Document:

Exhibit
      10.1

     

    EMPLOYMENT
      AGREEMENT

     

    THIS
      EMPLOYMENT AGREEMENT (this “Agreement”) is entered into and made effective as of
      June 19, 2007 by and between MODTECH HOLDINGS, INC., a Delaware corporation
      (the
“Company”), and Kenneth S. Cragun (“Executive”).

     

    R
      E C I T A L S

     

    WHEREAS,
      Executive is currently serving as the Company’s Senior Vice President of Finance
      and Chief Financial Officer (CFO).

     

    WHEREAS,
      the Company desires to retain the services of Executive on the terms and
      conditions provided herein, and Executive is willing to provide such services
      on
      such terms and conditions.

     

    A
      G R E E M E N T

     

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

     

    1.  Term.
      This
      Agreement shall continue in full force and effect for a period which shall
      commence on June 19, 2007 and shall continue until December 31, 2007 (the
“Term”), unless sooner terminated as hereinafter provided or extended by the
      mutual agreement of the parties. On December 31, 2007, and on each one-year
      anniversary of that date, this Agreement shall automatically be renewed for
      a
      period of one year, unless either party shall have given the other written
      notice of their intent not to renew this Agreement at least thirty (30)
      calendar days prior to the expiration of the Term or any extension.

     

    2.  Services
      and Exclusivity of Services.
      So long
      as this Agreement shall continue in effect, Executive shall devote Executive’s
      full business time, energy and ability exclusively to the business, affairs
      and
      interests of the Company and its direct and indirect subsidiaries
      (“Subsidiaries), and matters related thereto, shall use Executive’s best efforts
      and abilities to promote the Company’s interests, and shall perform the services
      contemplated by this Agreement in accordance with policies established by and
      under the direction of the Board of Directors of the Company (the “Board”).
      Executive shall at all times perform Executive’s duties and obligations
      faithfully and diligently and to the best of Executive’s ability.

     

    Executive
      may make and manage personal business investments of Executive’s choice and
      serve in any capacity with any civic, educational or charitable organization
      without seeking or obtaining approval by the Board or the CEO, provided that
      such activities and services do not substantially interfere or conflict with
      the
      performance of duties hereunder or create any conflict of interest with such
      duties. An investment that exceeds five percent (5%) of the equity securities
      or
      capitalization of a competitor, supplier or customer of the Company shall be
      deemed to constitute such a conflict.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Executive
      represents to the Company that Executive has no other outstanding commitments
      inconsistent with any of the terms of this Agreement or the services to be
      rendered hereunder.

     

    3.  Duties
      and Responsibilities.
      Executive shall serve as CFO of the Company for the duration of this Agreement.
      In performance of Executive’s duties, Executive shall report directly to the
      President and Chief Executive Officer (CEO) and shall be subject to such limits
      on Executive’s authority as the President and Chief Executive Officer (CEO) may
      from time to time impose. Executive agrees to observe and comply with the rules
      and regulations of the Company as adopted by the Board respecting the
      performance of Executive’s duties and agrees to carry out and perform directions
      and policies of the Company and its Board as they may be stated, either orally
      or in writing, from time to time. Executive shall have responsibilities, duties
      and authority consistent with Executive’s position as assigned by the Board,
      including day to day responsibility for the management of all of the Company’s
      financial affairs and operations, including oversight of the financial affairs
      and management of any Subsidiaries. 

     

    4.  Compensation,
      Benefits and Vacation.
      As
      compensation for the services provided by Executive hereunder, Executive shall
      be entitled to receive such compensation, benefits and vacation as set forth
      in
Exhibit
      A
      to this
      Agreement, subject to the terms and conditions of this Agreement, and subject
      to
      all appropriate shareholder approvals.

     

    5.  Expenses.
      During
      the Term hereof, Executive shall be entitled to receive prompt reimbursement
      of
      all reasonable expenses incurred by Executive (in accordance with the policies
      and procedures from time to time adopted by the Board for the Company’s senior
      officers) in performing the services contemplated hereunder, provided that
      Executive properly accounts therefor in accordance with the Company’s
      policies.

     

    6.  Termination.

     

    (a)  Death.
      Executive’s employment hereunder shall terminate immediately upon the death of
      Executive. In the event that Executive’s employment is terminated by reason of
      Executive’s death, the Company shall pay Executive’s estate or beneficiaries, as
      applicable, the following amounts, after deducting any amounts lawfully owing
      from Executive to the Company: (i) any Base Salary (as defined in Exhibit
      A
      to this
      Agreement or bonuses earned but unpaid through the date of termination); (ii)
      any vacation days accrued but unused prior to Executive’s termination; (iii) any
      expense reimbursements owed to Executive prior to Executive’s termination; and
      (iv) any unpaid vested amounts or benefits under the Company’s pension, deferred
      compensation or other benefit plans, subject to the terms and conditions of
      such
      plans (the items described in clauses (i) through (iv) of this sentence shall
      be
      referred to herein collectively as the “Standard Termination Benefits”). After
      such payments described in the preceding sentence, the Company shall have no
      further obligation to Executive or Executive’s estate or beneficiaries, as
      applicable, except to the extent that Executive’s estate or beneficiaries, as
      applicable, may be entitled to exercise any vested stock options or other equity
      compensation granted to Executive as contemplated in Exhibit
      A
      to this
      Agreement or otherwise (subject to the terms and conditions of applicable option
      plans and/or option agreements).

     

    
      
         

      

      
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    (b)  Disability.
      In the
      event that Executive shall be unable to perform the services contemplated
      hereunder by reason of disability, illness or other incapacity for a period
      of
      at least 90 consecutive days or an aggregate of 120 days, whether or not
      consecutive, during any 12 month period (“Disability”), the Company may
      terminate Executive’s employment hereunder prior to the expiration of the Term.
      In the event that Executive’s employment is terminated by reason of Executive’s
      Disability the Company shall pay to Executive in a lump sum payment in an amount
      equal to six (6) months of Executive’s Base Salary, less required withholding
      and deductions (the “Severance Payment”). The Severance Payment shall be made in
      full within thirty (30) days following the Date of Termination. After such
      payments described in the preceding sentence, the Company shall have no further
      obligation to Executive, except to the extent that Executive may be entitled
      to
      exercise any vested stock options or other equity compensation granted to
      Executive as contemplated in Exhibit
      A
      to this
      Agreement or otherwise (subject to the terms and conditions of applicable option
      plans and/or option agreements).

     

    (c)  By
      the Company, Without Cause.
      Executive’s employment hereunder may be terminated by the Company at any time
      prior to the expiration of the Term, for Cause (as defined below) or without
      Cause. 

     

    (d)  By
      the Company, For Cause.
      Executive’s employment hereunder may be terminated by the Company prior to the
      expiration of the Term for “Cause.” For the purposes of this Agreement, “Cause”
means (i) other than as a result of incapacity due to Executive’s
      Disability or Executive’s death, Executive’s failure or refusal to perform
      Executive’s duties or responsibilities or to follow the lawful directions of the
      CEO or the Board or Executive’s material breach of any of Executive’s duties and
      responsibilities under this Agreement or under the Company’s policies with
      respect to its employees or senior officers, in each case, after the Company
      provides Executive with written notice of such failure, refusal or breach and
      Executive fails to cure such failure, refusal or breach within 10 calendar
      days
      from the date of delivery of such notice to Executive; (ii) Executive’s
      conviction by, or entry of a plea of guilty or nolo contendere in, a court
      of
      competent jurisdiction for a felony, or any crime which, in the Company’s sole
      discretion, adversely affects the Company or its reputation in the community,
      or
      any crime which involves moral turpitude or is punishable by imprisonment;
      (iii) Executive’s commission of an act of fraud or embezzlement with
      respect to the Company or any personal dishonesty by Executive with respect
      the
      Company or Executive’s obligations to the Company; (iv) Executive’s
      violation of Executive’s duty of loyalty to the Company or Executive’s breach of
      Executive’s fiduciary duty to the Company; (v) Executive’s intentional or
      knowing failure to comply with, or violation of, or causing the Company to
      fail
      to comply with or violate, any laws or regulations applicable to the Company,
      including, without limitation, federal or state securities laws and regulations
      issued by the Internal Revenue Service; (vi) Executive becoming barred or
      prohibited by the Securities and Exchange Commission or another governmental
      entity or a securities exchange or quotation system upon which the Company’s
      securities are traded from holding Executive’s position with the Company; or
      (vii) Executive’s use of illegal drugs or other illegal substances.

     

    In
      the
      event that Executive is terminated by the Company for Cause, the Company shall
      pay Executive the Standard Termination Benefits (as defined above), after
      deducting any amounts lawfully owing from Executive to the Company. After such
      payments described in the preceding sentence, the Company shall have no further
      obligation to Executive, except to the extent that Executive may be entitled
      to
      exercise any vested stock options or other equity compensation granted to
      Executive as contemplated in Exhibit
      A
      to this
      Agreement or otherwise (subject to the terms and conditions of applicable option
      plans and/or option agreements).

     

    
      
         

      

      
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    (e)  By
      Executive.
      Executive shall be entitled to terminate Executive’s employment with the Company
      hereunder upon thirty (30) days prior written notice. In the event that
      Executive terminates Executive’s employment, the Company shall pay Executive the
      Standard Termination Benefits (as described above), after deducting any amounts
      lawfully owing from Executive to the Company. After such payments described
      in
      the preceding sentence, the Company shall have no further obligation to
      Executive, except to the extent that Executive may be entitled to exercise
      any
      vested stock options or other equity compensation granted to Executive as
      contemplated in Exhibit
      A
      to this
      Agreement or otherwise (subject to the terms and conditions of applicable option
      plans and/or option agreements).

     

    (f)  Form
      of Notice.
      Any
      termination of Executive’s employment by the Company or by Executive shall be
      communicated by written Notice of Termination to the other party hereto. For
      purposes of this Agreement, a “Notice of Termination” shall mean a notice which
      shall indicate the specific termination provision in this Agreement relied
      upon,
      shall set forth in reasonable detail the facts and circumstances claimed to
      provide a basis for termination of Executive’s employment under the provision so
      indicated, and shall set forth the date upon which such termination is effective
      (“Date of Termination”).

     

    7.  Compensation
      with respect to Terminations by Company without Cause or by Executive for
      Certain Reasons following Change of Control.
      In the
      event that (i) the Company terminates Executive’s employment without Cause
      (other than by reason of Executive’s death or Disability), or (ii) the Company
      declines to renew the Agreement at the expiration of the Term or any one year
      renewal thereof (other than for Cause or by reason of Executive’s death or
      Disability), or (iii) within one year following a Change of Control (as defined
      below), Executive terminates Executive’s employment due to a significant
      reduction in Executive’s duties, responsibilities and position relative to the
      duties, responsibilities and position of Executive immediately prior to such
      reduction (which such reduction continues without cure for a period of 30 days
      following Executive providing written notice to the Board of such significant
      reduction), Executive shall be entitled to the following severance benefits
      (after deducting any amounts lawfully owing from Executive to the Company)
      upon
      execution by Executive of a general release (which must be acceptable to the
      Company) of any and all claims relating to or arising from Executive’s
      employment or termination of employment:

     

    (a)  Severance
      Payment.
      The
      Company shall pay to Executive in a lump sum payment in an amount equal to
      twelve (12) months of Executive’s Base Salary, less required withholding and
      deductions (the “Severance Payment”). The Severance Payment shall be made in
      full within thirty (30) days following the Date of Termination. Executive
      is not required to mitigate the amount of the Severance Payment by seeking
      other
      employment or otherwise, nor shall any compensation earned by Executive in
      other
      employment or otherwise reduce the amount of the Severance Payment.

     

    
      
         

      

      
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    (b)  Pro-Rated
      Earned Bonus.
      The
      Company shall pay Executive a pro-rated earned bonus for the period of time
      during which Executive was employed by the Company during the applicable bonus
      period (based on the number of days Executive worked during such period divided
      by 365). Such pro-rated earned bonus shall be paid at such time as Executive
      would have otherwise received Executive’s bonus. 

     

    (c)  Equity
      Compensation.
      All
      stock options, grants or other forms of equity compensation held by Executive
      shall cease vesting as of the effective date of Executive’s termination.
      Executive shall have the right to exercise vested stock options in accordance
      with the terms and conditions of the applicable option plan. If Executive’s
      termination occurs following a Change of Control (#8 below) equity compensation
      previously granted to Executive shall vest immediately upon
      termination.

     

    (d)  Medical
      Benefits.
      Provided that Executive timely elects continuation of Executive’s and
      Executive’s eligible dependents medical and dental insurance coverage under
      COBRA, and they remain eligible for the continuation of such coverage under
      COBRA, the Company will cause to be continued medical and dental coverage
      substantially equivalent to the coverage maintained by the Company or its
      Subsidiaries for Executive and Executive’s eligible dependents prior to
      Executive’s termination. The Company shall provide such coverage to Executive at
      no premium cost to Executive, and it shall provide such coverage to Executive’s
      eligible dependents under the same terms and conditions, including the
      requirement of premium contributions, as applicable to the Company’s senior
      officers in active employment status. Such coverage shall cease upon the
      earliest of the following events: (i) expiration twelve (12) months from
      the Date of Termination, or (ii) when Executive or Executive’s eligible
      dependents cease to qualify for such extension of coverage under
      COBRA.

     

    (e)  Other
      Payments.
      Executive shall be entitled to receive (i) any vacation days accrued but unused
      prior to Executive’s termination; (ii) any expense reimbursements owed to
      Executive prior to Executive’s termination; and (iii) any unpaid vested amounts
      or benefits under the Company’s pension, deferred compensation or other benefit
      plans, subject to the terms and conditions of such plans. After such payments
      described in this Section 7, the Company shall have no further obligation to
      Executive, except to the extent that Executive may be entitled to exercise
      any
      vested stock options granted to Executive as contemplated in Exhibit
      A
      to this
      Agreement or otherwise (subject to the terms and conditions of applicable option
      plans and/or option agreements).

     

    8.  Change
      of Control.
      For
      purposes of this Agreement, a “Change of Control” shall be deemed to have taken
      place if: (i) any person or entity or group of affiliated persons or
      entities, including a group which is deemed a “person” by Section
      13(d)(3) of the Securities Exchange Action of 1934, as amended (the
“Exchange Act”), after the date hereof first acquires in one or more
      transactions, at least one of which is after the date of this Agreement,
      Ownership (as defined below) of fifty percent (50%) or more of the outstanding
      shares of stock entitled to vote in the election of directors of the Company,
      and (ii) as a result of, or in connection with, any such acquisition or any
      related proxy contest, cash tender or exchange offer, merger or other business
      combination, sale of all or substantially all of the assets of the Company
      or
      any combination of the foregoing transactions, hereinafter referred to as a
      “Transaction,” the persons who were directors of the Company immediately before
      the Transaction shall cease to constitute three-fourths of the membership of
      the
      Board or any successor to the Company during the period commencing with the
      consummation of the Transaction and ending on the first to occur of the first
      anniversary of such date or the conclusion of the next meeting of shareholders
      to elect directors. For purposes of this Agreement, “Ownership” means beneficial
      or record ownership, directly or indirectly, other than (i) by a person
      owning such shares merely of record (such as a member of a securities exchange,
      a nominee, or a securities depository system); (ii) by a person as a bona
      fide pledge of shares prior to a default and determination to exercise powers
      as
      an owner of the shares, (iii) by a person who is not required to file
      statements on Schedule 13D by virtue of Rule 13d-1(b) of the Securities and
      Exchange Commission under the Exchange Act, or (iv) by a person who owns or
      holds shares as an underwriter acquired in connection with an underwritten
      offering pending and for purposes of their public resale or planned private
      placement in increments of less than such amount.

     

    
      
         

      

      
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    9.  Indemnification.
      The
      Company shall indemnify Executive to the fullest extent permitted by law, for
      all amounts, (including, without limitation, judgments, fines, settlement
      payments that the Company has expressly approved in writing, litigation expenses
      and attorneys’ fees), incurred or paid by Executive in connection with any
      action, suit, investigation or proceeding, or threatened action, suit,
      investigation or proceeding, arising out of or relating to the performance
      by
      Executive of services for, or the acting by Executive as a director, officer
      or
      employee of, the Company or any Subsidiary. Any fees or other necessary expenses
      incurred by Executive in defending any such action, suit, investigation or
      proceeding shall be paid by the Company in advance, subject to the Company’s
      right to seek repayment from Executive if a determination is made that Executive
      was not entitled to indemnity. During the Term of this Agreement and for twenty
      four (24) months following Executive’s Date of Termination, the Company or its
      successor shall maintain general liability and directors and officers liability
      insurance covering Executive for claims and other amounts set forth in this
      Section 9. Nothing in this Section 9 or elsewhere in this Agreement is intended
      to prevent the Company from indemnifying Executive to any greater extent than
      is
      required by this Section 9.

     

    10.  Proprietary
      Information.

     

    (a)  Confidential
      Information.
      As used
      in this Agreement “Confidential Information” means (i) information (A) that
      is not known by actual or potential competitors of Company or is not generally
      known to the public, (B) that has been created, discovered, developed, or
      otherwise become known to the Company, or in which property rights have been
      assigned or otherwise conveyed to the Company, and (C) that has economic
      value to the Company’s present or future business and (ii) trade secrets (as
      defined under California Civil Code Section 3426.1) and all other discoveries,
      developments, designs, improvements, inventions, formulas, methods, software
      programs, processes, techniques, marketing materials, know-how, data, research,
      technical data, customer lists (past and present), customer preferences,
      financial information, contacts, lead sources, marketing materials, and
      personnel information, and any modifications or enhancements of any of the
      foregoing, and all program, marketing, sales, personnel, or other financial
      or
      business information, disclosed to Executive by the Company, either directly
      or
      indirectly, in writing or orally or by drawings or observation, which has actual
      or potential economic value to the Company, its Subsidiaries, divisions and
      affiliates.

     

    
      
         

      

      
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    (b)  Duty
      of Trust and Confidentiality.
      Executive’s employment with the Company creates a duty of trust and
      confidentiality to the Company with respect to the Confidential Information,
      or
      any other information: (a) related, applicable, or useful to the business
      of the Company, including its anticipated research and development; or
      (b) resulting from tasks assigned to Executive by the Company; or
      (c) resulting from the use of equipment, supplies, or facilities owned,
      leased, or contracted for by the Company; or (d) related, applicable, or
      useful to the business of any of the Company’s customers, which may be made
      known to Executive by the Company or by such customers, or learned by Executive
      during the course of Executive’s employment. Without limiting the generality of
      the foregoing, Executive agrees that while employed by the Company he will
      not
      divert or attempt to divert any business of the Company to any other competitive
      business by direct or indirect inducement or otherwise.

     

    (c)  Nondisclosure
      of Proprietary Information.
      At all
      times, both during employment and after termination of employment, whether
      termination is voluntary or involuntary: (a) Executive will keep in
      strictest confidence and trust all Confidential Information; and
      (b) Executive will not disclose, use, or induce or assist in the use or
      disclosure of any Confidential Information without the Company’s prior express
      written consent, except as may be necessary in the ordinary course of performing
      Executive’s duties for the Company. Executive will take reasonable measures to
      prevent unauthorized persons or entities from having access to, obtaining,
      or
      being furnished with any Confidential Information.

     

    (d)  Confidential
      and Proprietary Information of Third Parties.
      The
      Company has received and in the future will receive from third parties their
      confidential or proprietary information, subject to a duty to maintain the
      confidentiality of such information and to use it only for certain limited
      purposes. Executive agrees to hold all such confidential or proprietary
      information in strictest confidence, and will not disclose, use, or induce
      or
      assist in the use or disclosure of any such confidential or proprietary
      information without the Company’s prior express written consent, except as may
      be necessary in the ordinary course of performing Executive’s job duties for the
      Company, consistent with its agreement with such third party.

     

    (e)  Return
      of Documents Upon Termination.
      All
      records, files, lists, drawings, documents, equipment and similar items relating
      to the Company’s business which Executive will prepare for or receive from the
      Company, during the course of Executive’s employment hereunder, shall remain the
      Company’s sole and exclusive property and Executive shall not acquire any
      interest therein. Upon termination of employment, and in any event at the
      request of the Company at any time, Executive shall promptly return to the
      Company all property of the Company in Executive’s possession and all documents,
      records, diskettes, hard drives, notebooks, work papers, and all similar
      material containing any Confidential Information, whether prepared by Executive,
      the Company or anyone else.

     

    (f)  Non-solicitation
      of Employees Following Termination.
      During
      the term of this Agreement and for a period of twenty-four (24) months after
      the
      termination of employment for any reason, whether for or without Cause,
      Executive shall not directly or indirectly, either alone or in concert with
      others, solicit or in any way entice any employee of or consultant to the
      Company to leave the Company or work for anyone in competition with the
      Company.

     

    
      
         

      

      
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    (g)  Non-solicitation
      of Customers Following Termination.
      During
      the term of this Agreement and for a period of twenty-four (24) months after
      the
      termination of employment for any reason, whether for or without Cause,
      Executive shall not directly or indirectly, either alone or in concert with
      others, (a) contact any of the customers of the Company for the purpose of
      soliciting, inducing or encouraging such customers to divert or direct their
      business away from the Company, or (b) in any way attempt to disrupt the
      relationship between the Company and any of its customers, vendors or
      suppliers.

     

    (h)  Reasonableness
      of Restrictions; Equitable Remedies.
      Executive agrees that the periods of restriction and the geographical areas
      of
      restriction imposed by the provisions of this Agreement are fair and reasonable
      and are reasonably required for the protection of the Company. Executive agrees
      that irreparable injury will result to the Company from Executive’s violation of
      any of the provisions set forth in Sections 10(a) through 10(g) of
      this Agreement. Executive expressly agrees that the Company will be entitled,
      in
      addition to damages and any other remedies provided by law, to an injunction
      or
      other equitable remedy respecting any such violation or continued
      violation.

     

    11.  Parachute
      Payments.
      Notwithstanding anything to the contrary in this Agreement, if any payment
      or
      benefit Executive would receive from the Company pursuant to this Agreement
      or
      otherwise (“Payment”) would (i) constitute a “parachute payment” within the
      meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the
      “Code”), and (ii) but for this sentence, be subject to the excise tax imposed by
      Section 4999 of the Code (the “Excise Tax”), then such Payment shall be equal to
      the Reduced Amount. The “Reduced Amount” shall be either (1) the largest portion
      of the Payment that would result in no portion of the Payment being subject
      to
      the Excise Tax or (2) the Payment or a portion thereof after payment of the
      applicable Excise Tax, whichever amount after taking into account all applicable
      federal, state and local employment taxes, income taxes and the Excise Tax
      (all
      computed at the highest applicable marginal rate), results in Executive’s
      receipt, on an after-tax basis, of the greatest amount of the Payment. If a
      reduction in payments or benefits constituting “parachute payments” is necessary
      so that the Payment equals the Reduced Amount, reduction shall occur in the
      order of payments Executive elects in writing, provided,
      however,
      that
      such election shall be subject to Company approval if made on or after the
      date
      on which the event that triggers the Payment occurs. The Company’s principal
      outside accounting firm will make all determinations hereunder and shall provide
      its calculations, together with detailed supporting documentation, to the
      Company and Executive within fifteen (15) calendar days after the date on which
      Executive’s right to a Payment is triggered (if requested at that time by the
      Company or Executive) or such other time as requested by the Company or
      Executive. If the accounting firm determines that no Excise Tax is payable
      with
      respect to a Payment, either before or after the application of the Reduced
      Amount, it shall furnish the Company and Executive with an opinion reasonably
      acceptable to Executive that no Excise Tax will be imposed with respect to
      such
      Payment. The Company shall be entitled to rely upon the accounting firm’s
      determinations, which shall be final and binding on all persons.

     

    12.  Taxes
      and Deductions.
      Executive agrees and acknowledges that any and all payments and compensation
      (in
      any form) that Company makes or pays to Executive pursuant to this Agreement
      shall be subject to withholding taxes, employment taxes and such other
      deductions as the Company determines to be required by applicable law.

     

    
      
         

      

      
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    13.  General
      Provisions.

     

    (a)  Any
      notice, request, demand or other communication required or permitted hereunder
      shall be deemed to be properly given when personally served in writing, when
      deposited in the United States mail, postage prepaid, addressed to the Company
      or Executive at their respective last known address, or when hand delivered
      to
      the intended recipient. Either party may change its address by written notice
      given in accordance with this subparagraph.

     

    (b)  This
      Agreement shall inure to the benefit of and shall be binding upon the parties
      hereto and their respective executors, administrators, successors and assigns;
      provided,
      however,
      that
      Executive may not assign any or all of Executive’s rights or duties hereunder
      without the prior written consent of the Company.

     

    (c)  This
      Agreement is made and entered into, is to be performed primarily within, and
      shall be governed by and construed in all respects in accordance with the laws
      of the State of California.

     

    (d)  Captions
      and Section headings used herein are for convenience only and are not a part
      of
      this Agreement and shall not be used in interpreting or construing
      it.

     

    (e)  Should
      any provision of this Agreement for any reason be declared invalid, void, or
      unenforceable by a court of competent jurisdiction, the validity and binding
      effect of any remaining portions shall not be affected, and the remaining
      portions of this Agreement shall remain in full force and effect as if this
      Agreement had been executed with said provision eliminated.

     

    (f)  This
      Agreement contains the entire agreement of the parties, and supersedes any
      and
      all other agreements, either oral or in writing, between the parties hereto
      with
      respect to the employment of Executive by the Company. Each party to this
      Agreement acknowledges that no representations, inducements, promises or
      agreements, oral or otherwise, have been made by any party, or anyone acting
      on
      behalf of any parry, which are not embodied herein, and that no other agreement,
      statement or promise not contained herein shall be relied upon or be valid
      or
      binding. This Agreement may not be modified or amended by oral agreements,
      but
      only by an agreement in writing signed by the Company, on the one hand, and
      by
      Executive, on the other hand.

     

    (g)  If
      any
      legally actionable controversy, claim or dispute arises, which cannot be
      resolved by mutual discussion between Executive and the Company, each agrees
      to
      resolve that dispute through binding arbitration before an arbitrator
      experienced in employment law. The arbitration shall be conducted by a single
      arbitrator, in Riverside County, California, administered by the American
      Arbitration Association under its employment arbitration rules. The Company
      and
      Executive further agree that this agreement includes any disputes that the
      Company may have against Executive, or that Executive may have against the
      Company and/or its related entities and/or employees, arising out of or relating
      to Executive’s employment or termination of employment or this Agreement or the
      breach, termination, enforcement, interpretation or validity thereof, including
      determination of the scope or applicability of this agreement to arbitrate.
      This
      agreement to arbitrate includes all common law and statutory claims that may
      arise from the Agreement or termination of the Agreement, including but not
      limited to, claims for breach of contract, breach of an implied covenant of
      good
      faith and fair dealing, wrongful termination, failure to pay wages or other
      compensation, and harassment, discrimination or retaliation in alleges violation
      of state and/or federal discrimination statutes. The Company and Executive
      further agree that this is the exclusive and binding remedy for all such
      disputes and will be used instead of any court action, which is hereby expressly
      waived, except for any request by either party for temporary or preliminary
      injunctive relief pending arbitration in accordance with applicable law or
      an
      administrative claim with an administrative agency. Judgment on the award
      rendered by the arbitrator may be entered in any court having competent
      jurisdiction. 

     

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

    (h)  This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed an original for all purposes. This Agreement may be executed by a party’s
      signature transmitted by facsimile (“fax”), and copies of this Agreement
      executed and delivered by means of faxed signatures shall have the same force
      and effect as copies hereof executed and delivered with original signatures.
      All
      parties hereto agree that a faxed signature page may be introduced into evidence
      in any proceeding arising out of or related to this Agreement as if it were
      an
      original signature page.

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
      and delivered as of the date first above written. 

     

    
      	 	 	 
	 	 
	 	By:  	 
	 	
              

              Dennis
                L. Shorgren

              President,
                Chief Executive Officer

              and
                Driector,

              Modtech
                Holdings, Inc.

            

    

     

    
       

      
        	 	 	 
	 	 
	 	By:  	 
	 	
                

                
                  Kenneth
                    S. Cragun

                  SVP
                    Finance and Chief Financial Officer, 

                  Modtech
                    Holdings, Inc.

                

              

      

       

      
        
           

        

        
          -10-

          
            

          

        

        
           

        

      

    

    EXHIBIT
      A

     

    COMPENSATION,
      BENEFITS AND VACATION

     

    Base
      Salary:
      During
      the Term, the Company shall pay Executive a base salary at the annual rate
      of
      not less than $210,000. Base salary shall be payable in accordance with the
      usual payroll practices of the Company. Executive’s base salary shall be subject
      to annual review by the Board or the Company’s Compensation Committee
      (“Compensation Committee”) during the Term and may be increased, but not
      decreased, from time to time by the Board or the Compensation Committee. The
      base salary as determined as aforesaid from time to time shall constitute “Base
      Salary” for purposes of this Agreement.

    

    Incentive
      Compensation:
      

    

    	(a)  	
            Bonus:
              In
              addition to the Base Salary above, Executive shall be eligible to
              participate in any annual bonus plans, including incentive, performance
              and discretionary, the Company may implement at any time during the
              Term
              for senior executives at a level commensurate with his position.
              

          

    

    	(b)  	
            Equity
              Compensation: Subject
              to any required stockholder approval and in accordance with the Company’s
              2002 Stock Option Plan, as amended, Executive shall be entitled to
              a grant
              of 32,457 shares of restricted stock which will vest on June 19, 2009,
              a
              grant of 32,457 shares of restricted stock which will vest on June
              19,
              2010 and a grant of 32,457 shares of restricted stock which will vest
              on
              June 19, 2011. There shall be no partial vesting of the shares in any
              of
              the three grants prior to their vesting dates. Executive shall have
              no
              rights of ownership in any of the shares in any grant prior to the
              vesting
              date for such grant and Executive shall forfeit all rights to the shares
              in any grant if Executive’s employment with the Company terminates for any
              reason, except change of control as defined in the employment agreement,
              with or without cause, prior to the vesting date for such grant.
              

          

    

    Executive
      shall be eligible to participate at a level commensurate with his position
      in
      such other equity compensation programs including, without limitation, stock
      option grants or additional grants of restricted stock as the Board or
      Compensation Committee may determine.

    

    	(c)  	
            Automobile
              Allowance:
              During the term of this Agreement, Executive will receive an automobile
              allowance of $800.00 per month, plus
              fuel.

          

    

    	(d)  	
            Long
              Term Compensation:
              For each fiscal year or portion thereof during the Term, Executive
              shall
              be eligible to participate in any long-term incentive compensation
              plan
              generally made available to senior executives of the Company at a level
              commensurate with his position in accordance with and subject to the
              terms
              of such plan. 

          

    

    	(e)  	
            Other
              Compensation:
              The Company may, upon recommendation of the Compensation Committee,
              award
              to the Executive such other bonuses and compensation as it deems
              appropriate and reasonable. 

          

    

    Employee
      Benefits and Vacation: 

    

    (a)
      During the Term, Executive shall be entitled to participate in all benefit
      plans
      and arrangements and fringe benefits and perquisite programs generally provided
      to comparable senior executives of the Company. 

    

    (b)
      During the Term, Executive shall be entitled to vacation each year in accordance
      with the Company’s policies in effect from time to time, but in no event less
      than four (4) weeks paid vacation per calendar year. The Executive shall also
      be
      entitled to such periods of sick leave as is customarily provided by the Company
      for its senior executive employees.

    

    
      
         

      

      
        A-1E
        M P L O Y M E N T  A G R E E M E N T

      

      

      THIS
        AGREEMENT
        is made
        and entered into this 28th day of May, 2007 effective for the term provided
        herein, by and between Reliv'
        International, Inc.,
        a
        Delaware corporation (the "Company") and Robert
        L. Montgomery
        (hereinafter referred to as the "Executive").

      

      WHEREAS,
        the
        Executive is presently, and for some time has been, employed as Chief Executive
        Officer of the Company and has been instrumental in the management and success
        of the Company;

      

      WHEREAS,
        the
        Company desires to be assured of the continued association and services of
        Executive and Executive desires to continue in the employment of the Company
        on
        the terms provided herein.

      

      NOW,
        THEREFORE,
        in
        consideration of the premises and of the terms, covenants and conditions
        hereinafter contained, the parties hereto agree as follows:

      

      1. Employment,
        Duties and Authority.

      

      1.1 The
        Company hereby employs Executive and Executive hereby accepts employment
        by the
        Company on the terms, covenants and conditions herein contained.

      

      1.2 The
        Executive is hereby employed by the Company as Chief Executive Officer and
        President. The Executive shall have such duties, responsibilities and authority
        as the by-laws of the Company shall from time to time provide and as the
        Board
        of Directors of the Company shall from time to time prescribe in
        writing.

      

      1.3 During
        the term of Executive's employment hereunder, and subject to the other
        provisions hereof, Executive shall devote his full energies, interest, abilities
        and productive time to the performance of his duties and responsibilities
        hereunder and will perform such duties and responsibilities faithfully and
        with
        reasonable care for the welfare of the Company. During the term of his
        employment hereunder, Executive shall not perform any services for compensation
        for any person, firm, partnership, company or corporation other than the
        Company
        without the express written consent of the Board of Directors of the
        Company.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      

      2. Compensation
        and Benefits.

      

      2.1 Base
        Salary.

      2.1.1 The
        Company shall pay to Executive during the initial term of employment hereunder
        and each renewal term a basic salary at an annual rate to be determined by
        the
        Board of Directors of the Company but not less than the amount of $600,000.
        Such
        basic salary shall be paid by the Company to Executive each month, less amounts
        which the Company may be required to withhold from such payments by applicable
        federal, state or local laws or regulations.

      

      2.1.2 If
        the
        Executive shall be absent from work on account of personal injuries or sickness,
        he shall continue to receive the payments provided for in paragraph 2.1.1
        hereof; provided, however, that any such payment may, at the Company's option,
        be reduced by the amount which the Executive may receive, for the period
        covered
        by any such payments, in disability payments (i) pursuant to any disability
        insurance which the Company, in its sole discretion, may maintain, or (ii)
        under
        any governmental program for disability compensation.

      

      2.1.3 The
        Company agrees that the rate of the basic salary of the Executive hereunder
        shall be reviewed annually by the Board of Directors or such committee of
        the
        Board of Directors designated by it to review such matters and that the rate
        of
        the basic salary shall be determined and adjusted for each year during the
        term
        of Executive's employment hereunder by the Board of Directors or such committee
        commensurate with (i) the performance of Executive, (ii) the net income of
        the
        Company during the preceding fiscal year and as projected for the fiscal
        year
        for which the basic salary determination is made, (iii) comparable rates
        of
        compensation for executives and (iv) such other factors as the Board of
        Directors or such committee may deem relevant to the determination.

      

      2.2 Additional
        Compensation.

      

      2.2.1 Executive
        shall be a participant in the Company's Incentive Compensation Plan adopted
        by
        the Board of Directors of the Company in 2007, as amended from time to time,
        and
        any other incentive compensation or executive bonus plan which the Company
        may
        adopt or which shall be in effect at any time during the term hereof.

      

      2.2.2 The
        Company has adopted a Stock Option Plan and Executive shall participate in
        stock
        options issued to executives of the Company pursuant to such Plan, or such
        other
        stock options or bonus plans as the Company may adopt from time to time,
        in such
        amounts and on such terms as the Board of Directors of the Company shall
        from
        time to time determine. 

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      

      2.3 Benefits;
        Expense Reimbursement.

       

      2.3.1 The
        Executive shall be entitled to, and shall receive, all other benefits of
        employment available to other executives of the Company generally, including,
        without limitation, participation in any hospital, surgical, medical or other
        group health plans or accident benefits, life insurance benefits, pension
        or
        profit-sharing plans, bonus plans, 401(k) Plan, Employee Stock Ownership
        Plan or
        vacation plans as shall be instituted by the Company, in its sole
        discretion.

      

      2.3.2 During
        the term hereof, the Company shall reimburse Executive for all reasonable
        and
        necessary expenses incurred by Executive in the performance of his duties
        hereunder, including without limitation, travel, meals, lodging, office supplies
        or equipment subject to such reasonable limitations, restrictions and reporting
        standards as the Board of Directors of the Company may from time to time
        establish. Executive shall provide to the Company promptly after incurring
        any
        such expenses a detailed report thereof and such information relating thereto
        as
        the Company shall from time to time require. Such information shall be
        sufficient to support the deductibility of all such expenses by the Company
        for
        federal income tax purposes.

      

      2.3.3 The
        Company shall pay or reimburse Executive for legal and accounting fees relating
        to succession planning and annual financial planning fees as may be incurred
        by
        Executive and approved by the Audit Committee of the Company.

      

      2.3.4 The
        Company shall provide to Executive the use of an automobile.

      

      2.4 Reduced
        Services and Compensation.

      

      2.4.1 At
        the
        election of Executive at any time during the term hereof after Executive
        shall
        have attained the age of 65, Executive shall be entitled to elect to continue
        employment with the Company hereunder at a reduced level of service in
        accordance with the provisions of this paragraph.

      

      2.4.2 Executive
        shall make the election by written notice to the Company. The terms of this
        paragraph shall become applicable and effective on the first day of the month
        immediately following the month in which such notice is given and shall remain
        effective until termination of this Agreement or the election of Executive
        pursuant to paragraph 5 hereof.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      

      2.4.3 During
        the period that the election of Executive pursuant to this paragraph shall
        be
        effective:

      

      (a) Executive
        shall continue as an employee of the Company for the remaining term or renewal
        terms of this Agreement; 

      

      (b) Executive's
        obligation to perform services for the Company shall be at the rate of
        approximately 85 hours per month. The time of performance of services shall
        be
        within the discretion of Executive and in accordance with such arrangements
        as
        Executive and the Company shall determine and shall include reduced levels
        of
        travel and attendance at regional and international conferences.

      

      (c) Executive's
        title and duties shall be modified as Executive and the Company shall agree,
        provided that Executive shall remain Chief Executive Officer of the Company
        and
        shall retain duties and authority consistent with such position.

      

      (d) Executive's
        compensation shall be adjusted consistent with the reduction in his service.
        Executive's rate of base salary shall be adjusted to an amount equal to one-half
        of the annual rate of base salary in effect at the time of Executive's election
        pursuant to this paragraph, subject to modification in accordance with the
        provisions of paragraph 2.1.3 hereof and his participation level in the Company
        Incentive Compensation Plan shall be reduced by 25%. Executive shall continue
        to
        be entitled to all additional benefits as provided in paragraphs 2.2.1 and
        2.3.1
        hereof.

      

      (e) The
        provisions of this paragraph shall control and shall supersede any conflicting
        provisions of this Agreement. Except as modified by the provisions of this
        paragraph, all provisions of this Agreement shall remain in full force and
        effect.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      

      3. Term.

      

      The
        employment of Executive hereunder shall be for a term commencing on January
        1,
        2007 and expiring on December 31, 2009. Upon the expiration of the initial
        term
        or any renewal term of Executive's employment hereunder, the term of such
        employment automatically shall be renewed for an additional term of one year
        commencing on January 1 and expiring on the succeeding December 31 unless
        Executive or the Company shall give notice of the termination of Executive's
        employment and this Agreement by written notice to the other more than 120
        days
        prior to the date of expiration of the initial or any renewal term. In the
        event
        that such notice of termination shall be given timely, subject to any accrued
        rights of Executive to incentive or other compensation, including without
        limitation pursuant to the provisions of paragraph 5 hereof, this Agreement
        shall terminate on the date of expiration of such initial or renewal term.
        

      

      4. Termination.

      

      4.1 The
        Company shall be entitled to terminate this Agreement prior to the expiration
        of
        its term or any renewal term on the occurrence of either:

      

      4.1.1 an
        event
        of default with respect to Executive as provided herein, or

      

      4.1.2 the
        permanent mental or physical disability of Executive as provided herein
        occurring during the term or any renewal term of Executive's employment
        hereunder.

      

      4.2 For
        purposes of this Agreement, an event of default with respect to Executive
        shall
        include:

      

      4.2.1 Any
        failure by Executive to perform his duties, responsibilities or obligations
        hereunder in a faithful and diligent manner or with reasonable care and (if
        such
        failure can be cured) the failure by Executive to cure such failure within
        10
        days after written notice thereof shall have been given to Executive by the
        Company; or

      

      4.2.2 Commission
        by Executive of any material act of dishonesty as an employee of the Company
        or
        of disloyalty to the Company, or any wrongful or unauthorized appropriation,
        taking or misuse of funds, property or business opportunities of the
        Company.

      

      4.3 Permanent
        mental or physical disability of Executive shall be deemed to have occurred
        hereunder when Executive shall have failed or been unable to perform his
        duties
        hereunder on a full-time basis for an aggregate of 180 days in any one period
        of
        210 consecutive days and with a certification from a licensed physician in
        the
        State of Missouri that Executive is permanently disabled from performing
        his
        duties hereunder.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      

      4.4 Executive
        shall be entitled to terminate his employment with the Company under this
        Agreement prior to the expiration of its term upon the occurrence of an event
        of
        default with respect to the Company.

      

      4.5 For
        purposes of this Agreement an event of default with respect to the Company
        shall
        include:

      

      4.5.1 Any
        failure by the Company to perform its obligations to Executive under this
        Agreement and (if such failure can be cured) the failure by the Company to
        cure
        such failure within 10 days after written notice thereof shall have been
        given
        to the Company by Executive;

      

      4.5.2 The
        Company shall:

      

      (a) admit
        in
        writing its inability to pay its debts generally as they become
        due,

      

      (b) file
        a
        petition for relief under any chapter of Title 11 of the United States Code
        or a
        petition to take advantage of any insolvency under the laws of the United
        States
        of America or any state thereof,

      

      (c) make
        an
        assignment for the benefit of its creditors,

      

      (d) consent
        to the appointment of a receiver of itself or of the whole or any substantial
        part of its property,

      

      (e) suffer
        the entry of an order for relief under any chapter of Title 11 of the United
        Sates Code, or

      

      (f) file
        a
        petition or answer seeking reorganization under the Federal Bankruptcy Laws
        or
        any other applicable law or statute of the United States of America or any
        state
        thereof.

      

      4.6 In
        the
        event of termination of this Agreement and Executive's employment hereunder
        by
        the Company pursuant to paragraph 4.1 hereof, all rights and obligations
        of the
        Company and Executive hereunder shall terminate on the date of such termination,
        subject to the following:

      

      4.6.1 Executive
        shall be entitled to receive (subject to any rights of set off or counterclaim
        by the Company) all salary, additional compensation and benefits which shall
        have accrued prior to the date of such termination and the obligation of
        the
        Company for the payment of salary, additional compensation or benefits shall
        terminate as at the date of such termination;

      

      4.6.2 All
        rights of the Company or Executive which shall have accrued hereunder prior
        to
        the date of such termination, and all provisions of this Agreement provided
        herein to survive termination of employment of Executive hereunder, shall
        survive such termination and the Company and Executive shall continue to
        be
        bound by such provisions in accordance with the terms thereof;

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      

      4.7 In
        the
        event of termination of the Agreement by Executive in accordance with paragraph
        4.4 hereof, all rights and obligations of the Company and Executive hereunder
        shall terminate on the date of such termination, subject to the
        following:

      

      4.7.1 Executive
        shall be entitled to receive all salary, additional compensation and benefits
        which shall have accrued prior to the date of such termination and the Company's
        obligation for the payment of salary, additional compensation and benefits
        shall
        terminate as of the date of such termination;

      

      4.7.2 All
        rights of the Company or Executive which shall have accrued hereunder prior
        to
        the date of such termination and the obligations of Executive pursuant to
        paragraphs 6, 7 and 8 provided herein to survive termination of employment
        of
        Executive hereunder shall survive such termination and the Executive shall
        continue to be bound by such provisions in accordance with their
        terms.

      

      4.8 This
        Agreement and all rights and obligations of the parties hereunder shall
        terminate immediately upon the death of Executive except that the Company
        shall
        pay to the heirs, legatees or personal representative of Executive (i) all
        compensation or benefits hereunder accrued but not paid to the date of
        Executive's death, (ii) all amounts which may become due pursuant to any
        compensation program providing for payments to the beneficiaries of Executive
        upon his death and (iii) an amount equal to the total compensation which
        would
        have been payable to Executive hereunder, but for his death, for a period
        of six
        months from the date of his death.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      

      5. Consultation
        Period.
        

      

      5.1 The
        Executive may at any time during the term of this Agreement and after the
        Executive has attained the age of 65 deliver to the Company a notice in writing
        to the effect that the active employment of Executive with the Company is
        to
        terminate as of the first day of the calendar month next following the date
        on
        which the notice is delivered, or as of the first day of any specified calendar
        month thereafter. The active employment of Executive hereunder shall terminate
        on the date so specified and then from and after such termination date and
        for a
        period of 180 months (the "Consultation Period"), he shall serve as a consultant
        to the Company with respect to such business matters and at such time or
        times
        as the Company may reasonably request up to 40 hours per month. However,
        Executive shall not be required to undertake any assignment inconsistent
        with
        the dignity, importance, and scope of his prior position or with his physical
        and mental health at the time. Moreover, while it is the intent of this
        Agreement that the mutual convenience of the parties be served, it is understood
        that Executive shall act during the Consultation Period in the capacity of
        an
        independent contractor and shall not be subject to the direction, control,
        or
        supervision of the Company with respect to the time spent, research undertaken,
        or procedures followed in the performance of his consulting services hereunder.
        In particular, Executive will not be required without his consent to undertake
        any assignment which would require him to leave his city of residence at
        the
        time for purposes of such consultation. During the Consultation Period, the
        Company shall pay to Executive the Consulting Compensation (as defined in
        paragraph 5.2 below). Executive shall have no right to receive Additional
        Compensation as provided in paragraph 2.2 or Benefits as provided in paragraph
        2.3 during the Consultation Period; provided that Executive shall be entitled
        to
        receive reimbursement for expenses as provided in paragraph 2.3.2 and health
        insurance premiums.. Upon the termination of his active employment hereunder,
        and again upon expiration of the Consultation Period, Executive or his estate
        shall deliver to the Company all original files then in his or its possession
        pertaining to the business of the Company.

      

      5.2 Executive's
        Consulting Compensation shall consist of the Base Amount and the Supplemental
        Amount determined and paid on a monthly basis during the term of the
        Consultation Period. The "Base Amount" shall be the amount set forth on Schedule
        A hereto determined on the basis of the age of Executive on the date Executive
        shall elect to terminate his employment with the Company and commence the
        Consultation Period in accordance with paragraph 5.1 hereof. The "Supplemental
        Amount" shall be, initially, an annual rate of compensation equal to 30%
        of the
        average annual rate of compensation paid to Executive by the Company in the
        form
        of salary and bonuses (but excluding all other payments made to or for his
        benefit and any reimbursement of expenses) during the five complete fiscal
        years
        of the Company immediately preceding the earlier of (a) his election pursuant
        to
        paragraph 5.1 hereof to terminate his employment and commence the Consultation
        Period or (b) his election to continue employment at a reduced rate of service
        pursuant to paragraph 2.4 hereof. Effective on the July 1 first occurring
        more
        than six months from the date of the election of Executive pursuant to paragraph
        5.1 hereof and on each July 1 thereafter during each year during the
        Consultation Period and for the twelve months ending the following June 30,
        payments of the Supplemental Amount shall be increased or decreased, as the
        case
        may be, by the percentage change in the Consumer Price Index- U.S. City Average
        from that published for the month of June preceding the date of Executive's
        termination of employment as compared with that published for the month of
        June
        immediately preceding such July 1. No Consulting Compensation payable hereunder
        shall be deemed salary or other compensation to Executive for the purpose
        of
        computing benefits to which Executive may be entitled under any pension or
        profit-sharing plan or other arrangement of the Company for the benefit of
        its
        employees, nor shall anything contained herein affect any rights or obligations
        which Executive may now have under any such plan or arrangement. 

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      

      5.3 All
        payments of the consulting fees hereundere shall be paid in cash from the
        general funds of the Company and no special or separate fund shall be
        established and no other segregation of assets shall be made to assure the
        payment of such Deferred Compensation Benefit. Executive shall have no right,
        title, or interest whatever in or to any investments which the Company may
        make
        to aid it in meeting its obligation hereunder. Nothing contained in this
        Agreement, and no action taken pursuant to its provisions, shall create or
        be
        construed to create a trust of any kind, or a fiduciary relationship, between
        the Company and Executive or any other person. To the extent that any person
        acquires a right to receive payments from the Company, such right shall be
        no
        greater than the right of an unsecured creditor.

      

      5.4 The
        Company may terminate the Consultation Period and its obligation to make
        payments of the Deferred Compensation Benefit upon the occurrence of an event
        of
        default with respect to Executive as specified in Section 4.2.2 or upon breach
        by Executive of its continuing obligations under paragraphs 6, 7, 8 or 9
        of this
        Agreement.

      

      5.5
        During the term of the employment of Executive hereunder and Consultation
        Period, the Company shall be entitled to use the name and likeness of Executive,
        and to reproduce, copy and disseminate, video and audio recordings of Executive,
        without additional charge or payment to Executive, in connection with
        promotional materials and activities of the Company. From and after the date
        of
        the expiration of the Term of this Agreement or the Consultation Term, or
        of the
        earlier termination of this Agreement in accordance with Paragraph 5 hereof,
        the
        Company shall be entitled to use the name and likeness of Executive, and
        to
        reproduce, copy and disseminate, video and audio recordings of Executive;
        provided, however, that for each calender year during which the Company shall
        so
        utilize such items, the Company shall pay to Executive, or to his heirs,
        representatives, or assigns a fee in the amount of $10,000. The right of
        the
        Company provided herein shall survive the expiration of the term of this
        Agreement, or its termination, for any reason, for a period of 20
        years.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      

      

      6. Confidential
        Information.

      

      6.1 "Confidential
        Information" means information disclosed by the Company to Executive, or
        developed or obtained by Executive during his employment by the Company,
        either
        before the date or during the term of this Agreement, or during the Consultation
        Period, provided that such information is not generally known in the business
        and industry in which the Company is or may subsequently become engaged,
        relating to or concerning the business, projects, products, processes, formulas,
        know-how, techniques, designs or methods of the Company, whether relating
        to
        research, development, manufacture, purchasing, accounting, engineering,
        marketing, merchandising, selling or otherwise. Without limitation, Confidential
        Information shall include all know-how, technical information, inventions,
        ideas, concepts, processes and designs relating to products of the Company,
        whether now existing or hereafter developed, and all prices, customer or
        distributor names, customer or distributor lists, marketing and other
        relationships, whether contractual or not, between the Company, its suppliers,
        customers, distributors, employees, agents, consultants and independent
        contractors but shall exclude the names of customers or distributors known
        to
        Executive prior to the effective date hereof.

      

      6.2 Executive
        agrees that, during the term hereof or while Executive shall receive
        compensation hereunder and after termination of his employment with the Company
        for so long as the Confidential Information shall not be generally known
        or
        generally disclosed (except by Executive or by means of wrongful use or
        disclosure), Executive shall not use any Confidential Information, except
        on
        behalf of the Company, or disclose any Confidential Information to any person,
        firm, partnership, company, corporation or other entity, except as authorized
        by
        the President or the Board of Directors of the Company.

      

      7. Inventions.

      

      7.1 "Inventions"
        shall mean discoveries, concepts, ideas, designs, methods, formulas, know-how,
        techniques or any improvements thereon, whether patentable or not, made,
        conceived or developed, in whole or in part, by Executive.

      

      7.2 Executive
        covenants and agrees to communicate and fully disclose to the Board of Directors
        of the Company any and all Inventions made or conceived by him during the
        term
        hereof or while receiving any compensation or payment from the Company and
        further agrees that any and all such Inventions which he may conceive or
        make,
        during the term hereof or while receiving any compensation or payments from
        the
        Company, shall be at all times and for all purposes regarded as acquired
        and
        held by him in a fiduciary capacity and solely for the benefit of the Company
        and shall be the sole and exclusive property of the Company. The provisions
        of
        this subparagraph shall not apply to an invention for which no equipment,
        supplies, facilities or trade secret information of the Company was used
        and
        which was developed entirely on the Executive's own time, unless (a) the
        invention relates (i) to the business of the Company, or (ii) to the Company's
        actual or demonstrably anticipated research or development, or (b) the invention
        relates from any work performed by Executive for the Company. 

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      

      7.3 Executive
        also covenants and agrees that he will assist the Company in every proper
        way
        upon request to obtain for its benefit patents for any and all inventions
        referred to in paragraph 7.2 hereof in any and all countries. All such patents
        and patent applications are to be, and remain, the exclusive property of
        the
        Company for the full term thereof and to that end, the Executive covenants
        and
        agrees that he will, whenever so requested by the Company or its duly authorized
        agent, make, execute and deliver to the Company, its successors, assigns
        or
        nominees, without charge to the Company, any all applications, applications
        for
        divisions, renewals, reissues, specifications, oaths, assignments and all
        other
        instruments which the Company shall deem necessary or appropriate in order
        to
        apply for and obtain patents of the United States or foreign countries for
        any
        and all Inventions referred to in paragraph 7.2 hereof or in order to assign
        and
        convey to the Company, its successors, assigns or nominees, the sole and
        exclusive right, title and interest in and to such Inventions, applications
        or
        patents. Executive likewise covenants and agrees that his obligations to
        execute
        any such instruments or papers shall continue after the expiration or
        termination of this Agreement with respect to any and all such Inventions,
        and
        such obligations shall be binding upon his heirs, executors, assigns,
        administrators or other legal representatives.

      

      8. Writings
        and Working Papers.

      

      Executive
        covenants and agrees that any and all books, textbooks, letters, pamphlets,
        drafts, memoranda or other writings of any kind written by him for or on
        behalf
        of the Company or in the performance of Executive's duties hereunder,
        Confidential Information referred to in paragraph 6.1 hereof and all notes,
        records and drawings made or kept by him of work performed in connection
        with
        his employment by the Company shall be and are the sole and exclusive property
        of the Company and the Company shall be entitled to any and all copyrights
        thereon or other rights relating thereto. Executive agrees to execute any
        and
        all documents or papers of any nature which the Company or its successors,
        assigns or nominees deem necessary or appropriate to acquire, enhance, protect,
        perfect, assign, sell or transfer its rights under this paragraph. Executive
        also agrees that upon request he will place all such notes, records and drawings
        in the Company's possession and will not take with him without the written
        consent of the Board of Directors of the Company any notes, records, drawings,
        blueprints or other reproductions relating or pertaining to or connected
        with
        his employment of the business, books, textbooks, pamphlets, documents work
        or
        investigations of the Company. The obligations of this paragraph shall survive
        the term of employment hereunder or the termination or expiration of the
        term or
        any renewal term hereof or the term or termination of the Consultation
        Period.

      

      9. Covenant
        Not to Compete.

      

      9.1 For
        purposes of this paragraph:

      

      9.1.1 "Conflicting
        Organization" means any person, firm, company, partnership, business,
        corporation or other entity engaged in, or intending to engage in, research,
        development, production, marketing or selling a Conflicting
        Product.

        
        

      

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      9.1.2 "Conflicting
        Product" means any product, process, service or design which competes with,
        or
        is reasonably interchangeable as a substitute for, any product, process,
        service
        or design developed, planned, under development, produced marketed or sold
        by
        the Company or any Affiliate during the term of the covenant in this paragraph
        9. Without limitation, Conflicting Product includes any food product or
        nutritional supplement or product, or skin care product, which is marketed
        or
        sold, or intended to be marketed or sold, by direct or multilevel
        sales.

      

      9.1.3 "Territory"
        means the geographic area within which the Company or any Affiliate or any
        distributor or representative of the Company or any Affiliate is actively
        engaged in the sale of, or efforts to sell, the products of the Company or
        any
        Affiliate at any time during the term of this Agreement.

      

      9.1.4 "Affiliate"
        shall mean any corporation of which the Company, or any Affiliate, shall
        own in
        excess of 20% of the capital stock.

      

      9.2 Executive
        acknowledges and agrees as follows:

      

      9.2.1 That
        the
        Company and its Affiliates have developed, and are developing and establishing,
        a valuable and extensive trade in its services and products, including without
        limitation, nutritional, food and dietary products, and skin care products
        and
        that they have developed, and are developing, operations and distributors
        to
        sell such products and services throughout the United States and in foreign
        countries.

      

      9.2.2 That
        the
        Company and its Affiliates have developed, and are developing, at great expense,
        technical information concerning their products and methods of marketing
        and
        sale which are kept and protected as Confidential Information and trade secrets
        and are of great value to the Company and its Affiliates.

      

      9.2.3 That,
        during the course of his employment with the Company or an Affiliate and
        during
        the term of this Agreement, Executive has participated, and will participate,
        in
        such matters and has acquired and will acquire, possession of Confidential
        Information, and that Executive has had significant responsibility for the
        development activities of the Company and the development of unique products,
        methods and techniques of the Company and its Affiliates.

      

      9.2.4 That,
        for
        Executive to utilize Confidential Information of the Company and its Affiliates,
        or unique skills, techniques or information developed by him while an employee
        of the Company or its Affiliates or during the term of this Agreement for
        a
        Conflicting Organization within the area or time provided herein would result
        in
        material and irreparable injury to the Company.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      

      9.2.5 That
        the
        area and conduct covered by the restrictive covenant in this paragraph includes
        only a percentage of the total number of organizations and individuals who
        are
        customers or distributors or potential customer or distributors for products,
        processes or services with respect to which Executive has knowledge or
        expertise, that Executive would be able to utilize his knowledge, experience
        and
        expertise for an employer while fully complying with the terms of this paragraph
        and that the terms and conditions of this paragraph are reasonable and necessary
        for the protection of the Company's business and assets.

      

      9.3 Executive
        agrees that, during the term of this Agreement, during the term of the
        Consultation Period, for so long as Executive shall be receiving compensation
        hereunder, and for a period of 36 months from and after the date of termination
        of this Agreement (other than by Executive pursuant to paragraph 4.4 hereof),
        he
        will not, anywhere within the Territory, directly or indirectly, whether
        as an
        employee, agent, officer, consultant, partner, owner, shareholder or
        otherwise:

      

      9.3.1 solicit,
        or enter into any arrangement or agreement with, or participate with, provide
        services to, or be employed by any person, company, partnership, business
        or
        corporation which shall solicit, or enter into any arrangement with, any
        person
        who is, or at any time during the term of this Agreement has been, a distributor
        for the Company or any Affiliate, to become a distributor for a Conflicting
        Organization or for any organization engaged in the direct or multilevel
        sale of
        any product or service; 

      

      9.3.2 solicit
        for the sale of, or participate with, provide services to, or be employed
        by any
        person, company, partnership, business or corporation which shall solicit
        for
        the sale of, any Conflicting Product by a Conflicting Organization to any
        person
        who has been, during the term hereof, a customer of the Company or any
        Affiliate; and

      

      9.3.3 engage
        or
        participate in, be employed by, or provide services or assistance to, any
        Conflicting Organization.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      

      10. Specific
        Enforcement.

      

      Executive
        is obligated under this Agreement to render service of a special, unique,
        unusual, extraordinary and intellectual character, thereby giving this Agreement
        peculiar value so that the loss of such service or violation by Executive
        of
        this Agreement could not reasonably or adequately be compensated in damages
        in
        an action at law. Therefore, in addition to other remedies provided by law,
        the
        Company shall have the right during the term or any renewal term of this
        Agreement (or thereafter with respect o obligations continuing after the
        expiration or termination of this Agreement) to compel specific performance
        hereof by Executive or to obtain injunctive relief against violations hereof
        by
        Executive, and if the Company prevails in any proceeding therefor, it will
        also
        be entitled to recover all costs and expenses incurred by the Company in
        connection therewith, including attorneys' fees.

      

      11. Assignment.

       

      The
        rights and duties of a party hereunder shall not be assignable by that party,
        except that the Company may assign this Agreement and all rights and obligations
        hereunder to, and may require the assumption thereof by, any corporation
        or any
        other business entity which succeeds to all or substantially all the business
        of
        the Company through merger, consolidation or corporate reorganization or
        by
        acquisition of all or substantially all of the assets of the
        Company.

      

      12. Binding
        Effect.

      

      This
        Agreement shall be binding upon the parties hereto and their respective
        successors in interest, heirs and personal representatives and, to the extent
        permitted herein, the assigns of the Company.

      

      13. Severability.

      

      If
        any
        provision of this Agreement or any part hereof or application hereof to any
        person or circumstance shall be finally determined by a court of competent
        jurisdiction to be invalid or unenforceable to any extent, the remainder
        of this
        Agreement, or the remainder of such provision or the application of such
        provision to persons or circumstances other than those as to which it has
        been
        held invalid or unenforceable, shall not be affected thereby and each provision
        of this Agreement shall remain in full force and effect to the fullest extent
        permitted by law. The parties also agree that, if any portion of this Agreement,
        or any part hereof or application hereof, to any person or circumstance shall
        be
        finally determined by a court of competent jurisdiction to be invalid or
        unenforceable to any extent, any court may so modify the objectionable provision
        so as to make it valid, reasonable and enforceable.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      

      14. Notices.

      

      All
        notices, or other communications required or permitted to be given hereunder
        shall be in writing and shall be delivered personally or mailed, certified
        mail,
        return receipt requested, postage prepaid, to the parties as
        follows:

       

      
        	 If to the Company:	
                Board
                  of Directors

              
	 	
                Reliv'
                  International, Inc.

              
	 	
                P.
                  O. Box 405

              
	 	
                Chesterfield,
                  MO 63006-0405

              

      

       

      
        	 If to Executive:	 Robert L. Montgomery
	 	 17945 Wild Horse Creek
                Road
	 	 Chesterfield, MO
                63005

      

       

      Any
        notice mailed in accordance with the terms hereof shall be deemed received
        on
        the third day following the date of mailing. Either party may change the
        address
        to which notices to such party may be given hereunder by serving a proper
        notice
        of such change of address to the other party.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

      

      15. Entire
        Agreement.

      

      This
        Agreement constitutes the entire agreement between the parties hereto with
        respect to the subject matter hereof and supersedes all prior written or
        oral
        negotiations, representations, agreements, commitments, contracts or
        understandings with respect thereto and no modification, alteration or amendment
        to this Agreement may be made unless the same shall be in writing and signed
        by
        both of the parties hereto.

      

      16. Waivers.

      

      No
        failure by either party to exercise any of such party's rights hereunder
        or to
        insist upon strict compliance with respect to any obligation hereunder, and
        no
        custom or practice of the parties at variance with the terms hereof, shall
        constitute a waiver by either party to demand exact compliance with the terms
        hereof. Waiver by either party of any particular default by the other party
        shall not affect or impair such party's rights in respect to any subsequent
        default of the same or a different nature, nor shall any delay or omission
        of
        either party to exercise any rights arising from any default by the other
        party
        affect or impair such party's rights as to such default or any subsequent
        default.

      

      17. Governing
        Law; Jurisdiction.

      

      17.1 For
        purposes of construction, interpretation and enforcement, this Agreement
        shall
        be deemed to have been entered into under the laws of the State of Missouri
        and
        its validity, effect, performance, interpretation, construction and enforcement
        shall be governed by and subject to the laws of the State of
        Missouri.

      

      17.2 Any
        and
        all suits for any and every breach of this Agreement may be instituted and
        maintained in any court of competent jurisdiction in the State of Missouri
        and
        the parties hereto consent to the jurisdiction and venue in such court and
        the
        service of process by certified mail to the addresses for the parties provided
        for notices herein.

      

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

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

      

      
        	 	 	 
	 	RELIV
                INTERNATIONAL, INC.
	 
 	 
 	 
 
	 	By:  	/s/ Stephen
                M. Merrick 
	 	
                
Authorized
                Officer
	 	 
	 	 
	 Attest:	 
	 	 
	 /s/ Brett M. Hastings	 
	 Secretary	 

      

      
        	 	 	 
	 	
                EXECUTIVE:

              
	 
 	 
 	 
 
	 	
                /s/   
                  

              	 Robert
                L.
                Montgomery
	 	
                
Robert
                L. Montgomery

      

       

       

      
         

      

       

      

      

      

      
        
          
          

        

        
          17

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