becomes an employee, director or consultant of a person who is in direct competition with the Company. For this purpose, “cause” shall mean conviction of a felony, misappropriation of assets
of the Company or any subsidiary, continued or repeated insobriety, continued or repeated absence from service during the usual working hours of the Optionee’s position for reason other than disability or sickness, or refusal to carry out the
reasonable directions of the Company’s executive officers or of the Board. 
  
 8. Exercise Following Death or Disability. If the Optionee’s service with the Company terminates by reason of the Optionee’s death or Disability, or if the Optionee dies after termination of service
but while the Option would have been exercisable hereunder, then the Option may be exercised only to the extent that such Option would have been exercisable by the Optionee on the Termination Date and must be exercised by the Optionee (or the
Optionee’s legal representative or authorized assignee) no later than twelve (12) months after the Termination Date, but in any event no later than the expiration date of the Option. 
  
 9. Time of Termination of Service. For the purposes of this Agreement, Optionee’s service shall be deemed to
have terminated on the earlier of (a) the date when Optionee’s service in fact terminated or (b) the date when the Optionee gave or received written notice that his or her service is to terminate, in each case as determined by the Committee.

  
 10. Nontransferability. Unless the Company otherwise
consents in writing, the option and all rights and privileges granted hereunder shall be non-assignable and non-transferable by the Optionee, either voluntarily or by operation of law, except by will or by operation of the laws of descent and
distribution, shall not be pledged or hypothecated in any way, and shall be exercisable during lifetime only by the Optionee. Except as otherwise provided herein, any attempted alienation, assignment, pledge, hypothecation, attachment, execution or
similar process, whether 

 voluntary or involuntary, with respect to all or any part of the Option or any right thereunder, shall be null and void
and, at the Company’s option, shall cause all of Optionee’s rights under this Agreement to terminate. 
  
 All certificates representing shares of Stock purchased upon the exercise of the Option shall bear the following legend: 
  
 “THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE “ACT”). ANY TRANSFER OF SUCH SECURITIES WILL BE INVALID UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER OR IN THE OPINION OF COUNSEL FOR THE ISSUER SUCH REGISTRATION IS
UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT.” 
  
 11. Effect of Exercise. Upon exercise of all or any part of the Option, the number of shares of Stock subject to option under this Agreement shall be reduced by the number of shares with respect to which such exercise is made.

  
 12. Method of Exercise. Each exercise of the Option
shall be by means of a written notice of exercise in substantially the form prescribed from time to time by the Board or Committee (the “Exercise Agreement”) delivered to the Secretary of the Company at its principal office and accompanied
by payment in full of the option price for each share of Stock purchased under the Option. The Exercise Agreement shall state the number of shares of Stock with respect to which the Option is exercised, the restrictions imposed on such shares, if
any, such representations and agreements regarding the Optionee’s investment intent and access to information and other matters, if any, as may be required or desirable by the Company to comply with applicable securities laws, and shall be
signed by the person exercising the Option. If the Option is exercised by a person other than the Optionee, such notice shall be accompanied by proof, reasonably satisfactory to the Company, of such person’s right to exercise the Option.

  
 The Purchase Price specified in paragraph 3 above shall be
paid in full upon the exercise of the Option (i) by cash, in United States dollars; by the surrender of Shares in good form for transfer, owned by the person exercising the Option and having a Fair Market Value on the date of exercise equal to the
Purchase Price, or in any combination of cash and Shares, as long as the sum of the cash so paid and the Fair Market Value of the Shares so surrendered equal the Purchase Price; (ii) by cancellation of indebtedness owed by the Company to the
Optionee; or (iii) by any combination of the foregoing. 
  
 13.
Withholding Taxes. If the Optionee is an employee or former employee of the Company when all or part of the Option is exercised, the Company may require the Optionee to deliver payment of any withholding taxes (in addition to the Option
exercise price) in cash with respect to the difference between the Option exercise price and the fair market value of the Stock acquired upon exercise. 

 14. Issuance of Shares. Subject to the foregoing conditions, the Company, as soon as reasonably
practicable after receipt of a proper Exercise Agreement and without transfer or issue tax or other incidental expense to the person exercising the Option, shall deliver to such person at the principal office of the Company, or such other location
as may be acceptable to the Company and such person, one or more certificates for the shares of Stock with respect to which the option has been exercised. Such shares shall be fully paid and nonassessable and shall be issued in the name of such
person. However, at the request of the Optionee, such shares may be issued in the names of the Optionee and his or her spouse (a) as joint tenants with right of survivorship, (b) as community property or (c) as tenants in common without right of
survivorship. 
  
 15. Limitation of Optionee’s Rights.
Neither Optionee nor any person entitled to exercise the Option shall be or have any of the rights of a shareholder of the Company in respect of any share issuable upon the exercise of the Option unless and until a certificate or certificates
representing shares of Stock shall have been issued and delivered upon exercise of the Option in full or in part. No adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificates are
issued. 
  
 16. Consent Required to Transfer. In connection
with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the 1933 Act, the Optionee shall not sell, make any short sale of, loan, hypothecate, pledge, grant any option
for the purchase of, or otherwise dispose or transfer for value or otherwise agree to engage in any of the foregoing transactions with respect to, any Stock purchased under the Option without the prior written consent of the Company or its
underwriters. Such limitations shall be in effect for such period of time from and after the effective date of such registration statement as may be requested by the Company or such underwriters. 
  
 17. Notices. Any notice to the Company contemplated by this Agreement
shall be addressed to it in care of its President; any notice to the Optionee shall be addressed to him or her at the address on file with the Company on the date hereof or at such other address as Optionee may hereafter designate in a writing
delivered to the Company as provided herein. 
  
 18.
Interpretation. The interpretation, construction, performance and enforcement of this Agreement shall lie within the sole discretion of the Board, and the Board’s determinations shall be conclusive and binding on all interested persons.

  
 19. Governing Law. This Agreement has been made,
executed and delivered in, and the interpretation, performance and enforcement hereof shall be governed by and construed under the laws of the State of California. 
  

 IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement, in the case of the Company by
its duly authorized office, as the day and year first above written. 
  

			
	 MODTECH HOLDINGS, INC.,
 a Delaware
corporation

		
	By:	 	 
		
	Title:	 	 

  
  
 “Optionee” 
  
  

			
		
	 	 	 

  

 SCHEDULE 1 
  
 RIGHT TO EXERCISE 
  
 1. Subject to the conditions set forth in this Agreement, the Option shall first become exercisable as to the respective number of shares and at the times
indicated below: + 
  

									
	 	 	 Number of Shares

	  	 	 	 Date First ExercisableSeparation Agreement between the Company and E. Gruber

 Exhibit 10.5 
  
 SEPARATION AND CONSULTING AGREEMENT – EVAN M. GRUBER 
  
 This Separation and Consulting Agreement (“Separation and Consulting
Agreement”), is entered as of the 11th day of August 2004, by and between Evan M. Gruber, an individual
(“Gruber”), and Modtech Holdings, Inc., a corporation (the “Company”). 
  
 WHEREAS, Gruber has been employed as Chief Executive Officer of the Company, pursuant to an Employment Agreement, entered into as of November 7, 2003 (the “Employment Agreement”); 
  
 WHEREAS, Gruber and the Company have mutually agreed to terminate
their employment relationship upon the terms set forth herein; and 
  
 WHEREAS, Gruber and the Company have mutually agreed that Gruber will provide consulting services to the Company for a specified period after the termination of his employment relationship with the Company. 
  
 NOW, THEREFORE, in consideration of the covenants undertaken and the
releases contained in this Separation and Consulting Agreement, Gruber and the Company agree as follows: 
  
 I. Resignation as Chief Executive Officer. Gruber hereby resigns as Chief Executive Officer of the Company effective August 12, 2004 (the
“Separation Date”), and the Company hereby accepts such resignation. 
  
 II. Resignation as an Employee. Gruber hereby resigns as an employee of the Company effective as of the Separation Date, and the Company hereby accepts such resignation. 
  
 III. Resignation as a Director. The Board of Directors of the
Company may require Gruber to resign from the Board (and Gruber shall resign) and Gruber may resign from the Board at any time after September 13, 2004. On the date hereof, the Company counsel shall confirm in writing to Gruber that he is, and will
be following the Separation Date, covered under the Company’s current D&O policy. 
  
 IV. Termination of Employment Agreement. The Employment Agreement shall terminate and shall have no further force or effect upon the execution of this Agreement. All payments due to Gruber from the
Company after the effective date hereof shall be determined under this Separation and Consulting Agreement, and no payments shall be made under the Employment Agreement. Notwithstanding the foregoing, Sections 9 and 10 of the Employment Agreement
shall continue in force and effect as they relate to Gruber’s past and future services to the Company as a Director and as an employee and Chief Executive Officer of the Company and as a consultant. 
  
 V. Transition; Final Paycheck and Bonus. From and after the
Separation Date, Gruber shall assist in the transition of his duties and business contacts as a consultant pursuant to the terms set forth below. On or before the Separation Date, the Company shall pay to Gruber all earned, but unpaid compensation
through the Separation Date, including salary through the Separation Date, accrued bonus in the amount of $17,619.00, and five days of accrued but unused vacation. 
  
 VI. Severance Payment. On or before the Separation Date, the Company shall pay to Gruber severance pay in the
lump sum amount of $736,250.00, less tax withholdings and authorized deductions, in lieu of any severance payments or other termination payments provided under the Employment Agreement. 
  
 VII. Benefit Continuation. 
  
 A. Medical and Dental Coverage. Gruber hereby elects continuation of his and his eligible dependents medical and
dental insurance coverage under COBRA. The Company will pay for the premium for such continuation coverage until the earlier to occur of the following: (i) expiration of eighteen (18) months from the Separation Date or (ii) until Gruber or his
eligible dependents cease to qualify for such extension of coverage under COBRA. 

 B. Life Insurance and Long Term Disability. To the extent permitted by the Company’s group
insurance policies, the Company will cause to be continued Gruber’s life insurance coverage and long term disability insurance coverage substantially equivalent to the coverage maintained by the Company for Gruber prior to his separation at no
premium cost to Gruber. Such coverage will terminate upon the expiration of eighteen (18) months following the Separation Date. If such continuation is not permitted by the Company’s group insurance policies, the Company for a period of
eighteen (18) months following the Separation Date will reimburse Gruber for the premium cost incurred to obtain comparable life insurance and long term disability insurance under private policies, up to the amount the Company would have paid to
provide such coverage to Gruber had he remained an employee of the Company. 
  
 C. Other Benefits. Nothing in this Agreement is intended to deprive Gruber of any vested rights, payments, benefits or service credit for benefits which he earned during employment with respect to any welfare,
pension, deferred compensation, or other benefit plan.  
  
 VIII. Stock Options. On the Separation Date, Gruber shall receive 18 months of vesting credit with respect to all stock options granted prior to the date hereof as if he had provided services to the Company during such 18
month period. In addition, Gruber shall have twenty-one (21) months from the Separation Date to exercise all or any portion of his vested stock options in accordance with the terms and conditions of such options and the Company’s Stock Option
Plan. 
  
 IX. Non-Disparagement. Gruber and the
Company agree they shall not, directly or indirectly, make or ratify any statement, public or private, oral or written, to any person that disparages, either professionally or personally, the other. 
  
 X. Mutual Releases. 
  
 A. Gruber, on behalf of himself and his heirs, executors,
administrators, successors and assigns, hereby knowingly, voluntarily and irrevocably releases and discharges the Company and its subsidiaries, and any and all of their respective affiliates, current and former officers, employees, agents,
directors, legal representatives, attorneys, and any successor or assign or predecessor of any of the foregoing, from any and all claims, charges, actions or causes of action he may have against any such released person, whether known or unknown,
from the beginning of time through the date hereof based upon any matter, cause or thing whatsoever related to or arising out of (1) Gruber’s employment with the Company, or any subsidiary or predecessor entity prior to the Separation Date, (2)
Gruber’s service as a director of the Company, or any subsidiary or predecessor entity prior to the Separation Date, or (3) the termination of Gruber’s positions with the Company, or any subsidiary or predecessor entity as of or prior to
the Separation Date as contemplated by this Agreement; provided, however, that this release shall not limit in any way or constitute a waiver of any rights or claims Gruber may have (i) under this Agreement, (ii) under any applicable insurance
policy, (iii) that arise after the Separation Date, (iv) under any stock option, deferred compensation or other similar compensation plan, program, agreement or arrangement, or (v) under any pension, retirement or welfare benefit plan, program,
agreement or arrangement. 
  
 B. Except as set forth
herein, the Company, on behalf of itself and each subsidiary, and any successor or assign of any of the foregoing, hereby knowingly, voluntarily and irrevocably releases and discharges Gruber, his family, estate, legal representatives, agents,
attorneys, heirs, executors, successors and assigns, from any and all claims, charges, actions or causes of action any of them may have against any such released person, whether known or unknown, from the beginning of time through the date hereof
based upon any matter, cause or thing whatsoever related to or arising out of (1) Gruber’s employment with the 

 Company, or any subsidiary or predecessor entity prior to the Separation Date, (2) his service as a director of the
Company, or any subsidiary or predecessor entity prior to the Separation Date, or (3) the termination of Gruber’s positions with the Company, or any subsidiary or predecessor entity prior to or as of the Separation Date as contemplated by this
Agreement; provided, however, that this release shall not limit or waive any rights or claims of the Company or any subsidiary (i) under this Agreement, or (ii) as a result of any acts or omissions by Gruber that constitute fraud or willful
misconduct.  
  
 XI. Confidentiality.
Gruber and the Company agree that the terms and conditions of this Separation and Consulting Agreement shall remain confidential and shall not (except as required by law), disclose them to any other person other than (i) attorneys or any other
professional providing advice to Gruber or the Company, or (ii) Gruber’s spouse. Gruber will not respond to or in any way participate in or contribute to any public discussion, notice or other publicity concerning, or in any way relating to,
execution of this Separation and Consulting Agreement or the events (including any negotiations) which led to its execution. The parties hereby agree that disclosure of any of the terms and conditions of the Separation and Consulting Agreement in
violation of the foregoing shall constitute and be treated as a material breach of this Separation and Consulting Agreement. 
  
 XII. Consulting Engagement. The Company hereby engages Gruber and Gruber hereby accepts such engagement, upon the terms and conditions
hereinafter set forth, for a twelve (12) month period commencing on the Separation Date (the “Consulting Period”), unless earlier terminated by mutual agreement of the parties. 
  
 XIII. Consulting Services. 
  
 A. Gruber shall perform reasonable consulting services during the course of his engagement under this Separation and
Consulting Agreement which shall include providing advice to and consultation with the Company and its affiliates as the Board may request from time to time (and agreed to by Gruber) on matters with which Gruber was familiar and/or about which
Gruber acquired knowledge, expertise and/or experience during the time that Gruber was employed by the Company. Gruber shall not undertake any consulting project for the Company except as requested by the Board. 
  
 XIV. Consulting Compensation. The Company shall pay to Gruber a
consulting fee of $2,000.00 per day of consulting services to the Company (the “Consulting Fee”). Gruber shall submit invoices monthly in arrears for the consulting services provided the prior month, and such invoices shall be promptly
paid by the Company. Gruber agrees that he will be solely responsible for any taxes due as a result of the payment of such Consulting Fee, and Gruber will defend and indemnify the Company from and against any and all losses or liabilities, including
defense costs, arising out of Gruber’s failure to pay any taxes due with respect to such Consulting Fee. If the Company determines that applicable law requires that taxes should be withheld from the Consulting Fee, the Company reserves the
right to withhold, as legally required, and to notify Gruber accordingly. All services provided by Gruber under Section XVIII. E. shall be considered consulting services hereunder, and subject to the terms and conditions of providing such services
set forth herein, and the Company shall be required to pay Gruber the Consulting Fee in connection therewith. 
  
 XV. Expenses. Gruber shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him in performance of the
services under this Separation and Consulting Agreement upon the presentation of documentary evidence of such expenses. 
  
 XVI. Relationship. Gruber shall operate at all times as an independent contractor of the Company. This Separation and Consulting Agreement
does not authorize Gruber to act for the 

 Company as its agent or to make commitments on behalf of the Company. Gruber and the Company intend that an independent
contractor relationship be created by this Separation and Consulting Agreement, and nothing herein shall be construed as creating an employer/employee relationship, partnership, joint venture, or other business group or concerted action. Gruber at
no time shall hold himself out as an agent of the Company for any purpose, including reporting to any governmental authority or agency, and shall have no authority to bind the Company to any obligation whatsoever. 
  
 XVII. Soliciting Employees. Gruber promises and agrees that he
will not, for a period of one year following the Separation Date, directly or indirectly solicit any of the Company employees who earned annually $25,000 or more as a Company employee during the last six months of his or her own employment to work
for any business, individual, partnership, firm, or corporation. 
  
 XVIII. Miscellaneous 
  
 A.
Successors. 
  
 1. This Separation and
Consulting Agreement is personal to Gruber and shall not, without the prior written consent of the Company, be assignable by Gruber. 
  
 2. This Separation and Consulting Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns
and any such successor or assignee shall be deemed substituted for the Company under the terms of this Separation and Consulting Agreement for all purposes. As used herein, “successor” and “assignee” shall include any person,
firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires the stock of the Company or to which the Company assigns this Separation and Consulting Agreement by operation of
law or otherwise. This Agreement shall not be terminated by the Company merging with or otherwise being acquired by another entity, whether or not the Company is the surviving entity, or by the Company transferring all or substantially all of its
assets (any such event, an “Acquisition”). In the event of an Acquisition, the surviving entity or transferee, as the case may be, shall be bound by and shall have the benefits of this Agreement, and the Company shall not enter into any
Acquisition unless the surviving entity or transferee, as the case may be, agrees to be bound by the provisions of the Agreement. 
  
 B. Waiver. No waiver of any breach of any term or provision of this Separation and Consulting Agreement shall be construed to be, nor shall
be, a waiver of any other breach of this Separation and Consulting Agreement. No waiver shall be binding unless in writing and signed by the party waiving the breach. 
  
 C. Modification. This Separation and Consulting Agreement may not be amended or modified other than by a
written agreement executed by Gruber and the Chairman of the Board of the Company. 
  
 D. Complete Agreement. This Separation and Consulting Agreement constitutes and contains the entire agreement and final understanding concerning Gruber’s relationship with the Company and the other
subject matters addressed herein between the parties, and supersedes and replaces all prior negotiations and all agreements proposed or otherwise, whether written or oral, concerning the subject matters hereof. Any representation, promise or
agreement not specifically included in this Separation and Consulting Agreement shall not be binding upon or enforceable against either party. This is an integrated agreement. 

 E. Litigation and Investigation Assistance. As a part of the consulting services described
in Section XII, Gruber may be required to provide reasonable cooperation in the Company’s defense against any threatened or pending litigation or in any investigation or proceeding by any governmental agency or body that relates to any events
or actions which occurred during the term of Gruber’s employment. 
  
 F. Severability. If any provision of this Separation and Consulting Agreement or the application thereof is held invalid, the invalidity shall not affect other provisions or applications of the Separation and Consulting
Agreement which can be given effect without the invalid provisions or applications and to this end the provisions of this Separation and Consulting Agreement are declared to be severable. 
  
 G. Choice of Law. This Separation and Consulting Agreement shall be deemed to have been executed and delivered
within the State of California, and the rights and obligations of the parties hereunder shall be construed and enforced in accordance with, and governed by, the laws of the State of California without regard to principles of conflict of laws.

  
 H. Cooperation in Drafting. Each party has
cooperated in the drafting and preparation of this Separation and Consulting Agreement. Hence, in any construction to be made of this Separation and Consulting Agreement, the same shall not be construed against any party on the basis that the party
was the drafter. 
  
 I. Counterparts. This
Separation and Consulting Agreement may be executed in counterparts, and each counterpart, when executed, shall have the efficacy of a signed original. Photographic copies of such signed counterparts may be used in lieu of the originals for any
purpose. 
  
 J. Arbitration. Any controversy arising
out of or relating to this Separation and Consulting Agreement, its enforcement or interpretation, or because of an alleged breach, default, or misrepresentation in connection with any of its provisions, shall be submitted to final and binding
arbitration, to be held in Orange County, California in accordance with California Civil Procedure Code §§ 1282-1284.2, provided, however, that provisional injunctive relief may, but need not, be sought in a court of law while arbitration
proceedings are pending, and any provisional injunctive relief granted by such court shall remain effective until the matter is finally determined by the Arbitrator. In the event either party institutes arbitration under this Separation and
Consulting Agreement, the party prevailing in any such proceeding shall be entitled, in addition to all other relief, to reasonable attorneys’ fees relating to such arbitration. The non-prevailing party shall be responsible for all costs of the
arbitration, including but not limited to, the arbitration fees, court reporter fees, etc. 
  
 K. Supplementary Documents. All parties agree to cooperate fully and to execute any and all supplementary documents and to take all additional actions that may be necessary or appropriate to give full
force to the basic terms and intent of this Separation and Consulting Agreement and which are not inconsistent with its terms. 
  
 L. Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement. 
  
 M. Attorneys
Fees. The Company shall pay up to $5,000 of the attorney’s fees of Gruber in connection with the preparation, negotiation and execution of this Agreement. 
  
 N. Class Leasing. The Company acknowledges that Gruber owns an interest in and operates, and shall continue to
own and operate, Class Leasing, and that such ownership and operation by 

 Gruber shall not constitute a breach of any obligation under this Agreement, provided, however, that nothing in this
subsection shall operate as or be construed to be a waiver of any rights or obligations under Section 10 of the Employment Agreement. 
  
 I have read the foregoing Separation and Consulting Agreement and I accept and agree to the provisions it contains and hereby execute it voluntarily with
full understanding of its consequences. 
  
 EXECUTED this 11th day
of August 2004, at Riverside County, California. 
  

	
	“Gruber”
	
	 /s/ Evan M. Gruber

	Evan M. Gruber

  
 EXECUTED this
11th day of August 2004, at Riverside County, California. 
  

			
	“Company”
	
	Modtech Holdings, Inc.
	
	 /s/ Charles C. McGettigan

	By:	 	Charles C. McGettigan
	 	 	Its: Chairman

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