10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from N/A to N/A

Commission File Number 000-25161

MODTECH HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	33 - 0825386
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2830 Barrett Avenue, Perris, CA	92571
(Address of principal executive offices)	(Zip Code)

(951) 943-4014

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $0.01 par value per share	The NASDAQ Stock Market LLC (NASDAQ Global Market)

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the Registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes ¨  No x

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨  No x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨     Accelerated filer ¨    Non-accelerated filer x    Smaller reporting company ¨

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨   No x

The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of June 30, 2007 was approximately $45,000,000.

As of April 11, 2008, 21,419,415 shares of registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement for the 2008 Annual Meeting of Stockholders to be filed are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein.

Modtech Holdings, Inc.

Form 10-K

Table of contents

		Page #
	PART I
Item 1.	Business	3
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	16
Item 2.	Properties	16
Item 3.	Legal Proceedings	16
Item 4.	Submission of Matters to a Vote of Security Holders	17
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	18
Item 6.	Selected Financial Data	20
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	30
Item 8.	Financial Statements and Supplementary Data	31
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	31
Item 9A.	Controls and Procedures	31
Item 9B.	Other Information	32
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	33
Item 11.	Executive Compensation	33
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	33
Item 13.	Certain Relationships and Related Transactions, and Director Independence	33
Item 14.	Principal Accountant Fees and Services	33
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	34
Signatures		39
Index to Consolidated Financial Statements		F-1

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PART I

FORWARD LOOKING STATEMENTS

This annual report contains statements which, to the extent that they are not recitations of historical fact, constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. The words “believe,” “estimate,” “anticipate,” “project,” “intend,” “expect,” “plan,” “outlook,” “forecast,” “may,” “will,” “should,” “continue,” “predict” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are intended to be subject to the safe harbor protection within the meaning of that term in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. Statements in this annual report, including the Notes to the Consolidated Financial Statements and in the “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” describe factors, among others, that could contribute to or cause such differences. The accuracy of such forward looking statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including but not limited to: the ability to adequately pass through to customers unanticipated future increases in raw material costs; an unanticipated change in the types of classrooms required by school districts; and declines in available funding for modular classroom construction and other risks and uncertainties that are described elsewhere in this report and in our other filings with the Securities and Exchange Commission, including our reports on Form 10-Q. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, there is no assurance that our expectations will be attained. We will not update these forward-looking statements, even though our situation may change in the future. We qualify all of our forward-looking statements by these cautionary statements.

ITEM 1. BUSINESS

Overview

Modtech Holdings, Inc. (“Modtech”, “we”, “our”, or the “Company”) was founded in 1982 with its initial business consisting of purchasing unfinished and outdated classroom shells and performing installation work. We subsequently changed our business to the design, manufacturing, marketing and installation of classroom and other custom modular projects. In February 1999, we merged with SPI Holdings Inc., a Colorado corporation, which designed and manufactured commercial and light industrial modular buildings in Arizona, Texas and California. In March 1999, we acquired Coastal Modular Buildings, Inc. and in March 2001 we acquired Innovative Modular Structures. Both companies were based in central Florida. All of the acquired companies have been fully integrated into Modtech Holdings, Inc. We are a Delaware corporation and maintain our corporate offices in Perris, California, USA.

We are a leading provider of modular classrooms in California and Florida and are a significant provider of commercial and light industrial modular buildings in California, Florida, Arizona, Nevada and other neighboring states. We are also expanding our modular building products to include single family and multi-unit residences, military training buildings, and concrete block restroom facilities.

Public Funding

Virtually all of our classroom sales are dependent on public funding. Funding initiatives passed by the voters of California have contributed to our growth and success.

In 2002, the California legislature approved spending approximately $25 billion on new classroom and school construction. The funding was to come from bond issues to be approved by the voters. Between 2002 and 2004, California voters approved the bond issues. In November 2006 the State of California enacted a bond measure of $10.4 billion for educational facilities and local agencies in California approved $6.9 billion in bonds for education.

The State of California is currently experiencing a significant budget deficit, which is expected to negatively impact funding for education.

Florida voters approved a constitutional amendment in 2002 to address overcrowded public schools. This amendment established statewide ceilings to be in place by 2010; 18 students per classroom in kindergarten through third grade, 22 per classroom in fourth through eighth grade and 25 per classroom in high school. A number of counties have passed sales-tax initiatives to fund these new classrooms.

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Further details on certain historical public funding and legislative actions pertaining to the modular industry can be found in prior Form 10-K filings which are available at www.modtech.com.

Industry Overview

In recent years, school enrollments in California have increased at a modest rate, due to the growth in population in California, both from births and from immigration. Additionally, changes in population demographics have left many existing permanent school facilities in older residential areas with excess capacity due to declining enrollments, while many new residential areas are faced with a continuing shortage of available classrooms. Although demand for new classrooms has slowed, it has become necessary to add additional classrooms at many existing facilities, and to build a number of new schools.

Both the construction of new schools and the addition of classrooms at existing schools are tied to the sources and levels of funding available to California school districts. The availability of funding for new school and classroom additions, in turn, is determined in large measure by the amount of tax revenue raised by the State, the level of annual allocations for education from the State’s budget which is determined by educational policies that are subject to political factors, and the willingness of the California electorate to approve state and local bond issues to raise money for school facilities.

When compared to the construction of a conventionally built classroom, modular classrooms offer a number of advantages, including, among others:

Lower Cost	—	The cost of our standard modular classroom may be as much as 50% lower than conventional site built construction of a comparable classroom;
Shorter Construction Time	—	A modular classroom can be built and ready for occupancy in a shorter period of time than is needed for state approval and construction of a site built conventional school facility;
Flexibility of Use	—	Modular relocatable classrooms enable a school district to use the units for short or long-term needs and to move them if necessary to meet shifts in student populations; and
Ease of Financing	—	As personal rather than real property, modular classrooms may be leased on a long or short-term basis from manufacturers and leasing companies. This allows school districts to finance modular classrooms out of both their operating and capital budgets.

Our commercial and light industrial building revenues in the nonresidential modular market have resulted from the wide-spread acceptance of modular structures as an alternative to traditional site construction and the increasing number of applications for modular buildings across a broad spectrum of industries. Because modular buildings are constructed in a factory using an assembly line process, construction is typically not subject to the delays caused by weather and site conditions. Our buildings can, therefore, generally be built faster than conventional buildings, at a lower cost and with more consistent quality. Our buildings can generally be relocated more easily to meet the changing needs of end users and be quickly joined to other modular buildings to meet increased space requirements. Permanent modular construction has many of the same time saving characteristics as do the relocatable buildings, but can experience the same site delays as conventional construction.

California Modular Relocatable Classrooms

Our California modular relocatable classrooms are designed, engineered and constructed in accordance with structural and seismic specifications and safety regulations adopted by the California Division of the State Architect (DSA), standards which are more rigorous than the requirements for other portable buildings. The Division of the State Architect, which regulates all school construction on public land, has prescribed extensive regulations regarding the design and construction of school facilities, setting minimum qualifications for the preparation of plans and specifications, and reviews all plans for the construction or material modifications to any school building. Construction authorization is not given unless the school district’s architect certifies that a proposed project satisfies construction cost and allowable area standards. We interface with each school district’s architect or engineer to process project specifications through the Division of the State Architect. We believe that the regulated environment in which our California classrooms are manufactured serves as a significant barrier to market entry by prospective competitors. See “Business — Competition.”

Conventional site built school facilities constructed by school districts using funds from the California State Office of Public School Construction typically require two to three years for approval and funding. By contrast, factory-built school buildings like our standard classrooms may be pre-approved by the DSA for use in school construction. Once plans and specifications for a given classroom have been pre-approved, school districts can thereafter include in their application to obtain State funds for new facilities a notification that they intend to use pre-approved, standardized factory-built classrooms. This procedure reduces the time required in the DSA approval process to as little as 90 days, thereby providing an additional incentive to use factory-built relocatable classrooms. In all cases, continuous inspection by a licensed third party is required during actual manufacture of the classrooms, with the school district obligated to hire and pay for such inspection costs.

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Our California classrooms are manufactured and installed in accordance with applicable state building codes and DSA interpretive regulations, which supersede all local building codes for purposes of school construction. The classrooms must comply with accessibility requirements for the handicapped, structural, and seismic and fire code requirements. We manufacture and install standard, largely pre-fabricated modular relocatable classrooms, as well as customized classrooms, which are modular in design, but assembled on-site using components manufactured internally together with components purchased from third party suppliers. Our school facilities vary in size from two modular units containing a total of 960 square feet to complete campuses of 50,000 square feet and larger. Typical prices for our standard classrooms range from $40.00 per square foot to $70.00 per square foot, depending upon the extent of customization required and our scope of work.

The two basic structural designs for standard and custom modular classrooms are a rigid frame structure and a shear wall structure. The rigid frame structure uses a steel floor and roof system, supported at each corner with square steel tubing. These buildings have curtain walls to enclose the interior from the outside, and have the advantage of unlimited width and length. Rigid frame structures may be used for multipurpose rooms and physical education buildings as well as standard classrooms. Shear wall classrooms have a maximum width of 48 feet (four 12-foot modules) and a maximum length of 60 feet. These classrooms use the exterior and interior walls to produce the required structural strength and can be built at lower costs than rigid frame structures. Our most popular factory-built classroom is a rigid frame design, with two modules connected side by side to complete a 24 by 40-foot classroom.

Custom built classrooms, libraries and gymnasiums contain design variations and dimensions such as ceiling height, roof pitch, overall size and interior configuration. These units typically are not assembled at the factory, but instead are shipped in pieces, including floors, walls and roofs, and assembled on-site. Contracts for custom-built units may include the design, engineering and layout for an entire school or an addition to a school, and involve site preparation, grading, concrete and asphalt work and landscaping. Customized classrooms are generally more expensive and take longer to complete than standard classrooms.

Additionally, we have developed and manufactured two-story modular classroom buildings. A two-story complex may include cantilevered balconies, soffits, parapets and mansards. They typically include a modular elevator system as well as stairways. Our two-story structures offer a variety of material and design options such as stucco, brick veneer, fiber cement panels or traditional wood siding.

The interior and exterior of all of our modular classrooms can be customized by employing different materials, design features and floor plans. Most classrooms are open, but the interior of the buildings can be divided into individual rooms by permanent or relocatable partitions. The floor covering is usually carpet, but may be sheet vinyl or ceramic tile depending upon the intended use of the classroom. Interior wall material is usually vinyl covered firtex over gypsum board, while other finishes such as porcelain enamel or painted hardboard may be used in such places as restrooms and laboratories. Electrical wiring, air conditioning, windows, doors, fire sprinklers and plumbing are installed during the manufacturing process. The exterior of the units is typically plywood siding, painted to the customer’s specifications, but other common exterior finishes may also be applied.

Customers

In California, we market and sell our modular classrooms primarily to school districts. Sales of classrooms to individual California school districts accounted for approximately 49.9%, 39.2% and 45.5% of our net sales during the years ended December 31, 2007, 2006 and 2005, respectively. Sales to Coachella Valley Unified School District in California accounted for 10.2% of our net sales during the year ended December 31, 2007. Sales to St. Lucie County in Florida accounted for 12.5% of our net sales during the year ended December 31, 2006. See Item 1A. “Risk Factors.” The mix of school districts to which we sell our products varies somewhat from year to year. We also sell our classrooms to the State of California and leasing companies, both of which lease the classrooms principally to school districts.

We also design and build modular buildings to customer specifications for a wide array of uses beyond California classrooms, including residential, governmental, healthcare, educational, airport and correctional facilities; office and retail space; daycare centers; libraries; churches; construction trailers; golf clubhouses; police stations; convenience stores; fast food restaurants; classrooms and sales offices. The modular buildings serve as temporary, semi-permanent and permanent facilities and can function as free-standing buildings or additions to existing structures. These modular buildings range in size and complexity from a basic single-unit 100-square foot module to a 50,000-square foot building combining several structures and containing multiple stories. We sell these non-classroom products directly to the end customer in some instances, particularly for major projects. We also sell to and through dealers and distributors. In some instances these dealers provide third-party financing to the end customer for direct sales.

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Sales and Marketing

We utilize an internal sales force that focuses primarily on classroom and other major project opportunities. We rely on dealers and distributors for additional sales in all the markets we serve. Those markets are education; government (military, homeland security and other agencies); institutional (health care, day care, correctional); residential; retail (banks, kiosks, remote restrooms, fast food, motels, and others) and other commercial.

Most of our contracts are awarded on an open bid basis. The marketing process for many of our contracts begins prior to the time the bid process begins. After we select bids or contracts that we desire to pursue, our marketing and engineering personnel interface directly with various school boards, superintendents or architects during the process of formulating bid or contract specifications. We prepare our bids or proposals using various criteria, including current material prices, historical overhead costs and a targeted profit margin. Many of our contracts include services such as engineering and design, manufacturing, transportation and installation. Open bid contracts are normally awarded to the lowest responsible bidder.

Manufacturing and On-site Installation

Classroom Products

We use an assembly-line approach in the manufacture of our classrooms. The process begins with the fabrication of the steel floor joists. The floor joists are welded to a perimeter steel frame to form the floor sub-assembly, which is typically covered by plywood flooring. Concurrent with the floor assembly, the roof structure is welded in a similar fashion with joists and a perimeter frame. The completed roof is then welded to the completed floor utilizing four tube steel corner posts creating a moment connection. The unit progresses down the production line with value added at each work station with the installation of walls, insulation, suspended grid ceilings, electrical systems, heating and air conditioning, windows, doors, plumbing and chalkboards follow, with painting and finishing crews completing the process. Once construction of a classroom commences, the building can be completed in as little as three days. The construction of custom units on-site, from pre-manufactured components, is similar to factory-built units in its progressively-staged assembly process but may involve more extensive structural connections and finish work depending upon the size and type of building, and, typically takes 30 to 60 days to complete.

We are vertically integrated in the manufacture of our modular classrooms, in that we fabricate substantially all of our own metal components at our facilities, including structural floor and roof joists, exterior roof panels, gutters, foundation vents, ramps, stairs and railings. We believe that the ability to fabricate our own metal components helps to reduce the costs of our products and controls our quality and delivery schedules. We maintain a quality control system throughout the manufacturing process, under the supervision of both our own quality control personnel and independent third party inspectors engaged by our customers. In addition, we track the status of all classrooms from sale through installation and completion.

Completed classroom units, or components used in customized units, are loaded onto specially designed flatbed trailers for towing by trucks to the school site. Upon arrival at the site, the units are structurally connected, components are assembled, and the classroom is installed on its foundation. Connection with utilities is completed in the same manner as in conventional on-site construction. Installation of the modular classrooms may be on a separate foundation, or several units may be incorporated on a common foundation, so that upon installation they appear to be an integral part of an existing school facility or function as a larger building, such as a multi-purpose room or cafeteria.

Historically, we have overseen installation of our classrooms and other buildings on-site, using our own employees for project supervision as the general contractor. In the future, we will, in some instances, use the services of third parties to oversee installation work. In many projects, we supervise subcontracted electrical, plumbing, grading, paving, concrete work, and other site preparation work and services. We have general contractor licenses in the states where we engage in activities that require such licenses.

In addition to approvals by the California Division of the State Architect, licensed inspectors representing California school district customers are present at each of our California manufacturing facilities to continuously inspect the construction of classrooms for conformity to the approved plans. On-site inspections after installation are also made by independent third party inspectors for purposes of determining conformity with the approved plans and compliance with all applicable codes.

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Non-Classroom Products

We also use a continuous flow assembly line process for our non-classroom buildings. Multiple structures are assembled simultaneously at various stations along the assembly line. Depending upon the complexity of the design for a particular modular building, the average construction time from approval of the design to shipment ranges from 30 to 45 days. Once construction of a typical modular building commences, the building can be completed in as few as seven to ten days.

Warranty

Our standard contractual warranty for modular buildings is one year, although it may be varied by contract specifications. Purchased equipment installed by us, such as air conditioning units, carries the manufacturers’ standard warranty. Warranty costs have not been material in the past.

Backlog

We manufacture classrooms and other buildings to fill existing orders only, and not for inventory. As of February 29, 2008, the backlog of sales orders was approximately $73.5 million, up from approximately $60.4 million at February 28, 2007. We expect to convert substantially the entire backlog at February 29, 2008 into sales during fiscal year 2008. The rate of booking new contracts varies from month to month, and customer changes in delivery schedules occur. For these reasons, among others, our backlog as of any particular date may not be representative of actual sales for any succeeding period.

The backlog by region as of February 29, 2008 was as follows: California—$67.3 million; Arizona—$2.0 million; and Florida—$4.2 million. This compares to the following backlog by region as of February 28, 2007: California—$49.1 million; Arizona—$2.5 million; and Florida—$8.8 million. As of February 29, 2008, $48.3 million of the total backlog included signed contracts, with the remaining $25.2 million in letters of intent or other firm purchase commitments which are pending final contract approval. Included in the backlog is $3.4 million of sales to be made to the Lady Lake Partnership, which is developing a residential housing tract in Florida. Our President and Chief Executive Officer, Dennis Shogren, is a trustee and beneficiary of one of the partners of the partnership. The sales to Lady Lake Partnership have been approved by our Audit Committee.

Competition

The modular relocatable classroom industry is highly competitive, with the market divided among a number of privately-owned companies whose share of the market is smaller than ours. We believe that the nature of the bidding process, the level of performance bonding required, and the industry’s regulated environment serve as barriers to market entry, and that the expertise of our management and our employees gives us an advantage over competitors.

We believe that our expertise in site preparation and on-site installation gives us a competitive advantage over many manufacturers of higher-priced, customized modular units, while our vertically integrated, assembly-line approach to manufacturing enables us to be one of the low-cost producers of standardized, modular relocatable classrooms in California and Florida. Unlike many of our competitors, we manufacture most of our own metal components which allows us to maintain quality control over these components and to produce them at a lower average cost than that at which they could be obtained from outside sources. We also believe that the quality and appearance of our buildings, and our reputation for reliability in completion of our contracts, enable us to maintain a favorable position among our competition.

As the demand for modular classrooms and other non-residential buildings has shifted in recent years from standardized buildings to more complex, customized buildings, we have had to modify our production process and, as a result, have at times experienced competitive disadvantages.

We categorize our current competition based upon the geographic market served, as well as upon the relative degree of customization of products sold. The primary competitors in California in modular classrooms are believed to be American Modular Systems, Inc. and Global Modular, Inc., both of which are located in Northern California, and Modular Structures International, Inc. and Silver Creek Industries, Inc. located in Southern California.

The nonresidential modular building industry is highly competitive and fragmented. For our highly customized modular buildings, the main competitive factor is the ability to meet end user requirements in a timely manner, while price is the main competitive factor for less customized structures. Because the cost of transporting completed modular buildings is substantial, most manufacturers limit their distribution to dealers located within a 400-mile radius of their manufacturing facility. As a result, the nonresidential modular building industry outside of California is highly fragmented and is composed primarily of small, regionally based private companies maintaining a single manufacturing facility. These small, regionally based private companies may have a competitive advantage relative to certain overhead costs associated with a comparatively larger, publicly traded company.

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Our primary competitors for modular buildings other than non-California classroom manufacturers are believed to be Modular Structures International, Inc., Walden Structures Inc., Miller Building Systems, Inc., Southeast Modular Manufacturing, and Indicom Buildings Inc. Each year there are new entrants and departures in response to perceived market conditions. A recent example is a new start-up company, Silver Creek Industries, Inc. which began operations in 2005 and opened its Perris, California factory in January 2006.

Performance Bonds

A substantial portion of our sales require bid, performance and payment bonds to ensure that the contracts will be performed and completed in accordance with contract terms and conditions, and to assure that subcontractors and suppliers will be paid. In determining whether to issue a performance bond on our behalf, bonding companies consider a variety of factors concerning the specific project to be bonded, as well as our levels of working capital, stockholders’ equity and outstanding indebtedness. From time to time we have had difficulty in obtaining bonding for certain large projects. We believe this has been attributable to our levels of working capital, stockholders’ equity and indebtedness, and not concerns about our ability to perform the work required under the contract. Although we have been able to obtain the bonding we have needed during the last twelve months, we may again encounter difficulty in obtaining bonding for certain projects.

Raw Material and Components

The raw materials used in our business consist mainly of commodities such as steel, lumber and plywood, electrical components such as plugs, switches and lights, plumbing components such as pipe, fittings and fixtures, heating and air conditioning units and other general construction materials. We are not dependent upon a single source for our principal raw materials and such materials have historically been readily available. We believe we currently have ready access to adequate supplies of raw materials and components from numerous suppliers at competitive prices. The cost of raw materials represents a significant portion of our operating expenses. As a result of domestic and international events, the prices of raw materials we use in our operations fluctuate and have significantly increased in recent years. We are not always able to obtain the right in our contracts to pass through raw material price increases to our customers. Should we experience significant increases in the price of raw materials as we did in 2004, our profitability could be adversely affected.

Patents, Trademarks, Licenses and Other Intellectual Property

We use two registered trademarks; “Modtech” and “the right space, at the right time, for the right price”. We do not have any patents. We hold general contractors licenses in those states where our activities require such licenses. These licenses are readily available and renewable annually. We also hold certain intellectual property in the form of proprietary designs that have been approved for modular classroom design by the State of California. These approved designs and plans are required in order to sell classrooms into the State of California classroom market and create a short term barrier to entry into the California classroom market. We estimate that it takes approximately six months to obtain approval for a new set of plans. Our rights in our trademark and proprietary designs are for an indefinite term.

Environmental and Health and Safety Matters

Like other manufacturing concerns, we are subject to numerous laws and regulations that govern environmental and occupational health and safety matters. We believe that our operations are substantially in compliance with all such applicable laws and regulations. Such compliance has not caused us to incur, nor do we expect to incur, any material expenditures or liabilities for environmental matters. As a result, our environmental obligations have not had a material effect on our capital expenditures, earnings or competitive position in the past, and we do not believe they will have a material effect in the future.

The Phoenix facility, which we lease, is located within a 25-square-mile area listed by the Arizona Department of Environmental Quality on the state priority list for contaminated sites. According to a 1999 environmental site assessment report pertaining to the Phoenix facility, neither we nor the prior operators or owners of the property have been identified as potentially responsible parties at this site. Additionally, the environmental site assessment report identified no historical activity on the property we lease that was likely to have been a source of the contaminants at the site.

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Employees

The number of persons employed by us at year end 2007, 2006, and 2005 were 399, 710, and 1,071, respectively. None of our employees are represented by a labor union, and we have experienced no work stoppages. We believe that our employee relations are good.

Information Available on Our Website and Elsewhere

We make available free of charge on our website at www.modtech.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission (“SEC”). Our SEC filings, as well as those of other companies that file electronically with the SEC, are available at the SEC’s website at www.sec.gov. You may also read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C., 20549. In addition to SEC filings, we also make our press releases available on our website, as well as information regarding our Whistle Blower program.

ITEM 1A. RISK FACTORS

Our business is subject to a number of business risks and uncertainties that could impact the accuracy of any forward looking statements in this Report and cause actual results to differ materially from those projected or anticipated. These risk and uncertainties include, but are not limited to, the following:

We have incurred significant operating losses, negative gross margins as well as negative operating cash flow and may continue to do so. This could adversely affect our liquidity, our ability to obtain bonding necessary for our construction projects and our ability to service our debt.

We experienced significant operating losses and negative cash flow from operations in 2007, 2006 and 2005. We may continue to experience future operating losses and negative operating cash flow. For the year ended December 31, 2007, our revenues were down 44.0% compared to the year ended December 31, 2006. We experienced a net loss of $56.9 million for the year ended December 31, 2007 and net cash used in operating activities was $6.2 million for the year. Although we had positive gross profit during the year ended December 31, 2006, we experienced a net loss of $54.7 million for the year ended December 31, 2006 and net cash used in operating activities was $7.5 million for the year. We may experience future losses that could adversely affect our liquidity and ability to obtain bonding.

The promissory notes issued to Laurus Master Fund, Ltd. (“Laurus”), which had a principal balance of $14.4 million at December 31, 2007, are secured by liens on substantially all of our assets. Should we default under these notes the note holder could foreclose on all of our assets. We may not generate sufficient cash flow to repay our indebtedness, and we may not be able to obtain additional financing or refinance our indebtedness when needed on reasonable terms, if at all. The failure to obtain such financing would reduce our access to necessary capital to fund our operations and harm our business, results of operations and financial condition.

In the past three years, we have breached the financial covenants of our debt instruments and credit facilities.

During the past three years, we have, at times, been unable to meet certain financial ratios or covenants required by our current lenders and have been forced to seek waivers of default and amendments. In some instances, we have incurred substantial fees to obtain the waivers. In February 2008, we agreed to pay to Laurus and two of its related entities an aggregate of $750,000, plus interest, on December 29, 2009 in order to obtain a waiver of an event of default under the promissory notes issued to Laurus in 2006.

Our indebtedness to Laurus and its related entities, which had a principal balance of $14.4 million as of December 31, 2007, is secured by liens on substantially all of our assets. If we default under this indebtedness again and are unable to negotiate an amendment, forbearance or waiver, we could be required to repay all amounts then outstanding or face a foreclosure on all of our assets. Acceleration of the notes could require us to refinance the debt on terms less favorable to us. If we are unable to refinance the debt, we would be forced to repay it from existing funds, if available. Such a repayment would substantially reduce funds for operations and seriously harm our business, financial condition and results of operations. We could be forced to liquidate assets in order to repay the debt.

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Our substantial leverage could adversely affect our financial condition.

We are highly leveraged and expect to continue to be highly leveraged. As of December 31, 2007 such indebtedness was $14.4 million. As of December 31, 2006 such indebtedness was $19.5 million. The notes must be repaid in full by December 28, 2009. The notes are not a revolving credit facility which we can pay down and borrow against again.

Should we experience a decline in the value of our assets which secure our debt, it would limit our ability to obtain additional or new financing, if necessary, for operating expenses, or limit our ability to obtain such financing on reasonable terms.

Our future results may fluctuate or fail to meet expectations.

Our results may fluctuate in the future or fail to meet the expectations of securities analysts and investors. Our results and related ratios, such as gross margin, operating income percentage and effective tax rate may fluctuate as a result of:

· general economic conditions in the states where we sell our products;

· legislative and educational policies in the states where we sell our products;

· seasonality and variability in the modular classroom and our other end-markets;

· the timing of new product introductions by us and our competitors;

· product obsolescence;

· the scheduling, rescheduling or cancellation of orders by our customers;

· the cyclical nature of demand for our products;

· capacity utilization;

· product mix and pricing;

· movements in interest rates or tax rates; and

· litigation and regulatory matters.

The prices of raw materials have significantly increased in recent years and if we are unable to pass these costs onto our customers, our financial results could be significantly harmed.

The cost of raw materials represents a significant portion of our operating expenses. As a result of domestic and international events, the prices of raw materials we use in our operations fluctuate and have significantly increased in recent years. For example, during 2004, the cost of steel nearly doubled for certain steel used in some of our components and overall our steel costs were up in excess of 30%. We are not always able to obtain the right in our contracts to pass through raw material price increases to our customers. Should we experience significant increases in the price of raw materials as we did in 2004, our financial results could be adversely affected.

Our current promissory notes contain certain covenants and financial conditions that limit the way we conduct business.

The promissory notes we issued to Laurus and the related agreements contain various covenants limiting our ability to incur or guarantee additional indebtedness, pay dividends and make other distributions, make capital expenditures, make acquisitions and sell assets. These covenants may prevent us from raising additional financing, competing effectively or taking advantage of new business opportunities. Under the notes, we are also required to maintain a minimum amount of cash and approved accounts receivable.

We have experienced significant turnover of senior management and our current executive management team has been together for a limited time, which could slow the growth of our business and cause our operating results to decline.

Throughout 2003 and 2004, we announced a series of changes in our management that included the departure of several senior executives, and there have also been changes in the responsibilities of our board of directors. Our chairman, Charles C. McGettigan, a long serving company director became chairman in August 2003. In June 2003, Dennis Shogren joined us as our chief financial officer and in September 2004, David Buckley joined us as our chief executive officer. Mr. Buckley resigned in 2006, and Mr. Shogren was appointed chief executive officer. Kenneth Cragun joined us in 2006 as our new chief financial officer.

10

Other members of our senior management team are new to Modtech or new in their positions. Because of these recent changes, our management team has not worked together as a group for an extended period of time and may not work together as effectively to successfully execute on revenue goals, implement our strategies and manage our operations as they would if they had worked together for a longer period of time.

If our management team is unable to accomplish our business objectives, our ability to grow our business and successfully meet operational challenges could be severely impaired.

Only Mr. Shogren, Mr. Cragun and Ronald Savona, Senior Vice President of Operations, have long-term employment agreements and it is possible that the high turnover at our senior management levels may also continue for a variety of reasons. We are not aware of impending retirements or voluntary separations, but the loss of the services of one or more of our key senior executive officers could also affect our ability to successfully implement our business objectives, which could slow the growth of our business and cause our operating results to decline. For these reasons, our stockholders may lose confidence in our management team and decide to dispose of our common stock, which could cause the price of our common stock to decline.

We receive a significant portion of our revenues from the sale of classrooms to California school districts, the leasing companies that lease classrooms to such school districts and from a small number of independent dealers. The loss of any one of these customers or failure to collect a receivable from them could adversely affect our operations and financial position.

We receive a significant portion of our revenues from the sale of classrooms to California school districts, to leasing companies that lease to such school districts and to a small number of independent dealers. Historically, certain California school districts, certain leasing companies and certain independent dealers have individually accounted for 10% or more of our consolidated revenues in certain quarters or represented 10% or more of our net accounts receivables on any given date. During the year ended December 31, 2007, sales of classrooms, directly or indirectly, for use in California schools accounted for approximately 49.9% of our net sales. During the same year, one independent dealer accounted for 6.5% of our net sales.

The loss of any significant customer, the failure to collect a significant receivable from a significant customer, any material reduction in orders by a significant customer or the cancellation of a significant customer order could significantly reduce our revenues and consequently harm our financial condition and our ability to fund our operations and service our debt.

Sales of our classroom product are dependent upon the legislative and educational policies and the financial condition of the states in which we do business.

The demand for our modular relocatable classrooms is affected by various state statutes which, among other things, prescribe:

· the way in which all school classrooms to be constructed on public lands must be designed and engineered;

· the methods by which customers for our classroom product, primarily individual school districts, obtain funding for the construction of new facilities; and

· the manner in which available funding is spent.

As a result, our business depends upon the legislative and educational policies and financial condition of the states in which we do business. For example, in California, funding for new school construction and rehabilitation of existing schools by school districts currently is provided primarily at the state level, through annual allocations of funds derived from general revenue sources and statewide bond issues. In addition, school districts obtain funding for the purchase or lease of school facilities through the imposition of developers’ fees and local bond issuances. The availability of this funding is subject to financial and political considerations which vary from district to district and is not tied to demand. In California there is a requirement that, in order for school districts to increase the amount of funds to be received from developers in excess of the statutory level, school districts must show that 20% of all classroom space, not just space to be added, consists of relocatable classrooms. Although our classroom units qualify as relocatable structures, there are alternative structures that are less relocatable in nature than our classrooms that may also satisfy this legislative requirement. Changes in the legislative and educational policies or shortages of financial resources at either state or local levels in the states in which we do business could decrease demand for our products.

11

Despite the existence of some barriers to entry into our markets, our markets are competitive and our market share may be reduced if competitors enter the market or we are unable to respond to our competitors effectively.

Barriers to entry into the modular classroom and commercial and light industrial modular building markets consist primarily of access to capital, the availability of a qualified labor pool, the nature of the bidding process, the level of performance bonding required, and the industry’s regulated environment. In the California market, for example, the state approves the designs and plans for classrooms sold to California schools and the time required to complete the approval process also creates a barrier to entry.

However, manufacturers of other modular buildings, including housing and classrooms, who possess a skilled work force and manufacturing facilities, could easily adapt their manufacturing facilities to produce modular structures, and might choose to do so, during an economic downturn in their industry. We expect continued competition from existing competitors as well as competition from new entrants into the modular building market. In 2005, two of our former executive officers opened separate and unrelated modular building manufacturing business, one in Texas and the other across the street from our plant in Perris, California.

Our ability to compete successfully depends on several factors, including:

· maintaining high product quality;

· ability to deliver products on a timely basis;

· pricing policies of our competitors;

· success in designing and manufacturing new products;

· performance of competitors’ products;

· marketing, manufacturing and distribution capability; and

· financial strength.

To the extent our products achieve market success, competitors typically seek to offer competitive products or lower prices, which, if successful, could reduce our market share, harm our ability to compete successfully and reduce our revenue and margins which could harm our business, results of operations and financial condition.

Fluctuations, seasonality and economic downturns in any of our end-markets may have adverse consequences for our business.

Our quarterly revenue typically has been highest in the second and third quarters of the year, when school districts generally place a large number of orders for modular classrooms to be delivered in time for the upcoming school year. Additionally, first and fourth quarter revenues are typically lower due to a greater number of holidays, days of inclement weather, and customer budget and fiscal constraints during such periods.

In the past, the level of funding available from the states in which we do business to the school districts which are the end customers of our classrooms have caused such districts to experience budget shortfalls and to reduce their demand for our products despite growing student populations. If restrictions or limitations on funding available to school districts from the states in which we do business increases, it could result in a lower number of orders for our products which could reduce our revenues and consequently harm our financial condition and our ability to fund our operations and service our debt.

If liabilities related to inspection and certification tests exceed our estimates, our profitability could be harmed.

Most of our contracts require us to build classrooms which meet certain established state mandated function and manufacturing specifications. Under such contracts, we assume the liability for correcting, without additional compensation, any deficiencies which cause the classrooms to fail inspection and certification tests. We rely upon our experience and expertise to evaluate the potential for such liability and to price our bids accordingly and we follow strict quality control standards and subject our units under construction to extensive testing under the supervision of inspectors hired by our customers. If we incur such liability significantly in excess of our estimated profitability it could harm our business.

In addition, delays in obtaining approvals can cause costs to exceed our estimates and affect our results. For example, a delay in the approval of certain welds called for in a project for the Heritage High School in Brentwood, California in 2004 resulted in an accelerated timeline to complete that project which, in turn, led to approximately $3.8 million in additional costs.

12

We are subject to government regulations and other standards that impose operational and reporting requirements.

We are subject to a variety of Untied States federal, state and local government laws, rules and regulations, including those related to the use, storage, handling, discharge or disposal of certain toxic, volatile or otherwise hazardous chemicals used in the manufacturing process.

We believe we are currently in material compliance with such laws, rules and regulations and price our bids in accordance with our experience and expertise to include the costs of such compliance. If there are changes in such laws, rules or regulations or we are found not to be in compliance with such laws, rules or regulations, we could be required to incur substantial additional expenses to acquire equipment necessary to make our manufacturing process compliant and could incur fines or penalties associated with any non-compliance, which we are unable to quantify at this time but which could be material. Any such event could cause our product costs to significantly increase, thus reducing our margins and harming our ability to compete effectively. This would harm our business, results of operations and financial condition.

The Sarbanes-Oxley Act of 2002 required us to change or supplement some of our corporate governance and securities disclosure and compliance practices. The Securities and Exchange Commission and NASDAQ have revised, and continue to revise, their regulations and listing standards. These developments have increased, and may continue to increase, our legal compliance and financial reporting costs.

These developments may also make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. This, in turn, could make it more difficult for us to attract and retain qualified members of our board of directors or qualified executive officers.

Failure to comply with present or future laws, rules and regulations of any kind that govern our business could result in suspension of all or a portion of production, cessation of all or a portion of our operations, or the imposition of significant administrative, civil, or criminal penalties.

We have identified material weaknesses in our disclosure controls and procedures and our internal control over financial reporting, which, if not remedied effectively, could prevent us from reporting our financial results on a timely and accurate basis and result in a decrease in the trading price of our common stock and otherwise seriously harm our business.

Management through, in part, the documentation, testing and assessment of our internal control over financial reporting pursuant to the rules promulgated by the SEC under Section 404 of the Sarbanes-Oxley Act of 2002 and Item 308 of Regulation S-K has concluded that our disclosure controls and procedures and our internal control over financial reporting had material weaknesses as of December 31, 2005, 2006 and 2007. We have taken certain actions to begin to address those material weaknesses, but as of December 31, 2007 had not yet completed our remediation efforts.

If we fail to complete our remediation or if we complete the remediation but fail to maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Failure to achieve and maintain an effective internal control environment could prevent us from reporting our financial results on a timely and accurate basis or cause investors to lose confidence in our reported financial information. These effects could in turn result in a decrease in the trading price of our common stock.

Until we are able to remediate these material weaknesses, there remains the risk that the transitional controls on which we currently rely will fail to be sufficiently effective, which could result in a material misstatement of our financial position or results of operations and require a restatement. If this were to occur, investors may not be able to rely on the financial statements contained in this Form 10-K filing. In addition, even if we are successful in strengthening our controls and procedures, such controls and procedures may not be adequate to prevent or identify irregularities or facilitate the fair presentation of our financial statements or SEC reporting.

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Costs related to our compliance with Section 404 of the Sarbanes-Oxley Act have been significant and may continue to negatively impact our cash flow and results of operations.

Our efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding our required assessment of our internal control over financial reporting and our independent registered public accounting firm’s audit of that assessment has required the commitment of significant financial and managerial resources. Our compliance efforts have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. During 2004 and 2005 direct costs relating to Sarbanes-Oxley compliance were approximately $750,000 and $500,000, respectively. During 2006 and 2007 we did not incur significant costs related to Section 404 of the Sarbanes-Oxley Act of 2002 because, effective for the year ended December 31, 2005, we were no longer required to file as an accelerated filer. Although a management’s assessment of internal controls over financial reporting was required for the year ended December 31, 2007, our independent registered public accounting firm’s audit of that assessment was not required to be included in our annual filings on Form 10-K for the years ended December 31, 2005, 2006 and 2007. During 2008 we expect compliance costs to increase as our independent registered public accounting firm’s audit of management’s assessment is required to be included in our annual filings on Form 10-K for the year ended December 31, 2008. Based on an anticipated increase in compliance costs, our cash flows and results of operations will likely continue to be negatively impacted.

We are underutilizing our manufacturing facilities and may continue to do so in the future. In the past we closed some of our facilities which may in the future result in our having inadequate facilities to meet an increase in demand for our products.

During the past three years, we have closed two manufacturing facilities in California and one in Texas as a result of reduced demand for our products. We are currently underutilizing our three remaining manufacturing facilities for similar reasons. If this trend is not reversed, it will continue to negatively impact our margins which could inhibit our ability to fund operations and service our debt. Conversely, if demand for our products increases in the future our remaining manufacturing facilities may be inadequate to meet the demand. Our inability to generate sufficient manufacturing capacities to meet future demand, either through our own facilities or through outsourcing to third parties, could result in our inability to fulfill orders or require us to turn down orders.

We may be unable to hire sufficient numbers of employees when needed.

Our assembly line process requires a significant number of manufacturing employees, many of whom are employed at relatively low wages. During certain periods, we have experienced difficulty in finding suitable replacements for our workforce when turnover occurs. Since the beginning of 2008, we have reduced our workforce by approximately 30% because of low sales volume. We anticipate sales will improve throughout 2008 and that we will need to hire new employees. Our inability to hire and retain sufficient numbers of manufacturing employees at any of our operating facilities could result in our inability to fulfill orders or require us to turn down orders which could have an adverse effect on our business, results of operations and financial condition.

Our share price has been subject to extreme price fluctuations and could be subject to such fluctuations in the future. Stockholders could have difficulty trading shares.

The market price for our common stock has been and may continue to be subject to significant price fluctuations. Our stock price declined from an average price of approximately $4.67 in January 2007 to less than $1 in November and December of 2007.

Price fluctuations could be in response to operating results, announcements of technological innovations, changes in legislative and educational policies or general market conditions. Additionally, the stock market in recent years has experienced extreme price and volume fluctuations that often have been unrelated to the operating performance of individual companies. These market fluctuations, as well as general economic conditions, may adversely affect the price of our common stock.

In the past, securities class action litigation has often been instituted against a company following periods of volatility in the company’s stock price. This type of litigation, if filed against us, could result in substantial costs and divert our management’s attention and resources.

14

In addition, the future sale of a substantial number of shares of common stock by us or by our existing stockholders may have an adverse impact on the market price of the shares of common stock. There can be no assurance that the trading price of our common stock will remain at or near its current level.

The closing price of our stock has been below $1 for more than 30 consecutive business days and we are subject to being delisted by NASDAQ. We may decide to do a reverse stock split to avoid delisting.

The closing bid price of our stock has been below $1 since November 30, 2007. On January 16, 2008, we received written notice from The Nasdaq Stock Market advising us that we had until July 14, 2008 to regain compliance with the $1 minimum bid price rule or we will be delisted from The Nasdaq Global Market. To regain compliance, the closing bid price of our common stock must meet or exceed $1.00 per share for a minimum of 10 consecutive business days. Absent a reverse stock split, we do not foresee regaining compliance with the $1 minimum bid price rule by July 14, 2008.

Alternatively, we may apply to transfer our common stock to The Nasdaq Capital Market if we satisfy all of that market's requirements for initial inclusion (other than the $1 minimum bid price), which we believe we do. If we elect to apply for such a transfer and if such application is approved, we will be afforded the remainder of a second 180 calendar day period to regain compliance with the minimum bid price rule while listed on The Nasdaq Capital Market. If we fail to regain compliance with the minimum bid price rule in the second 180 day period, we will be delisted from The Nasdaq National Market and trade on the OTC Bulletin Board, provided one of our market makers applies to have our common stock quoted on the OTC Bulletin Board. The OTC Bulletin Board is not a company listing service and companies cannot apply for inclusion on the OTC Bulletin Board.

Our board of directors has not yet considered whether to authorize a reverse stock split to regain compliance with the $1 minimum bid requirement of The Nasdaq Stock Market. While a reverse stock split can bring us back into compliance, there are instances where the price per share of a company's common stock immediately after a reverse split does not increase proportionately with the reverse split. Also, there is the risk that the increase in price per share following the reverse split will not be sustained for any significant period of time.

We have acquired and may continue to acquire other companies and may be unable to successfully integrate these companies into our operations.

In the past, we have expanded our operations through strategic acquisitions, and we may continue to expand and diversify our operations with additional acquisitions. We may not realize the anticipated benefit from any of the transactions we pursue. Regardless of whether we consummate any such transaction, the negotiation of a potential transaction as well as the integration of the acquired business could require us to incur significant costs and cause diversion of management’s time and resources. Any such transaction could also result in impairment of goodwill and other intangibles, write-offs and other related expenses. If we are unsuccessful in integrating these companies into our operations or if integration is more difficult than anticipated our business, results of operations and financial condition could be harmed. Some of the risks that may affect our ability to integrate acquired companies include those associated with:

· unexpected losses of key employees or customers of the acquired company;

· conforming the acquired company’s standards, processes, procedures and controls with our operations;

· coordinating new product and process development;

· hiring additional management and other critical personnel; and

· increasing the scope, geographic diversity and complexity of our operations.

Earthquakes or other natural disasters may cause us significant losses.

Our corporate headquarters, certain of our manufacturing facilities and certain other critical business operations are located near major earthquake fault lines. We do not maintain earthquake insurance and could be harmed in the event of a major earthquake. We maintain some business interruption insurance to help reduce the effect of such business interruptions, but we are not fully insured against such risks.

15

Anti-takeover provisions in our charter documents and under Delaware law may make an acquisition of us, which may be beneficial to our stockholders, more difficult.

We are incorporated in Delaware. Certain anti-takeover provisions of Delaware law and our charter documents as currently in effect may make a change in control of our company more difficult, even if a change in control would be beneficial to the stockholders.

Our board of directors has the authority to issue additional shares of preferred stock and to determine the terms of those shares of stock without any further action by the stockholders. The rights of holders of our common stock are subject to the rights of the holders of any preferred stock that may be issued. The issuance of preferred stock could make it more difficult for a third party to acquire a majority of our outstanding voting stock. Delaware law also prohibits corporations from engaging in a business combination with any holders of 15% or more of their capital stock until the holder has held the stock for three years unless, among other possibilities, the board of directors approves the transaction. Our board of directors may use these provisions to prevent changes in the management and control of our company. Also, under applicable Delaware law, our board of directors may adopt additional anti-takeover measures in the future.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None

ITEM 2. PROPERTIES

Our principal executive and administrative facilities are located in approximately 17,000 square feet of modular buildings at our primary manufacturing facility located in Perris, California approximately 60 miles east of Los Angeles. This manufacturing facility occupies approximately 25 acres, with approximately 226,000 square feet of covered production space under roof, pursuant to a lease expiring in 2019.

We have two other manufacturing facilities: one in Phoenix, Arizona and another in Plant City, Florida, approximately 30 miles northeast of Tampa. Our Phoenix, Arizona facility consists of approximately 50,000 square feet of covered production space under roof, on a 10-acre site, pursuant to a lease expiring in 2012. Our Plant City, Florida facility consists of 106,000 square feet on a 17-acre site.

We believe that our facilities are well maintained and in good operating condition, and meet the requirements for our immediately foreseeable business needs.

On November 1, 2006, we sold our Plant City facility to NL Ventures V, L.P. for $4.4 million. Concurrently with the sale of the property, we entered into a Lease Agreement with the purchaser’s assignee, NL Ventures V Plant City, L.P., pursuant to which we leased back the property for an initial term of 20 years. We have the option to extend the lease term for two additional terms of five years each.

We closed our Texas plant in the first quarter of 2007 because of sluggish sales in the state and our ability, in some instances, to source products from other Modtech facilities or third-party manufacturers. We owned the land and building related to our steel shop in Texas and sold this property during 2007 for the $0.6 million approximate book value of the assets. We did not incur any material costs associated with exit or disposal activities.

During 2005, we closed and subsequently subleased a 400,000 square foot manufacturing facility, on a 30-acre site in Lathrop, California. The sublease runs through the term of the master lease until 2019. During the year, we also closed a manufacturing facility in Perris, California by returning the facility to our landlord and amending our lease with the landlord to include only the vacant property that we retained for storage use. The amended lease expires in 2015.

The California plants were closed because they represented excess capacity and, in the case of the Perris facility, we would have been required by the city to make extensive improvements to the property. The landlord we returned the facility to in Perris joined with one of our former executive officers in opening a competing modular manufacturing business at the facility.

ITEM 3. LEGAL PROCEEDINGS

On September 26, 2005, we filed lawsuit against the Campbell Union Elementary School District (the “District”) in the California Superior Court for Santa Clara County. In an amended pleading, we have asserted that the District improperly terminated our contract and that we are entitled to damages for breach of contract. Pursuant to our contract with the District entered into in October 2003, we submitted our plans for a two-story building with a design methodology that was pre-approved by the Division of State Architect (“DSA”) and in accordance with the contract documents. The District submitted the plans to the DSA’s Oakland regional office which unexpectedly refused to approve the plans. The District refused to grant us an extension of time to resolve this issue with the DSA Oakland regional office despite the fact that our contract provided for such an extension for District caused delays and for unforeseen events. The District declared us in default in December 2004, and on May 3, 2005, the District made a demand upon our bonding company, Liberty Mutual (“Liberty”), to complete the contract. On May 16, 2005 DSA directed its Oakland office to accept our design methodology as originally submitted. Liberty took over the project in June 2005, and we entered into an agreement with Liberty to complete the work on the project, reserving our rights and claims against the District. The project has now been completed. A trial date has not yet been established by the court, but is expected to be scheduled by the end of 2008.

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On January 25, 2006, a class action lawsuit was filed against us and Bayside Solutions, Inc. by TRICO Pipes, Aram Hodess, Micah Long and the Plumbers and Steamfitters Local Union No. 159 in the California Superior Court for Alameda County on behalf of those persons we employed on California public work projects from January 25, 2002 to the filing of the complaint. The complaint alleges that we failed to pay these individuals general prevailing wage rates, overtime rates, and required rates for holiday work. It also alleges that we failed to employ registered apprentices, thereby denying such apprentices the opportunity to earn wages. Bayside Solutions, Inc. is a temporary labor service used by us and TRICO Pipes is a joint labor management committee in the plumbing and pipe fitting industry in Contra Costa County. The court has not yet certified the class.

The complaint seeks restitution for all underpayments of wages, attorney’s fees and costs. We reassert our denial of the liability, but cannot predict with any certainty the outcome of the proceeding. This is especially true since until any class is defined, it is impossible to define what the class or claims are going to be. We are unable to ascertain at this time the potential monetary liability or financial impact to us should there be an unfavorable settlement or adverse decision, but we believe that either event could have a material effect on our operations or financial position.

Except for the two proceedings described above, we are not involved in any legal proceedings other than ordinary routine litigation incidental to our business, including product liability, employment disputes, administrative proceedings and commercial litigation. Such proceedings often do not specify the amount of damages sought, and their outcomes are not predictable. Consequently, we are unable to ascertain the ultimate aggregate amount of monetary liability or financial impact with respect to these routine pending proceedings. While they could affect operating results of any one quarter when resolved in future periods, it is management’s opinion that, after final disposition, any monetary liability or financial impact to us from these routine proceedings beyond that provided for at year-end would not be material to our financial position or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the NASDAQ Global Market under the symbol “MODT”. The range of high and low sales prices for the common stock as reported by the National Association of Securities Dealers, Inc. for the periods indicated below, are as follows:

Fiscal Year 2007 Quarters Ended	High		Low
March 31, 2007	$	5.53	$	2.95
June 30, 2007		3.39		2.47
September 30, 2007		2.98		1.03
December 31, 2007		2.00		0.63

Fiscal Year 2006 Quarters Ended	High		Low
March 31, 2006	$	9.49	$	6.93
June 30, 2006		10.95		6.17
September 30, 2006		7.74		5.00
December 31, 2006		5.69		4.27

On March 27, 2008, the closing sales price on the NASDAQ Global Market for a share of our common stock was $0.31. The approximate number of holders of record of our common stock on February 29, 2008, was 64.

On January 16, 2008, we received a letter from The Nasdaq Stock Market notifying us that for the 30 consecutive business days preceding the date of the letter the bid price of our common stock had closed below the $1.00 per share minimum bid price required for continued inclusion on The Nasdaq Global Market pursuant to Nasdaq Marketplace Rule 4450(a)(5). This notification has no effect on the listing of our common stock at this time.

In accordance with Nasdaq Marketplace Rule 4450(e)(2), we have 180 calendar days from the date of the Nasdaq letter, or until July 14, 2008, to regain compliance with the minimum bid price rule. To regain compliance, the closing bid price of our common stock must meet or exceed $1.00 per share for a minimum of 10 consecutive business days. Nasdaq may, in its discretion, require us to maintain a bid price of at least $1.00 per share for a period in excess of ten consecutive business days, but generally no more than 20 consecutive business days, before determining that we have demonstrated an ability to maintain long-term compliance. If compliance is not regained, Nasdaq will notify us of its determination to delist our common stock, which decision may be appealed to a Listings Qualification Panel.

We may alternatively apply to transfer our common stock to The Nasdaq Capital Market if we satisfy all of the requirements, other than the minimum bid price, for initial inclusion on this market. If we elect to apply for such a transfer and if such application is approved, we will be afforded the remainder of a second 180 calendar day period to regain compliance with the minimum bid price rule while listed on The Nasdaq Capital Market.

Dividend Policy

We have not paid a dividend on common stock at any time since 1990. The Board of Directors currently intends to follow a policy of retaining all earnings, if any, to finance our continued growth and development and does not anticipate paying cash dividends on our common stock in the foreseeable future. Our current credit facility prohibits the payment of dividends. Any future determination as to the payment of cash dividends will be dependent upon our financial condition and results of operations, the provisions of our then current credit facilities, and other factors deemed relevant by the Board of Directors.

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Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth the number of shares to be issued upon exercise of outstanding options, the weighted-average exercise price of such options, and the number of shares remaining available for issuance as of the end of our most recently completed fiscal year.

	(a) Number of Securities to Be Issued upon Exercise of Outstanding Options, Warrants and Rights			(b) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights			(c) Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
Equity compensation plans approved by security holders		1,614,038	(1)	$	6.66	(2)		1,038,881
Equity compensation plans not approved by security holders		N/A			N/A			N/A

(1) Includes 507,087 unvested shares of restricted stock issued pursuant to our 2002 Stock Option Plan.

(2) Because the 507,087 unvested shares of restricted stock shares issued pursuant to our 2002 Stock Option Plan do not have an exercise price, the shares are not included in the calculation of weighted average exercise price.

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ITEM 6. SELECTED FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The selected financial data presented below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the notes thereto included elsewhere in this report. The consolidated statements of income data for the years ended December 31, 2007, 2006 and 2005, and the consolidated balance sheet data at December 31, 2007 and 2006, are derived from our audited consolidated financial statements appearing elsewhere in this Form 10-K. The consolidated statements of income data for the years ended December 31, 2004 and 2003, and the consolidated balance sheet data at December 31, 2005, 2004 and 2003, are derived from our audited consolidated financial statements that are not included in this Form 10-K. The historical results are not necessarily indicative of the results to be expected in any future period.

	Year ended December 31,
	2007			2006			2005			2004			2003
Net sales	$	87,323,000		$	156,033,000		$	230,324,000		$	185,194,000		$	159,870,000
Cost of goods sold		93,223,000			151,655,000			221,376,000			188,114,000			147,938,000
Gross (loss) profit		(5,900,000	)		4,378,000			8,948,000			(2,920,000	)		11,932,000
Selling, general and administrative expenses		15,383,000			17,326,000			15,945,000			14,524,000			8,208,000
Impairment loss on goodwill		38,303,000			33,600,000			-			-			-
(Gain) loss on sale of property and equipment		(55,000	)		95,000			(6,000	)		(745,000	)		1,000
(Loss) income from operations		(59,531,000	)		(46,643,000	)		(6,991,000	)		(16,699,000	)		3,723,000
Other (expense) income:
Interest expense		(1,919,000	)		(2,479,000	)		(6,927,000	)		(1,663,000	)		(1,444,000	)
Interest income		238,000			326,000			358,000			31,000			85,000
Loss on extinguishment of debt		-			(3,421,000	)		-			-			-
Gain (loss) on warrant and embedded derivatives		7,657,000			6,959,000			(5,804,000	)		-			-
Amortization of debt costs		(628,000	)		(1,384,000	)		(1,037,000	)		(1,204,000	)		-
Accretion of convertible debt discount		(2,827,000	)		(3,740,000	)		(1,064,000	)		-			-
Early debt conversion fee		-			(4,716,000	)		-			-			-
Other income, net		102,000			407,000			361,000			881,000			31,000
		2,623,000			(8,048,000	)		(14,113,000	)		(1,955,000	)		(1,328,000	)
(Loss) income before income taxes		(56,908,000	)		(54,691,000	)		(21,104,000	)		(18,654,000	)		2,395,000
Income tax benefit (provision)		-			-			-			108,000			(938,000	)
Net (loss) income		(56,908,000	)		(54,691,000	)		(21,104,000	)		(18,546,000	)		1,457,000
Series A preferred stock dividend		-			-			-			221,000			7,000
Net (loss) income applicable to common shareholders	$	(56,908,000	)	$	(54,691,000	)	$	(21,104,000	)	$	(18,767,000	)	$	1,450,000
Basic (loss) earnings per common share	$	(2.66	)	$	(2.96	)	$	(1.35	)	$	(1.35	)	$	0.11
Basic weighted-average shares outstanding		21,355,000			18,465,000			15,682,000			13,949,000			13,708,000
Diluted (loss) earnings per common share	$	(2.66	)	$	(2.96	)	$	(1.35	)	$	(1.35	)	$	0.10
Diluted weighted-average shares outstanding		21,355,000			18,465,000			15,682,000			13,949,000			14,122,000

	Year ended December 31,
	2007		2006		2005		2004		2003
Balance Sheet Data:
Working capital	$	12,146,000	$	26,320,000	$	3,194,000	$	12,207,000	$	22,127,000
Total assets		47,220,000		122,810,000		181,833,000		179,792,000		146,209,000
Total liabilities		34,148,000		55,969,000		97,272,000		87,217,000		39,188,000
Long-term debt, excluding current portion		10,209,000		10,326,000		14,628,000		19,756,000		6,000,000
Shareholders' equity		13,072,000		66,841,000		84,561,000		92,575,000		107,021,000

	Year ended December 31,
	2007			2006			2005			2004			2003
Selected Operating Data:
Gross (loss) margin		-6.8	%		2.8	%		3.9	%		-1.6	%		7.5	%
Operating (loss) margin		-68.2	%		-29.9	%		-3.0	%		-9.0	%		2.3	%
Backlog at period end	$	80,000,000		$	60,000,000		$	81,000,000		$	172,000,000		$	115,000,000

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Modtech manufactures and sells modular relocatable classrooms and commercial and light industrial modular buildings. We are a leading provider of modular classrooms in California and Florida and a significant provider of commercial and light industrial modular buildings in California, Florida, Arizona, Nevada and other neighboring states.

In California and Florida, we market and sell our modular classrooms to school districts. Virtually all of our classroom sales are dependent upon public funding. Such funding is sourced in multiple ways which are strongly influenced by educational policies that are subject to political factors.

The modular relocatable classroom industry is highly competitive with the market divided among a number of privately-owned companies whose share of the market is smaller than ours. The nonresidential modular building industry is highly competitive and fragmented. It is composed primarily of regionally based private companies, each with a single manufacturing facility.

A total of approximately $2.2 million in change orders on three school projects in California are included in both revenue and cost of sales for 2007. A total of approximately $3.5 million in change orders on six school projects in California are included in both revenue and cost of sales for 2006. A total of approximately $2.4 million in change orders on one school project in California are included in both revenue and cost of sales for 2005. These change orders represent incremental work that was outside the original contract. The contract calls for this work to be completed and the change orders submitted for approval and payment after the completion of the work. We complied with this requirement. Although the change orders remain unapproved, we believe it is probable that these costs will be recovered.

In the first quarter of 2007 we closed our Glen Rose, Texas manufacturing facility. We moved much of our Texas inventory and fixed assets to our other factories. We owned the land and building related to our steel shop in Texas, which is adjacent to the Glen Rose facility. We sold the steel shop during 2007 for the $0.6 million approximate book value of the assets. We did not incur any material costs associated with exit or disposal activities related to the closure of the Glen Rose facility.

Results of Operations

The following table sets forth, for the periods indicated, the percentages of net sales represented by certain items in our statements of operations.

	Percent of Net Sales
	Year Ended December 31,
	2007			2006			2005
Net sales		100.0	%		100.0	%		100.0	%
Cost of goods sold		106.8			97.2			96.1
Gross (loss) profit		(6.8	)		2.8			3.9
Selling, general and administrative expenses		17.6			11.1			6.9
Impairment loss on goodwill		43.9			21.5			-
(Gain) loss on sale of property and equipment		(0.1	)		0.1			(0.0	)
Loss from operations		(68.2	)		(29.9	)		(3.0	)
Other (expense) income:
Interest expense		(2.2	)		(1.6	)		(3.0	)
Interest income		0.3			0.2			0.2
Loss on extinguishment of debt		-			(2.2	)		-
Gain (loss) on warrant and embedded derivatives		8.8			4.5			(2.5	)
Amortization of debt costs		(0.7	)		(0.9	)		(0.5	)
Accretion on convertible debt discount		(3.2	)		(2.4	)		(0.5	)
Early debt conversion fee		-			(3.0	)		-
Other income, net		0.1			0.3			0.2
Loss before income taxes		(65.2	)		(35.1	)		(9.2	)
Income tax benefit		-			-			-
Net loss		(65.2	)%		(35.1	)%		(9.2	)%

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Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

Net Sales

Net sales for the year ended December 31, 2007 decreased to $87.3 million from $156.0 million for 2006, a decrease of $68.7 million or 44.0%. When compared to the prior year, in 2007 California sales of $57.4 million were down 35.6%; Florida sales of $13.2 million were down 63.5%; Arizona sales of $16.7 million were down 20.6% and Texas sales decreased from $9.8 million in 2006 to zero in 2007 due to the closure of our manufacturing facility in 2007.

The decrease in sales in 2007 in California was primarily due to a general slowdown in the education and commercial markets. The change in the education market is caused primarily by delays imposed by our customers on various large educational projects, a relative flattening of California school enrollment in recent years and general economic conditions. The decrease in the commercial market can be attributed to the slowdown in the construction and housing markets.

In addition, we believe that the demise of the “piggyback” contracting system in California in the prior year continued to have an adverse affect on our sales volume in 2007. Prior to January 27, 2006, many school districts in California utilized piggyback contracts which allowed them to order buildings based on contracts bid and entered into by builders, including Modtech, with other school districts. Since January 27, 2006, these piggyback contracts have not been allowed in California school facilities procurement. As a result, the system allows more public bids for the same volume of work. The change to the public bidding process has resulted in increased competitive pressures because smaller contractors are able to bid on more contracts. In the first half of 2006, much of the revenue was realized under the old piggyback contracting system due to the long-term nature of our California education contracts. In 2007, all of our revenue from the California education market was realized under the new, more competitive public bid contracting system.

California public school enrollment has been essentially flat over the last three years and, while funds from recently enacted bond measures are available, spending for new schools has slowed from prior years. This leveling off of school enrollment has led to decreased demand for new school construction, causing a higher percentage of school bond funds to be utilized for modernization of existing structures and less on new permanent construction or facilities. Even the fast growing school districts are proceeding more conservatively in light of the slowdown in other districts. The modernization work has benefited the leasing companies, but has not resulted in relocatable classroom sales for Modtech because the leasing companies have not had to purchase significant numbers of new classrooms.

The sales decrease in Florida in 2007 was due to project delays in the education market, primarily from two large customers, and an overall decrease in the education market. The sales decrease in the Florida education market is the result of recently declining school enrollment. For the school year just completed in June 2007, public school enrollment in Florida declined for the first time since 1982. More than half of the school districts reported a decline and many school districts are now considering school closures.

The sales decrease in Arizona in 2007 is due to the decreased volume of orders in the education markets for Arizona and Nevada.

The sales decrease in Texas in 2007 is due to closing our Texas manufacturing facility in the first quarter of 2007.

Gross (Loss) Profit

Gross loss for the year ended December 31, 2007 was $5.9 million, a decrease of $10.3 million from the gross profit of $4.4 million recorded the previous year. Gross loss as a percentage of net sales decreased to 6.8% in 2007 down from a gross margin of 2.8% in 2006. Our gross profit margin declined as revenues declined because we were not able to adequately cover our fixed manufacturing costs, particularly due to continued production delays in key education projects and decreased sales volume in the education markets in California, Florida and Arizona. During 2007 we experienced negative gross margins on newly introduced product offerings including residential products. In the fourth quarter of 2007 we settled certain insurance claims and adjusted our estimate of proceeds from insurance claims, which resulted in a $1.6 million write down included in cost of goods sold. These insurance claims were for various building structural repairs, the costs of which were originally included in cost of goods sold.

Selling, General and Administrative Expense

In 2007, selling, general and administrative (SG&A) expenses decreased $1.9 million from the prior year to $15.4 million with SG&A costs representing 17.6% of net sales compared to 11.1% of net sales in the prior year. The decrease in SG&A was primarily attributable to a $1.9 million decrease in the provision to the allowance for contract adjustments over the same period. Excluding the provision to the allowance for contract adjustments, SG&A costs were essentially flat from 2006 to 2007.

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Goodwill

During the fourth quarter of 2006, our stock price declined significantly and in the first quarter of 2007 our market capitalization fell below the amount of our recorded equity. As a result of the existence of this and other indicators, we performed an impairment test to determine if the value of goodwill was recoverable under the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets” and it was determined that an impairment existed. As a result of this test, we recorded an estimated initial non-cash impairment charge of $33.6 million in the fourth quarter of 2006 to reduce our carrying value of goodwill to its implied fair value. The fair value estimate used in this initial goodwill impairment test was based on the trading price of our stock and the present value of future cash flows. This impairment charge represented management’s best estimate as to the actual charge at the time.

During the three months ended June 30, 2007, we completed the final measurement of goodwill impairment, resulting in a determination that the remaining balance of goodwill was fully impaired. The fair value calculation was based on market approaches and an updated present value of future cash flows. As a result of this independent goodwill impairment measurement, we recognized an impairment loss for the remaining balance of goodwill of $38.3 million for the three-month period ended June 30, 2007. As a result of this full impairment recognition, we recognized an impairment loss of $38,303,000 to write-down the carrying value of goodwill to zero during the three-month period ended June 30, 2007 and the year ended December 31, 2007.

Operating Loss

Operating losses increased to $59.5 million, or 68.2% of net sales, for the year ended December 31, 2007 from $46.6 million in losses, or 29.9% of net sales, for the year ended December 31, 2006. The increase in operating losses was a result of the decline in net sales and gross margins and the impairment loss on goodwill, partially offset by the decrease in SG&A expenses as discussed above.

Other Income (Expense)

Interest expense decreased from $2.5 million in 2006 to $1.9 million in 2007. The decrease is attributable to significantly reduced debt during 2007 as compared to 2006 as well as lower interest rates over the same period.

In 2006, we recognized a $3.4 million loss on extinguishment of debt. This consisted of a $2.1 million write off of the unamortized debt issue costs of the Fortress Credit Corp. credit facility when it was replaced in the first quarter of 2006 with a credit facility from Bank of America N.A., a $0.3 million write off of the unamortized debt issue cost of the Bank of America credit facility when the credit facility was replaced in the fourth quarter of 2006 with loans from Laurus Master Fund, Ltd. (“Laurus”), $0.5 million in early termination fees paid to Bank of America during the fourth quarter of 2006 and amortization of a portion of the debt issue costs associated with the promissory notes issued to Laurus. In addition we incurred a loss on the redemption of our $25.9 million convertible note issued to Amphora Limited (“Amphora Convertible Note”). On November 1, 2006 we redeemed the balance of the Amphora Convertible Note with a face value of $17.6 million through a combination of the conversion of one million shares pursuant to the terms of the note and the payment of $8.0 million cash. The shares issued upon conversion were recorded at the $7.82 per share conversion price of the notes. The loss on extinguishment is calculated based on the $15.2 million discounted amount of the Amphora Convertible Note and includes the write-off of $0.9 million in debt issuance costs and the non-cash benefit of writing off the $0.8 million embedded derivative.

We recognized a non-cash gain of $7.7 million related to the change in fair value of warrant derivatives in 2007, compared to $7.0 million in 2006.

Amortization of debt costs for 2007 was $0.6 million, compared to $1.4 million for 2006.

Accretion of debt discount for 2007 was $2.8 million, compared to an accretion of $3.7 million for 2006. Accretion on debt discount for 2007 and 2006 included $0.5 million and $2.7 million, respectively, in incremental non-cash charges related to the conversion of convertible notes.

We recognized non-cash early debt conversion fees of $4.7 million in 2006. In the second quarter of 2006, $1.9 million of the non-cash early debt conversion fee was recognized for the fair value of 189,189 restricted shares issued to Amphora Limited as consideration for the early conversion of a portion of the Amphora Convertible Note. In the fourth quarter of 2006, $2.9 million of the non-cash early debt conversion fee was recognized for the fair value of 636,663 incremental shares issued, or to be issued, to Laurus as consideration for the early conversion of the convertible note issued in 2006. The incremental shares issued in the fourth quarter of 2006 were the result of reducing the conversion price of the Laurus note during the quarter to $3.57 per share.

23

Income Tax Benefit

No benefit for income tax was recorded in 2007 or 2006 because under applicable accounting standards our cumulative losses for the three years ended December 31, 2007 are deemed to have created significant negative evidence that it is more likely than not that we will not be able to realize our net deferred tax assets. Therefore, a valuation allowance has been recorded against our net deferred tax assets, which totals $28.0 million at December 31, 2007, and $19.2 million at December 31, 2006. Our 2007 effective tax rate was 15.5% before the deferred tax asset valuation adjustment compared to prior year at 13.0%. The effective tax rate in 2008 is expected to range from 35% to 39%. The lower effective tax rates in prior years is due primarily to the goodwill impairment charge of $38.3 million and $33.6 million for the years ended December 31, 2007 and 2006, respectively.

Year Ended December 31, 2006 Compared to Year Ended December 31, 2005

Net Sales

Net sales for the year ended December 31, 2006, decreased to $156.0 million from $230.3 million for 2005, a decrease of $74.3 million or 32.3%. When compared to the prior year, in 2006 California sales of $89.1 million were down 30.2%; Florida sales of $36.2 million were down 32.6%; Arizona sales of $21.1 million were down 29.5% and Texas sales of $9.8 million were down 49.0%.

The decrease in Florida was due to a return to pre-2005 levels of sales in the region. Net sales in Florida in 2005 were bolstered by a major classroom project stemming from the hurricanes in the fall of 2004. The decrease in sales in 2006 in California was primarily due to project delays in the education market, lower production volumes in part due to factory inefficiencies and periodic labor shortages in California. In addition, in the prior year periods more of our California revenue was attributable to fieldwork on large school projects. In the current year period we were more reliant on revenue generated from the shipment of factory-built units for both schools and commercial customers.

It is believed that the demise of the piggyback contracting system in California has had an adverse affect on the sales volume in recent quarters. Prior to January 27, 2006 many school districts in California utilized “piggy-back” contracts which allowed them to order buildings off of contracts bid and entered into by builders, including Modtech, with other school districts. Since January 27, 2006, these piggyback contracts are no longer allowed. As a result, more public bids will have to occur for the same volume of work.

Gross Profit

Gross profit for the year ended December 31, 2006 was $4.4 million, a decrease of $4.6 million from the gross profit of $8.9 million recorded the previous year. Gross profit as a percentage of net sales decreased to 2.8% in 2006 down from a gross margin of 3.9% in 2005. Our gross profit margin declined as revenues declined more than expected and we were not able to reduce fixed and certain variable costs as quickly as revenues declined. In addition, the prior year margins benefited from volume efficiencies related to record results.

Selling, General and Administrative Expense

In 2006, selling, general and administrative expenses increased $1.4 million over the prior year to $17.3 million with SG&A costs representing 11.1% of net sales compared to 6.9% of net sales in the prior year. The increase in SG&A was primarily attributable to a $3.2 million provision to the allowance for contract adjustments and $1.2 million in stock compensation expense as a result of the implementation of SFAS123(R). Stock compensation expense was reported in the past on a pro forma basis pursuant to the predecessor to SFAS 123(R), SFAS 123. Excluding the provision to the allowance for contract adjustments and stock compensation expense, SG&A costs declined $2.3 million from 2005 to 2006 due to reduced legal, accounting and professional services as well as reduced sales commissions that resulted from lower sales. In the third quarter of 2006 management took actions to reduce SG&A costs, primarily by a reduction of staffing.

24

Goodwill

During the fourth quarter of 2006, our stock price declined significantly and in the first quarter of 2007 our market capitalization fell below the amount of our recorded equity. As a result of the existence of this and other indicators, we performed an impairment test to determine if the value of goodwill was recoverable under the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets” and it was determined that an impairment existed. As a result of this test, we recorded an estimated initial non-cash impairment charge of $33.6 million in the fourth quarter of 2006 to reduce our carrying value of goodwill to its implied fair value. The fair value estimate used in this initial goodwill impairment test was based on the trading price of our stock and the present value of future cash flows. This impairment charge represented management’s best estimate as to the actual charge at the time.

Operating Income (Loss)

Operating losses increased to $46.6 million, or 29.9% of net sales, for the year ended December 31, 2006 from $7.0 million in losses, or 3.0% of net sales, for the year ended December 31, 2005. The increase in operating losses was a result of the decline in net sales and gross margins, the impairment loss on goodwill and the increase in SG&A expenses as discussed above.

Other Income (Expense)

Interest expense decreased from $6.9 million in 2005 to $2.5 million in 2006. The decrease is attributable to significantly reduced debt during 2006 as compared to 2005.

We recognized a $3.4 million loss on extinguishment of debt. This consisted of a $2.1 million write off of the unamortized debt issue costs of the Fortress Credit Corp. credit facility when it was replaced in the first quarter of 2006 with a credit facility from Bank of America N.A., a $0.3 million write off of the unamortized debt issue cost of the Bank of America credit facility when the credit facility was replaced in the fourth quarter of 2006 with loans from Laurus, $0.5 million in early termination fees paid to Bank of America during the fourth quarter of 2006 and amortization of a portion of the debt issue costs associated with the promissory notes issued to Laurus. In addition we incurred a loss on the redemption of our $25.9 million convertible note issued to Amphora Limited (“Amphora Convertible Note”). On November 1, 2006 we redeemed the balance of the Amphora Convertible Note with a face value of $17.6 million through a combination of the conversion of one million shares pursuant to the terms of the note and the payment of $8.0 million cash. The shares issued upon conversion were recorded at the $7.82 per share conversion price of the notes. The loss on extinguishment is calculated based on the $15.2 million discounted amount of the Amphora Convertible Note and includes the write-off of $0.9 million in debt issuance costs and the non-cash benefit of writing off the $0.8 million embedded derivative.

We recognized a non-cash gain of $7.0 million related to the embedded and warrant derivatives associated with the Amphora Convertible Note and outstanding warrants in 2006.

Amortization of debt costs for 2006 was $1.4 million.

Accretion of convertible debt discount for 2006 was $3.7 million, which included $2.7 million incremental non-cash charges related to the discount on the $19.7 million conversion of convertible notes in 2006.

We recognized non-cash early debt conversion fees of $4.7 million in 2006. In the second quarter of 2006, $1.9 million of the non-cash early debt conversion fee was recognized for the fair value of 189,189 restricted shares issued to Amphora Limited as consideration for the early conversion of a portion of the Amphora Convertible Note. In the fourth quarter of 2006, $2.9 million of the non-cash early debt conversion fee was recognized for the fair value of 636,663 incremental shares issued, or to be issued, to Laurus as consideration for the early conversion of the convertible note issued in 2006. The incremental shares issued in the fourth quarter of 2006 were the result of reducing the conversion price of the Laurus note during the quarter to $3.57 per share.

Income Tax Benefit

No benefit for income tax was recorded in 2005 or 2006. No tax benefit was recognized because under applicable accounting standards our cumulative losses for the three years ended December 31, 2006 are deemed to have created significant negative evidence that it is more likely than not that we will not be able to realize our net deferred tax assets. Therefore, a valuation allowance has been recorded against our net deferred tax assets, which totals $19.2 million at December 31, 2006, and $12.3 million at December 31, 2005. Our 2006 effective tax rate was 13.0% before the deferred tax asset valuation adjustment compared to prior year at 23.7%. The lower effective tax rate in 2006 is due primarily to the goodwill impairment charge of $33.6 million. The lower effective tax rate in 2005 is due primarily to the $5.8 million in non-cash losses for the embedded and warrant derivatives, which are not deductible for tax purposes.

25

Liquidity and Capital Resources

In recent years we have funded our operations and capital expenditures mostly with cash generated internally by operations, borrowings under various credit facilities, cash received from exercised options and private placements of equity.

Cash and cash equivalents were $0.4 million at December 31, 2007 compared to $6.3 million at December 31, 2006. The decrease was primarily due to the loss from operations, excluding the non-cash impairment loss on goodwill and non-cash stock compensation expense, and payments on our accounts payable, offset by cash provided by reductions in restricted cash and collections of accounts receivable. We believe that our existing cash and cash equivalents, anticipated cash flows from operations in 2008, and the proceeds of an equity financing in the first quarter of 2008, will be sufficient to fund our operations and anticipated capital expenditures for at least the next 12 months.

Cash totaling $6.2 million was used by operating activities during 2007 compared to cash used of $7.5 million during 2006. During 2007, the net loss, adjusted for non-cash expenses from depreciation and amortization, provision for contract adjustments, gain on sale of equipment, stock compensation expense, impairment loss on goodwill, gain on derivative liability and accretion on debt discount used $18.2 million of operating cash. Changes in remaining working capital balances during this period provided $12.0 million in cash.

Net cash used by investing activities was $0.4 million in 2007, compared to net cash provided by investing activities of $3.0 million in 2006. Capital expenditures were $1.0 million in 2007 compared to $1.4 million in 2006. Prior year cash from investing activities included the $4.4 million proceeds from the sale of our manufacturing plant in Florida to NL Ventures V, L.P. Concurrently with the sale of the property, we entered into a lease agreement with the purchaser’s assignee, NL Ventures V Plant City, L.P., pursuant to which we leased back the property for an initial term of 20 years. We have the option to extend the lease term for two additional terms of five years each. The annual rent is $491,160 for the first year of the lease and increases at the rate of 3% per annum thereafter. We have posted a security deposit of $0.5 million in connection with the lease.

Net cash provided by financing activities was $0.8 million in 2007, consisting of proceeds from the reduction of restricted cash of $4.5 million, offset by $3.7 million in principal payments on long-term debt.

As of December 31, 2007, we were not in compliance with all covenants with our lender Laurus Master Fund, Ltd. (“Laurus”) and two of its related entities. In March 2008, we entered into an agreement with Laurus and its two related entities pursuant to which we obtained a waiver of the event of default and restructured certain other provisions of the promissory notes issued to Laurus in 2006, as further described below and in Note 21.

Management has taken the following actions, among others to address liquidity and operating performance issues:

·As discussed above, in March 2008 we entered into an amendment and waiver agreement with Laurus and its related entities. Pursuant to the waiver, we issued warrants to purchase 3,000,000 shares of Modtech’s common stock at an exercise price of $0.40 per share and additional promissory notes in the aggregate principal amount of $750,000, on which the principal amount plus related interest are due and payable on December 29, 2009. In return Laurus and its related entities agreed to defer principal payments of $375,000 per month for the period March 1, 2008 through June 30, 2008, for a total deferral of $1.5 million, temporarily eliminate the covenant to maintain on a monthly basis at least $9 million in cash and eligible accounts receivable (the “Minimum Balance”) as of December, 31, 2007 through February 29, 2008, reduce the Minimum Balance from $9 million to $5.4 million for the period March 1, 2008 through March 31, 2008 and to $6.6 million for the period April 1, 2008 through June 30, 2008. The monthly interest payments of approximately $110,000 per month will continue without deferral or abatement and, commencing July 1, 2008, the monthly principal payments will resume and the Minimum Balance will again be $9 million.

·  On March 10, 2008, we completed an equity financing with existing stockholders, new investors and current directors and executives of the company, pursuant to which we issued 14,190 shares of its newly created Series B Preferred Stock and 2,256 shares of its newly created Series C Preferred Stock, each at $100 per share for an aggregate purchase price of $1.6 million.

·We closed our Glen Rose, Texas manufacturing facility, and significantly reduced production staffing, overhead and selling general and administrative expenses.

26

·We have developed an operating plan to manage costs in line with estimated total revenues for fiscal 2008, including contingencies for further cost reductions if projected revenue and improvement in operating results are not fully realized.

·We have identified additional financing alternatives, including public or private offerings of equity or debt securities that we plan to pursue if necessary during 2008.

Based on the actions taken to date, and based on our current backlog and projections of future contracts, management believes that existing cash resources, working capital and cash flow from operations will be sufficient to meet our operating and liquidity requirements and that compliance with provisions of the modified promissory note agreements will be maintained during 2008.

Contractual Obligations

The following table represents a list of our future contractual obligations and commitments as of December 31, 2007:

Payments Due By Year Ending December 31,	Debt		Operating Leases		Total
2008		3,000,000		1,290,000		4,290,000
2009		11,354,000		1,300,000		12,654,000
2010		-		1,303,000		1,303,000
2011		-		1,313,000		1,313,000
2012		-		1,227,000		1,227,000
Thereafter		-		12,020,000		12,020,000
	$	14,354,000	$	18,453,000	$	32,807,000

Other than the deferred gain on our sales leaseback transaction of $1.4 million included in other long-term liabilities, we do not have any capital lease obligations or purchase obligations, nor do we have any other form of long-term liabilities, reflected on our consolidated balance sheet under GAAP that are not set forth in the preceding table.

Related Party Transactions

Except as disclosed above under Item 1. Business - Backlog, for the years ended December 31, 2007 and 2006, we had no related party transactions.

Use of Estimates and Critical Accounting Policies

In the preparation of our consolidated financial statements, we are required to make estimates and assumptions that affect the amount of assets, liabilities, revenue and expense reported in the statements. We base our estimates and assumptions on historical experience and other factors believed to be reasonable under the circumstances and continually evaluate our estimates and assumptions, nevertheless, estimates are inherently uncertain and actual results could significantly differ from our estimates. We believe that the following discussion addresses our most significant accounting policies.

Allowances for Contract Adjustments

We maintain allowances for contract adjustments that result from the inability of our customers to make their required payments. Management bases its allowances on analysis of the aging of accounts receivable, by account, at the date of the financial statements, assessments of historical collection trends, and an evaluation of the impact of current economic conditions. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Accrual for Worker’s Compensation Reserve

Prior to July 31, 2006, we were self-insured for workers compensation under a high deductible program. Management bases its accrual estimate on input from the insurance carrier which includes information regarding open and closed cases, historical costs associated with those claims, certain developed costs and an estimate of Incurred But Not Reported (IBNR) claims. Variation from the estimates of future liability claims from the pre-July 31, 2006 claims is not only possible, but probable. The inherent variability may result in actual costs being either above or below the estimates recorded on our consolidated financial statements.

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Revenue Recognition on Construction Contracts

Contracts are recognized using the percentage-of-completion method of accounting and, therefore, take into account the costs, estimated earnings and revenue to date on contracts not yet completed. Revenue recognized is that percentage of the total contract price that cost expended to date bears to anticipated final total cost, based on current estimates of costs to complete. The percentage-of-completion methodology generally results in the recognition of reasonably consistent profit margins over the life of a contract. Cumulative revenues recognized may be less or greater than cumulative costs and profits billed at any point in time during a contract’s term. The resulting difference is recognized as unbilled or deferred revenue.

Any estimation process, including that used in preparing contract accounting models, involves inherent risk. We attempt to reduce the inherent risk relating to revenue and cost estimates in percentage-of-completion models through corporate policy, approval and monitoring processes. Risks relating to project delivery, productivity and other factors are considered in the estimation process. Our estimates of revenues and costs on construction contracts change periodically in the normal course of business due to factors such as productivity and modifications of contractual arrangements. Such changes are reflected in the results of operations as a change in accounting estimate in the period the revisions are determined. Provisions for estimated losses are made in the period in which the loss first becomes apparent.

Revenue Recognition for Other Product Sales

Sales of other products are recognized when products are shipped and the customer takes ownership and assumes risk of loss, collection of the related accounts receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable.

Valuation of the Embedded and Warrant Derivatives

The valuation of our embedded derivatives and warrant derivatives are determined primarily by the Black-Scholes option pricing model. An embedded derivative is a derivative instrument that is embedded within another contract, which under the convertible note (the host contract) includes the right to convert the note by the holder, certain default redemption right premiums and a change of control premium (payable in cash if a fundamental change occurs). In accordance with FASB Statement No. 133, as amended, Accounting for Derivative Instruments and Hedging Activities, these embedded derivatives are marked-to-market each reporting period, with a corresponding non-cash gain or loss charged to the current period. A warrant derivative liability is determined in accordance with Emerging Issues Task Force (“EITF”) Issue No. 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” (“EITF 00-19”). Based on EITF 00-19, warrants which are determined to be classified as derivative liabilities are marked-to-market each reporting period, with a corresponding non-cash gain or loss charged to the current period. The practical effect of this has been that when our stock price increases so does our derivative liability, resulting in a non-cash loss charge that reduces our earnings and earnings per share. When our stock price declines, we record a non-cash gain, increasing our earnings and earnings per share.

To determine the fair value of our embedded derivatives, management evaluates assumptions regarding the probability of certain future events. Other factors used to determine fair value include our period end stock price, historical stock volatility, risk free interest rate and derivative term. The fair value recorded for the derivative liability varies from period to period. This variability may result in the actual derivative liability for a period either above or below the estimates recorded on our consolidated financial statements, resulting in significant fluctuations in other income (expense) because of the corresponding non-cash gain or loss recorded.

New Accounting Standards

In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 requires the use of a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions. We were required to adopt FIN 48 effective January 1, 2007. Only tax positions that meet the more likely than not recognition threshold at the effective date may be recognized upon adoption of FIN 48. Implementation of this new standard did not have a significant impact on our financial position, results of operation or cash flows.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 does not require new fair value measurements but rather defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. We are currently assessing the impact of SFAS 157 on our consolidated financial position and results of operations.

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In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment to FASB Statement No. 115.” This statement permits companies to choose to measure many financial instruments and other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement of accounting for financial instruments. This statement applies to all entities, including not for profit. The fair value option established by this statement permits all entities to measure eligible items at fair value at specified election dates. This statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. We are currently assessing the impact adoption of SFAS No. 159 will have on our consolidated financial statements.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (Revised 2007), “Business Combinations” (“FAS 141(R)”). FAS 141(R) establishes principles and requirements for how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, liabilities assumed, and any noncontrolling interests in the acquiree, as well as the goodwill acquired. Significant changes from current practice resulting from FAS 141(R) include the expansion of the definitions of a “business” and a “business combination.” For all business combinations (whether partial, full or step acquisitions), the acquirer will record 100% of all assets and liabilities of the acquired business, including goodwill, generally at their fair values; contingent consideration will be recognized at its fair value on the acquisition date and, for certain arrangements, changes in fair value will be recognized in earnings until settlement; and acquisition-related transaction and restructuring costs will be expensed rather than treated as part of the cost of the acquisition. FAS 141(R) also establishes disclosure requirements to enable users to evaluate the nature and financial effects of the business combination. FAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We are currently evaluating the potential impact of this statement.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51” (“FAS 160”). FAS 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary, which is sometimes referred to as minority interest, is a third-party ownership interest in the consolidated entity that should be reported as a component of equity in the consolidated financial statements. Among other requirements, FAS 160 requires consolidated statement of operations to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. FAS 160 also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. FAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. We are currently evaluating the potential impact of this statement.

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133,” (“FAS 161”) as amended and interpreted, which requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. Disclosing the fair values of derivative instruments and their gains and losses in a tabular format provides a more complete picture of the location in an entity’s financial statements of both the derivative positions existing at period end and the effect of using derivatives during the reporting period. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. FAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Early adoption is permitted. The Company does not expect SFAS 161 to have a material impact on its financial statements.

Seasonality

Historically, our quarterly revenues have been highest in the second and third quarters of each calendar year because a large number of orders for modular classrooms placed by school districts require that classrooms be constructed, delivered and installed in time for the upcoming new school year which generally commences in September. We have typically been able to add employees as needed to respond to the increases in manufacturing output required by this seasonal demand.

Our first and fourth quarter revenues are typically lower due to greater number of holidays and days of inclement weather during such periods. In addition, our operating margins may vary on a quarterly basis depending upon the mix of revenues between standardized classrooms and higher margin customized classrooms and the timing of the completion of large, higher margin customized contracts.

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We anticipate that the impact of seasonal demand for classrooms will diminish due to the growing impact of multi-year contracts and increased sales outside the traditional classroom market. However, these factors will not fully offset the impact of inclement weather and concentrations of holidays. So although the impact of seasonal demand is expected to be diminished, revenue and margins in the first and fourth quarters will likely be lower than in the second and third quarters.

The following tables present our unaudited quarterly information for each quarter of fiscal years 2007, 2006 and 2005 and reflect the seasonality of our business. In the opinion of management, all necessary adjustments, which consist only of normal and recurring accruals, have been included to fairly present the unaudited quarterly results. This data should be read together with the consolidated financial statements and the notes thereto included elsewhere in this report.

2007:	Fourth Quarter			Third Quarter			Second Quarter			First Quarter
Net sales	$	13,975,000		$	21,817,000		$	24,031,000		$	27,500,000
Gross (loss) profit		(5,253,000	)		(1,207,000	)		(529,000	)		1,089,000
Net (loss) income		(9,345,000	)		(5,163,000	)		(42,928,000	)		528,000
(Loss) earnings per common share:
Basic and diluted	$	(0.44	)	$	(0.24	)	$	(2.00	)	$	0.02

2006:	Fourth Quarter			Third Quarter		Second Quarter			First Quarter
Net sales	$	29,239,000		$	45,583,000	$	44,307,000		$	36,904,000
Gross (loss) profit		(3,692,000	)		2,915,000		2,868,000			2,287,000
Net (loss) income		(50,996,000	)		503,000		(297,000	)		(3,901,000	)
(Loss) earnings per common share:
Basic and diluted	$	(2.59	)	$	0.03	$	(0.02	)	$	(0.23	)

Inflation

We are subject to the effects of changing prices. During the years ended December 31, 2007, 2006 and 2005, there was no significant inflationary impact, but during 2004 we realized dramatic increases in the price of certain commodities used in the production of our products, in particular steel, dimensional lumber and plywood products. Many of our contracts at the time did not allow us to pass these costs on to our customers. While the cost outlook for these and other commodities used in our production is not certain, management believes it can manage these inflationary pressures with sales price adjustments that are allowed by our newer contracts and by actively pursuing internal cost reduction efforts, including improved supply chain and inventory management.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk refers to the risk that a change in the level of one or more market factors such as interest rates, foreign currency exchange rates, or equity prices will result in losses for a certain financial instrument or group of instruments. We are exposed to the risk of increased interest rates on our current debt instruments and the risk of loss on credit extended to our customers. We have issued equity instruments, including warrants and a convertible note which contain certain derivatives which fluctuate, primarily as a result of changes in our stock price.

Interest Rate Risk

We are exposed to the risk of fluctuation in interest rates on our debt instruments. During 2007, we did not use interest rate swaps or other types of derivative financial instruments to hedge our interest rate risk. Our outstanding debt instruments with Laurus Master Fund, Ltd. bear interest at adjustable rates equal to the prime rate as published in the Wall Street Journal, plus 2.5% and 3.75%, respectively. The debt outstanding under these notes entering 2008 is $14.4 million. Therefore, a one-percentage point increase in interest rates would result in an increase in interest expense of approximately $140,000 per annum.

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Credit Risk

Our credit terms generally are “net 30” for dealer accounts and defined by contracts which vary for direct sales. We actively monitor the risk of loss through a variety of control procedures involving senior management. Historically, credit losses have been less than 1.0% of sales and within our expectations.

Derivative Liability Risk

We are exposed to the risk of fair value derivative liability related to outstanding warrants. The fair value of these derivative liabilities is primarily determined by fluctuations in our stock price. As our stock price increases or decreases, the fair value of these derivative liabilities increase or decrease, resulting in a corresponding current period loss or gain to be recognized. Based on the number of outstanding warrants, market interest rates and historical volatility of our stock price as of December 31, 2007, a $1 decrease or increase in our stock price results in a non-cash derivative gain or loss of approximately $0.5 million and $1.0 million, respectively. During 2007, 2006 and 2005, we experienced a $7.7 million non-cash gain, a $7.0 million non-cash gain and a $5.8 million non-cash loss, respectively, on warrant and convertible note embedded derivatives.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements of the Company, along with the notes thereto and the Report of Independent Registered Public Accounting Firm thereon, required to be filed in response to this Item 8 are attached hereto as exhibits under Item 15.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such terms are defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, and because of the material weaknesses discussed below, our Chief Executive Officer and Chief Financial Officer concluded that, as of the December 31, 2007, our disclosure controls and procedures were not effective in ensuring that the information required to be filed or submitted under the Exchange Act is recorded, processed, summarized and reported as specified in the Securities and Exchange Commission’s rules and forms, and accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We believe, however, that the accompanying consolidated financial statements presented in this Annual Report of Form 10-K fairly present the financial condition and results of operations for the fiscal years indicated.

(b) Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems that are determined to be effective can provide only reasonable assurance as to the adequacy and accuracy of financial statement preparation and presentation.

As defined by the Public Company Accounting Oversight Board (“PCAOB”) in Auditing Standard No. 5, an internal control material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements of a company will not be prevented or detected on a timely basis. An internal control significant deficiency is a deficiency, or combination of deficiencies in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company’s financial reporting.

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Our management, under the supervision of and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated and assessed the effectiveness of our internal control over financial reporting as of December 31, 2007, based upon the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). This evaluation and assessment led to the identification of material weaknesses in our internal control over financial reporting.

The identified material weaknesses in our internal control over financial reporting relate to the following matters:

· We lack the necessary depth of personnel with sufficient technical accounting expertise to ensure that the preparation of interim and annual financial statements are without material misstatements.

· Our procedures associated with accounting for our long-term revenue contracts continue to be insufficient to ensure that revenue and costs are properly reflected in our consolidated financial statements.

Because of the material weaknesses described above, our management, under the supervision of and with the participation of our Chief Executive Officer and Chief Financial Officer, concluded that, as of December 31, 2007, our internal control over financial reporting was not effective based on the criteria in Internal Control - Integrated Framework issued by the COSO.

Our plan to remediate those material weakness remaining as of December 31, 2007 is as follows:

· We plan to either hire additional staff for our operational finance teams or utilize outside consulting resources for further documentation, testing and monitoring of key controls.

· We are currently re-evaluating all finance personnel to ensure that appropriate skills and training are maintained in all critical positions.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.

(c) Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the quarter ended December 31, 2007, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None

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PART III.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item is incorporated herein by reference from the definitive proxy statement for our next annual stockholders’ to be filed with the Commission pursuant to Regulation 14A under the Exchange Act within 120 days after the end of our most recently completed fiscal year.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated herein by reference from the definitive proxy statement for our next annual stockholders’ to be filed with the Commission pursuant to Regulation 14A under the Exchange Act within 120 days after the end of our most recently completed fiscal year.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated herein by reference from the definitive proxy statement for our next annual stockholders’ to be filed with the Commission pursuant to Regulation 14A under the Exchange Act within 120 days after the end of our most recently completed fiscal year.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated herein by reference from the definitive proxy statement for our next annual stockholders’ to be filed with the Commission pursuant to Regulation 14A under the Exchange Act within 120 days after the end of our most recently completed fiscal year.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated herein by reference from the definitive proxy statement for our next annual stockholders’ to be filed with the Commission pursuant to Regulation 14A under the Exchange Act within 120 days after the end of our most recently completed fiscal year.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits and Financial Statement Schedules

1 & 2. Index to Financial Statements

The following financial statements and financial statement schedule of the Company, along with the notes thereto and the Report of Independent Registered Public Accounting Firm, are filed herewith, as required by Part II, Item 8 hereof.

Financial Statements

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets – December 31, 2007 and 2006	F-3
Consolidated Statements of Operations – Years Ended December 31, 2007, 2006 and 2005	F-4
Consolidated Statements of Stockholders’ Equity – Years Ended December 31, 2007, 2006 and 2005	F-5
Consolidated Statements of Cash Flows – Years Ended December 31, 2007, 2006 and 2005	F-6
Notes to Consolidated Financial Statements	F-7
Schedule II – Valuation and Qualifying Accounts	F-32

All other financial statement schedules have been omitted because the required information is shown in the consolidated financial statements or notes thereto, the amounts involved are not significant, or the schedules are not applicable.

3. Exhibits

Exhibit
Number	Name of Exhibit
3.1(1)	Certificate of Incorporation of the Company.
3.2(1.1)	Bylaws of the Company.
3.3	Certificate of Amendment of Certificate of Incorporation
4.1	Certificate of Designation of Preferences
4.2	Amended and Restated Certificate of Designation of Preferences
10.1(2)	Company’s 1994 Stock Option Plan.
10.2(2)	Company’s 1996 Stock Option Plan.
10.3(2)	Company’s 1999 Stock Option Plan.
10.4(2)	Company’s 2002 Stock Option Plan.
10.5(3)	Employment Agreement between the Company and Dennis L. Shogren.
10.6(3.1)	Employment Agreement between the Company and Ronald Savona.
10.7(3.2)	Employment Agreement between the Company and Kenneth S. Cragun.
10.8(2)	Separation Agreement between the Company and Evan M. Gruber.

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Exhibit
Number	Name of Exhibit
10.9(2)	Separation Agreement between the Company and Michael G. Rhodes.
10.10(2)	Employment Agreement between the Company and David M. Buckley
10.11(4)	Lease between the Company and Pacific Continental Modular Enterprises, relating to the Barrett property in Perris, California
10.12(4)	Lease between the Company and BMG, relating to the property in Lathrop, California
10.13(5)	Conversion and Repurchase Agreement, dated October 31, 2006
10.14(6)	Securities Purchase Agreement, dated December 31, 2004
10.15(6)	Senior Subordinated Secured Convertible Note, dated December 31, 2004
10.16(6)	Warrant to Purchase Common Stock issued December 31, 2004
10.17(6)	Registration Rights Agreement, dated December 31, 2004
10.18(6)	Pledge and Security Agreement, dated December 31, 2004
10.19(6)	Intercreditor Agreement, dated December 31, 2004
10.20(6)	Amendment and Forbearance Agreement among the Company, Wells Fargo Bank, N.A., Union Bank of California, N.A. and Comerica Bank California, dated December 29, 2004.
10.21(7)	Financing Agreement between the Company and Fortress Credit Corp. as administrative agent, dated February 25, 2005.
10.22(8)	Amendment Number 1 to Industrial Real Estate Lease between Modtech Holdings, Inc. and BMG2 Enterprises, dated July 29, 2005
10.23(8)	Sublease between Modtech Holdings, Inc. and Boise Building Solutions Distribution, L.L.C., dated July 29, 2005
10.24(9)	Securities Purchase Agreement with Peninsula Fund, L.P. and others, dated August 5, 2005
10.25(9)	First Amendment and Waiver of Financing Agreement between Fortress and Modtech Holdings, Inc., dated August 5, 2005
10.26(9)	First Amendment and Restated Registration Rights Agreement, dated August 5, 2005
10.27(9)	Amended and Restated Senior Subordinated Secured Convertible Note, dated August 5, 2005
10.28(9)	Consent, Waiver, Amendment and Exchange Agreement, dated August 5, 2005 (“Waiver”)
10.29(9)	Form of Voting Agreement executed pursuant to Waiver
10.30(9)	Form of Lock Up Letter executed pursuant to the Securities Purchase Agreement, dated August 5, 2005
10.31(9)	Form of Warrant issued pursuant to the Securities Purchase Agreement, dated August 5, 2005
10.32(9)	Warrant for 8,276 shares of common stock, dated August 5, 2005
10.33(10)	Second Amendment of Financing Agreement between Fortress and Modtech Holdings, Inc., dated September 19, 2005

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Exhibit
Number	Name of Exhibit
10.34(11)	Third Amendment of Financing Agreement between Fortress and Modtech Holdings, Inc., dated December 22, 2005
10.35(12)	Intercreditor Agreement with Bank of America, N.A., dated, March 31, 2006
10.36(12)	Loan and Security Agreement with Bank of America, N.A., dated March 31, 2006
10.37(12)	Amendment Agreement, dated March 31, 2006
10.38(13)	Amendment to 2002 Stock Option Plan, dated June 13, 2006
10.39(14)	Exchange of Senior Subordinated Secured Convertible Notes, dated May 3, 2006
10.40(15)	Securities Purchase Agreement with Laurus Master Fund, Ltd. (and attached exhibits), dated October 21, 2006
10.41(15)	Intellectual Property Security Agreement, dated October 31, 2006
10.42(15)	Master Security Agreement with Laurus Master Fund, Ltd., dated October 31, 2006
10.43(15)	Registration Rights Agreement with Laurus Master Fund, Ltd., dated October 31, 2006
10.44(15)	Sale and Purchase Agreement and Joint Escrow Instructions with NL Ventures V, L.P. dated November 1, 2006
10.45(15)	Lease Agreement with NL Ventures V Plant City, L.P. dated November 1, 2006
10.46(16)	Registration Rights Agreement with Amphora Limited, dated October 31, 2006
10.47(16)	Conversion and Repurchase Agreement, dated October 31, 2006
10.48(17)	Amendment and Waiver Agreement with Laurus Master Fund, Ltd., dated December 28, 2006
10.49(17)	Securities Purchase Agreement with Laurus Master Fund, Ltd., dated December 28, 2006
10.50(17)	Secured Term Note issued to Laurus Master Fund, Ltd., dated December 28, 2006
10.51(17)	Common Stock Purchase Warrant issued to Laurus Master Fund, Ltd., dated December 28, 2006
10.52(17)	Amended and Restated Registration Rights Agreement with Laurus Master Fund, Ltd., dated December 28, 2006
10.53	Amendment and Waiver Agreement with Laurus Master Fund, Ltd., Valens Offshore SPV I, Ltd. and Valens U.S. SPV I, LLC, dated February 29, 2008
10.54	Promissory Note issued to Laurus Master Fund, Ltd. in the amount of $634,414.36, dated February 29, 2008
10.55	Promissory Note issued to Valens Offshore SPV I, Ltd. in the amount of $66,602.06, dated February 29, 2008
10.56	Promissory Note issued to Valens U.S. SPV I, LLC in the amount of $48,983.58, dated February 29, 2008
10.57	Common Stock Purchase Warrant issued to Laurus Master Fund, Ltd. for up to 2,537,657 shares of stock, dated February 29, 2008

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Exhibit
Number	Name of Exhibit
10.58	Common Stock Purchase Warrant issued to Valens Offshore SPV I, Ltd. for up to 266,408 shares of stock, dated February 29, 2008
10.59	Common Stock Purchase Warrant issued to Valens U.S. SPV I, LLC for up to 195,935 shares of stock, dated February 29, 2008
10.60	Registration Rights Agreement with Laurus Master Fund, Ltd., dated February 29, 2008
10.61	Registration Rights Agreement with Valens Offshore SPV I, Ltd., dated February 29, 2008
10.62	Registration Rights Agreement with Valens U.S. SPV I, LLC, dated February 29, 2008
10.63	Reaffirmation and Ratification Agreement with Laurus Master Fund, Ltd., Valens Offshore SPV I, Ltd. and Valens U.S. SPV I, LLC, dated February 29, 2008
10.64	Lock-Up Letter Agreement with Laurus Master Fund, Ltd., Valens Offshore SPV I, Ltd. and Valens U.S. SPV I, LLC, dated February 29, 2008
10.65	Subscription Agreement with the "Buyers" (as defined therein), dated March 10, 2008
10.66	Registration Rights Agreement with the Buyers as described in Exhibit 10.63 above, dated March 10, 2008
10.67	Amended and Restated Common Stock Purchase Warrant issued to Laurus Master Fund, Ltd. for up to 2,537,657 shares of stock, dated March 21, 2008
10.68	Amended and Restated Common Stock Purchase Warrant issued to Valens Offshore SPV I, Ltd. for up to 266,408 shares of stock, dated March 21, 2008
10.69	Amended and Restated Common Stock Purchase Warrant issued to Valens U.S. SPV I, LLC for up to 195,935 shares of stock, dated March 21, 2008
23.1	Consent of Independent Registered Public Accounting Firm - Squar, Milner, Peterson, Miranda & Williamson, LLP
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

________________________

(1)	Incorporated by reference to Modtech Holdings, Inc.’s Registration Statement on Form S-4 filed with the Commission on October 27, 1998 (Commission File No. 333-69033).
(1.1)	Incorporated by reference to Modtech Holdings, Inc.’s Form 10-K filed with the Commission on March 15, 2004 (Commission File No. 000-25161).
(2)	Incorporated by reference to Modtech Holdings, Inc.’s Form 10-Q filed with the Commission on November 12, 2004 (Commission File No. 000-25161).
(3)	Incorporated by reference to Modtech Holdings, Inc.’s Form 8-K filed with the Commission on September 22, 2006 (Commission File No. 000-25161).

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(3.1)	Incorporated by reference to Modtech Holdings, Inc.’s Form 8-K filed with the Commission on February 13, 2006 (Commission File No. 000-25161).
(3.2)	Incorporated by reference to Modtech Holdings, Inc.’s Form 8-K filed with the Commission on June 25, 2007 (Commission File No. 000-25161).
(4)	Incorporated by reference to Modtech, Inc.’s Registration Statement on Form S-1 filed with the Commission on June 6, 1990 (Commission File No. 033-35239).
(5)	Incorporated by reference to Modtech Holdings, Inc.’s Form 8-K filed with the Commission on November 1, 2002 (Commission File No. 000-25161).
(6)	Incorporated by reference to Modtech Holdings, Inc.’s Form 8-K filed with the Commission on January 3, 2005 (Commission File No. 000-25161).
(7)	Incorporated by reference to Modtech Holdings, Inc.’s Form 8-K filed with the Commission on March 2, 2005 (Commission File No. 000-25161).
(8)	Incorporated by reference to Modtech Holdings, Inc.’s Form 10-Q/A filed with the Commission on October 17, 2005 (Commission File No. 000-25161).
(9)	Incorporated by reference to Modtech Holdings, Inc.’s Form 8-K filed with the Commission on August 9, 2005 (Commission File No. 000-25161).
(10)	Incorporated by reference to Modtech Holdings, Inc.’s Form 8-K filed with the Commission on September 23, 2005 (Commission File No. 000-25161).
(11)	Incorporated by reference to Modtech Holdings, Inc.’s Form 8-K filed with the Commission on December 29, 2005 (Commission File No. 000-25161).
(12)	Incorporated by reference to Modtech Holdings, Inc.’s Form 10-K filed with the Commission on April 4, 2006 (Commission File No. 000-25161).
(13)	Incorporated by reference to Modtech Holdings, Inc.’s Definitive Proxy Statement filed with the Commission on May 5, 2006 (Commission File No. 000-25161).
(14)	Incorporated by reference to Modtech Holdings, Inc.’s Form 10-Q filed with the Commission on August 14, 2006 (Commission File No. 000-25161).
(15)	Incorporated by reference to Modtech Holdings, Inc.’s Form 10-Q filed with the Commission on November 14, 2006.
(16)	Incorporated by reference to Modtech Holdings, Inc.’s Form 8-K filed with the Commission on November 1, 2006 (Commission File No. 000-25161).
(17)	Incorporated by reference to Modtech Holdings, Inc. Form 8-K filed with the Commission on January 4, 2007 (Commission File No. 000-25161).

38

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	MODTECH HOLDINGS, INC.
Date: April 14, 2008	by:	/s/ DENNIS L. SHOGREN
		Dennis L. Shogren President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been duly signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Capacities	Date
/s/    DENNIS L. SHOGREN  Dennis L. Shogren	Director, President & Chief Officer Executive (Principal Executive Officer)	April 14, 2008
/s/    ROBERT W. CAMPBELL Robert W. Campbell	Director	April 14, 2008
/s/    DANIEL J. DONAHOE Daniel J. Donahoe	Director	April 14, 2008
/s/    STANLEY GAINES Stanley Gaines	Director	April 14, 2008
/s/    CHARLES C. MCGETTIGAN Charles C. McGettigan	Director, Chairman of the Board	April 14, 2008
/s/    MYRON A. WICK III Myron A. Wick III	Director	April 14, 2008
/s/    KENNETH S. CRAGUN Kenneth S. Cragun	Chief Financial Officer (Principal Accounting Officer)	April 14, 2008

39

Index to Consolidated Financial Statements

Financial Statements

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets – December 31, 2007 and 2006	F-3
Consolidated Statements of Operations – Years Ended December 31, 2007, 2006 and 2005	F-4
Consolidated Statements of Stockholders’ Equity – Years Ended December 31, 2007, 2006 and 2005	F-5
Consolidated Statements of Cash Flows – Years Ended December 31, 2007, 2006 and 2005	F-6
Notes to Consolidated Financial Statements	F-7
Schedule II – Valuation and Qualifying Accounts	F-32

All other financial statement schedules have been omitted because the required information is shown in the consolidated financial statements or notes thereto, the amounts involved are not significant, or the schedules are not applicable.

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Modtech Holdings, Inc.

We have audited the accompanying consolidated balance sheet of Modtech Holdings, Inc. and subsidiaries (the “Company”) as of December 31, 2007 and 2006, and the related consolidated statements of operations, shareholders’ equity and cash flows for the years ended December 31, 2007, 2006 and 2005. In connection with our audits of the consolidated financial statements, we have also audited the accompanying financial statement schedule II for the years ended December 31, 2007, 2006 and 2005. These consolidated financial statements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company was not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that were appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Modtech Holdings, Inc. and subsidiaries as of December 31, 2007 and 2006 and the results of their operations and their cash flows for the years ended December 31, 2007, 2006 and 2005 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule for the years ended December 31, 2007, 2006 and 2005, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

At December 31, 2007, the Company was not in compliance with debt covenants of two loans with an aggregate outstanding principal balance of $14.354 million at December 31, 2007. In March 2008, the Company negotiated an agreement with the lender that included, among other provisions, a waiver of its default, a deferral of scheduled principal payments in the aggregate amount of $375,000 per month during the period March 2008 through June 2008, and a modification of the monthly debt covenant requirements during the period March 2008 through June 2008.  See Note 1 for a discussion of this matter.

/s/ Squar, Milner, Peterson, Miranda & Williamson, LLP

San Diego, California

April 14, 2008

F-2

MODTECH HOLDINGS INC. AND SUBSIDIARIES

Consolidated Balance Sheets

	December 31,			December 31,
	2007			2006
Assets
Current assets:
Cash and cash equivalents	$	409,000		$	6,292,000
Restricted cash		3,377,000			9,139,000
Contracts receivable, less allowance for contract adjustments of $2,251,000 and
$2,358,000 in 2007 and 2006, respectively		14,056,000			27,910,000
Costs and estimated earnings in excess of billings on contracts		7,289,000			16,144,000
Inventories		5,923,000			6,282,000
Prepaid assets		617,000			1,032,000
Income tax receivable		8,000			8,000
Insurance receivable		2,955,000			3,535,000
Other current assets		14,000			104,000
Total current assets		34,648,000			70,446,000
Property and equipment, net		9,928,000			11,118,000
Goodwill		-			38,303,000
Debt issuance costs, net		740,000			1,369,000
Other assets		1,904,000			1,574,000
Total assets	$	47,220,000		$	122,810,000
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	13,209,000		$	22,419,000
Accrued compensation		1,221,000			1,613,000
Accrued insurance expense		1,517,000			2,945,000
Provision for estimated losses on contracts		588,000			31,000
Warrant derivative liability		512,000			8,169,000
Accrued warranty		975,000			1,307,000
Accrued sales taxes		666,000			695,000
Other accrued liabilities		813,000			1,430,000
Billings in excess of costs and estimated earnings on contracts		1,686,000			2,009,000
Current maturities of long-term debt, net		1,315,000			3,508,000
Total current liabilities		22,502,000			44,126,000
Long-term debt, net, excluding current portion		10,209,000			10,326,000
Other long-term liabilities		1,437,000			1,517,000
Total liabilities		34,148,000			55,969,000
Commitments and contingencies (Note 17)
Shareholders’ equity:
Series A preferred stock, $0.01 par value. Authorized 5,000,000 shares;
no shares issued and outstanding in 2007 and 2006		-			-
Common stock, $.01 par value. Authorized 55,000,000 shares; issued and
outstanding 21,419,415 and 21,008,855 in 2007 and 2006, respectively		214,000			210,000
Additional paid-in capital		136,706,000			133,571,000
Accumulated deficit		(123,848,000	)		(66,940,000	)
Total shareholders’ equity		13,072,000			66,841,000
Total liabilities and shareholders’ equity	$	47,220,000		$	122,810,000

See accompanying notes to consolidated financial statements.

F-3

MODTECH HOLDINGS INC. AND SUBSIDIARIES

Consolidated Statements of Operations

	Year ended December 31,
	2007			2006			2005
Net sales	$	87,323,000		$	156,033,000		$	230,324,000
Cost of goods sold		93,223,000			151,655,000			221,376,000
Gross (loss) profit		(5,900,000	)		4,378,000			8,948,000
Selling, general and administrative expenses		15,383,000			17,326,000			15,945,000
Impairment loss on goodwill		38,303,000			33,600,000			-
(Gain) loss on sale of property and equipment		(55,000	)		95,000			(6,000	)
Loss from operations		(59,531,000	)		(46,643,000	)		(6,991,000	)
Other (expense) income:
Interest expense		(1,919,000	)		(2,479,000	)		(6,927,000	)
Interest income		238,000			326,000			358,000
Loss on extinguishment of debt		-			(3,421,000	)		-
Gain (loss) on warrant and embedded derivatives		7,657,000			6,959,000			(5,804,000	)
Amortization of debt costs		(628,000	)		(1,384,000	)		(1,037,000	)
Accretion of convertible debt discount		(2,827,000	)		(3,740,000	)		(1,064,000	)
Early debt conversion fee		-			(4,716,000	)		-
Other income, net		102,000			407,000			361,000
		2,623,000			(8,048,000	)		(14,113,000	)
Loss before income tax benefit		(56,908,000	)		(54,691,000	)		(21,104,000	)
Income tax benefit		-			-			-
Net loss	$	(56,908,000	)	$	(54,691,000	)	$	(21,104,000	)
Basic and diluted loss per common share	$	(2.66	)	$	(2.96	)	$	(1.35	)
Basic and diluted weighted-average common shares outstanding		21,355,000			18,465,000			15,682,000

See accompanying notes to consolidated financial statements.

F-4

MODTECH HOLDINGS INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

								Retained Earnings
	Common Stock				Additional			(Accumulated			Shareholders'
	Shares		Amount		Paid-in Capital			Deficit)			Equity
Balance, December 31, 2004		14,479,082	$	145,000	$	83,575,000		$	8,855,000		$	92,575,000
Private placement of common stock		2,046,000		20,000		11,609,000			-			11,629,000
Equity issuance costs		-		-		(578,000	)		-			(578,000	)
Warrant derivatives issued
with private placement		-		-		(2,448,000	)		-			(2,448,000	)
Exercise of options, including tax
benefit of $290,000		537,137		5,000		4,482,000			-			4,487,000
Net loss		-		-		-			(21,104,000	)		(21,104,000	)
Balance, December 31, 2005		17,062,219		170,000		96,640,000			(12,249,000	)		84,561,000
Equity issuance costs		-		-		(63,000	)		-			(63,000	)
Reclassification of embedded and
warrant derivatives from
liabilities to equity		-		-		4,915,000			-			4,915,000
Record beneficial conversion feature
of convertible debt issuance		-		-		581,000			-			581,000
Exercise of options		376,804		4,000		3,367,000			-			3,371,000
Exercise of warrants		325,000		3,000		2,597,000			-			2,600,000
Stock-based compensation expense		-		-		1,166,000			-			1,166,000
Convertible notes converted into
shares of common stock		3,055,643		31,000		19,654,000			-			19,685,000
Common shares issued as payment
of debt conversion premium		189,189		2,000		1,862,000			-			1,864,000
Non-cash inducement fee		-		-		2,852,000			-			2,852,000
Net loss		-		-		-			(54,691,000	)		(54,691,000	)
Balance, December 31, 2006		21,008,855		210,000		133,571,000			(66,940,000	)		66,841,000
Stock-based compensation expense		-		-		1,674,000			-			1,674,000
Convertible notes converted into
shares of common stock		410,560		4,000		1,461,000			-			1,465,000
Net loss		-		-		-			(56,908,000	)		(56,908,000	)
Balance, December 31, 2007		21,419,415	$	214,000	$	136,706,000		$	(123,848,000	)	$	13,072,000

See accompanying notes to consolidated financial statements.

F-5

MODTECH HOLDINGS INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

	Year Ended December 31,
	2007			2006			2005
Cash flows from operating activities:
Net loss	$	(56,908,000	)	$	(54,691,000	)	$	(21,104,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on abandonment of leasehold improvements		-			178,000			979,000
Depreciation and amortization		2,232,000			2,386,000			2,862,000
Provision for contract adjustments		1,354,000			3,222,000			731,000
Write-off of allowance for contract adjustments		(1,461,000	)		(1,480,000	)		(1,641,000	)
Write-off of debt issuance costs		-			748,000			-
Loss on extinguishment of debt		-			3,421,000			-
Impairment loss on goodwill		38,303,000			33,600,000			-
(Gain) loss on sale of equipment		(55,000	)		95,000			(6,000	)
Stock compensation expense		1,674,000			1,166,000			-
Non-cash interest expense		-			-			1,150,000
(Gain) loss on warrant and embedded derivative liability		(7,657,000	)		(6,959,000	)		5,804,000
Accretion of debt discount		2,827,000			3,740,000			1,064,000
Early debt conversion fees settled with shares of common stock		-			4,716,000			-
Decrease (increase) in assets:
Restricted cash		1,297,000			334,000			-
Contracts receivable		13,961,000			11,035,000			(1,600,000	)
Costs and estimated earnings in excess of billings		8,855,000			(94,000	)		(6,777,000	)
Inventories		359,000			5,765,000			1,556,000
Income tax receivable		-			(2,000	)		5,162,000
Other current and non-current assets		755,000			(3,335,000	)		(359,000	)
(Decrease) increase in liabilities:
Accounts payable		(9,210,000	)		(3,268,000	)		5,403,000
Accrued compensation		(392,000	)		(1,021,000	)		(580,000	)
Accrued insurance expense		(1,428,000	)		(743,000	)		(714,000	)
Provision for estimated losses on contracts		557,000			(3,759,000	)		(508,000	)
Accrued sales taxes		(29,000	)		(289,000	)		(342,000	)
Accrued warranty		(332,000	)		377,000			162,000
Other accrued liabilities		(617,000	)		(854,000	)		1,222,000
Billings in excess of costs		(323,000	)		(1,800,000	)		(618,000	)
Net cash used in operating activities		(6,238,000	)		(7,512,000	)		(8,154,000	)
Cash flows from investing activities:
Proceeds from sale of equipment		556,000			4,352,000			118,000
Purchase of property and equipment		(994,000	)		(1,350,000	)		(1,897,000	)
Net cash (used in) provided by investing activities		(438,000	)		3,002,000			(1,779,000	)
Cash flows from financing activities:
Net principal payments under revolving credit line		-			(4,819,000	)		(19,379,000	)
Principal payments on long-term debt		(3,672,000	)		(20,895,000	)		(13,105,000	)
Proceeds from issuance of long-term debt		-			23,000,000			27,898,000
Decrease (increase) in restricted cash		4,465,000			6,979,000			(6,452,000	)
Payment of debt issuance costs		-			(2,634,000	)		(2,813,000	)
Net proceeds from issuance of common stock		-			5,908,000			15,248,000
Net cash provided by financing activities		793,000			7,539,000			1,397,000
Net (decrease) increase in cash and cash equivalents		(5,883,000	)		3,029,000			(8,536,000	)
Cash and cash equivalents at beginning of period		6,292,000			3,263,000			11,799,000
Cash and cash equivalents at end of period	$	409,000		$	6,292,000		$	3,263,000
Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,751,000		$	3,167,000		$	5,089,000
Cash paid for taxes	$	-		$	-		$	-
Non-cash financing and investing activities:
Derivative liability recorded in connection with warrants	$	-		$	6,781,000		$	2,448,000
Reclassification of derivative liabilities to equity	$	-		$	4,915,000		$	-
Beneficial conversion discount recorded in connection with convertible debt	$	-		$	581,000		$	-
Conversion of convertible debt to common stock	$	1,465,000		$	19,685,000		$	-

See accompanying notes to consolidated financial statements.

F-6

MODTECH HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1) Description of Business and Basis of Presentation

Description of Business

Modtech Holdings, Inc. and its subsidiaries (“Modtech”, “we”, “our”, or the “Company”) design, manufacture, market and install modular and relocatable classrooms, commercial and light industrial modular buildings, and custom residential modular houses.

Our classrooms are sold primarily to California school districts. Our modular classrooms include standardized units prefabricated at our manufacturing facilities, as well as customized units that are modular in design but constructed on site using components we manufacture. We also sell both standard and custom classrooms outside California, principally in Florida and Nevada.

We also design and manufacture modular, portable buildings to customer specifications for a wide array of uses, including governmental, military, healthcare, educational, airport and correctional facilities; office and retail space; daycare centers, libraries, churches, construction trailers, golf clubhouses, police stations, convenience stores, fast food restaurants, sales offices, motels and custom single family houses. The buildings are sold direct through an internal sales group, through leasing companies and through a dealer network to a wide range of end users.

Liquidity

As of December 31, 2007 we had cash and cash equivalents of $0.4 million and positive working capital of $12.1 million. For the year ended December 31, 2007 we had a net loss of $56.9 million (including an impairment loss on goodwill of $38.3 million) and negative cash flow from operating activities of $6.2 million, and as of December 31, 2007 had an accumulated deficit of $123.8 million.

As of December 31, 2007, we were not in compliance with all covenants with our lender Laurus Master Fund, Ltd. (“Laurus”) and two of its related entities. In March 2008, we entered into an agreement with Laurus and its two related entities pursuant to which we obtained a waiver of the event of default and restructured certain other provisions of the promissory notes issued to Laurus in 2006, as further described below and in Note 21.

Management has taken the following actions, among others to address liquidity and operating performance issues:

· As discussed above, in March 2008 we entered into an amendment and waiver agreement with Laurus and its related entities. Pursuant to the waiver, we issued warrants to purchase 3,000,000 shares of Modtech’s common stock at an exercise price of $0.40 per share and additional promissory notes in the aggregate principal amount of $750,000, on which the principal amount plus related interest are due and payable on December 29, 2009. In return Laurus and its related entities agreed to defer principal payments of $375,000 per month for the period March 1, 2008 through June 30, 2008, for a total deferral of $1.5 million, temporarily eliminate the covenant to maintain on a monthly basis at least $9 million in cash and eligible accounts receivable (the “Minimum Balance”) as of December, 31, 2007 through February 29, 2008, reduce the Minimum Balance from $9 million to $5.4 million for the period March 1, 2008 through March 31, 2008 and to $6.6 million for the period April 1, 2008 through June 30, 2008. The monthly interest payments of approximately $110,000 per month will continue without deferral or abatement and, commencing July 1, 2008, the monthly principal payments will resume and the Minimum Balance will again be $9 million.

· On March 10, 2008, we completed an equity financing with existing stockholders, new investors and current directors and executives of the company, pursuant to which we issued 14,190 shares of its newly created Series B Preferred Stock and 2,256 shares of its newly created Series C Preferred Stock, each at $100 per share for an aggregate purchase price of $1.6 million.

· We closed our Glen Rose, Texas manufacturing facility, and significantly reduced production staffing, overhead and selling general and administrative expenses.

F-7

· We have developed an operating plan to manage costs in line with estimated total revenues for fiscal 2008, including contingencies for further cost reductions if projected revenue and improvement in operating results are not fully realized.

· We have identified additional financing alternatives, including public or private offerings of equity or debt securities that we plan to pursue if necessary during 2008.

Based on the actions taken to date, and based on our current backlog and projections of future contracts, management believes that existing cash resources, working capital and cash flow from operations will be sufficient to meet our operating and liquidity requirements and that compliance with provisions of the modified promissory note agreements will be maintained during 2008.

2) Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the financial statements of Modtech Holdings, Inc. and its subsidiaries - Innovative Modular Structures, Inc., Trac Modular Manufacturing, Inc., Miller Acquisition Corp. and Modtech Merger Corp. All subsidiaries have been dormant during all periods presented, and as such there were no significant intercompany balances or transactions that required elimination in consolidation.

Use of Estimates

Preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, restricted cash, contracts receivable, costs and estimated earnings in excess of billings on contracts, prepaid and other assets, accounts payable, accrued liabilities, and billings in excess of estimated earnings on contracts are measured at cost which approximates their fair value due to the short maturity period of the instruments. The carrying amount of debt agreements approximate their fair value because the interest rate on these instruments fluctuates with market interest rates. The outstanding warrant derivatives have a fair value of $0.5 million at December 31, 2007. The estimated fair value of these amounts has been determined using available market information and appropriate valuation methodologies.

Concentrations of Credit Risks

Cash is maintained at various financial institutions. The Federal Deposit Insurance Corporation (“FDIC”) insures accounts at each financial institution for up to $100,000. At times, cash may be in excess of the FDIC insurance limit of $100,000. The Company had $4.8 million and $18.1 million uninsured bank balances at December 31, 2007 and 2006, respectively. These uninsured amounts include $3.4 million and $9.1 million in restricted cash at December 31, 2007 and 2006, respectively, and checks totaling $1.3 million and $2.9 million at December 31, 2007 and 2006, respectively, that had been issued by the Company but which had not yet cleared the bank.

The Company sells products to customers in California, Florida, Arizona, Nevada and other neighboring states. We market and sell our products primarily to school districts, with a high concentration of sales to California school districts. The Company’s ability to collect contract receivables is affected by economic fluctuations in the geographic areas and markets served by the Company. Although the Company does not obtain collateral with which to secure its contracts receivable, management periodically reviews contracts receivable and assesses the financial strength of its customers and, as a consequence, believes that the receivable credit risk exposure could, at times, be material to the financial statements.

F-8

Risks and Uncertainties

The Company operates in an industry that is subject to intense competition. The Company’s operations are subject to significant risks and uncertainties including financial, operational, technological and other risks associated with operating a business including the potential risk of business failure.

Revenue Recognition

Construction Contracts

Construction contracts are recognized using the percentage-of-completion method of accounting and, therefore, take into account the costs, estimated earnings and revenue to date on contracts not yet completed. Revenue recognized is that percentage of the total contract price that cost expended to date bears to anticipated final total cost, based on current estimates of costs to complete.

Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation costs. Selling, general, and administrative costs are charged to expense as incurred. At the time a loss on a contract becomes known, the entire amount of the estimated ultimate loss is recognized in the consolidated financial statements.

Claims for additional contract costs are recognized upon a signed change order from the customer or in accordance with paragraphs 62 and 65 of the AICPA’S Statement of Position (“SOP”) 81-1, “Accounting for Performance of Construction - Type and Certain Production - Type Contracts” (“SOP 81-1”).

The current asset, “Costs and estimated earnings in excess of billings on contracts,” represents revenues recognized in excess of amounts billed. The current liability, “Billings in excess of costs and estimated earnings on contracts,” represents billings in excess of revenues recognized.

The Company accounts for shipping and handling fees and costs in accordance with Emerging Issues Task Force (“EITF”) Issue No. 00-10 “Accounting for Shipping and Handling Fees and Costs.” Such fees and costs incurred by the Company are immaterial to the operations of the Company.

In accordance with SFAS 48, “Revenue Recognition when Right of Return Exists,” revenue is recorded net of an estimate of markdowns, price concessions and warranty costs. Such reserve is based on management’s evaluation of historical experience, current industry trends and estimated costs.

Allowances for Contract Adjustments

We maintain allowances for contract adjustments that result from the inability of our customers to make their required payments. Management bases its allowances on analysis of the aging of accounts receivable, by account, at the date of the financial statements, assessments of historical collection trends, and an evaluation of the impact of current economic conditions. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Other Products

Sales of other products are recognized when products are shipped and the customer takes ownership and assumes risk of loss, collection of the related accounts receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable.

Reporting of Taxes Included in Sales

The Company has historically presented and will continue to present sales taxes on a gross sales basis. For the years ended December 31, 2007, 2006 and 2005, such amounts totaled $1,326,000, $1,121,000 and $2,361,000, respectively.

F-9

Cash and cash equivalents

We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. All cash and cash equivalents are held in United States (U.S.) financial institutions.

Restricted cash

Restricted cash as of December 31, 2007 includes $3.0 million in cash collateral required for certain letters of credit and $0.4 million in an escrow account related to a settlement agreement. The amounts as of December 31, 2007 are classified as current assets.

Restricted cash as of December 31, 2006 consists of $7.5 million in cash collateral required for certain letters of credit and $1.7 million in cash collateral related to the promissory notes issued to Laurus Master Fund, Ltd. (Note 8) for the payment of interest. The amounts as of December 31, 2006 are classified as current assets. The $1.7 million balance of restricted cash at December 31, 2006 reflects the release of approximately $334,000 of previously restricted cash, which was used by the Company to pay interest payments in 2006.

Inventories

Inventories are valued at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method.

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization are calculated using the straight-line and accelerated methods over the following estimated useful lives (for leasehold improvements, over the shorter of the estimated useful life or term of the lease):

Buildings	15 to 39 years
Land and building improvements	5 to 39 years
Leasehold improvements	5 to 30 years
Machinery and equipment	5 to 20 years
Office equipment	3 to 7 years
Trucks and automobiles	3 to 5 years

Goodwill

Goodwill represents the excess of costs over fair value of assets of businesses acquired. We adopted the provisions of Financial Accounting Standards Board (“FASB”) Statement No. 142, “Goodwill and Other Intangible Assets”, as of January 1, 2002. Pursuant to Statement 142, goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. Statement 142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with FASB Statement No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets.”

Goodwill is tested annually for impairment, and is tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. This determination is made at the reporting unit level and consists of two steps. First, we determine the fair value of a reporting unit and compare it to its carrying amount. Second, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation, in accordance with FASB Statement No. 141, “Business Combinations.” The residual fair value after this allocation is the implied fair value of the reporting unit goodwill. We recorded goodwill impairment losses for the years ended December 31, 2007 and 2006 (See Note 7). There was no goodwill impairment recorded for the year ended December 31, 2005.

F-10

Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet. We recorded an impairment charge of $0.1 million for the year ended December 31, 2006 due to the closure of our manufacturing facility located in Glen Rose, Texas (See Note 6). We have recorded no impairment losses for the years ended December 31, 2007 and 2005.

Warranty

The Company provides a warranty on certain products sold. Estimated future warranty obligations related to certain products and services are provided by charges to operations in the period in which the related revenue is recognized. At December 31, 2007 and 2006, the warranty obligation was $975,000 and $1,307,000, respectively.

Debt Issuance Costs

Debt issuance costs are deferred and amortized over the term of the credit facility using the effective interest method (See Note 8).When a loan is paid in full (or converted or extinguished), any unamortized financing costs are removed from the related accounts and expensed.

Warrant Derivative Liability

The Company accounts for warrants issued in connection with financing arrangements in accordance with EITF Issue No. 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock) (“EITF 00-19”). Pursuant to EITF 00-19, an evaluation of specifically identified conditions is made to determine whether the fair value of warrants issued is required to be classified as a derivative liability. The fair value of warrants classified as derivative liabilities is adjusted for changes in fair value at each reporting period, and the corresponding non-cash gain or loss is recorded in current period earnings.

Beneficial Conversion Feature of Convertible Notes Payable

The convertible feature of certain notes payable provides for a rate of conversion that is below market value. Such feature is normally characterized as a “Beneficial Conversion Feature” (“BCF”). Pursuant to EITF Issue No. 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratio,” EITF No. 00-27, “Application of EITF Issue No. 98-5 To Certain Convertible Instruments” and APB 14 “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants,” the estimated fair value of the BCF is recorded in the consolidated financial statements as a discount from the face amount of the notes. Such discounts are amortized to accretion of convertible debt discount over the term of the notes (or conversion of the notes, if sooner).

Stock-based Compensation

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”) that addresses the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for equity instruments of the enterprise or liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. SFAS 123R eliminates the ability to account for share-based compensation transactions using the intrinsic value method under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”(“APB 25”), and generally requires instead that such transactions be accounted for using a fair-value-based method. We adopted SFAS 123R beginning January 1, 2006.

F-11

SFAS 123R requires the use of a valuation model to calculate the fair value of stock-based awards. We have elected to use the Black-Scholes-Merton (“BSM”) pricing model to determine the fair value of stock options on the dates of grant, consistent with that used for pro forma disclosures under SFAS No. 123, “Accounting for Stock-Based Compensation.” Restricted Stock grants are measured based on the fair market values of the underlying stock on the dates of grant.

We have elected the modified prospective transition method as permitted by SFAS 123R, and accordingly, prior periods have not been restated to reflect the impact of SFAS 123R. Under this method, we are required to recognize stock-based compensation for all new and unvested stock-based awards that are ultimately expected to vest as the requisite service is rendered beginning January 1, 2006. Stock-based compensation is measured based on the fair values of all stock-based awards on the dates of grant. As a result of adopting SFAS No. 123R on January 1, 2006, our net loss and basic and diluted loss per common share for the year ended December 31, 2006 were $1.2 million and $(0.06) per share higher, respectively, than if we had continued to account for stock based compensation under APB Opinion No. 25.

Prior to the adoption of SFAS 123R, we accounted for our employee stock-based compensation using the intrinsic value method prescribed by APB 25. We applied below the disclosure provisions of SFAS 123, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure,” as if the fair value method had been applied. If this method had been used, our net income and net income per share for the years ended December 31, 2005 would have been adjusted to the pro forma amounts below (in thousands, except per share data):

	2005
Net loss
As reported	$	(21,104,000	)
Deduct stock-based compensation expense determined under fair-value based method, net of tax		(425,000	)
Pro forma	$	(21,529,000	)
Basic and diluted loss per common share
As reported	$	(1.35	)
Pro forma	$	(1.37	)

For purposes of the above pro forma calculation, the value of each option granted through December 31, 2005 was estimated on the date of grant using the BSM pricing model with the weighted-average assumptions as follows:

Expected dividend yield	0	%
Average risk-free interest rate	4.0	%
Expected volatility	41.17	%
Expected life of options (in years)	4 years

Advertising

The Company expenses the cost of advertising when incurred as selling expense in the accompanying consolidated statements of operations. Advertising expenses were approximately $0.1 million, $0.1 million and $0.2 million for the years ended December 31, 2007, 2006 and 2005, respectively.

Research and Development Costs

Research and development costs are expensed as incurred.

(Loss) Earnings per Share

We account for (loss) earnings per share in accordance with Statement No. 128, “Earnings per Share.” This Statement requires the presentation of both basic and diluted net (loss) income per share for financial statement purposes. Basic net (loss) income per share is computed by dividing (loss) income available to common stockholders by the weighted average number of common shares outstanding. Diluted net (loss) income per share includes the effect of the potential common shares outstanding.

F-12

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Due to our cumulative losses for the three years ended December 31, 2007, we provided for a full valuation allowance on our net deferred tax assets, reducing these to zero. This valuation allowance and the amount of the deferred tax assets considered realizable could change if projected future taxable income is realized.

Segment Information

We apply the provisions of Statement No. 131, “Disclosures about Segments of an Enterprise and Related Information.” Statement No. 131 establishes standards for reporting financial and descriptive information about an enterprise’s operating segments in its annual consolidated financial statements and selected segment information in interim financial reports. In 2007, 2006 and 2005, we had one operating segment and in accordance with Statement No. 131, only enterprise-wide disclosures have been provided.

Reclassification

Certain amounts in the 2006 and 2005 consolidated financial statements have been reclassified to conform to the 2007 presentation.

Comprehensive (Loss) Income

We have no components of other comprehensive (loss) income. Accordingly, comprehensive (loss) income is the same as net (loss) income for each period presented.

Recent Accounting Pronouncements

Uncertainty in Income Taxes

In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 requires the use of a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions. We were required to adopt FIN 48 effective January 1, 2007. Only tax positions that meet the more likely than not recognition threshold at the effective date may be recognized upon adoption of FIN 48. Implementation of this new standard did not have a significant impact on our financial position, results of operation or cash flows.

Fair Value Measurements

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 does not require new fair value measurements but rather defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. We are currently assessing the impact of SFAS 157 on our consolidated financial position and results of operations.

The Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment to FASB Statement No. 115.” This statement permits companies to choose to measure many financial instruments and other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement of accounting for financial instruments. This statement applies to all entities, including not for profit. The fair value option established by this statement permits all entities to measure eligible items at fair value at specified election dates. This statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. We are currently assessing the impact adoption of SFAS No. 159 will have on our consolidated financial statements.

F-13

Business Combinations

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (Revised 2007), “Business Combinations” (“FAS 141(R)”). FAS 141(R) establishes principles and requirements for how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, liabilities assumed, and any noncontrolling interests in the acquiree, as well as the goodwill acquired. Significant changes from current practice resulting from FAS 141(R) include the expansion of the definitions of a “business” and a “business combination.” For all business combinations (whether partial, full or step acquisitions), the acquirer will record 100% of all assets and liabilities of the acquired business, including goodwill, generally at their fair values; contingent consideration will be recognized at its fair value on the acquisition date and, for certain arrangements, changes in fair value will be recognized in earnings until settlement; and acquisition-related transaction and restructuring costs will be expensed rather than treated as part of the cost of the acquisition. FAS 141(R) also establishes disclosure requirements to enable users to evaluate the nature and financial effects of the business combination. FAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We are currently evaluating the potential impact of this statement.

Noncontrolling Interests in Consolidated Financial Statements

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51” (“FAS 160”). FAS 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary, which is sometimes referred to as minority interest, is a third-party ownership interest in the consolidated entity that should be reported as a component of equity in the consolidated financial statements. Among other requirements, FAS 160 requires consolidated statement of operations to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. FAS 160 also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. FAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. We are currently evaluating the potential impact of this statement.

Disclosures about Derivative Instruments and Hedging Activities

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133,” (“FAS 161”) as amended and interpreted, which requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. Disclosing the fair values of derivative instruments and their gains and losses in a tabular format provides a more complete picture of the location in an entity’s financial statements of both the derivative positions existing at period end and the effect of using derivatives during the reporting period. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. FAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Early adoption is permitted. The Company does not expect SFAS 161 to have a material impact on its financial statements.

F-14

3) Contracts Receivable, Net

Contracts receivable consisted of customer billings for:

	2007			2006
Completed contracts	$	6,255,000		$	11,009,000
Contracts in progress		5,620,000			11,665,000
Retentions		4,432,000			7,594,000
		16,307,000			30,268,000
Less allowance for contract adjustments		(2,251,000	)		(2,358,000	)
	$	14,056,000		$	27,910,000

Contracts receivable at December 31, 2007 and 2006 include $2.2 million and $3.5 million, respectively, of unapproved change orders that have been included in revenue in accordance with provisions of SOP 81-1.

4) Costs and Estimated Earnings in Excess of Billings on Contracts

Customer billing is determined by the “schedule of values” in accordance with contract terms as agreed to by all parties. Timing differences between costs incurred and billings based on the contract terms generate the costs and estimated earnings in excess of billings.

Net costs and estimated earnings in excess of billings on contracts consisted of:

	2007			2006
Net costs and estimated earnings on uncompleted contracts	$	102,568,000		$	105,993,000
Billings to date		(98,000,000	)		(93,819,000	)
		4,568,000			12,174,000
Net under billed receivables from completed contracts		1,035,000			1,961,000
	$	5,603,000		$	14,135,000

These amounts are shown in the accompanying consolidated balance sheets under the following captions:

	2007			2006
Costs and estimated earnings in excess of billings on uncompleted contracts	$	6,128,000		$	14,183,000
Costs and estimated earnings in excess of billings on completed contracts		1,161,000			1,961,000
Costs and estimated earnings in excess of billings on contracts		7,289,000			16,144,000
Billings in excess of costs and estimated earnings on uncompleted contracts		(1,560,000	)		(2,009,000	)
Billings in excess of costs and estimated earnings on completed contracts		(126,000	)		-
Billings in excess of costs and estimated earnings on contracts		(1,686,000	)		(2,009,000	)
	$	5,603,000		$	14,135,000

F-15

5) Inventories

Inventories consist of:

	2007		2006
Raw materials	$	4,715,000	$	5,076,000
Work-in-process		584,000		829,000
Finished goods		624,000		377,000
	$	5,923,000	$	6,282,000

6) Property and Equipment, Net

Property and equipment, net consists of:

	2007			2006
Leasehold improvements	$	13,404,000		$	12,919,000
Machinery and equipment		4,690,000			4,898,000
Office equipment		3,904,000			3,386,000
Land		-			-
Construction-in-progress		349,000			868,000
Trucks and automobiles		745,000			763,000
Buildings		253,000			60,000
Land and building improvements		-			413,000
		23,345,000			23,307,000
Less accumulated depreciation and amortization		(13,417,000	)		(12,189,000	)
	$	9,928,000		$	11,118,000

In the first quarter of 2007, we closed our manufacturing facility located in Glen Rose, Texas as a result of reduced demand for our products in that State. A substantial portion of the fixed assets were transferred to our other manufacturing facilities. We sold the buildings we owned and some of the related machinery at that location. We reduced the carrying amount of certain machinery with an impairment charge of $0.1 million for the year ended December 31, 2006 which is included in loss (gain) on sale of property and equipment in the accompanying consolidated statements of operations. As a result, the carrying amount of property and equipment held for sale and classified in property and equipment in the accompanying consolidated balance sheet totaled $0.5 million at December 31, 2006.

Total depreciation expense for the years ended December 31, 2007, 2006 and 2005 was $1,683,000, $1,736,000 and $1,799,000, respectively.

7) Goodwill

During the fourth quarter of 2006, our stock price declined significantly. As a result of this, significant operating losses and other indicators, we performed an initial impairment test at December 31, 2006 to determine if the value of goodwill was recoverable under the provisions of SFAS 142, and it was determined that an impairment existed. During the fourth quarter of 2006, we made an estimate of the impairment and recorded a non-cash impairment charge of $33.6 million to reduce our carrying value of goodwill to its implied fair value. Our initial estimate was based on the trading price of our stock and the present value of future cash flows. This estimated impairment charge recorded during the fourth quarter of 2006 represented, at the time, management’s best estimate available until a final independent measurement of impairment could be completed.

During the three months ended June 30, 2007, we completed the independent measurement of goodwill impairment, resulting in a determination that the remaining balance of goodwill was fully impaired. We performed the two step analysis required under SFAS 142 with the assistance of an independent third party appraiser. In the first step of the goodwill fair value determination, a revised reporting unit fair value was determined. This updated reporting unit fair value resulted from a combination of market approaches and an updated present value of future cash flows. Under the second step of goodwill fair value determination, this revised reporting unit fair value was then allocated to the underlying fair value of recorded assets and liabilities, in a manner similar to a purchase price allocation in accordance with SFAS 141. This allocation resulted in no remaining residual fair value to be implied for the reporting unit goodwill. As a result of this independent goodwill impairment measurement, we recognized an impairment loss of $38,303,000 to write down the carrying value of goodwill to zero during the three month period ended June 30, 2007 and the year ended December 31, 2007.

F-16

8) Long-term Debt

Long-term debt consists of the following:

	2007			2006
Convertible Note due in 2009		-			1,466,000
Term Loans due in 2009		14,354,000			18,000,000
Long-term debt		14,354,000			19,466,000
Less: unamortized discount on Notes		(2,830,000	)		(5,632,000	)
Long-term debt, net		11,524,000			13,834,000
Less: current portion of Term Loans, net		(1,315,000	)		(2,621,000	)
Less: current portion of Convertible Note, net		-			(887,000	)
Long-term debt	$	10,209,000		$	10,326,000

The aggregate maturities of long-term debt for each of the five years and thereafter subsequent to December 31, 2007 are as follows:

Year Ending December 31,	Debt
2008	$	3,000,000
2009		11,354,000
2010		-
2011		-
2012		-
Thereafter		-
	$	14,354,000

Term Loans

We have two term notes as of December 31, 2007 (the “Term Loans”) with an aggregate principal balance of approximately $14.4 million as of that date. The Term Loans are held by Laurus Master Fund, Ltd. (“Laurus”), Valens U.S. SPV I, LLC (“Valens U.S.”) and Valens Offshore SPV I, Ltd (“Valens Offshore”). The original principal amounts of the Term Loans were $5 million and $13 million, respectively, and were originally issued on December 28, 2006 and October 31, 2006, respectively. The $5 million term note and the $13 million term note bear interest at an adjustable rate equal to the prime rate as published in the Wall Street Journal, plus 2.5% and 3.75%, respectively (the “Contract Rates”). These interest rates will be adjusted with each adjustment in the prime rate. Principal payments of $271,000 commenced under the $13 million term note on February 28, 2007 and continue on the same day of each month thereafter. Principal payments of $104,000 commenced under the $5 million term note to Laurus on April 1, 2007 and continue on the same day of each month thereafter. The maturity dates of the $13 million term note and the $5 million term note are October 31, 2009 and December 28, 2009, respectively. The Term Loans may be prepaid in whole, but not in part or separately, at any time by paying Laurus 124% of the then aggregate outstanding principal balance and accrued interest. The Term Loans are secured by substantially all of our assets.

Amounts owed under the Term Loans may be accelerated and are subject to default rate interest charges under various circumstances, including, but not limited to, the failure to make principal or interest payments when due under the Term Loans, breaches of certain covenants, representations, conditions and warranties set forth in the Term Loans and the purchase agreement pursuant to which they were issued, including, without limitation, the failure to maintain on a monthly basis at least $9 million in cash and eligible accounts receivable (the “Minimum Balance”), the occurrence of certain insolvency or bankruptcy events affecting us, a change of control in the Company, and certain judgments, liens and attachments in excess of permitted amounts. As of December 31, 2007, we were not in compliance with all covenants. However, on March 4, 2008 we entered into an amendment and waiver agreement with Laurus, Valens U.S. and Valens Offshore (Note 21). This amendment and waiver agreement temporarily eliminated the Minimum Balance requirement as of December 31, 2007.

F-17

The purchase agreement pursuant to which the Term Loans were issued contains certain negative covenants, including, without limitation, restrictions on our ability to, among other things, pay dividends, incur debt, or change our business.

Conversion of Debt

We also issued a $5 million convertible note (“Convertible Note”) to Laurus in October 31, 2006, of which $3.5 million of the principal amount was partially converted into 990,000 shares of common stock in December 2006. The remaining convertible note principal balance of $1.5 million was converted into 410,560 shares of common stock in February 2007. Upon the conversion of the remaining balance of the convertible note, we accelerated the accretion of debt discount amortization of $0.5 million and amortization of debt issuance costs of $0.1 million and recognized a charge of $0.6 million during the three months ended March 31, 2007. The Convertible Note had the same interest rate terms as the $5 million term note issued on December 28, 2006.

We deposited $2.0 million in a restricted account with North Fork Bank in connection with the issuance of the $5 million convertible note and the $13 million term note from which to pay the first year’s interest on the notes. The deposit was equivalent to one year’s interest on both notes at the Contract Rates when the notes were first issued. Interest on the notes is payable monthly. The balance of the restricted account was used to pay monthly interest on the Term Loans in 2007. As of December 31, 2007, there was no restricted cash on deposit with North Fork Bank.

2006 Securities Transaction

In connection with the Term Loans and Convertible Note issued in 2006, we also issued a Common Stock Purchase Warrant exercisable for 1,540,697 shares of our common stock, at an average exercise price of $7.57 per share, and a second Common Stock Purchase Warrant exercisable for 581,395 shares of our common stock, at an average exercise price of $5.69 per share to Laurus (“Laurus Warrants”). The Laurus Warrants are exercisable at any time up to October 31, 2013. The convertible note was convertible into shares of our common stock at the following conversion prices: $5.96 per share for the first $1,666,668 of principal, $6.23 per share for the next $1,666,666 of principal, and $7.69 per share for the remaining $1,666,666 of principal. Debt costs related to the October 31, 2006 Laurus financing were $1.4 million recorded as a non-current asset and amortized over 36 months. The value of the Laurus Warrants, using a Black-Scholes option pricing model, were recorded as a $5.7 million derivative liability in accordance with EITF 00-19 and as a debt discount. The Convertible Term Note was considered a conventional convertible debt instrument and was deemed to have a beneficial conversion feature valued at $0.6 million in accordance with EITF Issue No. 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratio,” EITF No. 00-27, “Application of EITF Issue No. 98-5 To Certain Convertible Instruments” and APB 14 “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants,” and recorded as a debt discount and additional paid-in capital. Although the conversion prices per the agreement were higher than the trading price of our stock at the date of issuance, the effective conversion price of a portion of the convertible note, calculated on the discounted amount of the note (net of the warrant derivate liability), was lower than the trading price of our stock, resulting in a beneficial conversion feature. The debt discount related to the warrant derivative and the beneficial conversion feature is amortized over the term of the notes.

On December 28, 2006, we entered into an Amendment and Waiver letter agreement (the “Amendment”) with Laurus pursuant to which the conversion price of the Convertible Note was reduced to $3.57 per share. Concurrently with the execution of the Amendment, Laurus converted $3.5 million of the principal amount of the convertible note into 990,000 shares of common stock. Pursuant to the Amendment, the remaining principal balance of the Convertible Note was converted into shares on the 61st day following the date the Amendment was executed. The modification of the conversion price was considered an induced conversion and in accordance with SFAS 84 “Induced Conversions of Convertible Debt” the 636,663 incremental shares to be issued upon conversion resulting from the reduced conversion price were valued at $2.9 million based on the $4.48 per share trading price of our stock on the date of the Amendment and recorded as an expense to early debt conversion fee and as additional paid-in capital in the fourth quarter of 2006. Upon the conversion of 990,000 shares we accelerated the accretion of debt discount amortization of $1.4 million and amortization of debt costs of $0.2 million.

F-18

In connection with the Amendment, we entered into a Securities Purchase Agreement with Laurus on December 28, 2006 pursuant to which we issued and sold to Laurus a Secured Term Note in the original principal amount of $5 million and a Common Stock Purchase Warrant to purchase 192,029 shares at an exercise price of $5.06 per share, 192,029 shares at an exercise price of $5.29 per share, and 192,028 shares at an exercise price of $6.53 per share. The warrant is exercisable at any time up to December 28, 2013. Debt costs related to the December 28, 2006 Laurus financing were $0.2 million recorded as a non-current asset and amortized over 36 months. The value of the warrants issued to Laurus, using a Black-Scholes option pricing model, were recorded as a $1.3 million derivative liability in accordance with EITF 00-19 and as a debt discount. The debt discount is amortized over the life of the note.

Warrant Derivative and Beneficial Conversion Feature related to Term Loans

The fair value of the warrants of $5.7 million and the beneficial conversion feature of $0.6 million were recorded as a discount to the carrying amount of the Term Loans and are amortized over the life of the debt using the effective interest method. As of December 31, 2007, the effective interest rates were 14.0% and 15.7% for the $5 million and $13 million Term Loans, respectively. Upon conversion of the Convertible Note, unamortized debt issue costs were charged to expense. The fair value of the warrants is classified as a warrant derivative liability.

Registration Rights Agreement

In connection with the sale and issuance of the Convertible Note and warrants to Laurus, we agreed pursuant to a Registration Rights Agreement to prepare and file, within 90 days following the issuance of the note and warrants, a registration statement with the U.S. Securities and Exchange Commission (“SEC”) covering the resale of the common stock issuable upon conversion of the note and exercise of the warrants. The Registration Rights Agreement was subsequently amended and restated to include the additional shares resulting from the reduction of the conversion price of the Convertible Note on December 28, 2006 and the issuance of the additional warrant in connection with such reduction. The registration statement covering the shares issued upon conversion of the convertible note was declared effective by the SEC on April 26, 2007. The registration statement covering the shares to be issued upon exercise of the warrants was declared effective by the SEC on October 17, 2007.

Bank of America Loan and Security Agreement

On March 31, 2006, we entered into a Loan and Security Agreement with Bank of America, N.A. (the “B of A Credit Facility”). The B of A Credit Facility was funded and closed on April 4, 2006.

In connection with the B of A Credit Facility, we terminated our old credit facility with Fortress Credit Corp. (“Fortress”). We paid off all amounts borrowed and due under the Fortress credit facility, which aggregated approximately $19.4 million, including approximately $260,000 in accrued interest. There were no early termination penalties incurred by us in connection with the termination of the Fortress credit facility. Due to the replacement of the Fortress credit facility, approximately $2.1 million of unamortized debt issue costs were written off and charged to loss on extinguishment of debt.

The B of A Credit Facility provided for revolving credit loans of up to a maximum principal amount of $25.0 million (the “Revolver Loans”) and a letter of credit subline in the maximum amount of $12.0 million. The Revolver Loans bore interest per annum, payable monthly, at a variable rate equal to Bank of America’s announced prime rate, plus up to 0.75%. Under certain circumstances, we could elect a LIBOR rate plus 2.0% to 3.0%.

The principal amount of the Revolver Loans was due and payable in full on March 31, 2009. The Revolver Loans could be prepaid from time to time without penalty or premium, but if the B of A Credit Facility was terminated during the first two years, there was a termination fee equal to $0.5 million in the first year and $250,000 in the second year. The B of A Credit Facility was secured by substantially all of our assets.

The B of A Credit Facility was terminated in the last quarter of 2006 in connection with the issuance of the $18 million in convertible and term notes to Laurus described above. The amount paid upon termination of the B of A Credit Facility was approximately $1.8 million which included the $0.5 million early termination fee. The early termination fee of $0.5 million and the write off of $0.3 million of unamortized debt issue costs were charged to loss on extinguishment of debt.

F-19

Conversion and Repurchase Agreement

In the last quarter of 2006, Amphora Limited (“Amphora”) converted $7.8 million of the principal amount of the convertible note we issued in 2004 (“Amphora Convertible Note”), and amended and restated in 2005 into 1.0 million shares of our common stock and accepted from us $8.0 million as full repayment of the remaining $9.7 million outstanding principal balance. The shares issued upon conversion were recorded at the $7.82 per share conversion price of the notes. The loss on extinguishment of $0.7 million is calculated based on the $15.2 million discounted amount of the Amphora Convertible Note and includes the write-off of $0.9 million in debt issuance costs and the non-cash benefit of writing off the $0.8 million embedded derivative (Note 9). The Amphora Convertible Note and its related pledge and security agreement were then terminated and we entered into a Registration Rights Agreement with Amphora Limited pursuant to which we agreed to register the 189,189 shares of our common stock issued to Amphora Limited in connection with a partial conversion of the Amphora Convertible Note that had occurred in the first half of 2006. The Registration Rights Agreement required us to file a registration statement covering the shares by January 19, 2007 which we did.

9) Embedded Derivatives

As of December 31, 2005, there were certain embedded derivatives associated with the Amphora Convertible Note. An embedded derivative is a derivative instrument that is embedded within another contract, which under the Amphora Convertible Note (the host contract) includes the right to convert the Amphora Convertible Note by the holder, certain default redemption right premiums and a change of control premium (payable in cash if a fundamental change occurs). In accordance with FASB Statement No. 133, as amended, “Accounting for Derivative Instruments and Hedging Activities,” these embedded derivatives are marked-to-market each reporting period, with a corresponding non-cash gain or loss charged to the current period. We conducted a valuation of these embedded derivatives as of December 31, 2005 using various valuation methods, which included Black-Scholes option pricing models. Primarily due to the increase in our stock price from December 31, 2004 to December 31, 2005, the valuation conducted as of December 31, 2005 resulted in a 2005 non-cash loss of $5,804,000, with a corresponding increase in the embedded derivative liability, which is included as a component of accrued liabilities at December 31, 2005. During 2006, due to the conversion and payoff of the underlying Amphora Convertible Note, the balance of the fair value of the embedded derivative liability of $3.4 million was reclassified to additional paid-in capital.

10) Income Taxes

On July 13, 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes” and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under FIN 48, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006.

The Company adopted the provisions of FIN 48 on January 1, 2007. We had no material unrecognized tax benefits as of the date of adoption or as of December 31, 2007. As a result of the implementation of FIN 48, the Company did not recognize a decrease in net deferred tax assets.

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. During the years ended December 31, 2007, 2006 and 2005, the Company did not recognize any interest or penalties. Upon adoption of FIN 48 on January 1, 2007, the Company did not record any interest or penalties.

The Company is subject to taxation in the U.S. and various state jurisdictions and is subject to examination due to the carryforward of unutilized net operating losses. During 2006, the Company satisfactorily completed an Internal Revenue Service tax audit covering the tax years 2002, 2003 and 2004, leaving the tax years for 2005 and forward subject to examination by the Internal Revenue Service. The Company’s tax years for 2002 and forward are subject to examination by California tax authorities.

F-20

The adoption of FIN 48 did not impact our consolidated financial condition, results of operations or cash flows. At December 31, 2007, we had net deferred tax assets of $27.5 million. The deferred tax assets are primarily composed of federal and state tax net operating loss (“NOL”) carryforwards. Due to uncertainties surrounding our ability to generate future taxable income to realize these assets, a full valuation has been established to offset our net deferred tax assets. Additionally, the future utilization of our NOL carryforwards to offset future taxable income may be subject to a substantial annual limitation as a result of ownership changes that may have occurred previously or that could occur in the future (“Section 382”). The Company recently completed an ownership change analysis study under Section 382 regarding the limitation of our NOL carryforwards. This analysis determined that there was an ownership change, but that it is more likely than not that our NOL carryforwards would not be limited to offset future taxable income. The results of this analysis did not affect our unrecognized tax benefits under FIN 48.

The components of the 2007, 2006 and 2005 provision for Federal and state income tax benefit (expense) computed in accordance with Statement No. 109 are summarized below:

	2007		2006		2005
Current:
Federal	$	-	$	-	$	-
State		-		-		-
Deferred:
Federal		-		-		-
State		-		-		-
	$	-	$	-	$	-

Income tax benefit attributable to loss from operations differed from the amounts computed by applying the U.S. Federal income tax rate to pretax loss from operations as a result of the following:

	2007			2006			2005
Taxes, U.S. statutory rates		34.0	%		34.0	%		34.0	%
State taxes, less Federal benefit		4.9			4.9			3.6
Effect on non-deductible expense - derivatives		5.2			2.6			(9.4	)
Effect of non-deductible expenses - convertible Note interest		0.0			0.0			(4.6	)
Effect of non-deductible expenses - amortization of debt discount		(1.9	)		(3.4	)		0.0
Effect on non-deductible expense - goodwill impairment		(26.2	)		(23.9	)		0.0
Effect of debt extinguishment		0.0			(1.1	)		0.0
Other		(0.5	)		(0.1	)		0.1
Change in valuation allowance		(15.5	)		(13.0	)		(23.7	)
Total taxes on loss		0.0	%		0.0	%		0.0	%

F-21

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities as of December 31, 2007 and 2006 are as follows:

	2007			2006
Deferred tax assets:
Allowances and accruals not recognized for income tax purposes	$	2,234,000		$	2,692,000
Federal net operating loss carryforward		19,865,000			12,673,000
State net operating loss carryforward		3,510,000			2,474,000
Federal AMT credit carryforward		249,000			249,000
Covenants not to compete		483,000			586,000
Stock compensation		1,406,000			374,000
Deferred gain		591,000			622,000
Other		245,000			230,000
Total gross deferred tax assets		28,583,000			19,900,000
Less valuation allowance		(27,962,000	)		(19,167,000	)
Net deferred tax assets		621,000			733,000
Deferred tax liabilities:
Billings in excess of costs and estimated earnings on contracts		(35,000	)		(61,000	)
Prepaid expenses		(123,000	)		(138,000	)
Property and equipment		(463,000	)		(472,000	)
Beneficial conversion feature		-			(62,000	)
Other		-			-
Total gross deferred tax liabilities		(621,000	)		(733,000	)
Total net deferred tax assets	$	-		$	-

As a result of the adoption of SFAS No. 123R in 2006, the Company recognizes windfall tax benefits associated with exercises of stock options directly to stockholders’ equity only when realized. Accordingly, deferred tax assets are not recognized for net operating loss carryforwards resulting from windfall tax benefits occurring from January 1, 2006 onward. At December 31, 2007 and 2006 deferred tax assets do not include excess tax benefits of approximately $155,000 resulting from stock-based compensation.

The change in the valuation allowance was $8,795,000 and $6,879,000 for the years ended December 31, 2007 and 2006, respectively. In September 2005, the FASB approved EITF Issue 05-8. “Income Tax Consequences of Issuing Convertible Debt with a Beneficial Conversion Feature” (EITF No. 05-8). EITF No.05-8 provides (i) that the recognition of a beneficial conversion feature creates a difference between book basis and tax basis of a convertible debt instrument (ii) that basis difference is a temporary difference for which a deferred tax liability should be recorded and (iii) the effect of recognizing the deferred tax liability should be charged to equity in accordance with SFAS No. 109. EITF No.05-8 was effective for financial statements for periods beginning after December 15, 2005. The Company applied EITF 05-8 to the 2006 issuance of convertible debt and the remaining deferred tax liability at December 31, 2007 and 2006 was $0 and $62,000, respectively. Pursuant to EITF No. 05-8 Issue Summary No. 1 dated August 29, 2005 paragraph 15, the Company offset the deferred tax liability against the deferred tax valuation allowance at December 31, 2006.

Due to the Company being in a net operating loss position, the adoption of EITF 05-8, in 2006 resulted in a negative percentage difference of approximately (0.4%) between the expected income tax at statutory rates and the percentage presented herein related to the change in the valuation allowance.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Included in deferred tax assets is a State net operating loss carryforwards of approximately $73.9 million, which will begin expiring in 2014, and a Federal net operating loss carryforwards of approximately $60.7 million, of which $2.7 million expires in 2024, $16.3 million expires in 2025, $18.2 million expires in 2026 and $23.5 million expires in 2027. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon our cumulative losses for the three years ended December 31, 2007 we have provided a valuation allowance in the amount of $28.0 million reducing the net realizable benefits of these deductible differences to zero at December 31, 2007.

F-22

11) 401(k) Plans

We have tax deferred savings plans under Section 401(k) of the Internal Revenue Code. Eligible employees can contribute up to 12% of gross annual earnings. Our contributions are made on a 50% matching basis of eligible contributions. Our contributions were approximately $164,000, $194,000 and $360,000 in 2007, 2006 and 2005, respectively.

12) Stock-Based Plans

Stock Plans

In May of 1994, the Board of Directors voted and approved a stock option plan (the May 1994 Plan). The May 1994 Plan provided for the grant of both incentive and non-qualified options to purchase up to 500,000 shares of the Company’s common stock. The incentive stock options were granted only to employees, including officers of the Company, while non-qualified stock options were granted to employees, non-employee officers and directors, consultants, vendors, customers and others expected to provide significant services to the Company. The exercise price of the stock options was not less than the fair market value of the underlying stock at the date of the grant (110% if granted to an employee who owns 10% or more of the Company’s common stock). All of these options were granted prior to 1999.

In 1996, our Board of Directors authorized the grant of options to purchase up to 500,000 shares of our common stock. The non-statutory options were granted to employees, non-employee officers and directors, consultants, vendors, customers and others expected to provide significant service to the Company. The exercise price of the stock options was not less than the fair market value of the underlying stock at the date of the grant (110% if granted to an employee who owns 10% or more of our common stock). All of these options were granted prior to 1999.

In 1999, our stockholders approved a stock option plan (the 1999 Plan). The 1999 Plan provides for the grant of non-statutory options to purchase up to 1,450,000 shares of our common stock. The non-statutory options may be granted to employees, officers, directors, consultants, independent contractors and others expected to provide significant service to the Company. The exercise price of the stock options cannot be less than the fair market value of the underlying stock at the date of the grant (110% if granted to an employee who owns 10% or more of our common stock). In 2002, 185,038 shares were granted, and no shares were granted under this plan in 2003, 2004 or 2005. As of December 31, 2007, 46,146 shares are available for future grants.

In 2002, our stockholders approved a stock option plan (the 2002 Plan). The 2002 Plan provides for the grant of non-statutory options to purchase up to 1,000,000 shares of our common stock. The non-statutory options may be granted to employees, officers, directors, consultants, independent contractors and others expected to provide significant service to the Company. The exercise price of the stock options cannot be less than the fair market value of the underlying stock at the date of the grant (110% if granted to an employee who owns 10% or more of our common stock).

In 2005, our stockholders approved an amendment to the 2002 Plan increasing the number of shares issuable from 1 million to 2 million. Grants of 165,671, 989,778 and 121,000 shares were made during the years ended December 31, 2007, 2006 and 2005, respectively. Shares available for future stock plan grants were 992,735 at December 31, 2007.

F-23

Valuation Assumptions

We use the BSM valuation model to estimate the fair value of stock-based awards, with the following weighted-average assumptions for the indicated periods:

	2007			2006			2005
Expected dividend yield		0	%		0	%		0	%
Average risk-free interest rate		4.28	%		4.4	%		4.0	%
Expected volatility		51.91	%		48.61	%		41.17	%
Expected life of options (in years)		5.75 years			5.8 years			4 years

The assumptions above are based on multiple factors, including historical exercise patterns of employees in relatively homogeneous groups with respect to exercise and post-vesting employment termination behaviors, expected future exercising patterns for these same homogeneous groups and the implied volatility of our stock price.

Stock Option Activity

The following table represents stock option activity for the year ended December 31, 2007:

	Number of			Weighted-Average		Weighted-Average Remaining Contractual Life		Aggregate
	Shares			Exercise Price		(in years)		Intrinsic Value
Outstanding at December 31, 2006		1,210,525			7.04
Granted		68,300			2.25
Exercised		-			-
Forfeited		(171,874	)		7.61
Outstanding at December 31, 2007		1,106,951		$	6.66		6.86	$	-
Vested and exercisable at December 31, 2007		764,896		$	7.52		6.07	$	-
Vested and expected to vest at December 31, 2007(1)		987,242		$	6.89		6.64	$	-

The following table represents stock option activity for the year ended December 31, 2006:

	Number of			Weighted-Average		Weighted-Average Remaining Contractual Life		Aggregate
	Shares			Exercise Price		(in years)		Intrinsic Value
Outstanding at December 31, 2005		1,373,300			9.79
Granted		525,000			4.68
Exercised		(376,804	)		8.95
Forfeited		(310,971	)		12.92
Outstanding at December 31, 2006		1,210,525		$	7.04		7.56	$	304,000
Vested and exercisable at December 31, 2006		496,359		$	9.03		5.20	$	-
Vested and expected to vest at December 31, 2006(1)		960,567		$	7.40		7.14	$	198,000

⁽¹⁾ The expected to vest options are the result of applying the pre-vesting forfeiture rate assumptions to total outstanding options.

The per share weighted-average fair value of stock options granted during 2007, 2006 and 2005 was $1.18, $2.43, and $3.11, respectively.During the years 2006 and 2005, the aggregate intrinsic value of options exercised under our stock plans was $0.4 million and $0.7 million, respectively, determined as of the date of option exercise. There were no options exercised during the year ended December 31, 2007. Therefore, the aggregate intrinsic value of options exercised was zero for the year ended December 31, 2007.

At December 31, 2007, there was $3.0 million of unrecognized compensation cost related to share-based payments which is expected to be recognized over a weighted-average period of 1.7 years.

F-24

The following table summarizes information concerning outstanding and exercisable options as of December 31, 2007:

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding		Average Remaining Contractual Life (in years)		Weighted-Average Exercise Price		Number Exercisable		Weighted-Average Exercise Price
$1.59 - $3.97		66,500		9.25	$	2.18		13,313	$	2.77
$4.31 - $7.00		486,800		8.13		4.52		273,325		4.68
$7.25 - $10.00		536,590		5.61		8.73		461,194		8.89
$12.62 - $19.88		17,061		0.50		19.88		17,064		19.88
		1,106,951		6.86	$	6.66		764,896	$	7.52

Between April 17, 2006 and July 11, 2006, outstanding options were exercised for a total of 376,804 shares at an aggregate exercise price of $3.4 million. There were no stock option exercises during 2007.

The following table summarizes our nonvested stock option activity for the years ended December 31, 2007 and 2006:

				Weighted-Average
	Number of			Grant-Date
	Shares			Fair Value
Nonvested stock options at December 31, 2005		443,107		$	3.61
Granted		525,000			2.43
Vested		(136,565	)		4.01
Forfeited		(117,376	)		3.20
Nonvested stock options at December 31, 2006		714,166		$	2.73
Granted		68,300			1.18
Vested		(347,411	)		2.78
Forfeited		(93,000	)		3.08
Nonvested stock options at December 31, 2007		342,055		$	2.28

Restricted Stock

On June 13, 2006 the stockholders approved an amendment to the 2002 Stock Option Plan to provide for the granting of (i) restricted stock and/or restricted stock units, (ii) stock appreciation rights, and (iii) stock bonuses (the “Amended Plan”). The Amended Plan also sets for the business criteria for “performance-based compensation” that is subject to Section 162(m) of the Internal Revenue Code of 1986, as amended, restricts the number of shares that may be granted to any one recipient in any one fiscal year to 100,000, and defines termination for cause (which was previously subject to definition in each stock option grant). During 2006 and 2007, the rights to acquire shares of restricted stock were granted to certain officers and members of the management team. The rights to acquire shares of restricted stock granted to employees under the 2002 Stock Option Plan vests over a four year period with one-third vesting at the end of two, three and four years, respectively. As a result of restricted stock grants in 2006 and 2007, $3.7 million in fair value of the restricted stock is required to be recognized as stock compensation expense ratably over the four year vesting period. Total charged to stock compensation expense for the year ended December 31, 2007 and 2006 was approximately $917,000 and $477,000, respectively.

F-25

The restricted stock activity for the years ended December 31, 2007 and 2006, is summarized below:

				Weighted-Average
	Number of			Grant-Date
	Shares			Fair Value
Outstanding restricted stock grants at December 31, 2005		-		$	-
Granted		464,778			7.56
Vested		-			-
Canceled		(42,311	)		7.56
Outstanding restricted stock grants at December 31, 2006		422,467		$	7.56
Granted		97,371			2.74
Vested		-			-
Canceled		(12,751	)		7.56
Outstanding restricted stock grants at December 31, 2007		507,087		$	6.63

13) Warrants

The warrant activity for the years ended December 31, 2007 and 2006, is summarized below:

				Weighted-Average
	Warrants			Exercise Price
Outstanding warrants at December 31, 2005		1,460,268		$	8.21
Granted		2,698,178			6.75
Antidilution adjustment		110,258			-
Exercised		(325,000	)		8.00
Forfeited		-			-
Outstanding warrants at December 31, 2006		3,943,704		$	7.00
Granted		-			-
Antidilution adjustment		-			-
Exercised		-			-
Forfeited		-			-
Outstanding warrants at December 31, 2007		3,943,704		$	7.00

The following table summarizes information concerning outstanding and exercisable warrants as of December 31, 2007:

	Warrants Outstanding						Warrants Exercisable
Range of Exercise Prices	Number Outstanding		Average Remaining Contractual Life (in years)		Weighted-Average Exercise Price		Number Exercisable		Weighted-Average Exercise Price
$5.00 - $7.00		1,157,481		5.92	$	5.66		1,157,481	$	5.66
$7.00 - $8.00		2,786,223		4.29		7.55		2,786,223		7.55
		3,943,704		4.77	$	7.00		3,943,704	$	7.00

14) Private Placement Issuance of Common Stock and Warrant Derivatives

On August 5, 2005, we completed a private placement of equity securities (“2005 Equity Issuance”) pursuant to which we raised $11.6 million through the sale of 2,046,000 shares of our common stock and five-year warrants to purchase an additional 1,033,800 shares of common stock (“2005 Equity Warrants”).

The securities were sold to a group of accredited investors, including certain of our officers and directors, in reliance on an exemption from the registration requirements of the Securities Act of 1933. Investors, other than Company officers and directors, paid $5.67 per share, including a warrant for one-half share, which was the average of the closing bid prices of our common stock for the five-day trading period from May 26, 2005, through June 2, 2005. Our officers and directors paid $6.285 per share, (including a warrant for one-half share) which was the closing bid price for our common stock on August 4, 2005, plus $0.085. The 2005 Equity Warrants are exercisable at a price of $8.00 per share, may be exercised at any time after February 5, 2006, will expire on August 5, 2010 and are subject to anti-dilution provisions that could result in the reduction of the per share exercise price and an increase in the number of shares under certain conditions, provided however that the exercise price cannot be reduced below $6.20 per share without prior stockholder approval.

F-26

The 2005 Equity Warrants issued in connection with the 2005 New Equity Issuance required analysis in accordance with EITF 00-19. EITF 00-19 specifies the conditions which must be met in order to classify warrants issued in a company’s own stock as either equity or as a derivative liability. Evaluation of these conditions under EITF 00-19 resulted in the determination that the 2005 Equity Warrants are classified as a derivative liability. The warrant derivative liability was valued using a Black-Scholes option pricing model, resulting in a total valuation of $2.4 million as of August 5, 2005 (the date of issuance) and recorded as a reduction to additional paid-in capital from the total 2005 Equity Issuance proceeds received. The valuation of the 2005 Equity Warrants was determined using a Black-Scholes option pricing model using the following assumptions: expected dividend yield of 0.0%, expected stock price volatility of 45.9%, risk free interest rate of 4.24% and a remaining contractual life of 5.0 years.

Also in connection with the 2005 Equity Issuance, a warrant was issued to a financial advisor to purchase 37,500 shares of our common stock, after an antidilution adjustment, as compensation for advisor services. The exercise price of this warrant is $8.00 per share. The warrant may be exercised at any time after issuance and will expire on August 5, 2010. The warrant was valued using a Black-Scholes option pricing model, resulting in a total valuation of $48,000 and was recorded as a reduction to additional paid-in capital from the proceeds received and recorded as a component of the warrant derivative liability. The valuation of this advisor warrant issued was determined using a Black-Scholes option pricing model using the following assumptions: expected dividend yield of 0.0%, expected stock price volatility of 45.0%, risk free interest rate of 3.79% and a remaining contractual life of 4.4 years.

Approximately $8.5 million of the proceeds from the 2005 Equity Issuance were used to pay down our outstanding debt. Additional paid-in capital was reduced by $578,000 for direct equity issuance costs. The balance was used for working capital.

Warrants which are determined to be classified as derivative liabilities are marked-to-market each reporting period, with a corresponding non-cash gain or loss charged to the current period. We valued all warrant derivative liabilities as of December 31, 2007, which include the 2005 Equity Warrants, the warrants issued to the financial advisor and the Laurus Warrants (Note 8). This was valued using a Black-Scholes option pricing model using the following assumptions: expected dividend yield of 0.0%, expected stock price volatility ranging from 62.0% to 90.7%, risk free interest rate ranging from 2.98% to 3.53% and a remaining contractual life ranging from 2.0 years to 6.0 years. Due to the decrease in our stock price from $4.95 at December 31, 2006 to $0.89 at December 31, 2007, the valuation conducted as of December 31, 2007 resulted in a non-cash gain of $7.7 million for the year ended December 31, 2007, with a corresponding decrease in the warrant derivative liability, which is included as a component of accrued liabilities at December 31, 2007. As of December 31, 2007 and 2006, the total fair value of the warrant derivative liability was $512,000 and $8,169,000, respectively.

15) Loss per Share

The following table represents the calculation of basic and diluted loss per common share:

	2007			2006			2005
Basic and diluted net loss per share:
Numerator:
Net loss	$	(56,908,000	)	$	(54,691,000	)	$	(21,104,000	)
Denominator:
Weighted average common shares outstanding		21,355,000			18,465,000			15,682,000
Basic and diluted net loss per share	$	(2.66	)	$	(2.96	)	$	(1.35	)

F-27

Excluded from diluted earnings per common share as of December 31, 2006 and 2005 were 410,560 and 3,022,170 shares, respectively, issuable upon conversion of the convertible notes because the effect would be anti-dilutive. Restricted stock, options and warrants to purchase 5,557,742, 5,576,696 and 2,833,102 shares of common stock were outstanding during 2007, 2006 and 2005, respectively, but were not included in the computation of diluted net loss per common share because the effect would be anti-dilutive.

16) Major Customers

Sales to four major customers represented the following percentage of net sales:

	2007			2006			2005
Customer A		7.5	%		1.5	%		9.9	%
Customer B		6.4	%		1.7	%		5.5	%
Customer C		8.4	%		12.5	%		1.9	%
Customer D		10.2	%		0.8	%		0.5	%

17) Commitments and Contingencies

Pending Claims and Litigation

On September 26, 2005, we filed lawsuit against the Campbell Union Elementary School District in the California Superior Court for Santa Clara County. In an amended pleading, we have asserted that the District improperly terminated our contract and that we are entitled to damages for the breach of contract. Pursuant to our contract with the District entered into in October 2003, we submitted our plans for a two-story building with a design methodology that was pre-approved by the Department of State Architect (“DSA”) and in accordance with the contract documents. The District submitted the plans to the DSA’s Oakland regional office which unexpectedly refused to approve the plans. The District refused to grant us an extension of time to resolve this issue with the DSA Oakland regional office even though our contract provided for such an extension for District caused delays and for unforeseen events. The District declared us in default in December 2004, and on May 3, 2005, the District made a demand on our bonding company, Liberty Mutual (“Liberty”), to complete the contract. On May 16, 2005 DSA directed its Oakland office to accept our design methodology as originally submitted. Liberty took over the project in June 2005 and we entered into an agreement with Liberty to complete the work on the project at the original contract price, reserving our rights and claims against the District. The project has now been completed. A trial date has not yet been established by the court, but is expected to be scheduled by the end of 2008.

On January 25, 2006, a claimed class action lawsuit was filed against us and Bayside Solutions, Inc by TRICO Pipes, Aram Hodess, Micah Long and the Plumbers and Steamfitters Local Union No. 159 in the California Superior Court for Alameda County on behalf of those persons we employed on California public work projects from January 25, 2002 to the filing of the complaint. The complaint alleges that we failed to pay these individuals general prevailing wage rates, overtime rates, and required rates for holiday work. It also alleges that we failed to employ registered apprentices, thereby denying such apprentices the opportunity to earn wages. Bayside Solutions, Inc. is a temporary labor service used by us and TRICO Pipes is a joint labor management committee in the plumbing and pipe fitting industry in Contra Costa County. The court has not yet certified the class.

The complaint seeks restitution for all underpayments of wages, attorney’s fees and costs. We reassert our denial of the liability, but cannot predict with any certainty the outcome of the proceeding. This is especially true since until any class is defined, it is impossible to define what the class or claims are going to be. We are unable to ascertain at this time either the probability of an adverse decision or the potential monetary liability or financial impact to us should there be an unfavorable settlement or adverse decision, and accordingly, no loss provision has been accrued in connection with this matter.

Except for the two proceedings described above, we are not involved in any legal proceedings other than ordinary routine litigation incidental to our business, including product liability, employment disputes, administrative proceedings and commercial litigation. Such proceedings often do not specify the amount of damages sought, and their outcomes are not predictable. Consequently, we are unable to ascertain the ultimate aggregate amount of monetary liability or financial impact with respect to these routine pending proceedings. While they could affect operating results of any one quarter when resolved in future periods, it is management’s opinion that, after final disposition, any monetary liability or financial impact to us from these routine proceedings would not be material to our financial position or results of operations.

F-28

Land Leases

We have entered into various non-cancelable agreements to lease land at our manufacturing facilities through 2026. Minimum lease payments under these non-cancelable operating leases for the next five years and thereafter are as follows:

Year Ending December 31,
2008		1,290,000
2009		1,300,000
2010		1,303,000
2011		1,313,000
2012		1,227,000
Thereafter		12,020,000
	$	18,453,000

Rent expense for the years ended December 31, 2007, 2006 and 2005 was $1,525,000, $1,305,000 and $1,834,000 respectively. Rental income from a sublease entered into during 2005 was, $390,000, $378,000 and $95,000 for the years ended December 31, 2007, 2006 and 2005, respectively. The monthly rental income for this sublease is $31,500 through August 2007, and increases to $34,500 per month through August 2009, $36,200 per month through August 2011, $38,000 per month through August 2013, and $40,000 per month through August 2015.

Employment Agreements

In June 2006, the Company entered into an employment agreement with our President, Chief Executive Officer and Director, Mr. Dennis Shogren that initially expired on December 31, 2007, but has automatically renewed until December 31, 2008. The agreement provides for an annual base salary of not less than $345,000 and for potential incentive or discretionary bonuses. This agreement automatically renews annually for a period of one year until terminated by either Mr. Shogren or the Company.

In February 2006, the Company entered into an employment agreement with our Senior Vice President of Operations and Corporate Officer, Mr. Ron Savona, which initially expired December 31, 2006, but has automatically renewed until December 31, 2008. This agreement provides for an annual base salary of not less than $230,000 and for potential incentive or discretionary bonuses, based on meeting certain performance targets. This agreement automatically renews annually for a period of one year until terminated by either Mr. Savona or the Company.

In June 2007, the Company entered into an employment agreement with our Senior Vice President and Chief Financial Officer, Mr. Kenneth Cragun, that initially expired on December 31, 2007, but has automatically renewed until December 31, 2008. The agreement provides for an annual base salary of not less than $210,000 and for potential incentive or discretionary bonuses, based on meeting certain performance targets. This agreement automatically renews annually for a period of one year until terminated by either Mr. Cragun or the Company.

In the event that the Company terminates Mr. Shogren’s, Mr. Savona’s or Mr. Cragun’s employment without cause or the Company declines to renew their employment agreement, the Company would be required to pay a severance payment equal to twelve (12) months base salary. This severance would be payable as a lump-sum cash payment within 30 days following the date of termination. All stock options, restricted stock grants or other forms of equity compensation held would cease vesting upon termination. Mr. Shogren, Mr. Savona or Mr. Cragun would have the right to exercise any vested stock options within 30 days of termination, but all restricted stock still subject to a risk of forfeiture would be forfeited. In the event that the Company terminates Mr. Shogren, Mr. Savona or Mr. Cragun for cause, no severance payment would be payable. Each employment agreement also contains non-solicitation provisions that extend for 24 months after termination of employment for any reason and confidentiality provisions which have no time limit.

F-29

18) Sale Leaseback Transaction

On November 1, 2006, we sold our manufacturing plant in Florida to NL Ventures V, L.P. for $4.4 million. Concurrently with the sale of the property, we entered into a Lease Agreement with the purchaser’s assignee, NL Ventures V Plant City, L.P., pursuant to which we leased back the property for an initial term of 20 years. We have the option to extend the lease term for two additional terms of five years each. The annual rent is $491,160 for the first year of the lease and increases at the rate of 3% per annum thereafter. We have posted a security deposit of $0.5 million in connection with the lease. The $1.6 million gain on the sale of the Florida manufacturing plant is deferred and amortized as an offset to rent expense over the 20 year term of the related lease. The $1.4 million long-term portion of the deferred gain is included in other long-term liabilities as of December 31, 2007.

19) Warranty

The standard contractual warranty for our modular buildings is one year, although it may vary by contract specifications. Purchased equipment installed by us, such as air conditioning units, carries the manufacturers’ standard warranty. To date, warranty costs incurred have been immaterial.

20) Selected Quarterly Financial Information (Unaudited)

The following table presents unaudited operating results for each quarter within the two most recent years. The Company believes that all necessary adjustments, consisting only of normal recurring adjustments, have been included in the amounts stated below to present fairly the following quarterly results when read in conjunction with the consolidated financial statements included elsewhere in this report. Results of operations for any particular quarter are not necessarily indicative of results of operations for a full fiscal year.

2007:	Fourth Quarter			Third Quarter			Second Quarter			First Quarter
Net sales	$	13,975,000		$	21,817,000		$	24,031,000		$	27,500,000
Gross (loss) profit		(5,253,000	)		(1,207,000	)		(529,000	)		1,089,000
Net (loss) income		(9,345,000	)		(5,163,000	)		(42,928,000	)		528,000
(Loss) earnings per common share:
Basic and diluted	$	(0.44	)	$	(0.24	)	$	(2.00	)	$	0.02

2006:	Fourth Quarter			Third Quarter		Second Quarter			First Quarter
Net sales	$	29,239,000		$	45,583,000	$	44,307,000		$	36,904,000
Gross (loss) profit		(3,692,000	)		2,915,000		2,868,000			2,287,000
Net (loss) income		(50,996,000	)		503,000		(297,000	)		(3,901,000	)
(Loss) earnings per common share:
Basic and diluted	$	(2.59	)	$	0.03	$	(0.02	)	$	(0.23	)

21) Subsequent Events

2008 Amendment and Waiver Agreement

On February 26, 2008, an “Event of Default” occurred under the two secured term notes issued to Laurus. The Event of Default was a result of a failure to meet the minimum balance of cash and eligible accounts receivables required under the Securities Purchase Agreements with Laurus.

On March 4, 2008, Modtech entered into an Amendment and Waiver Agreement (the “Waiver”) with Laurus Master Fund, Ltd. (“Laurus”), Valens U.S. SPV I, LLC (“Valens U.S.”) and Valens Offshore SPV I, Ltd (“Valens Offshore”). The Waiver cured the Event of Default.

Pursuant to the Waiver, Modtech issued to Laurus, Valens U.S. and Valens Offshore three separate warrants to purchase an aggregate of 3,000,000 shares of Modtech’s common stock at an exercise price of $0.40 per share (the “Warrants”) and three separate promissory notes in the aggregate principal amount of $750,000 (the “Additional Notes”). In return, Laurus, Valens U.S. and Valens Offshore agreed to defer the aggregate principal payments of $375,000 per month under the Original Notes for the period March 1, 2008 through June 30, 2008, for a total deferral of $1.5 million, eliminate the Minimum Balance requirement as of December, 31, 2007 through February 29, 2008, reduce the Minimum Balance from $9 million to $5.4 million for the period March 1, 2008 through March 31, 2008 and to $6.6 million for the period April 1, 2008 through June 30, 2008. The aggregate monthly interest payments on the Original Notes of approximately $110,000 per month will continue without deferral or abatement and, commencing July 1, 2008, the monthly principal payments will resume on the Original Notes and the Minimum Balance will again be $9 million.

F-30

The Additional Notes were issued to Laurus, Valens U.S. and Valens Offshore in the principal amounts of $634,414.36, $48,983.58 and $66,602.06, respectively. The principal amounts of the Additional Notes are due and payable December 28, 2009. Interest shall accrue on the principal of the Additional Notes at the greater of 8% per annum or a rate per annum equal to the prime rate published by The Wall Street Journal, plus 2.5%. Interest on the Additional Notes shall be payable monthly in arrears.

The Warrants issued to Laurus, Valens U.S. and Valens Offshore were for 2,537,657 shares, 195,935 shares, and 266,408 shares, respectively. Modtech entered into separate registration rights agreements on March 4, 2004 with Laurus, Valens U.S. and Valens Offshore, pursuant to which it agreed to register for resale the common stock to be issued upon exercise of the Warrants (the “Registration Rights Agreements”). The Registration Rights Agreements provide for liquidated damages of 1% for every 30 days that the registration statements are not filed by the required filing date of May 29, 2008 or not declared effective by the required effective date of August 27, 2008.

On March 4, 2008, Modtech also entered into a Reaffirmation and Ratification Agreement with Laurus, Valens U.S. and Valens Offshore with respect to the Original Notes and the Related Agreements ratifying and confirming the Original Notes and Related Agreements, except as modified by the Waiver, Additional Notes, Warrants and Registration Rights Agreements. Laurus, Valens U.S. and Valens Offshore agreed, pursuant to a letter agreement entered into the same date, to refrain until May 1, 2008 from selling on any trading day shares of Modtech’s common stock that exceed 20% of the daily trading volume.

2008 Equity Financing

On March 10, 2008, Modtech entered into a Subscription Agreement with existing stockholders, new investors and current directors and executives of the company (collectively the “Buyers”), pursuant to which Modtech agreed to issue 14,190 shares of its newly created Series B Preferred Stock and 2,256 shares of its newly created Series C Preferred Stock, each at $100 per share (collectively the “Preferred Shares”), for an aggregate purchase price of $1.6 million.

The Series B Preferred Stock, which is not being issued to Modtech directors and executives, is convertible into the company’s common stock at $0.40 per share and accrues dividends at 8% per annum, payable in additional shares of Series B Preferred Stock. The Series C Preferred Stock, which is being issued only to directors and executives of the company, is convertible into Modtech common stock at $0.49 per share which is the book value of the common shares. Dividends do not accrue on the Series C Preferred Stock.

The Preferred Shares are convertible into an aggregate of 4,007,908 shares of Modtech’s common stock. The Preferred Shares may be converted at any time, in whole or in part, at the election of the holders and are subject to redemption at Modtech’s option at any time after the closing price of Modtech’s common stock has been $2.00 or more for 20 consecutive trading days.

Modtech also entered into a Registration Rights Agreement with the Buyers on March 10, 2008 pursuant to which it agreed to register for resale the shares of its common stock to be issued upon conversion of the Preferred Shares. The Registration Rights Agreement provides for customary liquidated damage payments if the registration statement is not filed on, and declared effective by, the dates specified in the agreement.

F-31

Schedule II – Valuation and Qualifying Accounts

Years Ended December 31, 2007, 2006, and 2005

Description	Balance at Beginning of Year		Acquired Through Acquisition		Amounts Charged to Expense		Deductions			Balance at End of Year
Allowance for contract adjustments:
Year ended December 31, 2007	$	2,358,000	$	-	$	1,354,000	$	(1,461,000	)	$	2,251,000
Year ended December 31, 2006	$	616,000	$	-	$	3,222,000	$	(1,480,000	)	$	2,358,000
Year ended December 31, 2005	$	1,526,000	$	-	$	731,000	$	(1,641,000	)	$	616,000

F-32

EX-3.3

Exhibit 3.3

CERTIFICATE OF AMENDMENT

OF

CERTFICATE OF INCORPORATION

OF

MODTECH HOLDINGS, INC.

Modtech Holdings, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify:

FIRST: That the Board of Directors duly adopted a resolution setting forth a proposed amendment to the Certificate of Incorporation of the corporation. The resolution setting forth the proposed amendmentis as follows:

RESOLVED, that paragraph (a) of ARTICLE IV of the corporation's Certificate of Incorporation entitled "CAPITAL STOCK" be amended to read in its entirety as set forth below, and such amendment is recommended to the stockholders of the corporation for approval as being advisable and in the best interests of the corporation:

"The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 60,000,000, consisting of 5,000,000 shares of preferred stock, par value $0.01 per share ("Preferred Stock") and 55,000,000 shares of common stock, with a par value of $0.01 per share (the "Common Stock")."

SECOND: That the stockholders of the corporation duly approved the amendment at a special meeting of stockholders held on January 3, 2006 by affirmative vote of the necessary number of shares in accordance with the provisions of Section 216 and Section 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, the corporation has caused this Certificate of Amendment to be executed by its President on January 9, 2006.

Modtech Holdings, Inc.
By:	/s/David Buckley
	David Buckley
	Chief Executive Officer &
	President

ATTEST:
By:	/s/ Dennis Shogren
	Dennis Shogren, Secretary

EX-4.1

Exhibit 4.1

CERTIFICATE OF DESIGNATION OF

PREFERENCES, RELATIVE, PARTICIPATING, OPTIONAL, AND OTHER SPECIAL

RIGHTS, QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS

OF

SERIES B PREFERRED STOCK

AND SERIES C PREFERRED STOCK

OF

MODTECH HOLDINGS, INC.

The undersigned, Dennis Shogren and Kenneth Cragun, certify that:

ONE. They are the duly elected Chief Executive Officer and Secretary, respectively, of the above-named corporation.

TWO. Pursuant to and in accordance with the provisions of Section 151 of the Delaware General Corporation Law and the Certificate of Incorporation of this corporation, the Board of Directors of this corporation has duly adopted the following recitals and resolutions.

WHEREAS, the Certificate of Incorporation of this corporation provides for a class of its authorized shares known as Preferred Stock comprised of 5,000,000 shares issuable from time to time in one or more series; and

WHEREAS, the Board of Directors of this corporation is authorized to fix the number of shares of any series of Preferred Stock and to determine the designation of any such series and the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock; and

WHEREAS, the Board of Directors has previously fixed and determined the designation of, the number of shares constituting, and the rights, preferences, privileges and restrictions relating to a Series A Preferred Stock; and

WHEREAS, the Board of Directors of this corporation desires to establish two additional classes of Preferred Stock , one to be designated as the "Series B Preferred Stock" and the other to be designated as “Series C Preferred Stock,” and to fixthe number of shares in each class and the rights, preferences, privileges, restrictions and other matters relating thereto;

NOW, THER.EFORE, BE IT RESOLVED, that a series consistingof 50,000 shares of Preferred Stock, $0.01 par value per share, is hereby established and designated asthe "Series B Preferred Stock" of this corporation (the "Series B Preferred Stock"), and that the Series B Preferred Stock shall have the rights, preferences and privileges, and shall be subject to the restrictions, as are hereinafter set forth; and

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RESOLVED FURTHER, that a series consistingof 50,000 shares of Preferred Stock, $0.01 par value per share, is hereby established and designated asthe "Series C Preferred Stock" of this corporation (the "Series C Preferred Stock"), and that the Series C Preferred Stock shall have the rights, preferences and privileges, and shall be subject to the restrictions, as are hereinafter set forth:

1.Dividend Provisions.

(a)Series B Dividends. The holders of outstanding Series B Preferred Stock shall be entitled to receive when, as and if declared by the Board of Directors, out of unissued shares of Series B Preferred Stock at the time legally available therefor, dividends, in whole and/or fractional shares of such Series B Preferred Stock, at the rate of Eight Percent (8%) per share of outstanding Series B Preferred Stock per annum. Dividends shall accrue on each share of Series B Preferred Stock from the date of its original issuance and shall accrue from day to day, whether or not earned or declared. Such dividends shall be cumulative so that if such dividends in respect of any previous year at said rate per share per annum shall not have been paid or declared and set apart for all shares of Series B Preferred Stock at the time outstanding, the deficiency shall be fully paid on or declared and set apart for such shares before this corporation pays any dividend (except a dividend in shares of Common Stock) on Common Stock or any dividend on Series C Preferred Stock or on any Preferred Stock issued subsequent to the Series B Preferred Stock. Undeclared or unpaid dividends shall not bear or accrue interest.

(b)Series C Dividends. No dividend shall be declared or paid on the Common Stock of this corporation (other than in Common Stock of this corporation) or on any other series of Preferred Stock, except Series B Preferred Stock as provided above, unless prior to and in preference thereof a dividend of equal amount per share is declared and paid on the outstanding shares of the Series C Preferred Stock out of any assets legally available therefore. Unless and until declared, no dividends shall accrue on outstanding shares of Series C Preferred Stock.

2.Liquidation Preference.

(a)Series B Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution or winding up of this corporation, the holders of each then outstanding share of Series B Preferred Stock shall be entitled to receive, prior and in preference to any distribution of the assets or surplus funds of this corporation to the holders of Common Stock, Series C Preferred Stock, or any series of Preferred Stock issued subsequent to the Series B Preferred Stock, an amount equal to One Hundred Dollars ($100.00) per share, (appropriately adjusted to reflect stock splits, stock dividends, reorganizations, consolidations and similar changes with respect to the Series B Preferred Stock occurring after the date of the first issuance of shares of the Series B Preferred Stock), plus all accrued but unpaid cumulative dividends on such share of Series B Preferred Stock (the "Series B Liquidation Preference"). The Series B Liquidation Preference shall be paid or set apart for payment before, in connection with any liquidation, dissolution or winding up of the corporation, the payment or setting apart for payment of any amount for, or the distribution of any assets of this corporation to, the holders of Series C Preferred Stock, Common Stock or any series of Preferred Stock issued subsequent to the Series B Preferred Stock. If the assets or surplus funds to be distributed to the holders of the Series B Preferred Stock are insufficient to permit the payment to such holders of the full Series B Liquidation Preference, then the entire assets and surplus funds of this corporation legally available for distribution shall be distributed ratably among the holders of the Series B Preferred Stock in proportion to the share of the Series B Liquidation Preference each such holder is otherwise entitled to receive in respect of the shares of Series B Preferred Stock then held by such holder.

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(b) Series C Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution or winding up of this corporation and after the payment or setting apart for payment of the Series B Liquidation Preference, the holders of each then outstanding share of Series C Preferred Stock shall be entitled to receive, by reason of their ownership thereof, prior and in preference to any distribution of any of the assets of this corporation to the holders of the Common Stock or any series of Preferred Stock issued subsequent to the Series C Preferred Stock an amount equal to One Hundred Dollars ($100.00) per share (appropriately adjusted to reflect stock splits, stock dividends, reorganizations, consolidations and similar changes with respect to the Series C Preferred Stock occurring after the date of the first issuance of shares of the Series C Preferred Stock), plus any declared but unpaid dividends on such share of Series C Preferred Stock (the "Series C Liquidation Preference"). The Series C Liquidation Preference shall be paid or set apart for payment before, in connection with any liquidation, dissolution or winding up of the corporation, the payment or setting apart for payment of any amount for, or the distribution of any assets of this corporation to, the holders of Common Stock or any series of Preferred Stock issued subsequent to the Series C Preferred Stock. If the remaining assets or surplus funds to be distributed to the holders of the Series C Preferred Stock are insufficient to permit the payment to such holders of the full Series C Liquidation Preference, then the entire remaining assets and surplus funds of this corporation legally available for distribution shall be distributed ratably among the holders of the Series C Preferred Stock in proportion to the share of the Series C Liquidation Preference each such holder is otherwise entitled to receive in respect of the shares of Series C Preferred Stock then held by such holder.

(c)Remaining Assets. After the payment or setting apart for payment in full of the Series B Liquidation Preference and the Series C Liquidation Preference, any remaining assets or surplus funds of this corporation shall be distributed to the holders of Series B Preferred Stock, the holders of Series C Preferred Stock and the holders of Common Stock, ratably on the basis of the number of shares of Common Stock then held by them and then issuable upon conversion of the Series B Preferred Stock and Series C Preferred Stock then held by them.

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3.Redemption.

(a)Optional. Following the twentieth (20^th) consecutive trading day on which the closing price of the Common Stock (or the closing bid price if there is no closing price) equals or exceeds Two Dollars ($2.00) per share on the exchange or market on which the Common Stock is then traded, this corporation may at any time thereafter to the extent it may lawfully do so, at the option of its Board of Directors, redeem in whole or in part (i) the Series B Preferred Stock by paying in cash therefor a sum equal to One Hundred Dollars ($100.00) per share of Series B Preferred Stock (appropriately adjusted to reflect stock splits, stock dividends, reorganizations, consolidations and similar changes with respect to the Series B Preferred Stock occurring after the date of the first issuance of shares of Series B Preferred), together with all accrued but unpaid dividends on such shares to the date of redemption (the "Series B Redemption Price") and (ii) the Series C Preferred Stock by paying in cash therefor a sum equal to One Hundred Dollars ($100.00) per share of Series C Preferred Stock (appropriately adjusted to reflect stock splits, stock dividends, reorganizations, consolidations and similar changes with respect to the Series C Preferred Stock occurring after the date of the first issuance of shares of Series C Preferred Stock), together with all declared but unpaid dividends on such shares to the date of redemption (the "Series C Redemption Price"). Any redemption of Series B Preferred Stock and Series C Preferred Stock shall be pro rata among the outstanding shares of Series B Preferred Stock and Series C Preferred Stock based upon the number of shares held by each holder thereof.

(b)Notice of Redemption. The corporation shall give written notice at least thirty (30) days prior to the redemption date, of its intention to redeem the Series B Preferred Stock and Series C Preferred Stock as provided herein, to each holder thereof, such notice to be addressed to each holder at the address of such holder as it appears on the stock transfer books of the corporation and to specify (i) the total number of shares of Series B Preferred Stock and Series C Preferred Stock being redeemed; (ii) the number of shares of Series B Preferred Stock and Series C Preferred Stock held by the holder which the corporation intends to redeem; (iii) the date of redemption, the Series B Redemption Price and the Series C Redemption Price; and (iv) the date on which the conversion rights with respect to such shares terminate in accordance with Section 4 below. On or after the date of redemption, each holder of Series B Preferred Stock and Series C Preferred Stock shall surrender his certificate for the number of shares to be redeemed as stated in the notice provided by the corporation (other than those shares properly converted pursuant to Section 4 below). If less than all the shares represented by such certificates are to be redeemed, the corporation shall forthwith issue a new certificate for the unredeemed shares.

4.Conversion.

The holders of the Series B Preferred Stock and Series C Preferred Stock shall have conversion rights as follows:

(a)Optional Conversion into Common Stock. Each share of Series B Preferred Stock and Series C Preferred Stock shall be convertible at the option of the holder thereof, at any time after the date of issuance of such share and on or prior to the fifth day prior to the redemption date for such share fixed by a redemption notice in accordance with Section 3 above, at the office of the corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by, in the case of Series B Preferred Stock, dividing One Hundred Dollars ($100.00), plus accrued but unpaid dividends on the Series B Preferred Stock by the "Series B Conversion Price" in effect at the time and, in the case of Series C Preferred Stock, dividing One Hundred Dollars ($100.00), plus declared but unpaid dividends on the Series C Preferred Stock by the "Series C Conversion Price" in effect at the time. The initial Series B Conversion Price per share is Forty-Eight Cents ($0.48) and the initial Series C Conversion Price per share is Forty-Nine Cents ($0.49); provided, however, that the Series B Conversion Price and the Series C Conversion Price shall be subject to adjustment as set forth in subsection 4(c).

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(b) Mechanics of Conversion from Preferred Stock to Common Stock. No fractional shares of Common Stock shall be issued upon conversion of Series B Preferred Stock or Series C Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the corporation shall pay cash equal to such fraction multiplied by the then effective Series B Conversion Price or Series C Conversion Price, as applicable. Before any holder of Series B Preferred Stock or Series C Preferred Stock shall be entitled to convert the same into shares of Common Stock pursuant to Section 4(a) hereof, he shall surrender the certificate or certificates therefor, duly endorsed, at the office of the corporation or of any transfer agent for the Series B Preferred Stock or Series C Preferred Stock, and shall give written notice to the corporation at such office that he elects to convert the same and shall state therein his name or the name or names of his nominees in which he wishes the certificate or certificates for shares of Common Stock to be issued. The corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series B Preferred Stock or Series C Preferred Stock, or to his nominee or nominees, a certificate or certificates for the number of shares of Common Stock to which he shall be entitled as aforesaid, together with cash in lieu of any fraction of a share. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date.

(c)Adjustment in Conversion Price.

(i)Combinations or Subdivisions. If the corporation at any time or from time to time after the date of the first issuance of shares of the Series B Preferred Stock and Series C Preferred Stock ( the “Original Issue Date”) declares or pays any dividend on its Common Stock payable in Common Stock or in any right to acquire Common Stock, or effects a subdivision of the outstanding shares of Common Stock into a greater number of shares of Common Stock (by stock split, reclassification or otherwise), or if the outstanding shares of Common Stock is combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, then the Series B Conversion Price and Series C Conversion Price in effect immediately prior to such event shall, concurrently with the effectiveness of such event, be proportionately decreased or increased, as appropriate.

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(ii) Reorganization; Recapitalization. If at any time or from time to time there shall be a reclassification or recapitalization of the capital stock of the corporation (other than a subdivision, reclassification, stock split or combination provided for elsewhere in this Section 4), any consolidation, merger, or reorganization of the corporation with or into another entity or entities, or the conveyance of all or substantially all of the assets of the corporation to another entity, each share of Series B Preferred Stock and Series C Preferred Stock shall thereafter be convertible into the number of shares of stock or other securities or property (including cash) to which to which a holder of the number of shares of Common Stock deliverable upon conversion of such shares would have been entitled on such reclassification, recapitalization, consolidation, merger, reorganization or conveyance. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4 with respect to the rights of the holders of the Series B Preferred Stock and Series C Preferred Stock after the reclassification, recapitalization, consolidation, merger, reorganization or conveyance to the end that the provisions of this Section 4 (including adjustment of the Series B Conversion Price and Series C Conversion Price then in effect and the number of shares to be issued upon conversion of the Series B Preferred Stock and Series C Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable.

(iii)Issuance of Additional Securities; Other Adjustments. Except as otherwise provided in this Section 4(c), the Series B Conversion Price and the Series C Conversion Price will not be adjusted upward or downward because of the issuance of additional securities after the Original Issue Date.

(d)No Impairment.This corporation will not, by amendment of its Certificate of Incorporation, or through reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms tobe observed or performed hereunder by this corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of the Series B Preferred Stock and Series C Stock, respectively, against impairment.

(e)Certificate as to Adjustments Upon the occurrence of each adjustment or readjustment of the Series B Conversion Price and Series C Conversion Price pursuant to this Section 4, this corporation, at its expense, shall promptly compute suchadjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series B Preferred Stock and each holder of Series C Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. This corporation shall, upon the written request at any time of any holder of Series B Preferred Stock or Series C Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (a) such adjustment and readjustment, (b) the conversion price for such series of Preferred Stock at the time in effect, and (c) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of a share of Series B Preferred Stock and Series C Preferred Stock.

(f) Reservation of Stock Issuable Upon Conversion. This corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series B Preferred Stock and Series C Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all then outstanding shares of the Series B Preferred Stock and Series C Preferred Stock.

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(g) Notices. Any notice required by the provisions of this Section 4 to be given to the holders of shares of Series B Preferred Stock or Series C Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his address appearing on the books and the shares of this corporation.

5. Voting Rights. Except as otherwise required by law and the provisions of this Section 5, the holders of Series B Preferred Stock and Series C Preferred Stock shall be entitled to notice of any stockholders' meeting in accordance with the Bylaws of the Corporation and to vote together with the holders of Common Stock as a single class of capital stock upon any matter submitted to stockholders for a vote. Holders of Series B Preferred Stock and Series C Preferred Stock shall have that number of votes per share equal to the number of shares of Common Stock into which each such share of each such series of Preferred Stock held by such holder is convertible at the record date for the determination of the stockholders entitled to vote on such matters or, if no such record date is established, at the date such vote is taken or any written consent of stockholders is solicited. Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the foregoing formula (after aggregating all shares into which shares of Series B Preferred Stock and Series C Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward).

6. Protective Provisions. So long as at least 75% of the aggregate number of shares of Series B Preferred Stock and Series C Preferred Stock issued on the Original Issue Date (appropriately adjusted to reflect stock splits, stock dividends, reorganizations, consolidations and similar changes with respect to the Series B Preferred Stock and the Series C Preferred Stock occurring after the Original Issue Date), are outstanding, the corporation shall not, without the vote or written consent by the holders of at least a majority of the aggregate number of outstanding shares of Series B Preferred Stock and Series C Preferred Stock authorize or issue, or obligate itself to issue, any other equity security senior to the Series B Preferred Stock or Series C Preferred Stock as to dividend or redemption rights, liquidation preferences, conversion rights, voting rights or otherwise, or create any obligation or security convertible into or exchangeable for, or having any option rights to purchase, any such equity security which is senior to the Series B Preferred Stock or Series C Preferred Stock.

7.Status of Converted Stock. In the event any shares of Series B Preferred Stock or Series C Preferred Stock shall be converted pursuant to Section 4 hereof, the shares so converted shall be cancelled and shall not be reissuable by the corporation, but shall be returned to the status of undesignated shares of Preferred Stock.

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IN WITNESS WHEREOF, the undersigned have executed this certificate. Each of the undersigned declares under penalty of perjury that the matters set forth in the foregoing certificate are true of his own knowledge. Executed at Riverside, California effective March 6, 2008.

By:	/s/ Dennis Shogren
		Dennis Shogren
		Chief Executive Officer
By:	/s/ Kenneth Cragun
		Kenneth Cragun
		Secretary

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EX-4.2

Exhibit 4.2

AMENDED AND RESTATED

CERTIFICATE OF DESIGNATION OF

PREFERENCES, RELATIVE, PARTICIPATING, OPTIONAL, AND OTHER SPECIAL

RIGHTS, QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS

OF

SERIES B PREFERRED STOCK

AND SERIES C PREFERRED STOCK

OF

MODTECH HOLDINGS, INC.

The undersigned, Dennis Shogren and Kenneth Cragun, certify that:

ONE. They are the duly elected Chief Executive Officer and Secretary, respectively, of the above-named corporation.

TWO. Pursuant to and in accordance with the provisions of Section 151 of the Delaware General Corporation Law and the Certificate of Incorporation of this corporation, the Board of Directors of this corporation has duly adopted the following recitals and resolutions.

WHEREAS, the Certificate of Incorporation of this corporation provides for a class of its authorized shares known as Preferred Stock comprised of 5,000,000 shares issuable from time to time in one or more series; and

WHEREAS, the Board of Directors of this corporation is authorized to fix the number of shares of any series of Preferred Stock and to determine the designation of any such series and the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock; and

WHEREAS, the Board of Directors has previously fixed and determined the designation of, the number of shares constituting, and the rights, preferences, privileges and restrictions relating to a Series A Preferred Stock; and

WHEREAS, pursuant to a Certificate of Designation filed with the Delaware Secretary of State on March 6, 2008, the Board of Directors of this corporation has previously established two additional classes of Preferred Stock, one designated as the "Series B Preferred Stock" and the other designated as “Series C Preferred Stock,” and fixedthe number of shares in each class and the rights, preferences, privileges, restrictions and other matters relating thereto; and

WHEREAS, the Board of Directors wishes to amend and restate the Certificate of Designation filed March 6, 2008 in its entirety;

NOW, THER.EFORE, BE IT RESOLVED, that a series consistingof 50,000 shares of Preferred Stock, $0.01 par value per share, is hereby established and designated asthe "Series B Preferred Stock" of this corporation (the "Series B Preferred Stock"), and that the Series B Preferred Stock shall have the rights, preferences and privileges, and shall be subject to the restrictions, as are hereinafter set forth; and

RESOLVED FURTHER, that a series consistingof 50,000 shares of Preferred Stock, $0.01 par value per share, is hereby established and designated asthe "Series C Preferred Stock" of this corporation (the "Series C Preferred Stock"), and that the Series C Preferred Stock shall have the rights, preferences and privileges, and shall be subject to the restrictions, as are hereinafter set forth:

1.Dividend Provisions.

(a)Series B Dividends. The holders of outstanding Series B Preferred Stock shall be entitled to receive when, as and if declared by the Board of Directors, out of unissued shares of Series B Preferred Stock at the time legally available therefor, dividends, in whole and/or fractional shares of such Series B Preferred Stock, at the rate of Eight Percent (8%) per share of outstanding Series B Preferred Stock per annum. Dividends shall accrue on each share of Series B Preferred Stock from the date of its original issuance and shall accrue from day to day, whether or not earned or declared. Such dividends shall be cumulative so that if such dividends in respect of any previous year at said rate per share per annum shall not have been paid or declared and set apart for all shares of Series B Preferred Stock at the time outstanding, the deficiency shall be fully paid on or declared and set apart for such shares before this corporation pays any dividend (except a dividend in shares of Common Stock) on Common Stock or any dividend on Series C Preferred Stock or on any Preferred Stock issued subsequent to the Series B Preferred Stock. Undeclared or unpaid dividends shall not bear or accrue interest.

(b)Series C Dividends. No dividend shall be declared or paid on the Common Stock of this corporation (other than in Common Stock of this corporation) or on any other series of Preferred Stock, except Series B Preferred Stock as provided above, unless prior to and in preference thereof a dividend of equal amount per share is declared and paid on the outstanding shares of the Series C Preferred Stock out of any assets legally available therefore. Unless and until declared, no dividends shall accrue on outstanding shares of Series C Preferred Stock.

2.Liquidation Preference.

(a)Series B Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution or winding up of this corporation, the holders of each then outstanding share of Series B Preferred Stock shall be entitled to receive, prior and in preference to any distribution of the assets or surplus funds of this corporation to the holders of Common Stock, Series C Preferred Stock, or any series of Preferred Stock issued subsequent to the Series B Preferred Stock, an amount equal to One Hundred Dollars ($100.00) per share, (appropriately adjusted to reflect stock splits, stock dividends, reorganizations, consolidations and similar changes with respect to the Series B Preferred Stock occurring after the date of the first issuance of shares of the Series B Preferred Stock), plus all accrued but unpaid cumulative dividends on such share of Series B Preferred Stock (the "Series B Liquidation Preference"). The Series B Liquidation Preference shall be paid or set apart for payment before, in connection with any liquidation, dissolution or winding up of the corporation, the payment or setting apart for payment of any amount for, or the distribution of any assets of this corporation to, the holders of Series C Preferred Stock, Common Stock or any series of Preferred Stock issued subsequent to the Series B Preferred Stock. If the assets or surplus funds to be distributed to the holders of the Series B Preferred Stock are insufficient to permit the payment to such holders of the full Series B Liquidation Preference, then the entire assets and surplus funds of this corporation legally available for distribution shall be distributed ratably among the holders of the Series B Preferred Stock in proportion to the share of the Series B Liquidation Preference each such holder is otherwise entitled to receive in respect of the shares of Series B Preferred Stock then held by such holder.

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(b) Series C Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution or winding up of this corporation and after the payment or setting apart for payment of the Series B Liquidation Preference, the holders of each then outstanding share of Series C Preferred Stock shall be entitled to receive, by reason of their ownership thereof, prior and in preference to any distribution of any of the assets of this corporation to the holders of the Common Stock or any series of Preferred Stock issued subsequent to the Series C Preferred Stock an amount equal to One Hundred Dollars ($100.00) per share (appropriately adjusted to reflect stock splits, stock dividends, reorganizations, consolidations and similar changes with respect to the Series C Preferred Stock occurring after the date of the first issuance of shares of the Series C Preferred Stock), plus any declared but unpaid dividends on such share of Series C Preferred Stock (the "Series C Liquidation Preference"). The Series C Liquidation Preference shall be paid or set apart for payment before, in connection with any liquidation, dissolution or winding up of the corporation, the payment or setting apart for payment of any amount for, or the distribution of any assets of this corporation to, the holders of Common Stock or any series of Preferred Stock issued subsequent to the Series C Preferred Stock. If the remaining assets or surplus funds to be distributed to the holders of the Series C Preferred Stock are insufficient to permit the payment to such holders of the full Series C Liquidation Preference, then the entire remaining assets and surplus funds of this corporation legally available for distribution shall be distributed ratably among the holders of the Series C Preferred Stock in proportion to the share of the Series C Liquidation Preference each such holder is otherwise entitled to receive in respect of the shares of Series C Preferred Stock then held by such holder.

(c)Remaining Assets. After the payment or setting apart for payment in full of the Series B Liquidation Preference and the Series C Liquidation Preference, any remaining assets or surplus funds of this corporation shall be distributed to the holders of Series B Preferred Stock, the holders of Series C Preferred Stock and the holders of Common Stock, ratably on the basis of the number of shares of Common Stock then held by them and then issuable upon conversion of the Series B Preferred Stock and Series C Preferred Stock then held by them.

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3.Redemption.

(a)Optional. Following the twentieth (20^th) consecutive trading day on which the closing price of the Common Stock (or the closing bid price if there is no closing price) equals or exceeds Two Dollars ($2.00) per share on the exchange or market on which the Common Stock is then traded, this corporation may at any time thereafter to the extent it may lawfully do so, at the option of its Board of Directors, redeem in whole or in part (i) the Series B Preferred Stock by paying in cash therefor a sum equal to One Hundred Dollars ($100.00) per share of Series B Preferred Stock (appropriately adjusted to reflect stock splits, stock dividends, reorganizations, consolidations and similar changes with respect to the Series B Preferred Stock occurring after the date of the first issuance of shares of Series B Preferred), together with all accrued but unpaid dividends on such shares to the date of redemption (the "Series B Redemption Price") and (ii) the Series C Preferred Stock by paying in cash therefor a sum equal to One Hundred Dollars ($100.00) per share of Series C Preferred Stock (appropriately adjusted to reflect stock splits, stock dividends, reorganizations, consolidations and similar changes with respect to the Series C Preferred Stock occurring after the date of the first issuance of shares of Series C Preferred Stock), together with all declared but unpaid dividends on such shares to the date of redemption (the "Series C Redemption Price"). Any redemption of Series B Preferred Stock and Series C Preferred Stock shall be pro rata among the outstanding shares of Series B Preferred Stock and Series C Preferred Stock based upon the number of shares held by each holder thereof.

(b)Notice of Redemption. The corporation shall give written notice at least thirty (30) days prior to the redemption date, of its intention to redeem the Series B Preferred Stock and Series C Preferred Stock as provided herein, to each holder thereof, such notice to be addressed to each holder at the address of such holder as it appears on the stock transfer books of the corporation and to specify (i) the total number of shares of Series B Preferred Stock and Series C Preferred Stock being redeemed; (ii) the number of shares of Series B Preferred Stock and Series C Preferred Stock held by the holder which the corporation intends to redeem; (iii) the date of redemption, the Series B Redemption Price and the Series C Redemption Price; and (iv) the date on which the conversion rights with respect to such shares terminate in accordance with Section 4 below. On or after the date of redemption, each holder of Series B Preferred Stock and Series C Preferred Stock shall surrender his certificate for the number of shares to be redeemed as stated in the notice provided by the corporation (other than those shares properly converted pursuant to Section 4 below). If less than all the shares represented by such certificates are to be redeemed, the corporation shall forthwith issue a new certificate for the unredeemed shares.

4.Conversion.

The holders of the Series B Preferred Stock and Series C Preferred Stock shall have conversion rights as follows:

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(a)Optional Conversion into Common Stock. Each share of Series B Preferred Stock and Series C Preferred Stock shall be convertible at the option of the holder thereof, at any time after the date of issuance of such share and on or prior to the fifth day prior to the redemption date for such share fixed by a redemption notice in accordance with Section 3 above, at the office of the corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by, in the case of Series B Preferred Stock, dividing One Hundred Dollars ($100.00), plus accrued but unpaid dividends on the Series B Preferred Stock by the "Series B Conversion Price" in effect at the time and, in the case of Series C Preferred Stock, dividing One Hundred Dollars ($100.00), plus declared but unpaid dividends on the Series C Preferred Stock by the "Series C Conversion Price" in effect at the time. The initial Series B Conversion Price per share is Forty Cents ($0.40) and the initial Series C Conversion Price per share is Forty-Nine Cents ($0.49); provided, however, that the Series B Conversion Price and the Series C Conversion Price shall be subject to adjustment as set forth in subsection 4(c).

(b) Mechanics of Conversion from Preferred Stock to Common Stock. No fractional shares of Common Stock shall be issued upon conversion of Series B Preferred Stock or Series C Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the corporation shall pay cash equal to such fraction multiplied by the then effective Series B Conversion Price or Series C Conversion Price, as applicable. Before any holder of Series B Preferred Stock or Series C Preferred Stock shall be entitled to convert the same into shares of Common Stock pursuant to Section 4(a) hereof, he shall surrender the certificate or certificates therefor, duly endorsed, at the office of the corporation or of any transfer agent for the Series B Preferred Stock or Series C Preferred Stock, and shall give written notice to the corporation at such office that he elects to convert the same and shall state therein his name or the name or names of his nominees in which he wishes the certificate or certificates for shares of Common Stock to be issued. The corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series B Preferred Stock or Series C Preferred Stock, or to his nominee or nominees, a certificate or certificates for the number of shares of Common Stock to which he shall be entitled as aforesaid, together with cash in lieu of any fraction of a share. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date.

(c)Adjustment in Conversion Price.

(i)Combinations or Subdivisions. If the corporation at any time or from time to time after the date of the first issuance of shares of the Series B Preferred Stock and Series C Preferred Stock ( the “Original Issue Date”) declares or pays any dividend on its Common Stock payable in Common Stock or in any right to acquire Common Stock, or effects a subdivision of the outstanding shares of Common Stock into a greater number of shares of Common Stock (by stock split, reclassification or otherwise), or if the outstanding shares of Common Stock is combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, then the Series B Conversion Price and Series C Conversion Price in effect immediately prior to such event shall, concurrently with the effectiveness of such event, be proportionately decreased or increased, as appropriate.

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(ii) Reorganization; Recapitalization. If at any time or from time to time there shall be a reclassification or recapitalization of the capital stock of the corporation (other than a subdivision, reclassification, stock split or combination provided for elsewhere in this Section 4), any consolidation, merger, or reorganization of the corporation with or into another entity or entities, or the conveyance of all or substantially all of the assets of the corporation to another entity, each share of Series B Preferred Stock and Series C Preferred Stock shall thereafter be convertible into the number of shares of stock or other securities or property (including cash) to which to which a holder of the number of shares of Common Stock deliverable upon conversion of such shares would have been entitled on such reclassification, recapitalization, consolidation, merger, reorganization or conveyance. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4 with respect to the rights of the holders of the Series B Preferred Stock and Series C Preferred Stock after the reclassification, recapitalization, consolidation, merger, reorganization or conveyance to the end that the provisions of this Section 4 (including adjustment of the Series B Conversion Price and Series C Conversion Price then in effect and the number of shares to be issued upon conversion of the Series B Preferred Stock and Series C Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable.

(iii)Issuance of Additional Securities; Other Adjustments. Except as otherwise provided in this Section 4(c), the Series B Conversion Price and the Series C Conversion Price will not be adjusted upward or downward because of the issuance of additional securities after the Original Issue Date.

(d)No Impairment.This corporation will not, by amendment of its Certificate of Incorporation, or through reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms tobe observed or performed hereunder by this corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of the Series B Preferred Stock and Series C Stock, respectively, against impairment.

(e)Certificate as to Adjustments Upon the occurrence of each adjustment or readjustment of the Series B Conversion Price and Series C Conversion Price pursuant to this Section 4, this corporation, at its expense, shall promptly compute suchadjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series B Preferred Stock and each holder of Series C Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. This corporation shall, upon the written request at any time of any holder of Series B Preferred Stock or Series C Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (a) such adjustment and readjustment, (b) the conversion price for such series of Preferred Stock at the time in effect, and (c) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of a share of Series B Preferred Stock and Series C Preferred Stock.

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(f) Reservation of Stock Issuable Upon Conversion. This corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series B Preferred Stock and Series C Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all then outstanding shares of the Series B Preferred Stock and Series C Preferred Stock.

(g) Notices. Any notice required by the provisions of this Section 4 to be given to the holders of shares of Series B Preferred Stock or Series C Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his address appearing on the books and the shares of this corporation.

5. Voting Rights. Except as otherwise required by law and the provisions of this Section 5, the holders of Series B Preferred Stock and Series C Preferred Stock shall be entitled to notice of any stockholders' meeting in accordance with the Bylaws of the Corporation and to vote together with the holders of Common Stock as a single class of capital stock upon any matter submitted to stockholders for a vote. Holders of Series B Preferred Stock and Series C Preferred Stock shall have that number of votes per share equal to the number of shares of Common Stock into which each such share of each such series of Preferred Stock held by such holder is convertible at the record date for the determination of the stockholders entitled to vote on such matters or, if no such record date is established, at the date such vote is taken or any written consent of stockholders is solicited. Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the foregoing formula (after aggregating all shares into which shares of Series B Preferred Stock and Series C Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward).

6. Protective Provisions. So long as at least 75% of the aggregate number of shares of Series B Preferred Stock and Series C Preferred Stock issued on the Original Issue Date (appropriately adjusted to reflect stock splits, stock dividends, reorganizations, consolidations and similar changes with respect to the Series B Preferred Stock and the Series C Preferred Stock occurring after the Original Issue Date), are outstanding, the corporation shall not, without the vote or written consent by the holders of at least a majority of the aggregate number of outstanding shares of Series B Preferred Stock and Series C Preferred Stock authorize or issue, or obligate itself to issue, any other equity security senior to the Series B Preferred Stock or Series C Preferred Stock as to dividend or redemption rights, liquidation preferences, conversion rights, voting rights or otherwise, or create any obligation or security convertible into or exchangeable for, or having any option rights to purchase, any such equity security which is senior to the Series B Preferred Stock or Series C Preferred Stock.

7.Status of Converted Stock. In the event any shares of Series B Preferred Stock or Series C Preferred Stock shall be converted pursuant to Section 4 hereof, the shares so converted shall be cancelled and shall not be reissuable by the corporation, but shall be returned to the status of undesignated shares of Preferred Stock.

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IN WITNESS WHEREOF, the undersigned have executed this certificate. Each of the undersigned declares under penalty of perjury that the matters set forth in the foregoing certificate are true of his own knowledge. Executed at Riverside, California effective March 10, 2008.

By:	/s/Dennis Shogren
	Dennis Shogren
	Chief Executive Officer
By:	/s/ Kenneth Cragun
	Kenneth Cragun
	Secretary

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EX-10.53

Exhibit 10.53

February 29, 2008

Modtech Holdings, Inc.

2830 Barrett Avenue

Perris, California 92571

Attention: Chief Financial Officer

Amendment and Waiver Agreement

Ladies and Gentlemen:

Reference is made to (a) the Securities Purchase Agreement dated as of October 31, 2006; between Modtech Holdings, Inc. (the “Company”) and Laurus Master Fund, Ltd. (“Laurus”), as amended, modified and supplemented (the “First Purchase Agreement”); (b) the Secured Term Note dated October 31, 2006 in the original principal amount of $13,000,000 made by the Company in favor of Laurus (the “First Term Note”); (c) the Securities Purchase Agreement dated December 28, 2006 between the Company and Laurus (the “Second Purchase Agreement” and together with the First Purchase Agreement, the “Purchase Agreements”); (d) the Secured Term Note dated December 28, 2006 in the original principal amount of $5,000,000 made by the Company in favor of Laurus (the “Second Term Note” together with the First Term Note, the “Secured Term Notes”); and (e) the Related Agreements (as such term is defined in the Purchase Agreements).

Laurus has assigned a portion of its rights Purchase Agreements, the Secured Term Notes and the Related Agreements to Valens Offshore SPV I, Ltd. (“Valens Offshore”) and Valens U.S. SPV I, LLC (“Valens US” together with Laurus and Valens Offshore each a “Lender” and collectively, the “Lenders”).

Certain Events of Default (as such term is defined in the Secured Term Notes) have occurred and are continuing and the Company has requested that the Lenders waive such Events of Default and make certain amendments to the Purchase Agreements and the Secured Term Notes. The Lenders are willing to waive such Events of Defaults and amend the Purchase Agreements and the Notes on the terms and conditions specified herein.

Subject to the satisfaction of the conditions precedent set forth in this letter agreement and in reliance upon the representations, warranties and covenants of the Company contained in this letter agreement and any agreements documents or instruments executed in connection herewith, the Lenders agree to waive the Event of Default arising as a result of the Company’s failure for the period commencing on December 31, 2007 and ending on February 28, 2008 to comply with the Availability Covenant (as such term is defined in the Purchase Agreements).

Subject to the satisfaction of the conditions precedent set forth in this letter agreement and in reliance upon the representations, warranties and covenants of the Company contained in this letter agreement and any agreements documents or instruments executed in connection herewith:

1.The Availability Covenant contained in the Purchase Agreements is amended to be $5,400,000 for the period commencing on March 1, 2008 and ending on March 31, 2008, $6,600,000 for the period commencing on April 1, 2008 and ending on June 30, 2008 and $9,000,000 at all times on and after July 1, 2008.

2.In addition to the reporting obligations contained in the Purchase Agreements, the Company shall abide by the following additional reporting obligations:

(a) on Wednesday of each week, the Company shall deliver to the Lenders a cash flow projection prepared by the Company which includes the Company’s best estimate of all cash requirements (including interest, fees and principal amortization), projected sales and revenues, inventory, accounts payable and accounts receivable positions for the period covered thereby together with all supporting assumptions and schedules for the thirteen (13) week period covered thereby for the period commencing on Monday of the following week and for the thirteen week period thereafter together with a certificate of a responsible officer of the Company which shall state that such rolling weekly cash flow projection is based upon estimates and assumptions all of which the Company believes to be reasonable and fair in light of the conditions and facts known to the Company as of the date thereof and reflect the good faith estimate by the Company of the working capital needs of the Company for such period;

(b) on Wednesday of each week, the Company shall deliver to the Lenders: (i) an accounts receivable and accounts payable listing as of the close of business of the preceding week; (ii) collection reports for the preceding week; and (iii) a compliance report with respect to the rolling weekly cash flow projection for the preceding week which includes a comparison of all categories in such projection with actual levels of expenditures and revenues generated for the preceding week together with an explanation of all variances from such projection; and

(c) no later than fifteen (15) days after the end of each month, the Company shall deliver to Lenders a report listing all projects of the Company and the profitability / loss of each such project as of the end of such month.

3.Principal payments due under the Secured Term Notes on each of March 1, 2008, April 1, 2008, May 1, 2008 and June 1, 2008 shall not be required to be made with principal payments resuming on July 1, 2008. Notwithstanding anything to the contrary set forth in the Secured Term Notes, Section 2.1 of each Secured Term Note shall be amended to provide that if the Company prepays fully (i) the Secured Terms Notes, (ii) the Additional Secured Term Notes (as defined below) and (iii) any other obligations in connection therewith within twelve (12) months of the date hereof, the optional redemption rate set forth in Section 2.1 shall be reduced to one hundred five percent (105%).

4.No later than March 10, 2008, the Company shall receive proceeds of at least $1,500,000 from the issuance of preferred stock of the Company having a coupon not to exceed eight percent (8%) per annum and having such other terms and conditions acceptable to Lenders. The failure of the foregoing to occur shall constitute an Event of Default.

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5.In consideration of the Lenders entering into this letter agreement, the Company shall issue the Additional Term Notes (as defined below).

6.Each reference to the term “Warrants” and “Warrant Shares” contained in the Purchase Agreements shall include the Additional Warrants (as such term is defined below) and shares of common stock of the Company to be issued to any Lender under the Additional Warrants (the “Additional Warrant Shares”). Each representation, warranty and covenant relating to any Warrant and the Warrant Shares contained in the Purchase Agreements shall apply as respects the Additional Warrants and the Additional Warrant Shares as of the date of this letter agreement and are true and correct as of the date of this letter agreement.

7.The notice address for each Lender contained in the Purchase Agreements and the Related Agreements shall be changed to the notice address set forth below such Lender’s signature page at the end of this letter agreement.

This letter agreement shall become effective upon receipt by the Lenders, in form and substance satisfactory to Lenders of: (i) a Secured Term Note made by the Company in favor of Valens US in the original principal amount of $48,983.58, a Secured Term Note made by the Company in favor of Valens Offshore in the original principal amount of $66,602.06 and a Secured Term Note made by the Company in favor of Laurus in the original principal amount of $634,414.36 (collectively, the “Additional Secured Term Notes”); (ii) a Common Stock Warrant from the Company in favor of Laurus for 2,537,657 shares of the Company’s common stock, a Common Stock Warrant from the Company in favor of Valens US for 195,935 shares of the Company’s common stock and a Common Stock Warrant from the Company in favor of Valens Offshore for 266,408 shares of the Company’s common stock (collectively, the “Additional Warrants”); (iii) Registration Rights Agreements in favor of each Lender with respect to the Additional Warrants (collectively, the “Additional Registration Rights Agreements”); (iv) a Reaffirmation and Ratification Agreement duly executed by the Company; and (v) resolutions of the Company’s Board of Director approving and authorizing the execution, delivery and performance of this letter agreement and all documents, instruments and agreements to be executed and delivered in connection herewith certified as of the date of this letter agreement by the Company’s corporate secretary or an assistant secretary as being in full force and effect without any modification or amendment.

The parties hereto agree that the fair market value of the Additional Warrants (as reasonably determined by the parties) received in consideration of the consents and agreements made by Laurus under this letter agreement is hereby designated as interest and, accordingly, shall be treated as a reduction of the remaining stated principal amount (which reduced principal amount shall be treated as the issue price) of the  Obligations for U.S. federal income tax purposes under and pursuant to Treasury Regulation Sections 1.1001-3(e)(2)(iii), 1.1273-2(g)(2)(ii) and 1.1274-2(b)(1). The parties further agree to file all applicable tax returns in accordance with such characterization and shall not take a position on any tax return or in any judicial or administrative proceeding that is inconsistent with such characterization. Notwithstanding the foregoing, nothing contained herein shall or shall be deemed to modify or impair in any manner whatsoever the Obligations from time to time owing to Laurus under the Purchase Agreements, the Secured Term Notes, the Additional Secured Term Notes and the Related Agreement.

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The Company hereby represents and warrants as follows:

(a)This letter agreement, the Additional Secured Notes, the Additional Warrants, the Additional Registration Rights Agreements, the Purchase Agreement and the Related Agreements, as amended hereby, constitute legal, valid and binding obligations of the Company and are enforceable against the Company in accordance with their respective terms.

(b)Except as updated by the attached schedules, each of the representations and warranties made by or on behalf of the Company and the Lenders in any of the Purchase Agreements and the Related Agreements was true and correct when made and in all material respects is, to the extent not amended hereby, true and correct in all material respects on and as of the date of this letter agreement with the same full force and effect as if each of such representations and warranties had been made by the Company on the date hereof and in this letter agreement.

(c)Upon the effectiveness of this letter agreement, the Company hereby reaffirms all covenants made in the Purchase Agreements and the Related Agreements to the extent the same are not amended hereby and agree that all such covenants shall be deemed to have been remade as of the effective date of this letter.

(f)The execution and delivery and performance of this letter agreement by the Company will not conflict with or result in a breach of, or require any consent not previously obtained under, the organization documents of the Company or any applicable governmental rule or any agreement or instrument to which the Company is a party or any of its property is bound or to which it is subject, or constitute a default under, or result in the acceleration or mandatory prepayment of, any indebtedness evidenced by or termination of any such agreement or instrument or (except for the Liens created pursuant to the Related Agreements) result in the creation or imposition of any Lien upon any property of the Company pursuant to the terms of any such agreement or instrument.

THIS LETTER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

[REMAINER OF PAGE INTENTIONALLY LEFT BLANK]

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This letter agreement may be executed by the parties hereto in one or more counterparts, each of which shall be deemed an original and all of which when taken together shall constitute one and the same agreement. Any signature delivered by a party by facsimile transmission shall be deemed to be an original signature hereto.

Very truly yours,

LAURUS MASTER FUND, LTD.
By:	Laurus Capital management, LLC, its
	investment manager
By:	/s/ Patrick Regan
Name: Patrick Regan
Title:   Authorized Signatory
Address for Notice:
c/o Laurus Capital Management, LLC
335 Madison Avenue, 10th Floor
New York, New York 10017
Attn: Portfolio Services
VALENS U.S. SPV I, LLC
By:	Valens Capital Management, LLC, its
	investment manager
By:	/s/ Patrick Regan
Name: Patrick Regan
Title:   Authorized Signatory
Address for Notice:
c/o Valens Capital Management, LLC
335 Madison Avenue, 10th Floor
New York, New York 10017
Attn: Portfolio Services

[ADDITIONAL SIGNATURES FOLLOW]

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VALENS OFFSHORE SPV I, LTD.
By:	Valens Capital Management, LLC, its
	investment manager
By:	/s/ Patrick Regan
Name: Patrick Regan
Title:   Authorized Signatory
Address for Notice:
c/o Valens Capital Management, LLC
335 Madison Avenue, 10th Floor
New York, New York 10017
Attn: Portfolio Services

CONSENTED AND AGREED TO:
MODTECH HOLDINGS INC.
By:	/s/ Kenneth S. Cragun
Name: Kenneth S. Cragun
Title: Chief Financial Officer

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EX-10.54

Exhibit 10.54

SECURED TERM NOTE

FOR VALUE RECEIVED, MODTECH HOLDINGS, INC., a Delaware corporation (the “Company”), promises to pay to LAURUS MASTER FUND, LTD., c/o M&C Corporate Services Limited, P.O. Box 309 GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (the “Holder”) or its registered assigns or successors in interest, the sum of SIX HUNDRED THIRTY-FOUR THOUSAND FOUR HUNDRED FOURTEEN and 36/100 DOLLARS ($634,414.36), together with any accrued and unpaid interest hereon, on December 28, 2009 (the “Maturity Date”) if not sooner indefeasibly paid in full.

Capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Purchase Agreements (as defined in the Amendment and Waiver Agreement (the “Amendment Agreement”) dated as of the date hereof among the Company, the Holder, Valens U.S. SPV I, LLC (“Valens US”) and Valens Offshore SPV I, Ltd. (“Valens Offshore”)).

The following terms shall apply to this Secured Term Note (this “Note”):

ARTICLE I
CONTRACT RATE AND AMORTIZATION

1.1Contract Rate. Subject to Sections 3.2 and 4.10, interest payable on the outstanding principal amount of this Note (the “Principal Amount”) shall accrue at a rate per annum equal to the “prime rate” published in The Wall Street Journal from time to time (the “Prime Rate”), plus two and one half percent (2.5%) (the “Contract Rate”). The Contract Rate shall be increased or decreased as the case may be for each increase or decrease in the Prime Rate in an amount equal to such increase or decrease in the Prime Rate; each change to be effective as of the day of the change in the Prime Rate is announced in The Wall Street Journal. The Contract Rate shall not at any time be less than eight percent (8%). Interest shall be (a) calculated on the basis of a 360 day year, and (b) payable monthly, in arrears, commencing on March 1, 2008 and then on the first business day of each consecutive calendar month thereafter through and including the Maturity Date, and on the Maturity Date, whether by acceleration or otherwise.

1.2Contract Rate Payments. The Contract Rate shall be calculated on the last business day of each calendar month hereafter (other than for increases or decreases in the Prime Rate which shall be calculated and become effective in accordance with the terms of Section 1.1) until the Maturity Date and shall be subject to adjustment as set forth herein.

1.3Principal Payments. The aggregate principal amount outstanding under this Note at any time (the “Principal Amount”) together with any accrued and unpaid interest and any and all other unpaid amounts which are then owing by the Company to the Holder under this Note shall be due and payable on the Maturity Date.

ARTICLE II

REDEMPTION

2.1Optional Redemption in Cash. The Company may prepay this Note (“Optional Redemption”) by paying to the Holder a sum of money equal to one hundred twenty-four percent (124%) (the “Redemption Rate”) of the aggregate amount of (a) the Principal Amount together with accrued but unpaid interest hereon, (b) the principal amount outstanding pursuant to that certain Secured Term Note dated as of the date hereof, made by the Company in favor of Valens US, in the original principal amount of $48,983.58 together with accrued but unpaid interest thereon (c) the principal amount outstanding pursuant to that certain Secured Term Note dated as of the date hereof, made by the Company in favor of Valens Offshore, in the original principal amount of $66,602.06 together with accrued but unpaid interest thereon (d) the principal amount outstanding pursuant to that certain Secured Term Note dated as of December 28, 2006, made by the Company in favor of the Holder, in the original principal amount of $5,000,000 together with accrued but unpaid interest thereon and (e) the principal amount outstanding pursuant to that certain Secured Term Note dated as of October 31, 2006, made by the Company in favor of the Holder, in the original principal amount of $13,000,000, together with accrued but unpaid interest thereon and any and all other sums due, accrued or payable to the Holder arising under this Note, the Purchase Agreements or any other Related Agreement (the “Redemption Amount”) outstanding on the Redemption Payment Date (as defined below). Notwithstanding the foregoing, if the Company prepays in full the amounts set forth in items (a) through (e) above within twelve (12) months of the date hereof, the Redemption Rate shall be reduced to one hundred five percent (105%). The Company shall deliver to the Holder a written notice of redemption (the “Notice of Redemption”) specifying the date for such Optional Redemption (the “Redemption Payment Date”), which date shall be within seven (7) business days after the date of the Notice of Redemption (the “Redemption Period”). On the Redemption Payment Date, the Redemption Amount must be paid in good funds to the Holder. In the event the Company fails to pay the Redemption Amount on the Redemption Payment Date as set forth herein, then such Redemption Notice will be null and void.

ARTICLE III
EVENTS OF DEFAULT

3.1Events of Default. The occurrence of any of the following events set forth in this Section 3.1 shall constitute an event of default (“Event of Default”) hereunder:

(a)Failure to Pay. The Company fails to pay when due any installment of principal, interest or other fees hereon in accordance herewith, or the Company fails to pay any of the other Obligations (under and as defined in the Master Security Agreement as reaffirmed under and defined in the Reaffirmation and Ratification Agreement dated as of the date hereof between the Company, the Holder, Valens US and Valens Offshore) when due, and, in any such case, such failure shall continue for a period of three (3) Business Days following the date upon which any such payment was due.

(b)Breach of Covenant. The Company or any of its Subsidiaries breaches any covenant or any other term or condition of this Note in any material respect and such breach, if subject to cure, continues for a period of twenty (20) days after the occurrence thereof.

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(c)Breach of Representations and Warranties. Any representation, warranty or statement made or furnished by the Company or any of its Subsidiaries in this Note, the Purchase Agreements or any other Related Agreement shall at any time be false or misleading in any material respect on the date as of which made or deemed made.

(d)Default Under Other Agreements. The occurrence of any default (or similar term) in the observance or performance of any other agreement or condition relating to any indebtedness or contingent obligation of the Company or any of its Subsidiaries in excess of $200,000 in the aggregate (including, without limitation, the indebtedness evidenced by the Subordinated Debt Documentation) beyond the period of grace (if any), the effect of which default is to cause, or permit the holder or holders of such indebtedness or beneficiary or beneficiaries of such contingent obligation to cause, such indebtedness to become due prior to its stated maturity or such contingent obligation to become payable;

(e)Default Under Subordinated Debt Documentation. The Company or any of its Subsidiaries shall take or participate in any action which is prohibited under the provisions of any subordination agreement (each, a “Subordination Agreement”) entered into in connection with any indebtedness (all such indebtedness, “Subordinated Debt”) among the Company, the Holder, Valens US and/or Valens Offshore and the lender of such Subordinated Debt (or make any payment on the Subordinated Debt to a Person that was not entitled to receive such payments under the provisions of the applicable Subordination Agreement.

(f)Material Adverse Effect. Any change or the occurrence of any event which could reasonably be expected to have a Material Adverse Effect;

(g)Bankruptcy. The Company or any of its Subsidiaries shall (i) apply for, consent to or suffer to exist the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of creditors, (iii) commence a voluntary case under the federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vi) acquiesce to, without challenge within ten (10) days of the filing thereof, or failure to have dismissed, within thirty (30) days, any petition filed against it in any involuntary case under such bankruptcy laws, or (vii) take any action for the purpose of effecting any of the foregoing;

(h)Judgments. Attachments or levies in excess of $200,000 in the aggregate are made upon the Company or any of its Subsidiary’s assets or a judgment is rendered against the Company’s property involving a liability of more than $500,000 which shall not have been vacated, discharged, stayed or bonded within forty (40) days from the entry thereof;

(i)Insolvency. The Company or any of its Subsidiaries shall admit in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business;

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(j)Change of Control. A Change of Control (as defined below) shall occur with respect to the Company, unless Holder shall have expressly consented to such Change of Control in writing. A “Change of Control” shall mean any event or circumstance as a result of which (i) any “Person” or “group” (as such terms are defined in Sections 13(d) and 14(d) of the Exchange Act, as in effect on the date hereof), other than the Holder, is or becomes the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of 51% or more on a fully diluted basis of the then outstanding voting equity interest of the any Company, (ii) the Board of Directors of the Company shall cease to consist of a majority of the Company’s Board of Directors on the date hereof (or directors appointed by a majority of the Board of Directors in effect immediately prior to such appointment) or (iii) the Company or any of its Subsidiaries merges or consolidates with, or sells all or substantially all of its assets to, any other person or entity;

(k)Indictment; Proceedings. The indictment of the Company or any of its Subsidiaries or any executive officer of the Company or any of its Subsidiaries under any criminal statute, or commencement of criminal or civil proceeding against the Company or any of its Subsidiaries or any executive officer of the Company or any of its Subsidiaries pursuant to which statute or proceeding penalties or remedies sought or available include forfeiture of any of the property of the Company or any of its Subsidiaries;

(l)The Purchase Agreements and Related Agreements. (i) An Event of Default shall occur under and as defined in the Purchase Agreements or any other Related Agreement, (ii) the Company or any of its Subsidiaries shall breach any term or provision of the Purchase Agreements or any other Related Agreement in any material respect and such breach, if capable of cure, continues unremedied for a period of twenty (20) days after the occurrence thereof, (iii) the Company or any of its Subsidiaries attempts to terminate, challenges the validity of, or its liability under, the Purchase Agreements or any Related Agreement, (iv) any proceeding shall be brought to challenge the validity, binding effect of the Purchase Agreements or any Related Agreement or (v) the Purchase Agreements or any Related Agreement ceases to be a valid, binding and enforceable obligation of the Company or any of its Subsidiaries (to the extent such persons or entities are a party thereto);

3.2Default Interest. Following the occurrence and during the continuance of an Event of Default, the Company shall pay additional interest on the outstanding principal balance of this Note in an amount equal to two percent (2%) per month, and all outstanding obligations under this Note, the Purchase Agreements and each other Related Agreement, including unpaid interest, shall continue to accrue interest at such additional interest rate from the date of such Event of Default until the date such Event of Default is cured or waived.

3.3Default Payment. Following the occurrence and during the continuance of an Event of Default, the Holder, at its option, may demand repayment in full of all obligations and liabilities owing by Company to the Holder under this Note, the Purchase Agreements and/or any other Related Agreement and/or may elect, in addition to all rights and remedies of the Holder under the Purchase Agreements and the other Related Agreements and all obligations and liabilities of the Company under the Purchase Agreements and the other Related Agreements, to require the Company to make a Default Payment (“Default Payment”). The Default Payment shall be one hundred five percent (105%) of the outstanding principal amount of the Note, plus accrued but unpaid interest, all other fees then remaining unpaid, and all other amounts payable hereunder. The Default Payment shall be applied first to any fees due and payable to the Holder pursuant to this Note, the Purchase Agreements, and/or the other Related Agreements, then to accrued and unpaid interest due on this Note and then to the outstanding principal balance of this Note. The Default Payment shall be due and payable immediately on the date that the Holder has demanded payment of the Default Payment pursuant to this Section 3.3.

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ARTICLE IV
MISCELLANEOUS

4.1Issuance of New Note. Upon any partial redemption of this Note, a new note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Company to the Holder for the principal balance of this Note and interest which shall not have been paid as of such date. Subject to the provisions of Article III of this Note, the Company shall not pay any costs, fees or any other consideration to the Holder for the production and issuance of a new note.

4.2Cumulative Remedies. The remedies under this Note shall be cumulative.

4.3Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

4.4Notices. Any notice herein required or permitted to be given shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company at the address provided in the Purchase Agreement executed in connection herewith, and to the Holder at the address provided in the Purchase Agreement for the Holder, with a copy to Laurus Capital Management, LLC, Attn: Portfolio Services, 335 Madison Avenue, 10^th Floor, New York, New York 10017, facsimile number (212) 541-4410, or at such other address as the Company or the Holder may designate by ten days advance written notice to the other parties hereto.

4.5Amendment Provision. The term “Note” and all references thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented, and any successor instrument as such successor instrument may be amended or supplemented.

4.6Assignability. This Note shall be binding upon the Company and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns, and may be assigned by the Holder in accordance with the requirements of the Purchase Agreement. The Company may not assign any of its obligations under this Note without the prior written consent of the Holder, any such purported assignment without such consent being null and void.

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4.7Cost of Collection. In case of any Event of Default under this Note, the Company shall pay the Holder the Holder’s reasonable costs of collection, including reasonable attorneys’ fees.

4.8Governing Law, Jurisdiction and Waiver of Jury Trial.

(a)THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

(b)THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE OR ANY OF THE OTHER RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE OR ANY OF THE RELATED AGREEMENTS; PROVIDED, THAT THE COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHERPROVIDED, THAT NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE HOLDER. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUMNON CONVENIENS. THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN THE PURCHASE AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

(c)THE COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE COMPANY HERETO WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE HOLDER AND/OR THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, ANY OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

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4.9Severability. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Note.

4.10Maximum Payments. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum rate permitted by such law, any payments in excess of such maximum rate shall be credited against amounts owed by the Company to the Holder and thus refunded to the Company.

4.11Security Interest and Guarantee. The Holder has been granted a security interest (a) in certain assets of the Company and its Subsidiaries as more fully described in the Master Security Agreement dated as of the date hereof and various mortgages covering the real property owned by the Company and (b) in the equity interests of the Company’s Subsidiaries pursuant to the Stock Pledge Agreement dated as of the date hereof. The obligations of the Company under this Note are guaranteed by certain Subsidiaries of the Company pursuant to the Subsidiary Guaranty dated as of the date hereof.

4.12Construction. Each party acknowledges that its legal counsel participated in the preparation of this Note and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Note to favor any party against the other.

4.13Registered Obligation. This Note is intended to be a registered obligation within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i) and the Company (or its agent) shall register this Note (and thereafter shall maintain such registration) as to both principal and any stated interest. Notwithstanding any document, instrument or agreement relating to this Note to the contrary, transfer of this Note (or the right to any payments of principal or stated interest thereunder) may only be effected by (a) surrender of this Note and either the reissuance by the Company of this Note to the new holder or the issuance by the Company of a new instrument to the new holder, or (b) transfer through a book entry system maintained by the Company (or its agent), within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)(B).

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

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IN WITNESS WHEREOF, the Company has caused this Secured Term Note to be signed in its name effective as of this 29^th day of February, 2008.

  

	MODTECH HOLDINGS, INC.
	By:	/s/Kenneth S. Cragun
		Name: Kenneth S. Cragun
		Title:   Chief Financial Officer
WITNESS:
/s/ Lori Lopez
Lori Lopez

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EX-10.55

Exhibit 10.55

SECURED TERM NOTE

FOR VALUE RECEIVED, MODTECH HOLDINGS, INC., a Delaware corporation (the “Company”), promises to pay to VALENS OFFSHORE SPV I, LTD., c/o Valens Capital Management, LLC, 335 Madison Avenue, 10^th Floor, New York, New York 10017, Fax: 212-541-4410 (the “Holder”) or its registered assigns or successors in interest, the sum of SIXTY-SIX THOUSAND SIX HUNDRED TWO and 06/100 DOLLARS ($66,602.06), together with any accrued and unpaid interest hereon, on December 28, 2009 (the “Maturity Date”) if not sooner indefeasibly paid in full.

Capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Purchase Agreements (as defined in the Amendment and Waiver Agreement (the “Amendment Agreement”) dated as of the date hereof among the Company, the Holder, Laurus Master Fund, Ltd. (“Laurus”) and Valens U.S. SPV I, LLC (“Valens US”)).

The following terms shall apply to this Secured Term Note (this “Note”):

ARTICLE I

CONTRACT RATE AND AMORTIZATION

1.1Contract Rate. Subject to Sections 3.2 and 4.10, interest payable on the outstanding principal amount of this Note (the “Principal Amount”) shall accrue at a rate per annum equal to the “prime rate” published in The Wall Street Journal from time to time (the “Prime Rate”), plus two and one half percent (2.5%) (the “Contract Rate”). The Contract Rate shall be increased or decreased as the case may be for each increase or decrease in the Prime Rate in an amount equal to such increase or decrease in the Prime Rate; each change to be effective as of the day of the change in the Prime Rate is announced in The Wall Street Journal. The Contract Rate shall not at any time be less than eight percent (8%). Interest shall be (a) calculated on the basis of a 360 day year, and (b) payable monthly, in arrears, commencing on March 1, 2008 and then on the first business day of each consecutive calendar month thereafter through and including the Maturity Date, and on the Maturity Date, whether by acceleration or otherwise.

1.2Contract Rate Payments. The Contract Rate shall be calculated on the last business day of each calendar month hereafter (other than for increases or decreases in the Prime Rate which shall be calculated and become effective in accordance with the terms of Section 1.1) until the Maturity Date and shall be subject to adjustment as set forth herein.

1.3Principal Payments. The aggregate principal amount outstanding under this Note at any time (the “Principal Amount”) together with any accrued and unpaid interest and any and all other unpaid amounts which are then owing by the Company to the Holder under this Note shall be due and payable on the Maturity Date.

ARTICLE II

REDEMPTION

2.1Optional Redemption in Cash. The Company may prepay this Note (“Optional Redemption”) by paying to the Holder a sum of money equal to one hundred twenty-four percent (124%) (the “Redemption Rate”) of the aggregate amount of (a) the Principal Amount together with accrued but unpaid interest hereon, (b) the principal amount outstanding pursuant to that certain Secured Term Note dated as of the date hereof, made by the Company in favor of Laurus, in the original principal amount of $634,414.36 together with accrued but unpaid interest thereon (c) the principal amount outstanding pursuant to that certain Secured Term Note dated as of the date hereof, made by the Company in favor of Valens US, in the original principal amount of $48,983.58 together with accrued but unpaid interest thereon (d) the principal amount outstanding pursuant to that certain Secured Term Note dated as of December 28, 2006, made by the Company in favor of the Holder, in the original principal amount of $5,000,000 together with accrued but unpaid interest thereon and (e) the principal amount outstanding pursuant to that certain Secured Term Note dated as of October 31, 2006, made by the Company in favor of the Holder, in the original principal amount of $13,000,000, together with accrued but unpaid interest thereon and any and all other sums due, accrued or payable to the Holder arising under this Note, the Purchase Agreements or any other Related Agreement (the “Redemption Amount”) outstanding on the Redemption Payment Date (as defined below). Notwithstanding the foregoing, if the Company prepays in full the amounts set forth in items (a) through (e) above within twelve (12) months of the date hereof, the Redemption Rate shall be reduced to one hundred five percent (105%). The Company shall deliver to the Holder a written notice of redemption (the “Notice of Redemption”) specifying the date for such Optional Redemption (the “Redemption Payment Date”), which date shall be within seven (7) business days after the date of the Notice of Redemption (the “Redemption Period”). On the Redemption Payment Date, the Redemption Amount must be paid in good funds to the Holder. In the event the Company fails to pay the Redemption Amount on the Redemption Payment Date as set forth herein, then such Redemption Notice will be null and void.

ARTICLE III

EVENTS OF DEFAULT

3.1Events of Default. The occurrence of any of the following events set forth in this Section 3.1 shall constitute an event of default (“Event of Default”) hereunder:

(a)Failure to Pay. The Company fails to pay when due any installment of principal, interest or other fees hereon in accordance herewith, or the Company fails to pay any of the other Obligations (under and as defined in the Security Agreement as reaffirmed under and defined in the Reaffrimation and Ratification Agreement dated as of the date hereof between the Company, the Holder, Laurus and Valens US) when due, and, in any such case, such failure shall continue for a period of three (3) Business Days following the date upon which any such payment was due.

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(b)Breach of Covenant. The Company or any of its Subsidiaries breaches any covenant or any other term or condition of this Note in any material respect and such breach, if subject to cure, continues for a period of twenty (20) days after the occurrence thereof.

(c)Breach of Representations and Warranties. Any representation, warranty or statement made or furnished by the Company or any of its Subsidiaries in this Note, the Purchase Agreements or any other Related Agreement shall at any time be false or misleading in any material respect on the date as of which made or deemed made.

(d)Default Under Other Agreements. The occurrence of any default (or similar term) in the observance or performance of any other agreement or condition relating to any indebtedness or contingent obligation of the Company or any of its Subsidiaries in excess of $200,000 in the aggregate (including, without limitation, the indebtedness evidenced by the Subordinated Debt Documentation) beyond the period of grace (if any), the effect of which default is to cause, or permit the holder or holders of such indebtedness or beneficiary or beneficiaries of such contingent obligation to cause, such indebtedness to become due prior to its stated maturity or such contingent obligation to become payable;

(e)Default Under Subordinated Debt Documentation. The Company or any of its Subsidiaries shall take or participate in any action which is prohibited under the provisions of any subordination agreement (each, a “Subordination Agreement”) entered into in connection with any indebtedness (all such indebtedness, “Subordinated Debt”) among the Company, the Holder, Laurus and/or Valens US and the lender of such Subordinated Debt (or make any payment on the Subordinated Debt to a Person that was not entitled to receive such payments under the provisions of the applicable Subordination Agreement.

(f)Material Adverse Effect. Any change or the occurrence of any event which could reasonably be expected to have a Material Adverse Effect;

(g)Bankruptcy. The Company or any of its Subsidiaries shall (i) apply for, consent to or suffer to exist the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of creditors, (iii) commence a voluntary case under the federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vi) acquiesce to, without challenge within ten (10) days of the filing thereof, or failure to have dismissed, within thirty (30) days, any petition filed against it in any involuntary case under such bankruptcy laws, or (vii) take any action for the purpose of effecting any of the foregoing;

(h)Judgments. Attachments or levies in excess of $200,000 in the aggregate are made upon the Company or any of its Subsidiary’s assets or a judgment is rendered against the Company’s property involving a liability of more than $500,000 which shall not have been vacated, discharged, stayed or bonded within forty (40) days from the entry thereof;

(i)Insolvency. The Company or any of its Subsidiaries shall admit in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business;

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(j)Change of Control. A Change of Control (as defined below) shall occur with respect to the Company, unless Holder shall have expressly consented to such Change of Control in writing. A “Change of Control” shall mean any event or circumstance as a result of which (i) any “Person” or “group” (as such terms are defined in Sections 13(d) and 14(d) of the Exchange Act, as in effect on the date hereof), other than the Holder, is or becomes the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of 51% or more on a fully diluted basis of the then outstanding voting equity interest of the any Company, (ii) the Board of Directors of the Company shall cease to consist of a majority of the Company’s Board of Directors on the date hereof (or directors appointed by a majority of the Board of Directors in effect immediately prior to such appointment) or (iii) the Company or any of its Subsidiaries merges or consolidates with, or sells all or substantially all of its assets to, any other person or entity;

(k)Indictment; Proceedings. The indictment of the Company or any of its Subsidiaries or any executive officer of the Company or any of its Subsidiaries under any criminal statute, or commencement of criminal or civil proceeding against the Company or any of its Subsidiaries or any executive officer of the Company or any of its Subsidiaries pursuant to which statute or proceeding penalties or remedies sought or available include forfeiture of any of the property of the Company or any of its Subsidiaries;

(l)The Purchase Agreements and Related Agreements. (i) An Event of Default shall occur under and as defined in the Purchase Agreements or any other Related Agreement, (ii) the Company or any of its Subsidiaries shall breach any term or provision of the Purchase Agreements or any other Related Agreement in any material respect and such breach, if capable of cure, continues unremedied for a period of twenty (20) days after the occurrence thereof, (iii) the Company or any of its Subsidiaries attempts to terminate, challenges the validity of, or its liability under, the Purchase Agreements or any Related Agreement, (iv) any proceeding shall be brought to challenge the validity, binding effect of the Purchase Agreements or any Related Agreement or (v) the Purchase Agreements or any Related Agreement ceases to be a valid, binding and enforceable obligation of the Company or any of its Subsidiaries (to the extent such persons or entities are a party thereto);

3.2Default Interest. Following the occurrence and during the continuance of an Event of Default, the Company shall pay additional interest on the outstanding principal balance of this Note in an amount equal to two percent (2%) per month, and all outstanding obligations under this Note, the Purchase Agreements and each other Related Agreement, including unpaid interest, shall continue to accrue interest at such additional interest rate from the date of such Event of Default until the date such Event of Default is cured or waived.

3.3Default Payment. Following the occurrence and during the continuance of an Event of Default, the Holder, at its option, may demand repayment in full of all obligations and liabilities owing by Company to the Holder under this Note, the Purchase Agreements and/or any other Related Agreement and/or may elect, in addition to all rights and remedies of the Holder under the Purchase Agreements and the other Related Agreements and all obligations and liabilities of the Company under the Purchase Agreements and the other Related Agreements, to require the Company to make a Default Payment (“Default Payment”). The Default Payment shall be one hundred five percent (105%) of the outstanding principal amount of the Note, plus accrued but unpaid interest, all other fees then remaining unpaid, and all other amounts payable hereunder. The Default Payment shall be applied first to any fees due and payable to the Holder pursuant to this Note, the Purchase Agreements, and/or the other Related Agreements, then to accrued and unpaid interest due on this Note and then to the outstanding principal balance of this Note. The Default Payment shall be due and payable immediately on the date that the Holder has demanded payment of the Default Payment pursuant to this Section 3.3.

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ARTICLE IV

MISCELLANEOUS

4.1Issuance of New Note. Upon any partial redemption of this Note, a new note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Company to the Holder for the principal balance of this Note and interest which shall not have been paid as of such date. Subject to the provisions of Article III of this Note, the Company shall not pay any costs, fees or any other consideration to the Holder for the production and issuance of a new note.

4.2Cumulative Remedies. The remedies under this Note shall be cumulative.

4.3Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

4.4Notices. Any notice herein required or permitted to be given shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company at the address provided in the Purchase Agreement executed in connection herewith, and to the Holder at the address provided in the Purchase Agreement for the Holder, with a copy to Valens Capital Management, LLC, Attn: Portfolio Services, 335 Madison Avenue, 10^th Floor, New York, New York 10017, facsimile number (212) 541-4410, or at such other address as the Company or the Holder may designate by ten days advance written notice to the other parties hereto.

4.5Amendment Provision. The term “Note” and all references thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented, and any successor instrument as such successor instrument may be amended or supplemented.

4.6Assignability. This Note shall be binding upon the Company and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns, and may be assigned by the Holder in accordance with the requirements of the Purchase Agreement. The Company may not assign any of its obligations under this Note without the prior written consent of the Holder, any such purported assignment without such consent being null and void.

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4.7Cost of Collection. In case of any Event of Default under this Note, the Company shall pay the Holder the Holder’s reasonable costs of collection, including reasonable attorneys’ fees.

4.8Governing Law, Jurisdiction and Waiver of Jury Trial.

(a)THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

(b)THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE OR ANY OF THE OTHER RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE OR ANY OF THE RELATED AGREEMENTS; PROVIDED, THAT THE COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHERPROVIDED, THAT NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE HOLDER. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUMNON CONVENIENS. THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN THE PURCHASE AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

(c)THE COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE COMPANY HERETO WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE HOLDER AND/OR THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, ANY OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

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4.9Severability. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Note.

4.10Maximum Payments. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum rate permitted by such law, any payments in excess of such maximum rate shall be credited against amounts owed by the Company to the Holder and thus refunded to the Company.

4.11Security Interest and Guarantee. The Holder has been granted a security interest (a) in certain assets of the Company and its Subsidiaries as more fully described in the Master Security Agreement dated as of the date hereof and various mortgages covering the real property owned by the Company and (b) in the equity interests of the Company’s Subsidiaries pursuant to the Stock Pledge Agreement dated as of the date hereof. The obligations of the Company under this Note are guaranteed by certain Subsidiaries of the Company pursuant to the Subsidiary Guaranty dated as of the date hereof.

4.12Construction. Each party acknowledges that its legal counsel participated in the preparation of this Note and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Note to favor any party against the other.

4.13Registered Obligation. This Note is intended to be a registered obligation within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i) and the Company (or its agent) shall register this Note (and thereafter shall maintain such registration) as to both principal and any stated interest. Notwithstanding any document, instrument or agreement relating to this Note to the contrary, transfer of this Note (or the right to any payments of principal or stated interest thereunder) may only be effected by (a) surrender of this Note and either the reissuance by the Company of this Note to the new holder or the issuance by the Company of a new instrument to the new holder, or (b) transfer through a book entry system maintained by the Company (or its agent), within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)(B).

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

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IN WITNESS WHEREOF, the Company has caused this Secured Term Note to be signed in its name effective as of this 29^th day of February, 2008.

MODTECH HOLDINGS, INC.
By:	/s/ Kenneth S. Cragun
	Name:  Kenneth S. Cragun
	Title:    Chief Financial Officer

WITNESS:

/s/ Lori Lopez

Lori Lopez

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EX-10.56

Exhibit 10.56

SECURED TERM NOTE

FOR VALUE RECEIVED, MODTECH HOLDINGS, INC., a Delaware corporation (the “Company”), promises to pay to VALENS U.S. SPV I, LLC, c/o Valens Capital Management, LLC, 335 Madison Avenue, 10^th Floor, New York, New York 10017, Fax: 212-541-4410 (the “Holder”) or its registered assigns or successors in interest, the sum of FORTY-EIGHT THOUSAND NINE HUNDRED EIGHTY-THREE and 58/100 DOLLARS ($48,983.58), together with any accrued and unpaid interest hereon, on December 28, 2009 (the “Maturity Date”) if not sooner indefeasibly paid in full.

Capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Purchase Agreements (as defined in the Amendment and Waiver Agreement (the “Amendment Agreement”) dated as of the date hereof among the Company, the Holder, Laurus Master Fund, Ltd. (“Laurus”) and Valens Offshore SPV I, Ltd. (“Valens Offshore”)).

The following terms shall apply to this Secured Term Note (this “Note”):

ARTICLE I

CONTRACT RATE AND AMORTIZATION

1.1Contract Rate. Subject to Sections 3.2 and 4.10, interest payable on the outstanding principal amount of this Note (the “Principal Amount”) shall accrue at a rate per annum equal to the “prime rate” published in The Wall Street Journal from time to time (the “Prime Rate”), plus two and one half percent (2.5%) (the “Contract Rate”). The Contract Rate shall be increased or decreased as the case may be for each increase or decrease in the Prime Rate in an amount equal to such increase or decrease in the Prime Rate; each change to be effective as of the day of the change in the Prime Rate is announced in The Wall Street Journal. The Contract Rate shall not at any time be less than eight percent (8%). Interest shall be (a) calculated on the basis of a 360 day year, and (b) payable monthly, in arrears, commencing on March 1, 2008 and then on the first business day of each consecutive calendar month thereafter through and including the Maturity Date, and on the Maturity Date, whether by acceleration or otherwise.

1.2Contract Rate Payments. The Contract Rate shall be calculated on the last business day of each calendar month hereafter (other than for increases or decreases in the Prime Rate which shall be calculated and become effective in accordance with the terms of Section 1.1) until the Maturity Date and shall be subject to adjustment as set forth herein.

1.3Principal Payments. The aggregate principal amount outstanding under this Note at any time (the “Principal Amount”) together with any accrued and unpaid interest and any and all other unpaid amounts which are then owing by the Company to the Holder under this Note shall be due and payable on the Maturity Date.

ARTICLE II

REDEMPTION

2.1Optional Redemption in Cash. The Company may prepay this Note (“Optional Redemption”) by paying to the Holder a sum of money equal to one hundred twenty-four percent (124%) (the “Redemption Rate”) of the aggregate amount of (a) the Principal Amount together with accrued but unpaid interest hereon, (b) the principal amount outstanding pursuant to that certain Secured Term Note dated as of the date hereof, made by the Company in favor of Laurus, in the original principal amount of $634,414.36 together with accrued but unpaid interest thereon (c) the principal amount outstanding pursuant to that certain Secured Term Note dated as of the date hereof, made by the Company in favor of Valens Offshore, in the original principal amount of $66,602.06 together with accrued but unpaid interest thereon (d) the principal amount outstanding pursuant to that certain Secured Term Note dated as of December 28, 2006, made by the Company in favor of the Holder, in the original principal amount of $5,000,000 together with accrued but unpaid interest thereon and (e) the principal amount outstanding pursuant to that certain Secured Term Note dated as of October 31, 2006, made by the Company in favor of the Holder, in the original principal amount of $13,000,000, together with accrued but unpaid interest thereon and any and all other sums due, accrued or payable to the Holder arising under this Note, the Purchase Agreements or any other Related Agreement (the “Redemption Amount”) outstanding on the Redemption Payment Date (as defined below). Notwithstanding the foregoing, if the Company prepays in full the amounts set forth in items (a) through (e) above within twelve (12) months of the date hereof, the Redemption Rate shall be reduced to one hundred five percent (105%). The Company shall deliver to the Holder a written notice of redemption (the “Notice of Redemption”) specifying the date for such Optional Redemption (the “Redemption Payment Date”), which date shall be within seven (7) business days after the date of the Notice of Redemption (the “Redemption Period”). On the Redemption Payment Date, the Redemption Amount must be paid in good funds to the Holder. In the event the Company fails to pay the Redemption Amount on the Redemption Payment Date as set forth herein, then such Redemption Notice will be null and void.

ARTICLE III

EVENTS OF DEFAULT

3.1Events of Default. The occurrence of any of the following events set forth in this Section 3.1 shall constitute an event of default (“Event of Default”) hereunder:

(a)Failure to Pay. The Company fails to pay when due any installment of principal, interest or other fees hereon in accordance herewith, or the Company fails to pay any of the other Obligations (under and as defined in the Master Security Agreement as reaffirmed under and defined in the Reaffirmation and Ratification Agreement dated as of the date hereof between the Company, the Holder, Laurus and Valens Offshore) when due, and, in any such case, such failure shall continue for a period of three (3) Business Days following the date upon which any such payment was due.

(b)Breach of Covenant. The Company or any of its Subsidiaries breaches any covenant or any other term or condition of this Note in any material respect and such breach, if subject to cure, continues for a period of twenty (20) days after the occurrence thereof.

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(c)Breach of Representations and Warranties. Any representation, warranty or statement made or furnished by the Company or any of its Subsidiaries in this Note, the Purchase Agreements or any other Related Agreement shall at any time be false or misleading in any material respect on the date as of which made or deemed made.

(d)Default Under Other Agreements. The occurrence of any default (or similar term) in the observance or performance of any other agreement or condition relating to any indebtedness or contingent obligation of the Company or any of its Subsidiaries in excess of $200,000 in the aggregate (including, without limitation, the indebtedness evidenced by the Subordinated Debt Documentation) beyond the period of grace (if any), the effect of which default is to cause, or permit the holder or holders of such indebtedness or beneficiary or beneficiaries of such contingent obligation to cause, such indebtedness to become due prior to its stated maturity or such contingent obligation to become payable;

(e)Default Under Subordinated Debt Documentation. The Company or any of its Subsidiaries shall take or participate in any action which is prohibited under the provisions of any subordination agreement (each, a “Subordination Agreement”) entered into in connection with any indebtedness (all such indebtedness, “Subordinated Debt”) among the Company, the Holder, Laurus and/or Valens Offshore and the lender of such Subordinated Debt (or make any payment on the Subordinated Debt to a Person that was not entitled to receive such payments under the provisions of the applicable Subordination Agreement.

(f)Material Adverse Effect. Any change or the occurrence of any event which could reasonably be expected to have a Material Adverse Effect;

(g)Bankruptcy. The Company or any of its Subsidiaries shall (i) apply for, consent to or suffer to exist the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of creditors, (iii) commence a voluntary case under the federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vi) acquiesce to, without challenge within ten (10) days of the filing thereof, or failure to have dismissed, within thirty (30) days, any petition filed against it in any involuntary case under such bankruptcy laws, or (vii) take any action for the purpose of effecting any of the foregoing;

(h)Judgments. Attachments or levies in excess of $200,000 in the aggregate are made upon the Company or any of its Subsidiary’s assets or a judgment is rendered against the Company’s property involving a liability of more than $500,000 which shall not have been vacated, discharged, stayed or bonded within forty (40) days from the entry thereof;

(i)Insolvency. The Company or any of its Subsidiaries shall admit in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business;

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(j)Change of Control. A Change of Control (as defined below) shall occur with respect to the Company, unless Holder shall have expressly consented to such Change of Control in writing. A “Change of Control” shall mean any event or circumstance as a result of which (i) any “Person” or “group” (as such terms are defined in Sections 13(d) and 14(d) of the Exchange Act, as in effect on the date hereof), other than the Holder, is or becomes the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of 51% or more on a fully diluted basis of the then outstanding voting equity interest of the any Company, (ii) the Board of Directors of the Company shall cease to consist of a majority of the Company’s Board of Directors on the date hereof (or directors appointed by a majority of the Board of Directors in effect immediately prior to such appointment) or (iii) the Company or any of its Subsidiaries merges or consolidates with, or sells all or substantially all of its assets to, any other person or entity;

(k)Indictment; Proceedings. The indictment of the Company or any of its Subsidiaries or any executive officer of the Company or any of its Subsidiaries under any criminal statute, or commencement of criminal or civil proceeding against the Company or any of its Subsidiaries or any executive officer of the Company or any of its Subsidiaries pursuant to which statute or proceeding penalties or remedies sought or available include forfeiture of any of the property of the Company or any of its Subsidiaries;

(l)The Purchase Agreements and Related Agreements. (i) An Event of Default shall occur under and as defined in the Purchase Agreements or any other Related Agreement, (ii) the Company or any of its Subsidiaries shall breach any term or provision of the Purchase Agreements or any other Related Agreement in any material respect and such breach, if capable of cure, continues unremedied for a period of twenty (20) days after the occurrence thereof, (iii) the Company or any of its Subsidiaries attempts to terminate, challenges the validity of, or its liability under, the Purchase Agreements or any Related Agreement, (iv) any proceeding shall be brought to challenge the validity, binding effect of the Purchase Agreements or any Related Agreement or (v) the Purchase Agreements or any Related Agreement ceases to be a valid, binding and enforceable obligation of the Company or any of its Subsidiaries (to the extent such persons or entities are a party thereto);

3.2Default Interest. Following the occurrence and during the continuance of an Event of Default, the Company shall pay additional interest on the outstanding principal balance of this Note in an amount equal to two percent (2%) per month, and all outstanding obligations under this Note, the Purchase Agreements and each other Related Agreement, including unpaid interest, shall continue to accrue interest at such additional interest rate from the date of such Event of Default until the date such Event of Default is cured or waived.

3.3Default Payment. Following the occurrence and during the continuance of an Event of Default, the Holder, at its option, may demand repayment in full of all obligations and liabilities owing by Company to the Holder under this Note, the Purchase Agreements and/or any other Related Agreement and/or may elect, in addition to all rights and remedies of the Holder under the Purchase Agreements and the other Related Agreements and all obligations and liabilities of the Company under the Purchase Agreements and the other Related Agreements, to require the Company to make a Default Payment (“Default Payment”). The Default Payment shall be one hundred five percent (105%) of the outstanding principal amount of the Note, plus accrued but unpaid interest, all other fees then remaining unpaid, and all other amounts payable hereunder. The Default Payment shall be applied first to any fees due and payable to the Holder pursuant to this Note, the Purchase Agreements, and/or the other Related Agreements, then to accrued and unpaid interest due on this Note and then to the outstanding principal balance of this Note. The Default Payment shall be due and payable immediately on the date that the Holder has demanded payment of the Default Payment pursuant to this Section 3.3.

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ARTICLE IV

MISCELLANEOUS

4.1Issuance of New Note. Upon any partial redemption of this Note, a new note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Company to the Holder for the principal balance of this Note and interest which shall not have been paid as of such date. Subject to the provisions of Article III of this Note, the Company shall not pay any costs, fees or any other consideration to the Holder for the production and issuance of a new note.

4.2Cumulative Remedies. The remedies under this Note shall be cumulative.

4.3Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

4.4Notices. Any notice herein required or permitted to be given shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company at the address provided in the Purchase Agreement executed in connection herewith, and to the Holder at the address provided in the Purchase Agreement for the Holder, with a copy to Valens Capital Management, LLC, Attn: Portfolio Services, 335 Madison Avenue, 10^th Floor, New York, New York 10017, facsimile number (212) 541-4410, or at such other address as the Company or the Holder may designate by ten days advance written notice to the other parties hereto.

4.5Amendment Provision. The term “Note” and all references thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented, and any successor instrument as such successor instrument may be amended or supplemented.

4.6Assignability. This Note shall be binding upon the Company and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns, and may be assigned by the Holder in accordance with the requirements of the Purchase Agreement. The Company may not assign any of its obligations under this Note without the prior written consent of the Holder, any such purported assignment without such consent being null and void.

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4.7Cost of Collection. In case of any Event of Default under this Note, the Company shall pay the Holder the Holder’s reasonable costs of collection, including reasonable attorneys’ fees.

4.8Governing Law, Jurisdiction and Waiver of Jury Trial.

(a)THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

(b)THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE OR ANY OF THE OTHER RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE OR ANY OF THE RELATED AGREEMENTS; PROVIDED, THAT THE COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHERPROVIDED, THAT NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE HOLDER. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUMNON CONVENIENS. THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN THE PURCHASE AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

(c)THE COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE COMPANY HERETO WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE HOLDER AND/OR THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, ANY OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

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4.9Severability. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Note.

4.10Maximum Payments. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum rate permitted by such law, any payments in excess of such maximum rate shall be credited against amounts owed by the Company to the Holder and thus refunded to the Company.

4.11Security Interest and Guarantee. The Holder has been granted a security interest (a) in certain assets of the Company and its Subsidiaries as more fully described in the Master Security Agreement dated as of the date hereof and various mortgages covering the real property owned by the Company and (b) in the equity interests of the Company’s Subsidiaries pursuant to the Stock Pledge Agreement dated as of the date hereof. The obligations of the Company under this Note are guaranteed by certain Subsidiaries of the Company pursuant to the Subsidiary Guaranty dated as of the date hereof.

4.12Construction. Each party acknowledges that its legal counsel participated in the preparation of this Note and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Note to favor any party against the other.

4.13Registered Obligation. This Note is intended to be a registered obligation within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i) and the Company (or its agent) shall register this Note (and thereafter shall maintain such registration) as to both principal and any stated interest. Notwithstanding any document, instrument or agreement relating to this Note to the contrary, transfer of this Note (or the right to any payments of principal or stated interest thereunder) may only be effected by (a) surrender of this Note and either the reissuance by the Company of this Note to the new holder or the issuance by the Company of a new instrument to the new holder, or (b) transfer through a book entry system maintained by the Company (or its agent), within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)(B).

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

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IN WITNESS WHEREOF, the Company has caused this Secured Term Note to be signed in its name effective as of this 29^th day of February, 2008.

MODTECH HOLDINGS, INC.
By:	/s/ Kenneth S. Cragun
	Name: Kenneth S. Cragun
	Title: Chief Financial Officer

WITNESS:

/s/ Lori Lopez

Lori Lopez

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EX-10.57

Exhibit 10.57

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO MODTECH HOLDINGS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

Right to Purchase up to 2,537,657 Shares of Common Stock of

Modtech Holdings, Inc.

(subject to adjustment as provided herein)

COMMON STOCK PURCHASE WARRANT

No. __ Issue Date: February 29, 2008

MODTECH HOLDINGS, INC., a corporation organized under the laws of the State of Delaware (the “Company”), hereby certifies that, for value received, LAURUS MASTER FUND, LTD., or assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company (as defined herein) from and after the Issue Date of this Warrant and at any time or from time to time before 5:00 p.m., New York time, through the close of business February 29, 2015 (the “Expiration Date”), up to 2,537,657 fully paid and nonassessable shares of Common Stock (as hereinafter defined), $0.01 par value per share, at the applicable Exercise Price per share (as defined below). The number and character of such shares of Common Stock and the applicable Exercise Price per share are subject to adjustment as provided herein.

As used herein the following terms, unless the context otherwise requires, have the following respective meanings:

(a)The term “Company” shall include Modtech Holdings, Inc. and any person or entity which shall succeed, or assume the obligations of, Modtech Holdings, Inc. hereunder.

(b)The term “Common Stock” includes (i) the Company’s Common Stock, par value $0.01 per share; and (ii) any other securities into which or for which any of the securities described in the preceding clause (i) may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise.

(c)The term “Other Securities” refers to any stock (other than Common Stock) and other securities of the Company or any other person (corporate or otherwise) which the holder of the Warrant at any time shall be entitled to receive, or shall have received, on the exercise of the Warrant, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 4 or otherwise.

(d)The “Exercise Price” applicable under this Warrant shall be $0.48.

1.Exercise of Warrant.

1.1.Number of Shares Issuable upon Exercise. From and after the date hereof through and including the Expiration Date, the Holder shall be entitled to receive, upon exercise of this Warrant in whole or in part, by delivery of an original or fax copy of an exercise notice in the form attached hereto as Exhibit A (the “Exercise Notice”), shares of Common Stock of the Company, subject to adjustment pursuant to Section 4.

1.2.Fair Market Value. For purposes hereof, the “Fair Market Value” of a share of Common Stock as of a particular date (the “Determination Date”) shall mean:

(a)If the Company’s Common Stock is traded on the American Stock Exchange or another national exchange or is quoted on the Global or Capital Market of The Nasdaq Stock Market, Inc.(“Nasdaq”), then the closing or last sale price, respectively, reported for the last business day immediately preceding the Determination Date.

(b)If the Company’s Common Stock is not traded on the American Stock Exchange or another national exchange or on the Nasdaq but is traded on the NASD Over the Counter Bulletin Board, then the mean of the average of the closing bid and asked prices reported for the last business day immediately preceding the Determination Date.

(c)Except as provided in clause (d) below, if the Company’s Common Stock is not publicly traded, then as the Holder and the Company agree or in the absence of agreement by arbitration in accordance with the rules then in effect of the American Arbitration Association, before a single arbitrator to be chosen from a panel of persons qualified by education and training to pass on the matter to be decided.

(d)If the Determination Date is the date of a liquidation, dissolution or winding up, or any event deemed to be a liquidation, dissolution or winding up pursuant to the Company’s charter, then all amounts to be payable per share to holders of the Common Stock pursuant to the charter in the event of such liquidation, dissolution or winding up, plus all other amounts to be payable per share in respect of the Common Stock in liquidation under the charter, assuming for the purposes of this clause (d) that all of the shares of Common Stock then issuable upon exercise of the Warrant are outstanding at the Determination Date.

1.3.Company Acknowledgment. The Company will, at the time of the exercise of this Warrant, upon the request of the holder hereof acknowledge in writing its continuing obligation to afford to such holder any rights to which such holder shall continue to be entitled after such exercise in accordance with the provisions of this Warrant. If the holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such holder any such rights.

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1.4.Trustee for Warrant Holders. In the event that a bank or trust company shall have been appointed as trustee for the holders of this Warrant pursuant to Subsection 3.2, such bank or trust company shall have all the powers and duties of a warrant agent (as hereinafter described) and shall accept, in its own name for the account of the Holder or Holder such successor person as may be entitled thereto, all amounts otherwise payable to the Company or such successor, as the case may be, on exercise of this Warrant pursuant to this Section 1.

2.Procedure for Exercise.

2.1.Delivery of Stock Certificates, Etc., on Exercise. The Company agrees that the shares of Common Stock purchased upon exercise of this Warrant shall be deemed to be issued to the Holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such shares in accordance herewith. As soon as practicable after the exercise of this Warrant in full or in part, and in any event within three (3) business days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Holder, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct in compliance with applicable securities laws, a certificate or certificates for the number of duly and validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities) to which such Holder shall be entitled on such exercise, plus, in lieu of any fractional share to which such holder would otherwise be entitled, cash equal to such fraction multiplied by the then Fair Market Value of one full share, together with any other stock or other securities and property (including cash, where applicable) to which such Holder is entitled upon such exercise pursuant to Section 1 or otherwise.

2.2.Exercise. Payment shall be made either in cash or by certified or official bank check payable to the order of the Company equal to the applicable aggregate Exercise Price for the number of Common Shares specified in such Exercise Notice (as such exercise number shall be adjusted to reflect any adjustment in the total number of shares of Common Stock issuable to the Holder per the terms of this Warrant) and the Holder shall thereupon be entitled to receive the number of duly authorized, validly issued, fully-paid and non-assessable shares of Common Stock (or Other Securities) determined as provided herein.

3.Effect of Reorganization, Etc.; Adjustment of Exercise Price.

3.1.Reorganization, Consolidation, Merger, Etc. In case at any time or from time to time, the Company shall (a) effect a reorganization, (b) consolidate with or merge into any other person, or (c) transfer all or substantially all of its properties or assets to any other person under any plan or arrangement contemplating the dissolution of the Company, then, in each such case, as a condition to the consummation of such a transaction, if applicable, proper and adequate provision shall be made by the Company whereby the Holder, on the exercise hereof as provided in Section 1 at any time after the consummation of such reorganization, consolidation or merger or the effective date of such dissolution, as the case may be, shall receive, in lieu of the Common Stock (or Other Securities) issuable on such exercise prior to such consummation or such effective date, the stock and other securities and property (including cash) to which such Holder would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if such Holder had so exercised this Warrant, immediately prior thereto, all subject to further adjustment thereafter as provided in Section 4.

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3.2.Dissolution. In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, concurrently with any distributions made to holders of its Common Stock, shall at its expense deliver or cause to be delivered to the Holder the stock and other securities and property (including cash, where applicable) receivable by the Holder pursuant to Section 3.1 to the extent the Holder has exercised the warrant following the transfer of assets, or, if the Holder shall so instruct the Company, to a bank or trust company specified by the Holder and having its principal office in New York, NY as trustee for the Holder (the “Trustee”).

3.3.Continuation of Terms. Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in this Section 3, this Warrant shall continue in full force and effect and the terms hereof shall be applicable to the shares of stock and other securities and property receivable on the exercise of this Warrant after the consummation of such reorganization, consolidation or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any such stock or other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company, whether or not such person shall have expressly assumed the terms of this Warrant as provided in Section 4. In the event this Warrant does not continue in full force and effect after the consummation of the transactions described in this Section 3, then the Company’s securities and property (including cash, where applicable) receivable by the Holder will be delivered to the Holder or the Trustee as contemplated by Section 3.2.

4.Extraordinary Events Regarding Common Stock. In the event that the Company shall (a) issue additional shares of the Common Stock as a dividend or other distribution on outstanding Common Stock or any preferred stock issued by the Company (b) subdivide its outstanding shares of Common Stock, or (c) combine its outstanding shares of the Common Stock into a smaller number of shares of the Common Stock, then, in each such event, the Exercise Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Exercise Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Exercise Price then in effect. The Exercise Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein in this Section 4. The number of shares of Common Stock that the Holder shall thereafter, on the exercise hereof as provided in Section 1, be entitled to receive shall be adjusted to a number determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this Section 4) be issuable on such exercise by a fraction of which (a) the numerator is the Exercise Price that would otherwise (but for the provisions of this Section 4) be in effect, and (b) the denominator is the Exercise Price in effect on the date of such exercise (taking into account the provisions of this Section 4). Notwithstanding the foregoing, in no event shall the Exercise Price be less than the par value of the Common Stock.

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5.Certificate as to Adjustments. In each case of any adjustment or readjustment in the shares of Common Stock (or Other Securities) issuable on the exercise of this Warrant, the Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional shares of Common Stock (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant. The Company will forthwith mail a copy of each such certificate to the Holder and any Warrant agent of the Company (appointed pursuant to Section 11 hereof).

6.Reservation of Stock, Etc., Issuable on Exercise of Warrant. The Company will at all times reserve and keep available, solely for issuance and delivery on the exercise of this Warrant, shares of Common Stock (or Other Securities) from time to time issuable on the exercise of this Warrant.

7.Assignment; Exchange of Warrant. Subject to compliance with applicable securities laws, this Warrant, and the rights evidenced hereby, may be transferred by any registered holder hereof (a “Transferor”) in whole or in part. On the surrender for exchange of this Warrant, with the Transferor’s endorsement in the form of Exhibit B attached hereto (the “Transferor Endorsement Form”) and together with evidence reasonably satisfactory to the Company demonstrating compliance with applicable securities laws, which shall include, without limitation, the provision of a legal opinion from the Transferor’s counsel (at the Company’s expense) that such transfer is exempt from the registration requirements of applicable securities laws, the Company at its expense (but with payment by the Transferor of any applicable transfer taxes) will issue and deliver to or on the order of the Transferor thereof a new Warrant of like tenor, in the name of the Transferor and/or the transferee(s) specified in such Transferor Endorsement Form (each a “Transferee”), calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant so surrendered by the Transferor.

8.Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of this Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.

9.Registration Rights. The Holder has been granted certain registration rights by the Company. These registration rights are set forth in a Registration Rights Agreement entered into by the Company and Holder dated as of the date hereof, as the same may be amended, modified and/or supplemented from time to time.

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10.Maximum Exercise. Notwithstanding anything herein to the contrary, in no event shall the Holder be entitled to exercise any portion of this Warrant in excess of that portion of this Warrant upon exercise of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its Affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unexercised portion of this Warrant or the unexercised or unconverted portion of any other security of the Holder subject to a limitation on conversion analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the exercise of the portion of this Warrant with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its Affiliates of any amount greater than 9.99% of the then outstanding shares of Common Stock (whether or not, at the time of such exercise, the Holder and its Affiliates beneficially own more than 9.99% of the then outstanding shares of Common Stock). As used herein, the term “Affiliate” means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act of 1933, as amended.   For purposes of the second preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such sentence. For any reason at any time, upon written or oral request of the Holder, the Company shall within one (1) business day confirm orally and in writing to the Holder the number of shares of Common Stock outstanding as of any given date.  The limitations set forth herein (x) shall automatically become null and void following notice to the Company upon the occurrence and during the continuance of an Event of Default (as defined in the Additional Secured Term Notes referred to in the Amendment and Waiver Agreement dated as of the date hereof among the Holder, Valens U.S. SPV I, LLC, Valens Offshore SPV I, Ltd. and the Company) and (y) may be waived by the Holder upon provision of no less than sixty-one (61) days prior written notice to the Company; provided, however, that, such written notice of waiver shall only be effective if delivered at a time when no indebtedness (including, without limitation, principal, interest, fees and charges) of the Company of which the Holder or any of its Affiliates was, at any time, the owner, directly or indirectly is outstanding.

11.Warrant Agent. The Company may, by written notice to the each Holder of the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other Securities) on the exercise of this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section 7, and replacing this Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such agent.

12.Transfer on the Company’s Books. Until this Warrant is transferred on the books of the Company, the Company may treat the registered holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

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13.Notices, Etc. All notices and other communications from the Company to the Holder shall be mailed by first class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder who has so furnished an address to the Company.

14.Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION BROUGHT CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS WARRANT SHALL BE BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE HOLDER MAY CHOOSE TO WAIVE THIS PROVISION AND BRING AN ACTION OUTSIDE THE STATE OF NEW YORK. The individuals executing this Warrant on behalf of the Company agree to submit to the jurisdiction of such courts and waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorneys’ fees and costs. In the event that any provision of this Warrant is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Warrant. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision hereof. The Company acknowledges that legal counsel participated in the preparation of this Warrant and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Warrant to favor any party against the other party.

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

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IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above.

	MODTECH HOLDINGS, INC.
WITNESS:
/s/ Lori Lopez	By:	/s/ Kenneth S. Cragun
Lori Lopez	Name:	Kenneth S. Cragun
	Title:	Chief Financial Officer

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Exhibit A

FORM OF SUBSCRIPTION

(To Be Signed Only On Exercise Of Warrant)

TO:         Modtech Holdings, Inc.

Attention:        Chief Financial Officer

The undersigned, pursuant to the provisions set forth in the attached Warrant (No.____), hereby irrevocably elects to purchase (check applicable box):

________ shares of the Common Stock covered by such Warrant; or

the maximum number of shares of Common Stock covered by such Warrant pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned herewith makes payment of the full Exercise Price for such shares at the price per share provided for in such Warrant, which is $___________. Such payment takes the form of (check applicable box or boxes):

$__________ in lawful money of the United States; and/or

the cancellation of such portion of the attached Warrant as is exercisable for a total of _______ shares of Common Stock (using a Fair Market Value of $_______ per share for purposes of this calculation); and/or

the cancellation of such number of shares of Common Stock as is necessary, in accordance with the formula set forth in Section 2.2, to exercise this Warrant with respect to the maximum number of shares of Common Stock purchasable pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned requests that the certificates for such shares be issued in the name of, and delivered to _________________________________ whose address is _______________________________________________.

The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable upon exercise of the within Warrant shall be made pursuant to registration of the Common Stock under the Securities Act of 1933, as amended (the “Securities Act”) or pursuant to an exemption from registration under the Securities Act.

Dated: ________________________
	(Signature must conform to name of holder as specified on the face of the Warrant)
	Address:

A-1

Exhibit B

FORM OF TRANSFEROR ENDORSEMENT

(To Be Signed Only On Transfer Of Warrant)

For value received, the undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading “Transferees” the right represented by the within Warrant to purchase the percentage and number of shares of Common Stock of Modtech Holdings, Inc. into which the within Warrant relates specified under the headings “Percentage Transferred” and “Number Transferred,” respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to transfer its respective right on the books of Modtech Holdings, Inc. with full power of substitution in the premises.

Transferees Address Percentage Transferred Number Transferred

Dated:
	(Signature must conform to name of holder as specified on the face of the Warrant)
	Address:
	SIGNED IN THE PRESENCE OF:
	(Name)
ACCEPTED AND AGREED:
[TRANSFEREE]
(Name)

B-1

EX-10.58

Exhibit 10.58

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO MODTECH HOLDINGS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

Right to Purchase up to 266,408 Shares of Common Stock of
Modtech Holdings, Inc.
(subject to adjustment as provided herein)

COMMON STOCK PURCHASE WARRANT

No. __ Issue Date: February 29, 2008

MODTECH HOLDINGS, INC., a corporation organized under the laws of the State of Delaware (the “Company”), hereby certifies that, for value received, VALENS OFFSHORE SPV I, LTD., or assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company (as defined herein) from and after the Issue Date of this Warrant and at any time or from time to time before 5:00 p.m., New York time, through the close of business February 29, 2015 (the “Expiration Date”), up to 266,408 fully paid and nonassessable shares of Common Stock (as hereinafter defined), $0.01 par value per share, at the applicable Exercise Price per share (as defined below). The number and character of such shares of Common Stock and the applicable Exercise Price per share are subject to adjustment as provided herein.

As used herein the following terms, unless the context otherwise requires, have the following respective meanings:

(a)The term “Company” shall include Modtech Holdings, Inc. and any person or entity which shall succeed, or assume the obligations of, Modtech Holdings, Inc. hereunder.

(b)The term “Common Stock” includes (i) the Company’s Common Stock, par value $0.01 per share; and (ii) any other securities into which or for which any of the securities described in the preceding clause (i) may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise.

(c)The term “Other Securities” refers to any stock (other than Common Stock) and other securities of the Company or any other person (corporate or otherwise) which the holder of the Warrant at any time shall be entitled to receive, or shall have received, on the exercise of the Warrant, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 4 or otherwise.

(d)The “Exercise Price” applicable under this Warrant shall be $0.48.

1.Exercise of Warrant.

1.1.Number of Shares Issuable upon Exercise. From and after the date hereof through and including the Expiration Date, the Holder shall be entitled to receive, upon exercise of this Warrant in whole or in part, by delivery of an original or fax copy of an exercise notice in the form attached hereto as Exhibit A (the “Exercise Notice”), shares of Common Stock of the Company, subject to adjustment pursuant to Section 4.

1.2.Fair Market Value. For purposes hereof, the “Fair Market Value” of a share of Common Stock as of a particular date (the “Determination Date”) shall mean:

(a)If the Company’s Common Stock is traded on the American Stock Exchange or another national exchange or is quoted on the Global or Capital Market of The Nasdaq Stock Market, Inc.(“Nasdaq”), then the closing or last sale price, respectively, reported for the last business day immediately preceding the Determination Date.

(b)If the Company’s Common Stock is not traded on the American Stock Exchange or another national exchange or on the Nasdaq but is traded on the NASD Over the Counter Bulletin Board, then the mean of the average of the closing bid and asked prices reported for the last business day immediately preceding the Determination Date.

(c)Except as provided in clause (d) below, if the Company’s Common Stock is not publicly traded, then as the Holder and the Company agree or in the absence of agreement by arbitration in accordance with the rules then in effect of the American Arbitration Association, before a single arbitrator to be chosen from a panel of persons qualified by education and training to pass on the matter to be decided.

(d)If the Determination Date is the date of a liquidation, dissolution or winding up, or any event deemed to be a liquidation, dissolution or winding up pursuant to the Company’s charter, then all amounts to be payable per share to holders of the Common Stock pursuant to the charter in the event of such liquidation, dissolution or winding up, plus all other amounts to be payable per share in respect of the Common Stock in liquidation under the charter, assuming for the purposes of this clause (d) that all of the shares of Common Stock then issuable upon exercise of the Warrant are outstanding at the Determination Date.

1.3.Company Acknowledgment. The Company will, at the time of the exercise of this Warrant, upon the request of the holder hereof acknowledge in writing its continuing obligation to afford to such holder any rights to which such holder shall continue to be entitled after such exercise in accordance with the provisions of this Warrant. If the holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such holder any such rights.

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1.4.Trustee for Warrant Holders. In the event that a bank or trust company shall have been appointed as trustee for the holders of this Warrant pursuant to Subsection 3.2, such bank or trust company shall have all the powers and duties of a warrant agent (as hereinafter described) and shall accept, in its own name for the account of the Holder or Holder such successor person as may be entitled thereto, all amounts otherwise payable to the Company or such successor, as the case may be, on exercise of this Warrant pursuant to this Section 1.

2.Procedure for Exercise.

2.1.Delivery of Stock Certificates, Etc., on Exercise. The Company agrees that the shares of Common Stock purchased upon exercise of this Warrant shall be deemed to be issued to the Holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such shares in accordance herewith. As soon as practicable after the exercise of this Warrant in full or in part, and in any event within three (3) business days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Holder, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct in compliance with applicable securities laws, a certificate or certificates for the number of duly and validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities) to which such Holder shall be entitled on such exercise, plus, in lieu of any fractional share to which such holder would otherwise be entitled, cash equal to such fraction multiplied by the then Fair Market Value of one full share, together with any other stock or other securities and property (including cash, where applicable) to which such Holder is entitled upon such exercise pursuant to Section 1 or otherwise.

2.2.Exercise. Payment shall be made either in cash or by certified or official bank check payable to the order of the Company equal to the applicable aggregate Exercise Price for the number of Common Shares specified in such Exercise Notice (as such exercise number shall be adjusted to reflect any adjustment in the total number of shares of Common Stock issuable to the Holder per the terms of this Warrant) and the Holder shall thereupon be entitled to receive the number of duly authorized, validly issued, fully-paid and non-assessable shares of Common Stock (or Other Securities) determined as provided herein.

3.Effect of Reorganization, Etc.; Adjustment of Exercise Price.

3.1.Reorganization, Consolidation, Merger, Etc. In case at any time or from time to time, the Company shall (a) effect a reorganization, (b) consolidate with or merge into any other person, or (c) transfer all or substantially all of its properties or assets to any other person under any plan or arrangement contemplating the dissolution of the Company, then, in each such case, as a condition to the consummation of such a transaction, if applicable, proper and adequate provision shall be made by the Company whereby the Holder, on the exercise hereof as provided in Section 1 at any time after the consummation of such reorganization, consolidation or merger or the effective date of such dissolution, as the case may be, shall receive, in lieu of the Common Stock (or Other Securities) issuable on such exercise prior to such consummation or such effective date, the stock and other securities and property (including cash) to which such Holder would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if such Holder had so exercised this Warrant, immediately prior thereto, all subject to further adjustment thereafter as provided in Section 4.

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3.2.Dissolution. In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, concurrently with any distributions made to holders of its Common Stock, shall at its expense deliver or cause to be delivered to the Holder the stock and other securities and property (including cash, where applicable) receivable by the Holder pursuant to Section 3.1 to the extent the Holder has exercised the warrant following the transfer of assets, or, if the Holder shall so instruct the Company, to a bank or trust company specified by the Holder and having its principal office in New York, NY as trustee for the Holder (the “Trustee”).

3.3.Continuation of Terms. Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in this Section 3, this Warrant shall continue in full force and effect and the terms hereof shall be applicable to the shares of stock and other securities and property receivable on the exercise of this Warrant after the consummation of such reorganization, consolidation or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any such stock or other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company, whether or not such person shall have expressly assumed the terms of this Warrant as provided in Section 4. In the event this Warrant does not continue in full force and effect after the consummation of the transactions described in this Section 3, then the Company’s securities and property (including cash, where applicable) receivable by the Holder will be delivered to the Holder or the Trustee as contemplated by Section 3.2.

4.Extraordinary Events Regarding Common Stock. In the event that the Company shall (a) issue additional shares of the Common Stock as a dividend or other distribution on outstanding Common Stock or any preferred stock issued by the Company (b) subdivide its outstanding shares of Common Stock, or (c) combine its outstanding shares of the Common Stock into a smaller number of shares of the Common Stock, then, in each such event, the Exercise Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Exercise Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Exercise Price then in effect. The Exercise Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein in this Section 4. The number of shares of Common Stock that the Holder shall thereafter, on the exercise hereof as provided in Section 1, be entitled to receive shall be adjusted to a number determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this Section 4) be issuable on such exercise by a fraction of which (a) the numerator is the Exercise Price that would otherwise (but for the provisions of this Section 4) be in effect, and (b) the denominator is the Exercise Price in effect on the date of such exercise (taking into account the provisions of this Section 4). Notwithstanding the foregoing, in no event shall the Exercise Price be less than the par value of the Common Stock.

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5.Certificate as to Adjustments. In each case of any adjustment or readjustment in the shares of Common Stock (or Other Securities) issuable on the exercise of this Warrant, the Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional shares of Common Stock (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant. The Company will forthwith mail a copy of each such certificate to the Holder and any Warrant agent of the Company (appointed pursuant to Section 11 hereof).

6.Reservation of Stock, Etc., Issuable on Exercise of Warrant. The Company will at all times reserve and keep available, solely for issuance and delivery on the exercise of this Warrant, shares of Common Stock (or Other Securities) from time to time issuable on the exercise of this Warrant.

7.Assignment; Exchange of Warrant. Subject to compliance with applicable securities laws, this Warrant, and the rights evidenced hereby, may be transferred by any registered holder hereof (a “Transferor”) in whole or in part. On the surrender for exchange of this Warrant, with the Transferor’s endorsement in the form of Exhibit B attached hereto (the “Transferor Endorsement Form”) and together with evidence reasonably satisfactory to the Company demonstrating compliance with applicable securities laws, which shall include, without limitation, the provision of a legal opinion from the Transferor’s counsel (at the Company’s expense) that such transfer is exempt from the registration requirements of applicable securities laws, the Company at its expense (but with payment by the Transferor of any applicable transfer taxes) will issue and deliver to or on the order of the Transferor thereof a new Warrant of like tenor, in the name of the Transferor and/or the transferee(s) specified in such Transferor Endorsement Form (each a “Transferee”), calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant so surrendered by the Transferor.

8.Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of this Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.

9.Registration Rights. The Holder has been granted certain registration rights by the Company. These registration rights are set forth in a Registration Rights Agreement entered into by the Company and Holder dated as of the date hereof, as the same may be amended, modified and/or supplemented from time to time.

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10.Maximum Exercise. Notwithstanding anything herein to the contrary, in no event shall the Holder be entitled to exercise any portion of this Warrant in excess of that portion of this Warrant upon exercise of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its Affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unexercised portion of this Warrant or the unexercised or unconverted portion of any other security of the Holder subject to a limitation on conversion analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the exercise of the portion of this Warrant with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its Affiliates of any amount greater than 9.99% of the then outstanding shares of Common Stock (whether or not, at the time of such exercise, the Holder and its Affiliates beneficially own more than 9.99% of the then outstanding shares of Common Stock). As used herein, the term “Affiliate” means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act of 1933, as amended.   For purposes of the second preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such sentence. For any reason at any time, upon written or oral request of the Holder, the Company shall within one (1) business day confirm orally and in writing to the Holder the number of shares of Common Stock outstanding as of any given date.  The limitations set forth herein (x) shall automatically become null and void following notice to the Company upon the occurrence and during the continuance of an Event of Default (as defined in the Additional Secured Term Notes referred to in the Amendment and Waiver Agreement dated as of the date hereof among the Holder, Valens U.S. SPV I, LLC, Laurus Master Fund, Ltd. and the Company) and (y) may be waived by the Holder upon provision of no less than sixty-one (61) days prior written notice to the Company; provided, however, that, such written notice of waiver shall only be effective if delivered at a time when no indebtedness (including, without limitation, principal, interest, fees and charges) of the Company of which the Holder or any of its Affiliates was, at any time, the owner, directly or indirectly is outstanding.

11.Warrant Agent. The Company may, by written notice to the each Holder of the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other Securities) on the exercise of this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section 7, and replacing this Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such agent.

12.Transfer on the Company’s Books. Until this Warrant is transferred on the books of the Company, the Company may treat the registered holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

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13.Notices, Etc. All notices and other communications from the Company to the Holder shall be mailed by first class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder who has so furnished an address to the Company.

14.Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION BROUGHT CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS WARRANT SHALL BE BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE HOLDER MAY CHOOSE TO WAIVE THIS PROVISION AND BRING AN ACTION OUTSIDE THE STATE OF NEW YORK. The individuals executing this Warrant on behalf of the Company agree to submit to the jurisdiction of such courts and waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorneys’ fees and costs. In the event that any provision of this Warrant is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Warrant. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision hereof. The Company acknowledges that legal counsel participated in the preparation of this Warrant and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Warrant to favor any party against the other party.

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

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IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above.

	MODTECH HOLDINGS, INC.
WITNESS:
	By:	/s/ Kenneth S. Cragun
/s/ Lori Lopez	Name: Kenneth S. Cragun
Lori Lopez	Title:    Chief Financial Officer

Exhibit A
FORM OF SUBSCRIPTION
(To Be Signed Only On Exercise Of Warrant)

TO:Modtech Holdings, Inc.

Attention:Chief Financial Officer

The undersigned, pursuant to the provisions set forth in the attached Warrant (No.____), hereby irrevocably elects to purchase (check applicable box):

________ shares of the Common Stock covered by such Warrant; or

the maximum number of shares of Common Stock covered by such Warrant pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned herewith makes payment of the full Exercise Price for such shares at the price per share provided for in such Warrant, which is $___________. Such payment takes the form of (check applicable box or boxes):

$__________ in lawful money of the United States; and/or

the cancellation of such portion of the attached Warrant as is exercisable for a total of _______ shares of Common Stock (using a Fair Market Value of $_______ per share for purposes of this calculation); and/or

the cancellation of such number of shares of Common Stock as is necessary, in accordance with the formula set forth in Section 2.2, to exercise this Warrant with respect to the maximum number of shares of Common Stock purchasable pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned requests that the certificates for such shares be issued in the name of, and delivered to ____________________________________ whose address is ________________________ ___________________________________________________.

The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable upon exercise of the within Warrant shall be made pursuant to registration of the Common Stock under the Securities Act of 1933, as amended (the “Securities Act”) or pursuant to an exemption from registration under the Securities Act.

Dated: ________________________
	(Signature must conform to name of holder as specified on the face of the Warrant)
	Address:

A-1

Exhibit B

FORM OF TRANSFEROR ENDORSEMENT
(To Be Signed Only On Transfer Of Warrant)

For value received, the undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading “Transferees” the right represented by the within Warrant to purchase the percentage and number of shares of Common Stock of Modtech Holdings, Inc. into which the within Warrant relates specified under the headings “Percentage Transferred” and “Number Transferred,” respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to transfer its respective right on the books of Modtech Holdings, Inc. with full power of substitution in the premises.

Transferees Address Percentage
Transferred Number
Transferred

Dated:
	(Signature must conform to name of holder as specified on the face of the Warrant)
	Address:
	SIGNED IN THE PRESENCE OF:
	(Name)
ACCEPTED AND AGREED:
[TRANSFEREE]
(Name)

B-1

EX-10.59

Exhibit 10.59

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO MODTECH HOLDINGS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

Right to Purchase up to 195,935 Shares of Common Stock of

Modtech Holdings, Inc.

(subject to adjustment as provided herein)

COMMON STOCK PURCHASE WARRANT

No. __ Issue Date: February 29, 2008

MODTECH HOLDINGS, INC., a corporation organized under the laws of the State of Delaware (the “Company”), hereby certifies that, for value received, VALENS U.S. SPV I, LLC, or assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company (as defined herein) from and after the Issue Date of this Warrant and at any time or from time to time before 5:00 p.m., New York time, through the close of business February 29, 2015 (the “Expiration Date”), up to 195,935 fully paid and nonassessable shares of Common Stock (as hereinafter defined), $0.01 par value per share, at the applicable Exercise Price per share (as defined below). The number and character of such shares of Common Stock and the applicable Exercise Price per share are subject to adjustment as provided herein.

As used herein the following terms, unless the context otherwise requires, have the following respective meanings:

(a)The term “Company” shall include Modtech Holdings, Inc. and any person or entity which shall succeed, or assume the obligations of, Modtech Holdings, Inc. hereunder.

(b)The term “Common Stock” includes (i) the Company’s Common Stock, par value $0.01 per share; and (ii) any other securities into which or for which any of the securities described in the preceding clause (i) may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise.

(c)The term “Other Securities” refers to any stock (other than Common Stock) and other securities of the Company or any other person (corporate or otherwise) which the holder of the Warrant at any time shall be entitled to receive, or shall have received, on the exercise of the Warrant, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 4 or otherwise.

(d)The “Exercise Price” applicable under this Warrant shall be $0.48.

1.Exercise of Warrant.

1.1.Number of Shares Issuable upon Exercise. From and after the date hereof through and including the Expiration Date, the Holder shall be entitled to receive, upon exercise of this Warrant in whole or in part, by delivery of an original or fax copy of an exercise notice in the form attached hereto as Exhibit A (the “Exercise Notice”), shares of Common Stock of the Company, subject to adjustment pursuant to Section 4.

1.2.Fair Market Value. For purposes hereof, the “Fair Market Value” of a share of Common Stock as of a particular date (the “Determination Date”) shall mean:

(a)If the Company’s Common Stock is traded on the American Stock Exchange or another national exchange or is quoted on the Global or Capital Market of The Nasdaq Stock Market, Inc.(“Nasdaq”), then the closing or last sale price, respectively, reported for the last business day immediately preceding the Determination Date.

(b)If the Company’s Common Stock is not traded on the American Stock Exchange or another national exchange or on the Nasdaq but is traded on the NASD Over the Counter Bulletin Board, then the mean of the average of the closing bid and asked prices reported for the last business day immediately preceding the Determination Date.

(c)Except as provided in clause (d) below, if the Company’s Common Stock is not publicly traded, then as the Holder and the Company agree or in the absence of agreement by arbitration in accordance with the rules then in effect of the American Arbitration Association, before a single arbitrator to be chosen from a panel of persons qualified by education and training to pass on the matter to be decided.

(d)If the Determination Date is the date of a liquidation, dissolution or winding up, or any event deemed to be a liquidation, dissolution or winding up pursuant to the Company’s charter, then all amounts to be payable per share to holders of the Common Stock pursuant to the charter in the event of such liquidation, dissolution or winding up, plus all other amounts to be payable per share in respect of the Common Stock in liquidation under the charter, assuming for the purposes of this clause (d) that all of the shares of Common Stock then issuable upon exercise of the Warrant are outstanding at the Determination Date.

1.3.Company Acknowledgment. The Company will, at the time of the exercise of this Warrant, upon the request of the holder hereof acknowledge in writing its continuing obligation to afford to such holder any rights to which such holder shall continue to be entitled after such exercise in accordance with the provisions of this Warrant. If the holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such holder any such rights.

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1.4.Trustee for Warrant Holders. In the event that a bank or trust company shall have been appointed as trustee for the holders of this Warrant pursuant to Subsection 3.2, such bank or trust company shall have all the powers and duties of a warrant agent (as hereinafter described) and shall accept, in its own name for the account of the Holder or Holder such successor person as may be entitled thereto, all amounts otherwise payable to the Company or such successor, as the case may be, on exercise of this Warrant pursuant to this Section 1.

2.Procedure for Exercise.

2.1.Delivery of Stock Certificates, Etc., on Exercise. The Company agrees that the shares of Common Stock purchased upon exercise of this Warrant shall be deemed to be issued to the Holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such shares in accordance herewith. As soon as practicable after the exercise of this Warrant in full or in part, and in any event within three (3) business days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Holder, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct in compliance with applicable securities laws, a certificate or certificates for the number of duly and validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities) to which such Holder shall be entitled on such exercise, plus, in lieu of any fractional share to which such holder would otherwise be entitled, cash equal to such fraction multiplied by the then Fair Market Value of one full share, together with any other stock or other securities and property (including cash, where applicable) to which such Holder is entitled upon such exercise pursuant to Section 1 or otherwise.

2.2.Exercise. Payment shall be made either in cash or by certified or official bank check payable to the order of the Company equal to the applicable aggregate Exercise Price for the number of Common Shares specified in such Exercise Notice (as such exercise number shall be adjusted to reflect any adjustment in the total number of shares of Common Stock issuable to the Holder per the terms of this Warrant) and the Holder shall thereupon be entitled to receive the number of duly authorized, validly issued, fully-paid and non-assessable shares of Common Stock (or Other Securities) determined as provided herein.

3.Effect of Reorganization, Etc.; Adjustment of Exercise Price.

3.1.Reorganization, Consolidation, Merger, Etc. In case at any time or from time to time, the Company shall (a) effect a reorganization, (b) consolidate with or merge into any other person, or (c) transfer all or substantially all of its properties or assets to any other person under any plan or arrangement contemplating the dissolution of the Company, then, in each such case, as a condition to the consummation of such a transaction, if applicable, proper and adequate provision shall be made by the Company whereby the Holder, on the exercise hereof as provided in Section 1 at any time after the consummation of such reorganization, consolidation or merger or the effective date of such dissolution, as the case may be, shall receive, in lieu of the Common Stock (or Other Securities) issuable on such exercise prior to such consummation or such effective date, the stock and other securities and property (including cash) to which such Holder would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if such Holder had so exercised this Warrant, immediately prior thereto, all subject to further adjustment thereafter as provided in Section 4.

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3.2.Dissolution. In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, concurrently with any distributions made to holders of its Common Stock, shall at its expense deliver or cause to be delivered to the Holder the stock and other securities and property (including cash, where applicable) receivable by the Holder pursuant to Section 3.1 to the extent the Holder has exercised the warrant following the transfer of assets, or, if the Holder shall so instruct the Company, to a bank or trust company specified by the Holder and having its principal office in New York, NY as trustee for the Holder (the “Trustee”).

3.3.Continuation of Terms. Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in this Section 3, this Warrant shall continue in full force and effect and the terms hereof shall be applicable to the shares of stock and other securities and property receivable on the exercise of this Warrant after the consummation of such reorganization, consolidation or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any such stock or other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company, whether or not such person shall have expressly assumed the terms of this Warrant as provided in Section 4. In the event this Warrant does not continue in full force and effect after the consummation of the transactions described in this Section 3, then the Company’s securities and property (including cash, where applicable) receivable by the Holder will be delivered to the Holder or the Trustee as contemplated by Section 3.2.

4.Extraordinary Events Regarding Common Stock. In the event that the Company shall (a) issue additional shares of the Common Stock as a dividend or other distribution on outstanding Common Stock or any preferred stock issued by the Company (b) subdivide its outstanding shares of Common Stock, or (c) combine its outstanding shares of the Common Stock into a smaller number of shares of the Common Stock, then, in each such event, the Exercise Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Exercise Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Exercise Price then in effect. The Exercise Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein in this Section 4. The number of shares of Common Stock that the Holder shall thereafter, on the exercise hereof as provided in Section 1, be entitled to receive shall be adjusted to a number determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this Section 4) be issuable on such exercise by a fraction of which (a) the numerator is the Exercise Price that would otherwise (but for the provisions of this Section 4) be in effect, and (b) the denominator is the Exercise Price in effect on the date of such exercise (taking into account the provisions of this Section 4). Notwithstanding the foregoing, in no event shall the Exercise Price be less than the par value of the Common Stock.

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5.Certificate as to Adjustments. In each case of any adjustment or readjustment in the shares of Common Stock (or Other Securities) issuable on the exercise of this Warrant, the Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional shares of Common Stock (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant. The Company will forthwith mail a copy of each such certificate to the Holder and any Warrant agent of the Company (appointed pursuant to Section 11 hereof).

6.Reservation of Stock, Etc., Issuable on Exercise of Warrant. The Company will at all times reserve and keep available, solely for issuance and delivery on the exercise of this Warrant, shares of Common Stock (or Other Securities) from time to time issuable on the exercise of this Warrant.

7.Assignment; Exchange of Warrant. Subject to compliance with applicable securities laws, this Warrant, and the rights evidenced hereby, may be transferred by any registered holder hereof (a “Transferor”) in whole or in part. On the surrender for exchange of this Warrant, with the Transferor’s endorsement in the form of Exhibit B attached hereto (the “Transferor Endorsement Form”) and together with evidence reasonably satisfactory to the Company demonstrating compliance with applicable securities laws, which shall include, without limitation, the provision of a legal opinion from the Transferor’s counsel (at the Company’s expense) that such transfer is exempt from the registration requirements of applicable securities laws, the Company at its expense (but with payment by the Transferor of any applicable transfer taxes) will issue and deliver to or on the order of the Transferor thereof a new Warrant of like tenor, in the name of the Transferor and/or the transferee(s) specified in such Transferor Endorsement Form (each a “Transferee”), calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant so surrendered by the Transferor.

8.Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of this Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.

9.Registration Rights. The Holder has been granted certain registration rights by the Company. These registration rights are set forth in a Registration Rights Agreement entered into by the Company and Holder dated as of the date hereof, as the same may be amended, modified and/or supplemented from time to time.

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10.Maximum Exercise. Notwithstanding anything herein to the contrary, in no event shall the Holder be entitled to exercise any portion of this Warrant in excess of that portion of this Warrant upon exercise of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its Affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unexercised portion of this Warrant or the unexercised or unconverted portion of any other security of the Holder subject to a limitation on conversion analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the exercise of the portion of this Warrant with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its Affiliates of any amount greater than 9.99% of the then outstanding shares of Common Stock (whether or not, at the time of such exercise, the Holder and its Affiliates beneficially own more than 9.99% of the then outstanding shares of Common Stock). As used herein, the term “Affiliate” means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act of 1933, as amended.   For purposes of the second preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such sentence. For any reason at any time, upon written or oral request of the Holder, the Company shall within one (1) business day confirm orally and in writing to the Holder the number of shares of Common Stock outstanding as of any given date.  The limitations set forth herein (x) shall automatically become null and void following notice to the Company upon the occurrence and during the continuance of an Event of Default (as defined in the Additional Secured Term Notes referred to in the Amendment and Waiver Agreement dated as of the date hereof among the Holder, Laurus Master Fund, Ltd., Valens Offshore SPV I, Ltd. and the Company) and (y) may be waived by the Holder upon provision of no less than sixty-one (61) days prior written notice to the Company; provided, however, that, such written notice of waiver shall only be effective if delivered at a time when no indebtedness (including, without limitation, principal, interest, fees and charges) of the Company of which the Holder or any of its Affiliates was, at any time, the owner, directly or indirectly is outstanding.

11.Warrant Agent. The Company may, by written notice to the each Holder of the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other Securities) on the exercise of this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section 7, and replacing this Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such agent.

12.Transfer on the Company’s Books. Until this Warrant is transferred on the books of the Company, the Company may treat the registered holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

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13.Notices, Etc. All notices and other communications from the Company to the Holder shall be mailed by first class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder who has so furnished an address to the Company.

14.Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION BROUGHT CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS WARRANT SHALL BE BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE HOLDER MAY CHOOSE TO WAIVE THIS PROVISION AND BRING AN ACTION OUTSIDE THE STATE OF NEW YORK. The individuals executing this Warrant on behalf of the Company agree to submit to the jurisdiction of such courts and waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorneys’ fees and costs. In the event that any provision of this Warrant is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Warrant. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision hereof. The Company acknowledges that legal counsel participated in the preparation of this Warrant and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Warrant to favor any party against the other party.

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

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IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above.

	MODTECH HOLDINGS, INC.
WITNESS:
	By:	/s/ Kenneth S. Cragun
/s/ Lori Lopez	Name: Kenneth S. Cragun
Lori Lopez	Title: Chief Financial Officer

Exhibit A

FORM OF SUBSCRIPTION

(To Be Signed Only On Exercise Of Warrant)

TO:Modtech Holdings, Inc.

Attention:Chief Financial Officer

The undersigned, pursuant to the provisions set forth in the attached Warrant (No.____), hereby irrevocably elects to purchase (check applicable box):

________ shares of the Common Stock covered by such Warrant; or

the maximum number of shares of Common Stock covered by such Warrant pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned herewith makes payment of the full Exercise Price for such shares at the price per share provided for in such Warrant, which is $___________. Such payment takes the form of (check applicable box or boxes):

$__________ in lawful money of the United States; and/or

the cancellation of such portion of the attached Warrant as is exercisable for a total of _______ shares of Common Stock (using a Fair Market Value of $_______ per share for purposes of this calculation); and/or

the cancellation of such number of shares of Common Stock as is necessary, in accordance with the formula set forth in Section 2.2, to exercise this Warrant with respect to the maximum number of shares of Common Stock purchasable pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned requests that the certificates for such shares be issued in the name of, and delivered to _________________________________________ whose address is ___________________________________________________________________.

The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable upon exercise of the within Warrant shall be made pursuant to registration of the Common Stock under the Securities Act of 1933, as amended (the “Securities Act”) or pursuant to an exemption from registration under the Securities Act.

Dated: ________________________
	(Signature must conform to name of holder as specified on the face of the Warrant)
	Address:

A-1

Exhibit B

FORM OF TRANSFEROR ENDORSEMENT

(To Be Signed Only On Transfer Of Warrant)

For value received, the undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading “Transferees” the right represented by the within Warrant to purchase the percentage and number of shares of Common Stock of Modtech Holdings, Inc. into which the within Warrant relates specified under the headings “Percentage Transferred” and “Number Transferred,” respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to transfer its respective right on the books of Modtech Holdings, Inc. with full power of substitution in the premises.

  Transferees   Address   Percentage Transferred   Number Transferred

Dated:
	(Signature must conform to name of holder as specified on the face of the Warrant)
	Address:
	SIGNED IN THE PRESENCE OF:
	(Name)
ACCEPTED AND AGREED:
[TRANSFEREE]
(Name)

B-2

EX-10.60

Exhibit 10.60

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “Agreement”) is made and entered into as of February 29, 2008, by and between Modtech Holdings, Inc., a Delaware corporation (the “Company”), and Laurus Master Fund, Ltd. (the “Purchaser”).

This Agreement is made pursuant to the Amendment and Waiver Agreement dated as of the date hereof among the Purchaser, Valens U.S. SPV I, LLC, Valens Offshore SPV I, Ltd. and the Company (the “Amendment Agreement”), and pursuant to the Warrants referred to therein and defined below.

The Company and the Purchaser hereby agree as follows:

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

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

“Commission” means the Securities and Exchange Commission.

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

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

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

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

“Filing Date” means, with respect to the Registration Statement required to be filed hereunder in respect of the shares of Common Stock (a) issuable upon exercise of any Warrant, the date which is ninety (90) days after the issuance of such Warrant and (b) with the shares of Common Stock issuable to the Holder as a result of adjustments to the Exercise Price made pursuant to the Warrant or otherwise, thirty (30) days after the occurrence of such event.

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

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

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

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

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

“Registrable Securities” means the shares of Common Stock issued upon the exercise of any Warrants.

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

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

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

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

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

“Warrants” means the Common Stock purchase warrants dated as of the date hereof issued pursuant to the Amendment Agreement.

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2.Registration.

(a)On or prior to the Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the Registrable Securities for a selling stockholder resale offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith). The Company may include in a single registration statement the “Registrable Securities” defined under the Registration Rights Agreements in paragraphs 3 and 4 of Schedule 7(b) hereto, subject to the requirement that if at any time the Commission takes the position that the offering of some or all of the Registrable Securities in such combined Registration Statement is not eligible to be made on a delayed or continuous basis under the provisions of Rule 415, the Company shall remove from the Registration Statement that number of the Registrable Securities as defined in the Registration Rights Agreement described in paragraph 4 of Schedule 7(b) hereto as the Commission may require to assure the Company’s compliance with the requirements of Rule 415. The Company shall cause each Registration Statement to become effective and remain effective as provided herein. The Company shall use its best efforts to cause each Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no later than the Effectiveness Date. The Company shall use its reasonable commercial efforts to keep each Registration Statement continuously effective under the Securities Act until the date which is the earlier date of when (i) all Registrable Securities covered by such Registration Statement have been sold or (ii) all Registrable Securities covered by such Registration Statement may be sold immediately without registration under the Securities Act and without volume restrictions pursuant to Rule 144(k) (or its successor), as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s transfer agent and the affected Holders (the “Effectiveness Period”).

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

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

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

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

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

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

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

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

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

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

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

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5.Indemnification.

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

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

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

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

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6.Representations and Warranties.

(a)The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act and, except with respect to certain matters which the Company has disclosed to the Purchaser on Schedule 4.21 to the Purchase Agreements, the Company has filed all proxy statements, reports, schedules, forms, statements and other documents required to be filed by it under the Exchange Act. The Company has filed (i) its Annual Report on Form 10-K for its fiscal year ended December 31, 2006 and (ii) its Quarterly Report on Form 10-Q for the fiscal quarters ended March 31, 2007, June 30, 2007 and September 30, 2007 (collectively, the “SEC Reports”). Each SEC Report was, at the time of its filing, in substantial compliance with the requirements of its respective form and none of the SEC Reports, nor the financial statements (and the notes thereto) included in the SEC Reports, as of their respective filing dates, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes, customary year-end adjustments, or may be condensed) and fairly present in all material respects the financial condition, the results of operations and the cash flows of the Company and its subsidiaries, on a consolidated basis, as of, and for, the periods presented in each such SEC Report.

(b)The Common Stock is listed or quoted, as applicable, for trading on the NASDAQ Global Market and, except as set forth below, satisfies all requirements for the continuation of such listing or quotation, as applicable, and the Company shall do all things necessary for the continuation of such listing or quotation, as applicable. Except as set forth below, the Company has not received any notice that its Common Stock will be delisted from or no longer be quoted on, as applicable, the NASDAQ Global Market (except for prior notices which have been fully remedied) or that the Common Stock does not meet all requirements for the continuation of such listing or quotation, as applicable. On January 16, 2008, the Company received a letter from The Nasdaq Stock Market notifying it that for the 30 consecutive business days preceding the date of the letter the bid price of the Company’s common stock had closed below the $1.00 per share minimum bid price required for continued inclusion on The Nasdaq Global Market pursuant to Nasdaq Marketplace Rule 4450(a) (5). In accordance with Nasdaq Marketplace Rule 4450(e) (2), the Company has 180 calendar days from the date of the Nasdaq letter, or until July 14, 2008, to regain compliance with the minimum bid price rule.

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

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

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

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

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

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

7.Miscellaneous.

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

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

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

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

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

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

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

If to the Company:	Modtech Holdings, Inc. 2830 Barrett Avenue Perris, California 92571 Attention:Chief Financial Officer Facsimile: (951) 943-9655
with a copy to:	Haddan & Zepfel LLP 500 Newport Center Drive Suite 580 Newport Beach, California 92660 Attention: Robert J. Zepfel, Esq. Facsimile: (949) 706-6060
If to a Purchaser:	To the address set forth under such Purchaser name on the signature pages hereto.
If to any other Person who is then the registered Holder:	To the address of such Holder as it appears in the stock transfer books of the Company

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

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

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

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

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

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

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

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

MODTECH HOLDINGS, INC.
By:	/s/ Kenneth S. Cragun
Name: Kenneth S. Cragun
Title:     Chief Financial Officer
LAURUS MASTER FUND, LTD.
By:  Laurus Capital Management, LLC, its
investment manager
By:	/s/ Patrick Regan
Name:  Patrick Regan
Title:      Chief Financial Officer
Address for Notices:
Laurus Master Fund, Ltd.
c/o Laurus Capital Management, LLC
335 Madison Avenue, 10th Floor
New York, New York 10017
Attention:     Portfolio Services
Facsimile:     212-541-4410

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EXHIBIT A

____________, 200___

[Continental Stock Transfer

& Trust Company

Two Broadway

New York, New York 10004

Attn: William Seegraber]

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

Ladies and Gentlemen:

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

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

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

Very truly yours,

[Company counsel]

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Schedule A to Exhibit A

  Selling Stockholder   R/N/O Shares Being Offered

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SCHEDULE 7(b)

1.The Company is a party to the First Amended and Restated Registration Rights Agreement with Amphora Limited, Peninsula Catalyst Fund, L.P., and others, dated August 5, 2005 and to a Registration Rights Agreement with Amphora Limited, dated October 31, 2006, with respect to 189,189 shares of common stock The registration statements described in these agreements have been declared effective, but there are ongoing obligations under the agreements, including indemnification provisions.

2.[intentionally omitted]

3.The Company is also a party to a Registration Rights Agreement with Valens U.S. SPV I, LLC, dated February 29, 2008, with respect to 195,935 shares of common stock and a Registration Rights Agreement with Valens Offshore SPV I, LTD, also dated February 29, 2008 with respect to 266,408 shares of common stock. The registration statements described in these two Registration Rights Agreements have not yet been filed.

4.The Company intends to enter into a single Registration Rights Agreement in the next 10 days with various investors to register between approximately 3,125,000 and 4,166,667 shares of common stock to be issued upon conversion of convertible preferred stock to be issued to such investors.

5. Outstanding Warrants

Warrants to acquire the number of shares of common stock at the exercise prices set forth below are currently outstanding and exercisable:

No. of Shares of Common Stock	Exercise Price
770,349	$	7.82
770,348	$	7.31
581,395	$	5.69
192,029	$	5.06
192,029	$	5.29
192,028	$	6.53

The warrants were originally issued to Laurus Master Fund, Ltd.

EX-10.61

Exhibit 10.61

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “Agreement”) is made and entered into as of February 29, 2008, by and between Modtech Holdings, Inc., a Delaware corporation (the “Company”), and Valens Offshore SPV I, Ltd. (the “Purchaser”).

This Agreement is made pursuant to the Amendment and Waiver Agreement dated as of the date hereof among the Purchaser, Laurus Master Fund, Ltd., Valens U.S. SPV I, LLC and the Company (the “Amendment Agreement”), and pursuant to the Warrants referred to therein and defined below.

The Company and the Purchaser hereby agree as follows:

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

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

“Commission” means the Securities and Exchange Commission.

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

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

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

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

“Filing Date” means, with respect to the Registration Statement required to be filed hereunder in respect of the shares of Common Stock (a) issuable upon exercise of any Warrant, the date which is ninety (90) days after the issuance of such Warrant and (b) with the shares of Common Stock issuable to the Holder as a result of adjustments to the Exercise Price made pursuant to the Warrant or otherwise, thirty (30) days after the occurrence of such event.

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

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

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

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

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

“Registrable Securities” means the shares of Common Stock issued upon the exercise of any Warrants.

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

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

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

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

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

“Warrants” means the Common Stock purchase warrants dated as of the date hereof issued pursuant to the Amendment Agreement.

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2.Registration.

(a)On or prior to the Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the Registrable Securities for a selling stockholder resale offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith). The Company may include in a single registration statement the “Registrable Securities” defined under the Registration Rights Agreements in paragraphs 3 and 4 of Schedule 7(b) hereto, subject to the requirement that if at any time the Commission takes the position that the offering of some or all of the Registrable Securities in such combined Registration Statement is not eligible to be made on a delayed or continuous basis under the provisions of Rule 415, the Company shall remove from the Registration Statement that number of the Registrable Securities as defined in the Registration Rights Agreement described in paragraph 4 of Schedule 7(b) hereto as the Commission may require to assure the Company’s compliance with the requirements of Rule 415. The Company shall cause each Registration Statement to become effective and remain effective as provided herein. The Company shall use its best efforts to cause each Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no later than the Effectiveness Date. The Company shall use its reasonable commercial efforts to keep each Registration Statement continuously effective under the Securities Act until the date which is the earlier date of when (i) all Registrable Securities covered by such Registration Statement have been sold or (ii) all Registrable Securities covered by such Registration Statement may be sold immediately without registration under the Securities Act and without volume restrictions pursuant to Rule 144(k), (or its successor), as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s transfer agent and the affected Holders (the “Effectiveness Period”).

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

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

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

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

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

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

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

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

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

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

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

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5.Indemnification.

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

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

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

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

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6.Representations and Warranties.

(a)The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act and, except with respect to certain matters which the Company has disclosed to the Purchaser on Schedule 4.21 to the Purchase Agreements, the Company has filed all proxy statements, reports, schedules, forms, statements and other documents required to be filed by it under the Exchange Act. The Company has filed (i) its Annual Report on Form 10-K for its fiscal year ended December 31, 2006 and (ii) its Quarterly Report on Form 10-Q for the fiscal quarters ended March 31, 2007, June 30, 2007 and September 30, 2007 (collectively, the “SEC Reports”). Each SEC Report was, at the time of its filing, in substantial compliance with the requirements of its respective form and none of the SEC Reports, nor the financial statements (and the notes thereto) included in the SEC Reports, as of their respective filing dates, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes, customary year-end adjustments, or may be condensed) and fairly present in all material respects the financial condition, the results of operations and the cash flows of the Company and its subsidiaries, on a consolidated basis, as of, and for, the periods presented in each such SEC Report.

(b)The Common Stock is listed or quoted, as applicable, for trading on the NASDAQ Global Market and, except as set forth below, satisfies all requirements for the continuation of such listing or quotation, as applicable, and the Company shall do all things necessary for the continuation of such listing or quotation, as applicable. Except as set forth below, the Company has not received any notice that its Common Stock will be delisted from or no longer be quoted on, as applicable, the NASDAQ Global Market (except for prior notices which have been fully remedied) or that the Common Stock does not meet all requirements for the continuation of such listing or quotation, as applicable. On January 16, 2008, the Company received a letter from The Nasdaq Stock Market notifying it that for the 30 consecutive business days preceding the date of the letter the bid price of the Company’s common stock had closed below the $1.00 per share minimum bid price required for continued inclusion on The Nasdaq Global Market pursuant to Nasdaq Marketplace Rule 4450(a) (5). In accordance with Nasdaq Marketplace Rule 4450(e) (2), the Company has 180 calendar days from the date of the Nasdaq letter, or until July 14, 2008, to regain compliance with the minimum bid price rule.

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

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

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

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

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

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

7.Miscellaneous.

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

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

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

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

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

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

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

If to the Company:	Modtech Holdings, Inc. 2830 Barrett Avenue Perris, California 92571 Attention: Chief Financial Officer Facsimile: (951) 943-9655
with a copy to:	Haddan & Zepfel LLP 500 Newport Center Drive Suite 580 Newport Beach, California 92660 Attention:   Robert J. Zepfel, Esq. Facsimile:   (949) 706-6060
If to a Purchaser:	To the address set forth under such Purchaser name on the signature pages hereto.
If to any other Person who is then the registered Holder:	To the address of such Holder as it appears in the stock transfer books of the Company

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

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

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

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

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

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

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

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

MODTECH HOLDINGS, INC.
By:	/s/ Kenneth S. Cragun
Name:	Kenneth S. Cragun
Title:	Chief Financial Officer
VALENS OFFSHORE SPV I, LTD.
By:	Valens Capital Management, LLC, its investment manager
By:	/s/ Patrick Regan
Name:	Patrick Regan
Title:	Authorized Signatory

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Address for Notices:

Valens Offshore SPV I, Ltd.

c/o Valens Capital Management, LLC

335 Madison Avenue, 10^th Floor

New York, New York 10017

Attention:   Portfolio Services

Facsimile:    212-541-4410

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EXHIBIT A

____________, 200___

[Continental Stock Transfer

& Trust Company

Two Broadway

New York, New York 10004

Attn: William Seegraber]

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

Ladies and Gentlemen:

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

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

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

Very truly yours,

[Company counsel]

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Schedule A to Exhibit A

Selling Stockholder R/N/O Shares Being Offered

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SCHEDULE 7(b)

1.The Company is a party to the First Amended and Restated Registration Rights Agreement with Amphora Limited, Peninsula Catalyst Fund, L.P., and others, dated August 5, 2005 and to a Registration Rights Agreement with Amphora Limited, dated October 31, 2006, with respect to 189,189 shares of common stock The registration statements described in these agreements have been declared effective, but there are ongoing obligations under the agreements, including indemnification provisions.

2.[intentionally omitted]

3.The Company is also a party to a Registration Rights Agreement with Valens U.S. SPV I, LLC, dated February 29, 2008, with respect to 195,935 shares of common stock and a Registration Rights Agreement with Valens Offshore SPV I, LTD, also dated February 29, 2008 with respect to 266,408 shares of common stock. The registration statements described in these two Registration Rights Agreements have not yet been filed.

4.The Company intends to enter into a single Registration Rights Agreement in the next 10 days with various investors to register between approximately 3,125,000 and 4,166,667 shares of common stock to be issued upon conversion of convertible preferred stock to be issued to such investors.

5. Outstanding Warrants

Warrants to acquire the number of shares of common stock at the exercise prices set forth below are currently outstanding and exercisable:

No. of Shares of Common Stock	Exercise Price
770,349	$	7.82
770,348	$	7.31
581,395	$	5.69
192,029	$	5.06
192,029	$	5.29
192,028	$	6.53

The warrants were originally issued to Laurus Master Fund, Ltd.

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EX-10.62

Exhibit 10.62

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “Agreement”) is made and entered into as of February 29, 2008, by and between Modtech Holdings, Inc., a Delaware corporation (the “Company”), and Valens Offshore SPV I, Ltd. (the “Purchaser”).

This Agreement is made pursuant to the Amendment and Waiver Agreement dated as of the date hereof among the Purchaser, Laurus Master Fund, Ltd., Valens U.S. SPV I, LLC and the Company (the “Amendment Agreement”), and pursuant to the Warrants referred to therein and defined below.

The Company and the Purchaser hereby agree as follows:

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

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

“Commission” means the Securities and Exchange Commission.

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

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

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

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

“Filing Date” means, with respect to the Registration Statement required to be filed hereunder in respect of the shares of Common Stock (a) issuable upon exercise of any Warrant, the date which is ninety (90) days after the issuance of such Warrant and (b) with the shares of Common Stock issuable to the Holder as a result of adjustments to the Exercise Price made pursuant to the Warrant or otherwise, thirty (30) days after the occurrence of such event.

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

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

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

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

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

“Registrable Securities” means the shares of Common Stock issued upon the exercise of any Warrants.

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

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

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

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

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

“Warrants” means the Common Stock purchase warrants dated as of the date hereof issued pursuant to the Amendment Agreement.

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2.Registration.

(a)On or prior to the Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the Registrable Securities for a selling stockholder resale offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith). The Company may include in a single registration statement the “Registrable Securities” defined under the Registration Rights Agreements in paragraphs 3 and 4 of Schedule 7(b) hereto, subject to the requirement that if at any time the Commission takes the position that the offering of some or all of the Registrable Securities in such combined Registration Statement is not eligible to be made on a delayed or continuous basis under the provisions of Rule 415, the Company shall remove from the Registration Statement that number of the Registrable Securities as defined in the Registration Rights Agreement described in paragraph 4 of Schedule 7(b) hereto as the Commission may require to assure the Company’s compliance with the requirements of Rule 415. The Company shall cause each Registration Statement to become effective and remain effective as provided herein. The Company shall use its best efforts to cause each Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no later than the Effectiveness Date. The Company shall use its reasonable commercial efforts to keep each Registration Statement continuously effective under the Securities Act until the date which is the earlier date of when (i) all Registrable Securities covered by such Registration Statement have been sold or (ii) all Registrable Securities covered by such Registration Statement may be sold immediately without registration under the Securities Act and without volume restrictions pursuant to Rule 144(k), (or its successor), as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s transfer agent and the affected Holders (the “Effectiveness Period”).

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

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

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

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

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

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

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

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

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

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

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

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5.Indemnification.

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

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

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

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

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6.Representations and Warranties.

(a)The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act and, except with respect to certain matters which the Company has disclosed to the Purchaser on Schedule 4.21 to the Purchase Agreements, the Company has filed all proxy statements, reports, schedules, forms, statements and other documents required to be filed by it under the Exchange Act. The Company has filed (i) its Annual Report on Form 10-K for its fiscal year ended December 31, 2006 and (ii) its Quarterly Report on Form 10-Q for the fiscal quarters ended March 31, 2007, June 30, 2007 and September 30, 2007 (collectively, the “SEC Reports”). Each SEC Report was, at the time of its filing, in substantial compliance with the requirements of its respective form and none of the SEC Reports, nor the financial statements (and the notes thereto) included in the SEC Reports, as of their respective filing dates, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes, customary year-end adjustments, or may be condensed) and fairly present in all material respects the financial condition, the results of operations and the cash flows of the Company and its subsidiaries, on a consolidated basis, as of, and for, the periods presented in each such SEC Report.

(b)The Common Stock is listed or quoted, as applicable, for trading on the NASDAQ Global Market and, except as set forth below, satisfies all requirements for the continuation of such listing or quotation, as applicable, and the Company shall do all things necessary for the continuation of such listing or quotation, as applicable. Except as set forth below, the Company has not received any notice that its Common Stock will be delisted from or no longer be quoted on, as applicable, the NASDAQ Global Market (except for prior notices which have been fully remedied) or that the Common Stock does not meet all requirements for the continuation of such listing or quotation, as applicable. On January 16, 2008, the Company received a letter from The Nasdaq Stock Market notifying it that for the 30 consecutive business days preceding the date of the letter the bid price of the Company’s common stock had closed below the $1.00 per share minimum bid price required for continued inclusion on The Nasdaq Global Market pursuant to Nasdaq Marketplace Rule 4450(a) (5). In accordance with Nasdaq Marketplace Rule 4450(e) (2), the Company has 180 calendar days from the date of the Nasdaq letter, or until July 14, 2008, to regain compliance with the minimum bid price rule.

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

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

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

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

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

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

7.Miscellaneous.

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

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

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

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

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

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

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

If to the Company:	Modtech Holdings, Inc. 2830 Barrett Avenue Perris, California 92571 Attention:Chief Financial Officer Facsimile: (951) 943-9655
with a copy to:	Haddan & Zepfel LLP 500 Newport Center Drive Suite 580 Newport Beach, California 92660 Attention: Robert J. Zepfel, Esq. Facsimile: (949) 706-6060
If to a Purchaser:	To the address set forth under such Purchaser name on the signature pages hereto.

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If to any other Person who is then
the registered Holder: To the address of such Holder as it appears in the stock transfer books of the Company

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

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

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

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

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

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

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

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

MODTECH HOLDINGS, INC.
By:	/s/ Kenneth S. Cragun
Name:		Kenneth S. Cragun
Title:		Chief Financial Officer
VALENS OFFSHORE SPV I, LTD.
By:	Valens Capital Management, LLC, its investment manager
By:	/s/ Patrick Regan
Name:		Patrick Regan
Title:		Authorized Signatory

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Address for Notices:

Valens Offshore SPV I, Ltd.

c/o Valens Capital Management, LLC

335 Madison Avenue, 10^th Floor

New York, New York 10017

Attention: Portfolio Services

Facsimile:  212-541-4410

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EXHIBIT A

____________, 200___

[Continental Stock Transfer

& Trust Company

Two Broadway

New York, New York 10004

Attn: William Seegraber]

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

Ladies and Gentlemen:

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

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

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

Very truly yours,

[Company counsel]

15

Schedule A to Exhibit A

  Selling Stockholder   R/N/O Shares
Being Offered

16

SCHEDULE 7(b)

1.The Company is a party to the First Amended and Restated Registration Rights Agreement with Amphora Limited, Peninsula Catalyst Fund, L.P., and others, dated August 5, 2005 and to a Registration Rights Agreement with Amphora Limited, dated October 31, 2006, with respect to 189,189 shares of common stock The registration statements described in these agreements have been declared effective, but there are ongoing obligations under the agreements, including indemnification provisions.

2.[intentionally omitted]

3.The Company is also a party to a Registration Rights Agreement with Valens U.S. SPV I, LLC, dated February 29, 2008, with respect to 195,935 shares of common stock and a Registration Rights Agreement with Valens Offshore SPV I, LTD, also dated February 29, 2008 with respect to 266,408 shares of common stock. The registration statements described in these two Registration Rights Agreements have not yet been filed.

4.The Company intends to enter into a single Registration Rights Agreement in the next 10 days with various investors to register between approximately 3,125,000 and 4,166,667 shares of common stock to be issued upon conversion of convertible preferred stock to be issued to such investors.

5. Outstanding Warrants

Warrants to acquire the number of shares of common stock at the exercise prices set forth below are currently outstanding and exercisable:

No. of Shares of Common Stock	Exercise Price
770,349	$	7.82
770,348	$	7.31
581,395	$	5.69
192,029	$	5.06
192,029	$	5.29
192,028	$	6.53

The warrants were originally issued to Laurus Master Fund, Ltd.

17

EX-10.63

Exhibit 10.63

REAFFIRMATION AND RATIFICATION AGREEMENT

As of February 29, 2008

Laurus Master Fund, Ltd.

Valens U.S. SPV I, LLC

Valens Offshore SPV I, Ltd.

335 Madison Avenue, 10the Floor

New York, New York 10017

Ladies and Gentlemen:

Reference is made to (a) the Securities Purchase Agreement, dated as of October 31, 2006 (as amended, modified and supplemented from time to time, the “First Purchase Agreement”) by and between Modtech Holdings, Inc. (the “Company”) and Laurus Master Fund, Ltd. (“Laurus”); (b) the Securities Purchase Agreement, dated as of December 28, 2006 (as amended, modified and supplemented from time to time, the “Second Purchase Agreement,” together with the October Purchase Agreement, the “Purchase Agreements”) by and between the Company and Laurus; (c) the Related Agreements (as defined in the Purchase Agreements), (d) the Master Security Agreement, dated as of October 31, 2006 (as amended, modified and supplemented from time to time, the “Security Agreement”), by and between the Company and Laurus; (e) the Intellectual Property Security Agreement, dated as of October 31, 2006, made by the Company in favor of Laurus (as amended, modified or supplemented from time to time, the “IP Security Agreement”); (f) the Restricted Account Agreement dated as of October 31, 2006 by and among the Company, Laurus and North Fork Bank (as amended, modified and supplemented from time to time, the “Restricted Account Agreement”); and (g) the side letter agreement regarding restricted cash dated as of October 31, 2006 made by the Company in favor of Laurus (as amended , modified and/or supplemented from time to time, the “Side Letter”; and collectively with the Purchase Agreements, the Related Agreements, the Master Security Agreement, the IP Security Agreement, and the Restricted Account Agreement, each an “Existing Agreement” and collectively, the “Existing Agreements”).

Laurus has assigned a portion of its rights under the Existing Agreement to Valens U.S. SPV I, LLC (“Valens US”) and Valens Offshore SPV I, Ltd. (“Valens Offshore,” together with Laurus and Valens US, each a “Lender,” collectively, the “Lenders”).

To induce the Lenders to enter into an Amendment and Waiver Agreement dated as of the date hereof among the Lenders and the Company (the “Amendment Agreement”), the Company hereby:

(a) represents and warrants to the Lenders that it has reviewed and approved the terms and provisions of (i) the Amendment; (ii) the Additional Secured Term Notes (as such term is defined in the Amendment ), (iii) the Additional Common Stock Warrants (as such term is defined in the Amendment and (iv) the Additional Registration Rights Agreements (as such term is defined in the “Amendment”) (the documents listed in items (i) through (iv) of this paragraph are collectively hereinafter referred to as the “Additional Documents”);

(b) acknowledges, ratifies and confirms that, except as expressly modified by the Amendment Documents, all of the terms, conditions, representations and covenants contained in the Existing Agreements are in full force and effect and shall remain in full force and effect after giving effect to the execution and effectiveness of the Amendment Documents;

(c) acknowledges, ratifies and confirms that the defined term “Obligations” under the Master Security Agreement and the IP Security Agreement, include, without limitation, all obligations and liabilities of the Company under the Amendment Documents and the Existing Agreements, as applicable, and all other obligations and liabilities of each of the Company to the Lenders (including interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, whether or not a claim for post-filing or post-petition interest is allowed or allowable in such proceeding), whether now existing or hereafter arising, direct or indirect, liquidated or unliquidated, absolute or contingent;

(d) acknowledges and confirms that (i) the occurrence of an Event of Default under any of the Amendment Documents shall constitute an Event of Default under the Existing Agreements and (ii) the occurrence of an Event of Default under any of the Existing Agreements shall constitute an Event of Default under the Amendment Documents;

(e) represents and warrants that no offsets, counterclaims or defenses exist as of the date hereof with respect to any of the Company’s obligations under any of the Existing Agreements;

(f) acknowledges, ratifies and confirms (i) the grant by the Company to the Lenders of a security interest and lien in the assets of the Company as more specifically set forth in the Existing Agreements, as applicable (the “Security Interest Grants”) and (ii) that the Security Interest Grants secure all the Obligations;

(g) represents and warrants that all of the representations made by or on behalf of the Company in the Existing Agreements are true and correct in all material respects on and as of the date hereof;

(h) releases, remises, acquits and forever discharges each Lender and each Lender’s employees, agents, representatives, consultants, attorneys, fiduciaries, officers, directors, partners, predecessors, successors and assigns, subsidiary corporations, parent corporations, and related corporate divisions (all of the foregoing hereinafter called the “Released Parties”), from any and all actions and causes of action, judgments, executions, suits, debts, claims, demands, liabilities, obligations, damages and expenses of any and every character, known or unknown, direct and/or indirect, at law or in equity, of whatsoever kind or nature, for or because of any matter or things done, omitted or suffered to be done by any of the Released Parties in any way directly or indirectly arising out of or in any way connected to this Reaffirmation and Ratification Agreement, the Existing Agreements, the Amendment Documents and any other document, instrument or agreement made by the undersigned in favor of the Lenders, in each case arising prior to and including the date of execution hereof.

2

This Reaffirmation and Ratification Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, and all which when taken together shall constitute one and the same agreement.

[Remainder of this page intentionally left blank.]

3

This Reaffirmation and Ratification Agreement shall be governed by and construed in accordance with the laws of the State of New York.

Very truly yours,
MODTECH HOLDINGS, INC.
By:	/s/ Kenneth S. Cragun
Name: Kenneth S. Cragun
Title:    Chief Financial Officer

ACCEPTED AND AGREED TO:
LAURUS MASTER FUND, LTD.
By:	Laurus Capital Management, LLC,
	its investment manager
By:	/s/ Patrick Regan
Name: Patrick Regan
Title:    Authorized Signatory
VALENS U.S. SPV I, LLC
By:	Valens Capital Management, LLC,
	its investment manager
By:	/s/ Patrick Regan
Name: Patrick Regan
Title:    Authorized Signatory
VALENS OFFSHORE SPV I, LTD.
By:	Valens Capital Management, LLC,
	its investment manager
By:	/s/ Patrick Regan
Name: Patrick Regan
Title:    Authorized Signatory

EX-10.64

Exhibit 10.64

LAURUS MASTER FUND, LTD.

VALENS U.S. SPV I, LLC

VALENS OFFSHORE SPV I, LTD.

335 Madison Avenue, 10the Floor

New York, New York 10017

February 29, 2008

Modtech Holdings, Inc.

2830 Barrett Avenue

Perris, California 92571

Attention: Chief Financial Officer

Ladies and Gentlemen:

Reference is made to that certain Amendment and Waiver Agreement (the “Amendment Agreement”) dated as of the date hereof among Modtech Holdings, Inc. (the “Company”), Laurus Master Fund, Ltd. (“Laurus”), Valens U.S. SPV I, LLC (“Valens US”) and Valens Offshore SPV I, Ltd. (“Valens Offshore,” together with Laurus and Valens US, each a “Lender,” collectively, the “Lenders”); (ii) the Common Stock Warrant dated as of the date hereof by the Company in favor of Laurus for 2,537,657 shares of the Company’s common stock; (iii) the Common Stock Warrant dated as of the date hereof by the Company in favor of Valens US for 195,935 shares of the Company’s common stock; (iv) the Common Stock Warrant dated as of the date hereof by the Company in favor of Valens Offshore for 266,408 shares of the Company’s common stock (the documents listed in items (ii) through (iv) are collectively hereinafter referred to as the “Warrants”). Defined terms not otherwise defined in this letter agreement (the “Letter Agreement”) shall have the meanings set forth in the Amendment Agreement.

The Lenders hereby irrevocably agree with the Company that for the period commencing on the date hereof and ending on May 1, 2008 (such period, the “Restriction Period”), except as set forth herein, no Lender shall directly or indirectly offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by such Lender or any affiliate of such Lender or any person in privity with such Lender) (each, a “Transfer”), including the filing (or participation in the filing) of a registration statement with the Securities and Exchange Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with respect to, any shares of common stock of the Company (the “Common Stock”) or securities that entitle such Lender to acquire shares of the Common Stock beneficially owned, held or hereafter acquired by such Lender (together with the Common Stock, the “Securities”). Beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act. In order to enforce this agreement, the Company may impose irrevocable stop-transfer instructions preventing BNY Mellon Shareholder Services, the Company’s transfer agent (the “Transfer Agent”), from effecting any actions in violation of this Letter Agreement.

The restrictions imposed by this Letter Agreement shall (i) terminate following such time that the Company shall effect a reorganization, consolidate with or merge into any other entity (where the Company is not the surviving entity) or in the event that the Company transfers all or substantially all of its properties and assets and (ii) not restrict any Lender from enforcing any of its rights and remedies with respect to the Common Stock under Warrants.

Notwithstanding the foregoing restrictions, any Lender shall be permitted to sell, on any trading day during the Restriction Period, shares of the Common Stock in the amount of up to twenty percent (20%) of the average daily trading volume on such trading day.

Notwithstanding the foregoing restrictions, (i) each Lender is permitted to pledge or otherwise collateralize the Securities as part of a commercial or margin loan against all or substantially all of such Lender’s general portfolio of securities and (ii) the Company is required to register the Securities in accordance with the Amendment Agreement and/or any Registration Rights Agreement entered into in connection with the Warrants, but the fact of such registration shall not serve to release the Lenders from the restrictions on Transfer otherwise contained herein.

The Lenders hereby represent that each Lender has the power and authority to execute, deliver and perform this Letter Agreement, that each Lender has received adequate consideration therefor and that each Lender will indirectly benefit from the closing of the transaction contemplated by the Amendment Agreement.

This Letter Agreement may not be amended or otherwise modified in any respect without the written consent of each of the Company and the Lenders. This Letter Agreement shall be construed and enforced in accordance with the laws of the State of New York without regard to the principles of conflict of laws. Each of the Lenders and the Company hereby irrevocably submits to the exclusive jurisdiction of the United States District Court sitting in the Southern District of New York and the courts of the State of New York located in Manhattan, for the purposes of any suit, action or proceeding arising out of or relating to this Letter Agreement, and hereby waives, and agrees not to assert in any such suit, action or proceeding any claim that (i) it is not personally subject to the jurisdiction of such court, (ii) the suit, action or proceeding is brought in an inconvenient forum, or (iii) the venue of the suit, action or proceeding is improper. Each of the Lenders and the Company hereby waives personal service of process and consents to process being served in any suit, action or proceeding relating to this Letter Agreement by receiving a copy thereof sent to such party at the address beneath its signature hereto and agrees that such service shall constitute good and sufficient service of process and notice thereof. Each of the Lenders and the Company hereby waives any right to a trial by jury. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each of the Lenders and the Company agrees and understands that no issuance or sale of the Securities is created or intended by virtue of this Letter Agreement.

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This Letter Agreement shall be binding on all respective successors and assigns of the Lenders and the Company.

[Remainder of Page Intentionally Left Blank; Signatures Follow]

3

This Letter Agreement may be executed in two or more counterparts, all of which when taken together may be considered one and the same agreement.

Very truly yours,
LAURUS MASTER FUND, LTD.
By:	Laurus Capital management, LLC, its
	investment manager
By:	/s/ Patrick Regan
Name: Patrick Regan
Title:   Authorized Signatory
Address for Notice:
c/o Laurus Capital Management, LLC
335 Madison Avenue, 10th Floor
New York, New York 10017
Attn:  Portfolio Services
VALENS U.S. SPV I, LLC
By:	Valens Capital management, LLC, its
	investment manager
By:	/s/ Patrick Regan
Name:  Patrick Regan
Title:     Authorized Signatory
Address for Notice:
c/o Valens Capital Management, LLC
335 Madison Avenue, 10th Floor
New York, New York 10017
Attn:  Portfolio Services

[Additional Signatures Follow]

4

VALENS OFFSHORE SPV I, LTD.
By:	Valens Capital management, LLC, its
	investment manager
By:	/s/ Patrick Regan
Name:  Patrick Regan
Title:     Authorized Signatory
Address for Notice:
c/o Valens Capital Management, LLC
335 Madison Avenue, 10th Floor
New York, New York 10017
Attn: Portfolio Services

Acknowledged andagreed to

as of the date set forth above:

MODTECH HOLDINGS, INC.
By:	/s/ Kenneth S. Cragun
Name: Kenneth S. Cragun
Title:    Chief Financial Officer
Address for Notice:
2830 Barrett Avenue
Perris, California 92571
Attention: Chief Financial Officer

5

EX-10.65

Exhibit 10.65

SUBSCRIPTION AGREEMENT

THIS SUBSCRIPTION AGREEMENT (“Agreement”) is made as of March 10, 2008 by and among Modtech Holdings, Inc., a Delaware corporation (the “Company”), and the parties set forth on the signature pages affixed hereto (each a “Buyer” and collectively the “Buyers”).

1.Subject to the satisfaction (or waiver) of the conditions set forth in Section 2 below, at the "Closing" the Company shall issue and sell to each Buyer and each Buyer, severally and not jointly, agrees to purchase from the Company at $100.00 per share the respective number of shares of Series B Preferred Stock or Series C Preferred Stock (collectively the "Securities") at the price (the “Purchase Price”) set forth opposite such Buyer's name on the attached Schedule of Buyers (the “Closing”). The Series B Preferred Stock shall have an accruing dividend of 8% per year payable in additional shares of Series B Preferred Stock and shall be convertible into common stock of the Company at an initial conversion price of $0.40 per share. The Series C Preferred Stock shall not have an accruing dividend and shall be convertible into common stock of the Company at an initial conversion price which will be the higher of the Company's book value per share on February 29, 2008 or the closing consolidated bid price for the Company's common stock on The Nasdaq Global Market on the last trading day immediately preceding the execution of this Agreement. The closing consolidated bid price for the Company's common stock on March 7, 2008 was $0.43 and the Company's book value on February 29, 2008 was $0.49 per share. The complete terms of the Series B Preferred Stock and Series C Preferred Stock are set forth in Exhibit A hereto.

2.Subject to notification of satisfaction (or waiver) of the conditions to the Closing set forth below, the date and time of the Closing (the “Closing Date”) shall, be as is mutually agreed to by the Company and the Buyers. The Closing shall occur on the Closing Date at the offices of Haddan & Zepfel LLP, 500 Newport Center Drive, Suite 580, Newport Beach, California 92660. Unless other arrangements have been made, on the Closing Date, (i) each Buyer shall pay an amount equal to the Purchase Price for the Securities to be issued and sold to such Buyer at the Closing, by wire transfer of immediately available funds to the trust account of Haddan & Zepfel LLP in accordance with such law firm's wire instructions and such funds shall be held and disbursed by such law firm in accordance with the escrow instructions attached hereto as Exhibit B, which each Buyer who executes this Subscription Agreement shall be considered a party to, and (ii) the Company shall deliver to each Buyer, stock certificates (in the denominations as such Buyer shall request representing such number of the Securities which such Buyer is then purchasing (as indicated opposite such Buyer’s name on the attached Schedule of Buyers), duly executed on behalf of the Company and registered in the name of such Buyer or its designee.

The obligations of the Company to issue the Securities are subject to (i) the representations and warranties made by the Buyers being true and correct in all respects when made, and being true and correct in all respects on the Closing Date with the same force and effect as if they had been made on and as of said date, and (ii) each of the Buyers having delivered the Purchase Price with respect to the Securities being purchased by them. The obligations of the Buyers to purchase the Securities are subject to (i) each of the Buyers having delivered the Purchase Price with respect to the Securities being purchased by them, and (ii) the Company having executed the Registration Rights Agreement attachedas Exhibit C hereto (the "Registration Rights Agreement"). The Registration Rights Agreement provides that, in the event the number of shares to be covered by a registration statement are required to be cutback due to Rule 415 under the Securities Act of 1933, the first shares to be excluded will be those purchased by officers, directors and employees of the Company pursuant to this Subscription Agreement and the next shares to be excluded will be those purchased by the other Buyers pursuant to this Subscription Agreement.

3.Each of the Buyers hereby severally, and not jointly, represents and warrants to the Company that:

3.1Organization and Existence. Unless such Buyer is an individual, it is a validly existing corporation, limited partnership or limited liability company and has all requisite corporate, partnership or limited liability company power and authority to invest in the Securities pursuant to this Agreement. Such Buyer was not organized specifically for the purpose of investing in the Securities.

3.2Authorization. The execution, delivery and performance by such Buyer of this Agreement, the Registration Rights Agreement and all ancillary agreements to which such Buyer is a party have been duly authorized and each will constitute the valid and legally binding obligation of such Buyer, enforceable against such Buyer in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally.

3.3Purchase Entirely for Own Account. The Securities to be received by such Buyer hereunder will be acquired for such Buyer’s own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the Securities Act of 1933 (the "1933 Act"), and such Buyer has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of the 1933 Act without prejudice, however, to such Buyer’s right at all times to sell or otherwise dispose of all or any part of such Securities in compliance with applicable federal and state securities laws. Nothing contained herein shall be deemed a representation or warranty by such Buyer to hold the Securities for any period of time. Such Buyer is not a broker-dealer registered with the SEC under the Securities Exchange Act of 1934 (the "1934 Act") or an entity engaged in a business that would require it to be so registered. Such Buyer is acquiring the Securities hereunder in the ordinary course of its business. If such Buyer is acting in a representative capacity on behalf or one or more funds, partnerships or managed accounts, such Buyer has the authority to make, and has made, the foregoing representations and warranties on behalf of each such fund, partnership or account, each of which shall be deemed an Buyer hereunder for the purposes of such representations and warranties, unless not otherwise treated as a purchaser under Regulation D of the 1933 Act.

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3.4Investment Experience. Such Buyer acknowledges that it can bear the economic risk and complete loss of its investment in the Securities and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment contemplated hereby.

3.5Disclosure of Information. Such Buyer has had an opportunity to receive all information related to the Company requested by it and to ask questions of and receive answers from the Company regarding the Company, its business and the terms and conditions of the offering of the Securities. Such Buyer acknowledges receipt of copies of the Company's filings with the Securities and Exchange Commission for the last 12 months. Such Buyer understands that its investment in the Securities involves a high degree of risk. Such Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities.

3.6Restricted Securities. Such Buyer understands that the Securities are characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under federal and state securities laws only in certain limited circumstances.

3.7Legends. It is understood that, except as provided below, certificates evidencing the Securities may bear the following or any similar legend:

(a)“The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, or applicable state securities laws. The securities represented hereby have been acquired for investment and may not be transferred unless (i) such securities have been registered for sale pursuant to the Securities Act of 1933, as amended and applicable state securities laws, (ii) such securities may be sold pursuant to Rule 144(k)(or a successor rule), or (iii) the Company has received an opinion of counsel reasonably satisfactory to it that such transfer may lawfully be made without registration under the Securities Act of 1933 or qualification under applicable state securities laws.”

(b)If required by the authorities of any state in connection with the issuance of sale of the Securities, the legend required by such state authority.

3.8Accredited Buyer. Such Buyer is an accredited Buyer as defined in Rule 501(a) of Regulation D, as amended, under the 1933 Act.

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3.9No General Solicitation. Such Buyer did not learn of the investment in the Securities as a result of any general solicitation or general advertising.

3.10Brokers and Finders. No person or entity will have, as a result of the transactions contemplated by this Agreement, any valid right, interest or claim against or upon the Company, any "Subsidiary" of the Company (as hereinafter defined), or any Buyer for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of such Buyer.

3.11. Ownership. Such Buyer will not become the beneficial owner (as such term is defined in Rule 13d-3 under the 1934 Act) of more than 19.9% of the outstanding common stock or voting power of the Company as a result of the transaction contemplated hereby.

3.12Reliance on Exemptions; No Governmental Review. Such Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part on the truth and accuracy of, and such Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of such Buyer to acquire the Securities. Such Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

4.Representations and Warranties of the Company. The Company hereby represents and warrants to the Buyers that, except as set forth in the schedules delivered herewith (collectively, the “Disclosure Schedules”):

4. 1Organization, Good Standing and Qualification. Each of the Company and the entities in which it owns more than 50% of the outstanding voting ("Subsidiaries") is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to carry on its business as now conducted and to own its properties. Each of the Company and its Subsidiaries is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property makes such qualification or leasing necessary unless the failure to so qualify has not had and could not reasonably be expected to have a material adverse effect on the financial condition of the Company and its Subsidiaries taken as a whole ("Material Adverse Effect"). The Company’s Subsidiaries are listed on Schedule 4.1 hereto.

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4.2Authorization. The Company has full power and authority and has taken all requisite action on the part of the Company, its officers, directors and stockholders necessary for (i) the authorization, execution and delivery of this Subscription Agreement and the Registration Rights Agreement (collectively, the "Transaction Documents"), (ii) the authorization of the performance of all obligations of the Company hereunder or thereunder, and (iii) the authorization, issuance (or reservation for issuance) and delivery of the Securities. The Transaction Documents constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally.

4.3Capitalization. Schedule 4.3 sets forth as of the date hereof (a) the authorized capital stock of the Company, excluding the Securities to be authorize upon the filing of the Certificate of Determination set forth as Exhibit A hereto; (b) the number of shares of capital stock issued and outstanding; (c) the number of shares of capital stock issuable pursuant to the Company’s stock plans; and (d) the number of shares of capital stock issuable and reserved for issuance pursuant to securities (other than the Securities) exercisable for, or convertible into or exchangeable for any shares of capital stock of the Company. All of the issued and outstanding shares of the Company’s capital stock have been duly authorized and validly issued and are fully paid, nonassessable and free of pre-emptive rights and were issued in full compliance with applicable state and federal securities law and any rights of third parties. Except as described on Schedule 4.3, all of the issued and outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued and are fully paid, nonassessable and free of pre-emptive rights, were issued in full compliance with applicable state and federal securities law and any rights of third parties and are owned by the Company, beneficially and of record, subject to no lien, encumbrance or other adverse claim. Except as described on Schedule 4.3, no individual or entity (collectively, "Person") is entitled to pre-emptive or similar statutory or contractual rights with respect to any securities of the Company. Except as described on Schedule 4.3, there are no outstanding warrants, options, convertible securities or other rights, agreements or arrangements of any character under which the Company or any of its Subsidiaries is or may be obligated to issue any equity securities of any kind and except as contemplated by this Agreement, neither the Company nor any of its Subsidiaries is currently in negotiations for the issuance of any equity securities of any kind. Except as described on Schedule 4.3 and except for the Registration Rights Agreement, there are no voting agreements, buy-sell agreements, option or right of first purchase agreements or other agreements of any kind among the Company and any of the securityholders of the Company relating to the securities of the Company held by them. Except as described on Schedule 4.3 and except as provided in the Registration Rights Agreement, no Person has the right to require the Company to register any securities of the Company under the 1933 Act, whether on a demand basis or in connection with the registration of securities of the Company for its own account or for the account of any other Person.

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Except as described on Schedule 4.3, the issuance and sale of the Securities hereunder will not obligate the Company to issue shares of Common Stock or other securities to any other Person (other than the Buyers) and will not result in the adjustment of the exercise, conversion, exchange or reset price of any outstanding security.

Except as described on Schedule 4.3, the Company does not have outstanding stockholder purchase rights or “poison pill” or any similar arrangement in effect giving any Person the right to purchase any equity interest in the Company upon the occurrence of certain events.

4.4Valid Issuance. The Securities have been duly and validly authorized and, when issued and paid for pursuant to this Agreement, will be validly issued, fully paid and nonassessable, and shall be free and clear of all encumbrances and restrictions (other than those created by the Buyers), except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws.

4.5Consents. The execution, delivery and performance by the Company of the Transaction Documents and the offer, issuance and sale of the Securities require no consent of, action by or in respect of, or filing with, any Person, governmental body, agency, or official other than filings that have been made pursuant to applicable state securities laws and post-sale filings pursuant to applicable state and federal securities laws which the Company undertakes to file within the applicable time periods. Subject to the accuracy of the representations and warranties of each Buyer set forth in Section 5 hereof, the Company has taken all action necessary to exempt (i) the issuance and sale of the Securities and (ii) the other transactions contemplated by the Transaction Documents from the provisions of any stockholder rights plan or other “poison pill” arrangement, any anti-takeover, business combination or control share law or statute binding on the Company or to which the Company or any of its assets and properties may be subject and any provision of the Company’s Certificate of Incorporation or Bylaws that is or could reasonably be expected to become applicable to the Buyers as a result of the transactions contemplated hereby, including without limitation, the issuance of the Securities and the ownership, disposition or voting of the Securities by the Buyers or the exercise of any right granted to the Buyers pursuant to this Agreement or the other Transaction Documents.

4.6Delivery of SEC Filings; Business. The Company has made available to the Buyers through the EDGAR system, true and complete copies of the Company’s most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (the “10-K”), and all other reports filed by the Company pursuant to the 1934 Act since the filing of the 10-K and prior to the date hereof (collectively, the “SEC Filings”). The SEC Filings are the only filings required of the Company pursuant to the 1934 Act for such period. The Company and its Subsidiaries are engaged in all material respects only in the business described in the SEC Filings and the SEC Filings contain a complete and accurate description in all material respects of the business of the Company and its Subsidiaries, taken as a whole.

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4.7Use of Proceeds. The net proceeds of the sale of the Securities shall be used by the Company for working capital and general corporate purposes.

4.8No Material Adverse Change. Since December 31, 2006, except as identified and described in the SEC Filings or as described on Schedule 4.8, there has not been:

(i)any change in the consolidated assets, liabilities, financial condition or operating results of the Company from that reflected in the financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, except for changes in the ordinary course of business which have not had and could not reasonably be expected to have a Material Adverse Effect, individually or in the aggregate;

(ii)any declaration or payment of any dividend, or any authorization or payment of any distribution, on any of the capital stock of the Company, or any redemption or repurchase of any securities of the Company;

(iii)any material damage, destruction or loss, whether or not covered by insurance to any assets or properties of the Company or its Subsidiaries;

(iv)any waiver, not in the ordinary course of business, by the Company or any Subsidiary of a material right or of a material debt owed to it;

(v)any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by the Company or a Subsidiary, except in the ordinary course of business and which is not material to the assets, properties, financial condition, operating results or business of the Company and its Subsidiaries taken as a whole (as such business is presently conducted and as it is proposed to be conducted);

(vi)other than the filing of the Certificate of Determination set forth as Exhibit A hereto, any change or amendment to the Company's Certificate of Incorporation or Bylaws, or material change to any material contract or arrangement by which the Company or any Subsidiary is bound or to which any of their respective assets or properties is subject;

(vii)any material labor difficulties or labor union organizing activities with respect to employees of the Company or any Subsidiary;

(viii)any material transaction entered into by the Company or a Subsidiary other than in the ordinary course of business;

(ix)the loss of the services of any key employee, or material change in the composition or duties of the senior management of the Company or any Subsidiary;

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(x)the loss or threatened loss of any customer which has had or could reasonably be expected to have a Material Adverse Effect; or

(xi)any other event or condition of any character that has had or could reasonably be expected to have a Material Adverse Effect.

4.9SEC Filings; S-3 Eligibility.

(a)At the time of filing thereof, the SEC Filings complied as to form in all material respects with the requirements of the 1934 Act and did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

(b)Each registration statement and any amendment thereto filed by the Company since January 1, 2005 pursuant to the 1933 Act and the rules and regulations thereunder, as of the date such statement or amendment became effective, complied as to form in all material respects with the 1933 Act and did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein not misleading; and each prospectus filed pursuant to Rule 424(b) under the 1933 Act, as of its issue date and as of the closing of any sale of securities pursuant thereto did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

(c)The Company is eligible to use Form S-3 to register the Registrable Securities (as such term is defined in the Registration Rights Agreement) for sale by the Buyers as contemplated by the Registration Rights Agreement.

4.10No Conflict, Breach, Violation or Default. The execution, delivery and performance of the Transaction Documents by the Company and the issuance and sale of the Securities will not conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default under (i) the Company’s Certificate of Incorporation or the Company’s Bylaws, both as in effect on the date hereof (true and complete copies of which have been made available to the Buyers through the EDGAR system), or (ii)(a) any statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company, any Subsidiary or any of their respective assets or properties, or (b) any agreement or instrument to which the Company or any Subsidiary is a party or by which the Company or a Subsidiary is bound or to which any of their respective assets or properties is subject.

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4.11Tax Matters. The Company and each Subsidiary has timely prepared and filed all tax returns required to have been filed by the Company or such Subsidiary with all appropriate governmental agencies and timely paid all taxes shown thereon or otherwise owed by it. The charges, accruals and reserves on the books of the Company in respect of taxes for all fiscal periods are adequate in all material respects, and there are no material unpaid assessments against the Company or any Subsidiary nor, to the actual knowledge of the Company’s executive officers (the "Company's Knowledge"), any basis for the assessment of any additional taxes, penalties or interest for any fiscal period or audits by any federal, state or local taxing authority except for any assessment which is not material to the Company and its Subsidiaries, taken as a whole. All taxes and other assessments and levies that the Company or any Subsidiary is required to withhold or to collect for payment have been duly withheld and collected and paid to the proper governmental entity or third party when due. There are no tax liens or claims pending or, to the Company’s Knowledge, threatened against the Company or any Subsidiary or any of their respective assets or property. Except as described on Schedule 4.11, there are no outstanding tax sharing agreements or other such arrangements between the Company and any Subsidiary or other corporation or entity.

4.12Title to Properties. Except as disclosed in the SEC Filings and Schedule 4.12, the Company and each Subsidiary has good and marketable title to all real properties and all other properties and assets owned by it, in each case free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or currently planned to be made thereof by them; and except as disclosed in the SEC Filings, the Company and each Subsidiary holds any leased real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made or currently planned to be made thereof by them.

4.13Certificates, Authorities and Permits. The Company and each Subsidiary possess adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by it, and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Company or such Subsidiary, could reasonably be expected to have a Material Adverse Effect, individually or in the aggregate.

4.14Labor Matters.

(a)Except as set forth on Schedule 4.14, the Company is not a party to or bound by any collective bargaining agreements or other agreements with labor organizations. The Company has not violated in any material respect any laws, regulations, orders or contract terms, affecting the collective bargaining rights of employees, labor organizations or any laws, regulations or orders affecting employment discrimination, equal opportunity employment, or employees’ health, safety, welfare, wages and hours.

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(b)Except as set forth on Schedule 4.14, (i) there are no labor disputes existing, or to the Company's Knowledge, threatened, involving strikes, slow-downs, work stoppages, job actions, disputes, lockouts or any other disruptions of or by the Company's employees, (ii) there are no unfair labor practices or petitions for election pending or, to the Company's Knowledge, threatened before the National Labor Relations Board or any other federal, state or local labor commission relating to the Company's employees, (iii) no demand for recognition or certification heretofore made by any labor organization or group of employees is pending with respect to the Company and (iv) to the Company's Knowledge, the Company enjoys good labor and employee relations with its employees and labor organizations.

(c)The Company is, and at all times has been, in compliance in all material respects with all applicable laws respecting employment (including laws relating to classification of employees and independent contractors) and employment practices, terms and conditions of employment, wages and hours, and immigration and naturalization. Except as set forth in Schedule 4.14, There are no claims pending against the Company before the Equal Employment Opportunity Commission or any other administrative body or in any court asserting any violation of Title VII of the Civil Rights Act of 1964, the Age Discrimination Act of 1967, 42 U.S.C. §§ 1981 or 1983 or any other federal, state or local law, statute or ordinance barring discrimination in employment.

(d)Except as disclosed in the SEC Filings or as described on Schedule 4.14, the Company is not a party to, or bound by, any employment or other contract or agreement that contains any severance, termination pay or change of control liability or obligation, including, without limitation, any “excess parachute payment,” as defined in Section 280G(b) of the Internal Revenue Code.

(e)Except as specified in Schedule 4.14, to the Company’s Knowledge each of the Company's employees is a Person who is either a United States citizen or a permanent resident entitled to work in the United States. To the Company's Knowledge, the Company has no liability for the improper classification by the Company of such employees as independent contractors or leased employees prior to the Closing.

4.15Intellectual Property.

(a)All of the Company's and its Subsidiaries (i) patents, patent applications, patent disclosures and inventions; (ii) trademarks, service marks, trade dress, trade names, corporate names, logos, slogans and Internet domain names, together with all goodwill associated with each of the foregoing; (iii) copyrights and copyrightable works; (iv) registrations, applications and renewals for any of the foregoing; and (v) proprietary computer software (including but not limited to data, data bases and documentation) (collectively "Intellectual Property") is currently in compliance with all legal requirements (including timely filings, proofs and payments of fees) and is valid and enforceable. No Intellectual Property of the Company or its Subsidiaries which is necessary for the conduct of Company’s and each of its Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted has been or is now involved in any cancellation, dispute or litigation, and, to the Company’s Knowledge, no such action is threatened. No patent of the Company or its Subsidiaries has been or is now involved in any interference, reissue, re-examination or opposition proceeding.

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(b)All of the licenses and sublicenses and consent, royalty or other agreements concerning Intellectual Property which are necessary for the conduct of the Company’s and each of its Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted to which the Company or any Subsidiary is a party or by which any of their assets are bound (other than  generally commercially available, non-custom, off-the-shelf software application programs having a retail acquisition price of less than $10,000 per license) (collectively, “License Agreements”) are valid and binding obligations of the Company or its Subsidiaries that are parties thereto and, to the Company’s Knowledge, the other parties thereto, enforceable in accordance with their terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors’ rights generally, and there exists no event or condition which will result in a material violation or breach of or constitute (with or without due notice or lapse of time or both) a default by the Company or any of its Subsidiaries under any such License Agreement.

(c)The Company and its Subsidiaries own or have the valid right to use all of the Intellectual Property that is necessary for the conduct of the Company’s and each of its Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted and for the ownership, maintenance and operation of the Company’s and its Subsidiaries’ properties and assets, free and clear of all liens, encumbrances, adverse claims or obligations to license all such owned Intellectual Property and trade secrets, confidential information and confidential know-how (collectively "Confidential Information"), other than licenses entered into in the ordinary course of the Company’s and its Subsidiaries’ businesses. The Company and its Subsidiaries have a valid and enforceable right to use all third party Intellectual Property and Confidential Information used or held for use in the respective businesses of the Company and its Subsidiaries.

(d)The conduct of the Company’s and its Subsidiaries’ businesses as currently conducted does not infringe or otherwise impair or conflict with (collectively, “Infringe”) any Intellectual Property rights of any third party or any confidentiality obligation owed to a third party, and, except as described in Schedule 4.15, to the Company’s Knowledge, the Intellectual Property and Confidential Information of the Company and its Subsidiaries which are necessary for the conduct of Company’s and each of its Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted are not being Infringed by any third party. There is no litigation or order pending or outstanding or, to the Company’s Knowledge, threatened or imminent, that seeks to limit or challenge or that concerns the ownership, use, validity or enforceability of any Intellectual Property or Confidential Information of the Company and its Subsidiaries and the Company’s and its Subsidiaries’ use of any Intellectual Property or Confidential Information owned by a third party, and, to the Company’s Knowledge, there is no valid basis for the same.

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(e)The consummation of the transactions contemplated hereby and by the other Transaction Documents will not result in the alteration, loss, impairment of or restriction on the Company’s or any of its Subsidiaries’ ownership or right to use any of the Intellectual Property or Confidential Information which is necessary for the conduct of Company’s and each of its Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted.

(f)The Company and its Subsidiaries have taken reasonable steps to protect the Company’s and its Subsidiaries’ rights in their Intellectual Property and Confidential Information. Each employee, consultant and contractor who has had access to Confidential Information which is necessary for the conduct of Company’s and each of its Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted has executed an agreement to maintain the confidentiality of such Confidential Information and has executed appropriate agreements that are substantially consistent with the Company’s standard forms thereof. Except under confidentiality obligations, there has been no material disclosure of any of the Company’s or its Subsidiaries’ Confidential Information to any third party.

4.16Environmental Matters. Except as described on Schedule 4.16, neither the Company nor any Subsidiary is in material violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, “Environmental Laws”), owns or operates any real property contaminated with any substance that is subject to any Environmental Laws, is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or is subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim has had or could reasonably be expected to have a Material Adverse Effect, individually or in the aggregate; and there is no pending or, to the Company’s Knowledge, threatened investigation that might lead to such a claim.

4.17Litigation. Except as described on Schedule 4.17, there are no pending actions, suits or proceedings against or affecting the Company, its Subsidiaries or any of its or their properties; and to the Company’s Knowledge, no such actions, suits or proceedings are threatened or contemplated. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or since January 1, 2003 has been the subject of any action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the Company’s Knowledge, there is not pending or contemplated, any investigation by the Securities and Exchange Commission ("SEC") involving the Company or any current or former director or officer of the Company. The SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the 1933 Act or the 1934 Act.

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4.18Financial Statements. The financial statements included in each SEC Filing present fairly, in all material respects, the consolidated financial position of the Company as of the dates shown and its consolidated results of operations and cash flows for the periods shown, and such financial statements have been prepared in conformity with United States generally accepted accounting principles applied on a consistent basis (“GAAP”) (except as may be disclosed therein or in the notes thereto, and, in the case of quarterly financial statements, as permitted by Form 10-Q under the 1934 Act). Except as set forth in the financial statements of the Company included in the SEC Filings filed prior to the date hereof or as described on Schedule 4.18, neither the Company nor any of its Subsidiaries has incurred any liabilities, contingent or otherwise, except those incurred in the ordinary course of business, consistent (as to amount and nature) with past practices since the date of such financial statements, none of which, individually or in the aggregate, have had or could reasonably be expected to have a Material Adverse Effect.

4.19Insurance Coverage. The Company and each Subsidiary maintains in full force and effect insurance coverage that is customary for comparably situated companies for the business being conducted and properties owned or leased by the Company and each Subsidiary, and the Company reasonably believes such insurance coverage to be adequate against all liabilities, claims and risks against which it is customary for comparably situated companies to insure.

4.20Compliance with Nasdaq Continued Listing Requirements. Except as described in the SEC Filings or on Schedule 4.20, (i) the Company is in compliance with applicable continued listing requirements of The Nasdaq Global Market or The Nasdaq Capital Market ("Nasdaq"), (ii) there are no proceedings pending or, to the Company’s Knowledge, threatened against the Company relating to the continued listing of the Common Stock on Nasdaq and (iii) the Company has not received any notice of, nor to the Company’s Knowledge is there any basis for, the delisting of the Common Stock from Nasdaq.

4.21Brokers and Finders. No Person will have, as a result of the transactions contemplated by the Transaction Documents, any valid right, interest or claim against or upon the Company, any Subsidiary or a Buyer for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Company, other than as described inSchedule 4.21.

4.22No Directed Selling Efforts or General Solicitation. Neither the Company nor any Person acting on its behalf has conducted any general solicitation or general advertising (as those terms are used in Regulation D) in connection with the offer or sale of any of the Securities.

4.23No Integrated Offering. Neither the Company nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any Company security or solicited any offers to buy any security, under circumstances that would adversely affect reliance by the Company on Section 4(2) of the 1933 Act for the exemption from registration for the transactions contemplated hereby or would require registration of the Securities under the 1933 Act.

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4.24Private Placement. Subject to the accuracy of the representations and warranties of the Buyers set forth in Section 3, the offer and sale of the Securities to the Buyers as contemplated hereby is exempt from the registration requirements of the 1933 Act.

4.25Questionable Payments. Neither the Company nor any of its Subsidiaries nor, to the Company’s Knowledge, any of their respective current or former stockholders, directors, officers, employees, agents or other Persons acting on behalf of the Company or any Subsidiary, has on behalf of the Company or any Subsidiary or in connection with their respective businesses: (a) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payments to any governmental officials or employees from corporate funds; (c) established or maintained any unlawful or unrecorded fund of corporate monies or other assets; (d) made any false or fictitious entries on the books and records of the Company or any Subsidiary; or (e) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any nature.

4.26Transactions with Affiliates. Except as disclosed in the SEC Filings or as disclosed on Schedule 4.26, none of the officers or directors of the Company and, to the Company’s Knowledge, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than as holders of stock options and/or warrants, and for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the Company’s Knowledge, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

4.27Internal Controls. The Company is in material compliance with the provisions of the Sarbanes-Oxley Act of 2002 currently applicable to the Company. Except for the material weaknesses disclosed in the SEC Filings, the Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company has established disclosure controls and procedures (as defined in 1934 Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that material information relating to the Company, including the Subsidiaries, is made known to the certifying officers by others within those entities, particularly during the period in which the Company’s most recently filed periodic report under the 1934 Act, as the case may be, is being prepared. The Company's certifying officers have evaluated the effectiveness of the Company's controls and procedures as of the end of the period covered by the most recently filed periodic report under the 1934 Act (such date, the "Evaluation Date"). The Company presented in its most recently filed periodic report under the 1934 Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no significant changes in the Company's internal controls (as such term is defined in Item 308 of Regulation S-K) or, to the Company's Knowledge, in other factors that could significantly affect the Company's internal controls. The Company maintains and will continue to maintain a standard system of accounting established and administered in accordance with GAAP and the applicable requirements of the 1934 Act.

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4.28Disclosures. The written materials delivered to the Buyers in connection with the transactions contemplated by the Transaction Documents do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading.

5.The representations and warranties set forth in Sections 3 and 4 above shall survive the sale of the Securities to the Buyers pursuant to this Subscription Agreement. The Buyers and the Company agree to indemnify and hold harmless each other, and their respective officers, directors, shareholders, employees and agents, as the case may be, from and against any and all damages suffered and liabilities incurred by any of them (including costs of investigation and defense and attorneys' fees) arising out of any inaccuracy in their representations and warranties made above.

6.Each Buyer hereby irrevocably constitutes and appoints Kenneth Cragun and Dennis Shogren, and each of them acting alone, with full power of substitution, as his true and lawful attorney-in-fact with full power and authority in the Buyer's name, place and stead and for the Buyer's use and benefit to execute and deliver the Escrow Agreement attached hereto as Exhibit B and the Registration Rights Agreement attached hereto as Exhibit A. This power of attorney is coupled with an interest and declared to be irrevocable.

6. This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and may be amended only by a writing executed by all parties. This Agreement shall be enforced, governed and construed in all respects in accordance with the laws of the State of California.

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WITNESS WHEREOF, the Buyers and the Company have caused this Subscription Agreement to be duly executed as of the date first written above.

COMPANY:
Modtech Holdings, Inc.
By:	/s/ Dennis Shogren
Name:  Dennis Shogren

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IN WITNESS WHEREOF, the Buyers and the Company have cause this Subscription Agreement to be duly executed as of the date first written above.

BUYERS:

/s/ Charles McGettigan

Charles McGettigan

17

IN WITNESS WHEREOF, the Buyers and the Company have cause this Subscription Agreement to be duly executed as of the date first written above.

BUYERS:

/s/ Robert Campbell

Robert Campbell

18

IN WITNESS WHEREOF, the Buyers and the Company have cause this Subscription Agreement to be duly executed as of the date first written above.

BUYERS:

/s/ Stanley Gaines

Stanley Gaines

19

IN WITNESS WHEREOF, the Buyers and the Company have cause this Subscription Agreement to be duly executed as of the date first written above.

BUYERS:

/s/ Daniel Donahoe

Daniel Donahoe

20

IN WITNESS WHEREOF, the Buyers and the Company have cause this Subscription Agreement to be duly executed as of the date first written above.

BUYERS:

/s/ Dennis Shogren

Dennis Shogren

/s/ Kenneth Cragun

Kenneth Cragun

/s/ Ronald Savona

Ronald Savona

/s/ Richard Bartolotti

Richard Bartolotti

/s/ Harold Clark

Harold Clark

/s/ Karen Andreasen

Karen Andreasen

/s/ Richard Von Hor

Richard Von Hor

/s/ Danny Ewing

Danny Ewing

21

WITNESS WHEREOF, the Buyers and the Company have cause this Subscription Agreement to be duly executed as of the date first written above.

BUYERS:

/s/ Thomas McGovern

Thomas McGovern

22

IN WITNESS WHEREOF, the Buyers and the Company have cause this Subscription Agreement to be duly executed as of the date first written above.

BUYERS:

/s/ Kenneth Keska

Kenneth Keska

23

IN WITNESS WHEREOF, the Buyers and the Company have cause this Subscription Agreement to be duly executed as of the date first written above.

BUYERS:

R & R Opportunity Fund

By: /s/ John J. Borer, III

John J. Borer, III

Authorized Signatory

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IN WITNESS WHEREOF, the Buyers and the Company have cause this Subscription Agreement to be duly executed as of the date first written above.

BUYERS:

Dolphin Offshore Partners, L.P.

By: /s/ Peter E. Salas

Peter E. Salas

General Partner

25

IN WITNESS WHEREOF, the Buyers and the Company have cause this Subscription Agreement to be duly executed as of the date first written above.

BUYERS:

/s/ Thomas Peckosh

Thomas Peckosh

26

IN WITNESS WHEREOF, the Buyers and the Company have cause this Subscription Agreement to be duly executed as of the date first written above.

BUYERS:

/s/ Charles R. Skemp

Charles R. Skemp

27

IN WITNESS WHEREOF, the Buyers and the Company have cause this Subscription Agreement to be duly executed as of the date first written above.

BUYERS:

/s/ Charles Gwirtsman

Charles Gwirtsman

28

IN WITNESS WHEREOF, the Buyers and the Company have cause this Subscription Agreement to be duly executed as of the date first written above.

BUYERS:

GCA Strategic Investment Fund Limited

By: /s/ Lewis N. Lester

Lewis N. Lester

Authorized Signatory

29

IN WITNESS WHEREOF, the Buyers and the Company have cause this Subscription Agreement to be duly executed as of the date first written above.

BUYERS:

Maythorpe Holdings Limited

By: /s/ Joel Handel

Joel Handel

Authorized Signatory

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IN WITNESS WHEREOF, the Buyers and the Company have cause this Subscription Agreement to be duly executed as of the date first written above.

BUYERS:

/s/ Myron Wick, III

Myron Wick, III

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SCHEDULE OF BUYERS

Buyer’s Name	Buyer’s Address and Facsimile Number	Number of Securities	Purchase Price
Charles McGettigan	McGettigan, Wick & Co. 50 Osgood Place, Penthouse San Francisco, CA 94133 Facsimile # (415) 986-3617	588 shares of Series C Preferred Stock	$	58,800
Myron Wick	McGettigan, Wick & Co. 50 Osgood Place, Penthouse San Francisco, CA 94133 Facsimile # (415) 986-3617	500 shares of Series C Preferred Stock	$	50,000
Robert Campbell	B. Riley & Co 4675 MacArthur Court, Suite 1500 Newport Beach, CA 92660 Facsimile # (949) 852-0430	50 shares of Series C Preferred Stock	$	5,000
Stanley Gaines	1473 North Ocean Blvd. Palm Beach, FL 33480 Facsimile # (561) 840-9011	500 shares of Series C Preferred Stock	$	50,000
Daniel Donahoe	Red Rock Resorts 7114 East Stetson Drive, Suite 205 Scottsdale, AZ 85251 Facsimile # (480) 994-3521	100 shares of Series C Preferred Stock	$	10,000
Dennis Shogren	Modtech Holdings, Inc. 2830 Barrett Avenue Perris, CA 92571 Facsimile # (951) 943-9655	200 shares of Series C Preferred Stock	$	20,000
Kenneth Cragun	Modtech Holdings, Inc. 2830 Barrett Avenue Perris, CA 92571 Facsimile # (951) 943-9655	10 shares of Series C Preferred Stock	$	1,000
Ronald Savona	Modtech Holdings, Inc. 2830 Barrett Avenue Perris, CA 92571 Facsimile # (951) 943-9655	10 shares of Series C Preferred Stock	$	1,000
Richard Bartolotti	Modtech Holdings, Inc. 2830 Barrett Avenue Perris, CA 92571 Facsimile # (951) 943-9655	100 shares of Series C Preferred Stock	$	10,000
Harry Clark	Modtech Holdings, Inc. 2830 Barrett Avenue Perris, CA 92571 Facsimile # (951) 943-9655	50 shares of Series C Preferred Stock	$	5,000
Karen Andreasen	Modtech Holdings, Inc. 2830 Barrett Avenue Perris, CA 92571 Facsimile # (951) 943-9655	50 shares of Series C Preferred Stock	$	5,000

Buyer’s Name	Buyer’s Address and Facsimile Number	Number of Securities		Purchase Price
Richard Von Hor	Modtech Holdings, Inc. 2830 Barrett Avenue Perris, CA 92571 Facsimile # (951) 436-4088	18 shares of Series C Preferred Stock	$	1,800
Thomas McGovern	Modtech Holdings, Inc. 1602 Industrial Park Dr. Plant City, FL 33566 Facsimile # 813-759-0576	50 shares of Series C Preferred Stock	$	5,000
Kenneth Keska	Modtech Holdings, Inc. 5301 W. Madison Phoenix, AZ 85043 Facsimile # 602-233-9458	10 shares of Series C Preferred Stock	$	1,000
Danny Ewing	Modtech Holdings, Inc. 2830 Barrett Avenue Perris, CA 92571 Facsimile #951-943-3725	20 shares of Series C Preferred Stock	$	2,000
R&R Opportunity Fund	R&R Opp. Fund - care of Noari Holdings LLC 1 Bridge Street, Suite #126 Irvington, N.Y. 10533	2000 shares of Series B Preferred Stock	$	200,000
Dolphin Offshore Partners, L.P.	129 East 17TH Street New York, NY 10003 Facsimile # (904) 491-5011	7,500 shares of Series B Preferred Stock	$	750,000
Thomas Peckosh	2310 Simpson Street Dubuque, Iowa 52003	960 shares of Series B Preferred Stock	$	96,000
Charles R. Skemp	The Skemp Company 1950 John F. Kennedy Road Dubuque, Iowa 52002 Facsimile # (563) 557-3143	480 shares of Series B Preferred Stock	$	48,000
Charles Gwirtsman	KRG Capital Partners, LLC 1515 Arapahoe Street Tower One - Suite 1500 Denver, CO 80202 Facsimile # (303) 390-5015	1250 shares of Series B Preferred Stock	$	125,000
GCA Strategic Investment Fund Limited	Mechanics Building, 12 Church Street Hamilton, Bermuda HM11	1000 shares of Series B Preferred Stock	$	100,000
Maythorpe Holdings Limited	2nd Floor, Geneva Place 333 Waterfront Drive Road Town, Tortola, British Virgin Islands Facsimile #. (284) 494-3088	1000 shares of Series B Preferred Stock	$	100,000

EX-10.66

Exhibit 10.66

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (the “Agreement”) is made and entered into as of March 10, 2008 by and among Modtech Holdings, Inc., a Delaware corporation (the “Company”), and the “Buyers” named in that certain Subscription Agreement by and among the Company and the Buyers, dated the date hereof (the “Subscription Agreement”). Capitalized terms used herein have the respective meanings ascribed thereto in the Subscription Agreement unless otherwise defined herein.

The parties hereby agree as follows:

1.Certain Definitions.

As used in this Agreement, the following terms shall have the following meanings:

“Buyers” shall mean the Buyers identified in the Subscription Agreement and any Affiliate or permitted transferee of any Buyer who is a subsequent holder of any Registrable Securities.

“Common Stock” shall mean the Company’s common stock, par value $0.01 per share, and any securities into which such shares may hereinafter be reclassified.

“Insider” means a Person who is either an officer or a director of the Company or any Subsidiary of the Company.

“Insider Shares” means the Shares purchased by any Insider.

“Prospectus” shall mean (i) the prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus, and (ii) any “free writing prospectus” as defined in Rule 405 under the 1933 Act.

“Register,” “registered” and “registration” refer to a registration made by preparing and filing a Registration Statement or similar document in compliance with the 1933 Act (as defined below), and the declaration or ordering of effectiveness of such Registration Statement or document.

“Registrable Securities” shall mean (i) the Shares and (ii) any other securities issued or issuable with respect to or in exchange for Registrable Securities; provided, that, a security shall cease to be a Registrable Security upon (A) sale pursuant to a Registration Statement or Rule 144 under the 1933 Act, or (B) such security becoming eligible for sale without restriction by the Buyers pursuant to Rule 144.

“Registration Statement” shall mean any registration statement of the Company filed under the 1933 Act that covers the resale of any of the Registrable Securities pursuant to the provisions of this Agreement, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all material incorporated by reference in such Registration Statement.

“Required Buyers” means the Buyers holding a majority of the Registrable Securities.

“SEC” means the U.S. Securities and Exchange Commission.

“Shares” means the shares of Common Stock to be issued upon conversion of the Series B Preferred Stock and Series C Preferred Stock issued pursuant to the Subscription Agreement.

“1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

2.Registration.

(a)Registration Statements.

(i)Promptly following the Closing but no later than the earlier of (i) Five (5) Business Days after the Company files its Annual Report on Form 10-K for the year ended December 31, 2007 with the SEC or (ii) April 7, 2008 (the “Filing Deadline”), the Company shall prepare and file with the SEC one Registration Statement on Form S-3 (or, if Form S-3 is not then available to the Company, on such form of registration statement as is then available to effect a registration for resale of the Registrable Securities), covering the resale of the Shares (the “Registrable Securities”). Subject to any SEC comments, such Registration Statement shall include the plan of distribution attached hereto as Exhibit A; provided, however, that no Buyer shall be named as an “underwriter” in the Registration Statement without the Buyer's ' prior written consent. Such Registration Statement also shall cover, to the extent allowable under the 1933 Act and the rules promulgated thereunder (including Rule 416), such indeterminate number of additional shares of Common Stock resulting from stock splits, stock dividends or similar transactions with respect to the Registrable Securities. Such Registration Statement shall not include any shares of Common Stock or other securities for the account of any other holder without the prior written consent of the Required Buyers; provided, however, that the Company may include in such Registration Statement the securities defined as "Registrable Securities" under the Registration Rights Agreements dated February 29, 2008 between the Company and Laurus Master Fund, Ltd., Valens Offshore SPV I, Ltd., and Valens U.S. SPV I, LLC (the "Other Registrable Securities"). The Registration Statement (and each amendment or supplement thereto, and each request for acceleration of effectiveness thereof) shall be provided in accordance with Section 3(c) to the Buyers prior to its filing or other submission. If a Registration Statement covering the Registrable Securities is not filed with the SEC on or prior to the Filing Deadline, the Company will make pro rata payments to each Buyer (other thanan Insider), as liquidated damages and not as a penalty, in an amount equal to 1.5% of the aggregate amount invested by such Buyer on the Closing Date for each 30-day period or pro rata for any portion thereof following the Filing Deadline for which no Registration Statement is filed with respect to the Registrable Securities. Such payments shall constitute the Buyers' exclusive monetary remedy for such events, but shall not affect the right of the Buyers to seek injunctive relief. Such payments shall be made to each Buyer in cash within three Business Days after the end of each calendar month.

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(b)Expenses. The Company will pay all expenses associated with each registration, including filing and printing fees, the Company’s counsel and accounting fees and expenses, costs associated with clearing the Registrable Securities for sale under applicable state securities laws, listing fees, fees in connection with the registration, but excluding discounts, commissions, fees of underwriters, selling brokers, dealer managers or similar securities industry professionals with respect to the Registrable Securities being sold.

(c)Effectiveness.

(i)The Company shall use commercially reasonable efforts to have any Registration Statement declared effective as soon as practicable. The Company shall notify the Buyers by facsimile or e-mail as promptly as practicable, and in any event, within twenty-four (24) hours, after any Registration Statement is declared effective and shall simultaneously provide the Buyers with copies of any related Prospectus to be used in connection with the sale or other disposition of the securities covered thereby. If (A)(x) a Registration Statement covering the Registrable Securities is not declared effective by the SEC prior to the earlier of (i) five (5) Business Days after the SEC shall have informed the Company that no review of the Registration Statement will be made or that the SEC has no further comments on the Registration Statement or (ii) the 60^th day after the Filing Deadline or (B) after a Registration Statement has been declared effective by the SEC, sales cannot be made pursuant to such Registration Statement for any reason (including without limitation by reason of a stop order, or the Company’s failure to update the Registration Statement), but excluding any Allowed Delay (as defined below) or the inability of any Buyer to sell the Registrable Securities covered thereby due to market conditions, then, if a Buyer cannot sell their Registrable Securities without restriction pursuant to Rule 144 or otherwise, the Company will make pro rata payments to each such Buyer (other than an Insider) as liquidated damages and not as a penalty, in an amount equal to 1.5% of the aggregate amount invested by such Buyer under the Subscription Agreement for each 30-day period or pro rata for any portion thereof following the date by which such Registration Statement should have been effective (the “Blackout Period”). Such payments shall constitute the Buyers' exclusive monetary remedy for such events, but shall not affect the right of the Buyers to seek injunctive relief. The amounts payable as liquidated damages pursuant to this paragraph shall be paid monthly within three (3) Business Days of the last day of each month following the commencement of the Blackout Period until the termination of the Blackout Period. Such payments shall be made to each Buyer in cash.

(ii)For not more than twenty (20) consecutive days or for a total of not more than forty-five (45) days in any twelve (12) month period, the Company may suspend the use of any Prospectus included in any Registration Statement contemplated by this Section in the event that the Company determines in good faith that such suspension is necessary to (A) delay the disclosure of material non-public information concerning the Company, the disclosure of which at the time is not, in the good faith opinion of the Company, in the best interests of the Company or (B) amend or supplement the affected Registration Statement or the related Prospectus so that such Registration Statement or Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the case of the Prospectus in light of the circumstances under which they were made, not misleading (an “Allowed Delay”); provided, that the Company shall promptly (a) notify each Buyer in writing of the commencement of and the reasons for an Allowed Delay, but shall not (without the prior written consent of a Buyer other than an Insider) disclose to such Buyer any material non-public information giving rise to an Allowed Delay, (b) advise the Buyers in writing to cease all sales under the Registration Statement until the end of the Allowed Delay and (c) use commercially reasonable efforts to terminate an Allowed Delay as promptly as practicable.

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(d)Rule 415; Cutbacks. If at any time the SEC takes the position that the offering of some or all of the Registrable Securities or the Other Registrable Securities in a Registration Statement is not eligible to be made on a delayed or continuous basis under the provisions of Rule 415 under the 1933 Act or requires any Buyer to be named as an “underwriter”, the Company shall use its commercially reasonable best efforts to persuade the SEC that the offering contemplated by the Registration Statement is a valid secondary offering and not an offering “by or on behalf of the issuer” as defined in Rule 415 and that none of the Buyers is an “underwriter”. The Buyers collectively (other than the Insiders) shall have the right to each have a single counsel representing them participate in any meetings or discussions with the SEC regarding the SEC’s position and to have their counsel comment on any written submission made to the SEC with respect thereto. No such written submission shall be made to the SEC to which the Buyers' counsel reasonably objects. In the event that, despite the Company’s commercially reasonable efforts and compliance with the terms of this Section 2(e), the SEC refuses to alter its position, the Company shall (i) remove from the Registration Statement such portion of the Registrable Securities (the “Cut Back Shares”) and/or (ii) agree to such restrictions and limitations on the registration and resale of the Registrable Securities as the SEC may require to assure the Company’s compliance with the requirements of Rule 415; provided, however, that the Company shall not agree to name any Buyer as an “underwriter” in such Registration Statement without the prior written consent of such Buyer (collectively, the “SEC Restrictions”). Any cut-back imposed pursuant to this Section 2(d) shall be allocated first, to the Insider Shares pro rata among the holders thereof, and second, to the remaining Registrable Securities held by Buyer's pro rata among them, unless the SEC Restrictions otherwise require or provide. No liquidated damages shall accrue on or as to any Cut Back Shares. No cut-back will be imposed on the Other Registrable Securities.

3.Company Obligations. The Company will use commercially reasonable efforts to effect the registration of the Registrable Securities in accordance with the terms hereof, and pursuant thereto the Company will, as expeditiously as possible:

(a)use commercially reasonable efforts to cause such Registration Statement to become effective and to remain continuously effective for a period that will terminate upon the earlier of (i) the date on which all Registrable Securities covered by such Registration Statement as amended from time to time, have been sold, and (ii) the date on which all Registrable Securities covered by such Registration Statement may be sold without restriction pursuant to Rule 144 (the “Effectiveness Period”) and advise the Buyers writing when the Effectiveness Period has expired. it being understood that the Effectiveness Period may expire for some Buyers sooner than others;

(b)prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement and the Prospectus as may be necessary to keep the Registration Statement effective for the Effectiveness Period and to comply with the provisions of the 1933 Act and the 1934 Act with respect to the distribution of all of the Registrable Securities covered thereby;

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(c)provide copies to and permit a single counsel designated by the Buyers to review each Registration Statement and all amendments and supplements thereto no fewer than three (3) Business Days prior to their filing with the SEC and not file any document to which such counsel reasonably objects;

(d)furnish to the Buyers (other than the Insiders) and the legal counsel of the Buyers, if any (i) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company (but not later than two (2) Business Days after the filing date, receipt date or sending date, as the case may be) one (1) copy of any Registration Statement and any amendment thereto, each preliminary prospectus and Prospectus and each amendment or supplement thereto, and each letter written by or on behalf of the Company to the SEC or the staff of the SEC, and each item of correspondence from the SEC or the staff of the SEC, in each case relating to such Registration Statement (other than any portion of any thereof which contains information for which the Company has sought confidential treatment), and (ii) such number of copies of a Prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as each Buyer may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Buyer that are covered by the related Registration Statement;

(e)use commercially reasonable efforts to (i) prevent the issuance of any stop order or other suspension of effectiveness and, (ii) if such order is issued, obtain the withdrawal of any such order at the earliest possible moment;

(f)prior to any public offering of Registrable Securities use commercially reasonable efforts to register or qualify or cooperate with the Buyers and their respective counsels, if any, in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions requested by the Buyers and do any and all other commercially reasonable acts or things necessary or advisable to enable the distribution in such jurisdictions of the Registrable Securities covered by the Registration Statement; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (i) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(f), (ii) subject itself to general taxation in any jurisdiction where it would not otherwise be so subject but for this Section 3(f), or (iii) file a general consent to service of process in any such jurisdiction;

(g)use commercially reasonable efforts to cause all Registrable Securities covered by a Registration Statement to be listed on each securities exchange, interdealer quotation system or other market on which similar securities issued by the Company are then listed;

(h)immediately notify the Buyers, at any time prior to the end of the Effectiveness Period, upon discovery that, or upon the happening of any event as a result of which, the Prospectus includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly prepare, file with the SEC and furnish to such holder a supplement to or an amendment of such Prospectus as may be necessary so that such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; and

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(i)otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the SEC under the 1933 Act and the 1934 Act, file any final Prospectus, including any supplement or amendment thereof, with the SEC pursuant to Rule 424 under the 1933 Act, and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder; and make available to its security holders, as soon as reasonably practicable, but not later than the Availability Date (as defined below), an earnings statement covering a period of at least twelve (12) months, beginning after the effective date of each Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the 1933 Act, including Rule 158 promulgated thereunder (for the purpose of this subsection 3(i), “Availability Date” means the 45th day following the end of the fourth fiscal quarter that includes the effective date of such Registration Statement, except that, if such fourth fiscal quarter is the last quarter of the Company’s fiscal year, “Availability Date” means the 90th day after the end of such fourth fiscal quarter).

(j)With a view to making available to the Buyers the benefits of Rule 144 (or its successor rule) and any other rule or regulation of the SEC that may at any time permit the Buyers to sell shares of Common Stock to the public without registration, the Company covenants and agrees to: (i) make and keep public information available, as those terms are understood and defined in Rule 144, until the earlier of (A) six months after such date as all of the Registrable Securities may be sold without restriction by the holders thereof pursuant to Rule 144 or any other rule of similar effect or (B) such date as all of the Registrable Securities shall have been resold; (ii) file with the SEC in a timely manner all reports and other documents required of the Company under the 1934 Act; and (iii) furnish to each Buyer upon request, as long as such Buyer owns any Registrable Securities, (A) a written statement by the Company that it has complied with the reporting requirements of the 1934 Act, (B) a copy of the Company’s most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q, and (C) such other information as may be reasonably requested in order to avail such Buyer of any rule or regulation of the SEC that permits the selling of any such Registrable Securities without registration.

5.Obligations of the Buyers.

(a)Each Buyer shall furnish in writing to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request. At least five (5) Business Days prior to the first anticipated filing date of any Registration Statement, the Company shall notify each Buyer of the information the Company requires from them if they elect to have any of the Registrable Securities included in the Registration Statement. Each Buyer shall provide such information to the Company at least two (2) Business Days prior to the first anticipated filing date of such Registration Statement if they elect to have any of the Registrable Securities included in the Registration Statement.

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(b)Each Buyer, by their acceptance of the Registrable Securities agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of a Registration Statement hereunder, unless they have notified the Company in writing of their election to exclude all of their Registrable Securities from such Registration Statement.

(c)Each Buyer agrees that, upon receipt of any notice from the Company of either (i) the commencement of an Allowed Delay pursuant to Section 2(c)(ii) or (ii) the happening of an event pursuant to Section 3(h) hereof, they will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities, until they are advised by the Company that such dispositions may again be made.

6.Indemnification.

(a)Indemnification by the Company. The Company will indemnify and hold harmless each Buyer and their respective officers, directors, members, employees and agents, successors and assigns, and each other person, if any, who controls such Buyer within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which they may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, any preliminary Prospectus or final Prospectus, or any amendment or supplement thereof; (ii) any blue sky application or other document executed by the Company specifically for that purpose or based upon written information furnished by the Company filed in any state or other jurisdiction in order to qualify any or all of the Registrable Securities under the securities laws thereof (any such application, document or information herein called a “Blue Sky Application”); (iii) the omission or alleged omission to state in a Blue Sky Application a material fact required to be stated therein or necessary to make the statements therein not misleading; (iv) any violation by the Company or its agents of any rule or regulation promulgated under the 1933 Act applicable to the Company or its agents and relating to action or inaction required of the Company in connection with such registration; or (v) any failure to register or qualify the Registrable Securities included in any such Registration Statement in any state where the Company or its agents has affirmatively undertaken or agreed in writing that the Company will undertake such registration or qualification on behalf of a Buyer and will reimburse such Buyer, and each of their respective officers, directors or members and each of their controlling persons for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Buyer or any such controlling person in writing specifically for use in such Registration Statement or Prospectus.

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(b)Indemnification by the Buyers. Each Buyer agrees, severally but not jointly, to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors, officers, employees, stockholders and each person who controls the Company (within the meaning of the 1933 Act) against any losses, claims, damages, liabilities and expense (including reasonable attorney fees) resulting from (x) such Buyer’s failure to deliver a Prospectus in connection with any sales under the Registration Statement, if required, or (y) any untrue statement of a material fact or any omission of a material fact required to be stated in the Registration Statement or Prospectus or preliminary Prospectus or amendment or supplement thereto or necessary to make the statements therein not misleading, to the extent, but only to the extent that such untrue statement or omission is contained (1) in any information furnished in writing by such Buyer to the Company specifically for inclusion in such Registration Statement or Prospectus or amendment or supplement thereto or (2) in an outdated or defective Prospectus delivered by the Buyer in connection with any sales under the Registration Statement after being notified by the Company that the Prospectus is outdated or defective, but only if and to the extent that following the receipt of the amended or supplemented Prospectus the misstatement or omission giving rise to such loss, claim, damage or liability would have been corrected. In no event shall the liability of a Buyer be greater in amount than the dollar amount of the proceeds (net of all expense paid by such Buyer in connection with any claim relating to this Section 6 and the amount of any damages such Buyer has otherwise been required to pay by reason of such untrue statement or omission) received by such Buyer upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation.

(c)Conduct of Indemnification Proceedings. Any person entitled to indemnification hereunder shall (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided that any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person unless (a) the indemnifying party has agreed to pay such fees or expenses, or (b) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such person or (c) in the reasonable judgment of any such person, based upon written advice of its counsel, a conflict of interest exists between such person and the indemnifying party with respect to such claims (in which case, if the person notifies the indemnifying party in writing that such person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such person); and provided, further, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations hereunder, except to the extent that such failure to give notice shall materially adversely affect the indemnifying party in the defense of any such claim or litigation. It is understood that the indemnifying party shall not, in connection with any proceeding in the same jurisdiction, be liable for fees or expenses of more than one separate firm of attorneys at any time for all such indemnified parties. No indemnifying party will, except with the consent of the indemnified party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation.

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(d)Contribution. If for any reason the indemnification provided for in the preceding paragraphs (a), (b) and (c) is unavailable to an indemnified party or insufficient to hold it harmless, other than as expressly specified therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations. No person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the 1933 Act shall be entitled to contribution from any person not guilty of such fraudulent misrepresentation. In no event shall the contribution obligation of a holder of Registrable Securities be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such holder in connection with any claim relating to this Section 6 and the amount of any damages such holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission) received by it upon the sale of the Registrable Securities giving rise to such contribution obligation.

7.Miscellaneous.

(a)Amendments and Waivers. This Agreement may be amended only by a writing signed by the Company and the Required Buyers. The Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent to such amendment, action or omission to act, of the Required Buyers.

(b)Notices. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given by telex or telecopier, then such notice shall be deemed given upon receipt of confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one business day after delivery to such carrier. All notices shall be addressed to the party to be notified at the address as follows, or at such other address as such party may designate by ten days’ advance written notice to the other party:

If to the Company:

Modtech Holdings, Inc.

2830 Barrett Avenue

Perris, California 92571

Attention: Dennis Shogren

If to the Buyers:

At their addresses reflected on the books and records of the Company.

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(c)Assignments and Transfers by Buyers. The provisions of this Agreement shall be binding upon and inure to the benefit of the Buyers, and their respective successors and assigns. A Buyer may transfer or assign, in whole or from time to time in part, to one or more persons its rights hereunder in connection with the transfer of Registrable Securities by such Buyer to such person, provided that such Buyer complies with all laws applicable thereto and provides written notice of assignment to the Company promptly after such assignment is effected.

(d)Assignments and Transfers by the Company. This Agreement may not be assigned by the Company (whether by operation of law or otherwise) without the prior written consent of the Required Buyers, provided, however, that the Company may assign its rights and delegate its duties hereunder to any surviving or successor corporation in connection with a merger or consolidation of the Company with another corporation, or a sale, transfer or other disposition of all or substantially all of the Company’s assets to another corporation, without the prior written consent of the Required Buyers, after notice duly given by the Company to each Buyer.

(e)Benefits of the Agreement. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

(f)Counterparts; Faxes. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may also be executed via facsimile, which shall be deemed an original.

(g)Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

(h)Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provisions hereof prohibited or unenforceable in any respect.

(i)Further Assurances. The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained.

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(j)Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

(k)Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to the choice of law principles thereof. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of New York located in New York County and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement. Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

The Company:	MODTECH HOLDINGS, INC.
	By:	/s/ Dennis Shogren
	Name: Dennis Shogren
	Title: President and Chief Executive Officer

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

BUYERS:

/s/ Charles McGettigan

Charles McGettigan

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

BUYERS:

/s/ Robert Campbell

Robert Campbell

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

BUYERS:

/s/ Stanley Gaines

Stanley Gaines

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

BUYERS:

/s/ Daniel Donahoe

Daniel Donahoe

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

BUYERS:

/s/ Dennis Shogren

Dennis Shogren

/s/ Kenneth Cragun

Kenneth Cragun

/s/ Ronald Savona

Ronald Savona

/s/ Richard Bartolotti

Richard Bartolotti

/s/ Harold Clark

Harold Clark

/s/ Karen Andreasen

Karen Andreasen

/s/ Richard Von Hor

Richard Von Hor

/s/ Danny Ewing

Danny Ewing

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

BUYERS:

/s/ Thomas McGovern

Thomas McGovern

-18-

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

BUYERS:

/s/ Kenneth Keska

Kenneth Keska

-19-

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

BUYERS:

R & R Opportunity Fund

By: /s/ John J. Borer, III

John J. Borer, III

Authorized Signatory

-20-

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

BUYERS:

Dolphin Offshore Partners, L.P.

By: /s/ Peter E. Salas

Peter E. Salas

General Partner

-21-

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

BUYERS:

/s/ Thomas Peckosh

Thomas Peckosh

-22-

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

BUYERS:

/s/ Charles R. Skemp

Charles R. Skemp

-23-

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

BUYERS:

/s/ Charles Gwirtsman

Charles Gwirtsman

-24-

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

BUYERS:

GCA Strategic Investment Fund Limited

By: /s/ Lewis N. Lester

Lewis N. Lester

Authorized Signatory

-25-

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

BUYERS:

Maythorpe Holdings Limited

By: /s/ Joel Handel

Joel Handel

Authorized Signatory

-26-

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

BUYERS:

/s/ Myron Wick, III

Myron Wick, III

-27-

Exhibit A

Plan of Distribution

The selling stockholders, which as used herein includes donees, pledgees, transferees or other successors-in-interest selling shares of common stock or interests in shares of common stock received after the date of this prospectus from a selling stockholder as a gift, pledge, partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise dispose of any or all of their shares of common stock or interests in shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices.

The selling stockholders may use any one or more of the following methods when disposing of shares or interests therein:

- ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

- block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;

- purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

- an exchange distribution in accordance with the rules of the applicable exchange;

- privately negotiated transactions;

- short sales effected after the date the registration statement of which this Prospectus is a part is declared effective by the SEC;

- through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

- broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share; and

- a combination of any such methods of sale.

The selling stockholders may, from time to time, pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

In connection with the sale of our common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The selling stockholders may also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

The aggregate proceeds to the selling stockholders from the sale of the common stock offered by them will be the purchase price of the common stock less discounts or commissions, if any. Each of the selling stockholders reserves the right to accept and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly or through agents. We will not receive any of the proceeds from this offering.

The selling stockholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act of 1933, provided that they meet the criteria and conform to the requirements of that rule.

The selling stockholders and any underwriters, broker-dealers or agents that participate in the sale of the common stock or interests therein may be "underwriters" within the meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit they earn on any resale of the shares may be underwriting discounts and commissions under the Securities Act. Selling stockholders who are "underwriters" within the meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities Act.

To the extent required, the shares of our common stock to be sold, the names of the selling stockholders, the respective purchase prices and public offering prices, the names of any agents, dealer or underwriter, any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement that includes this prospectus.

In order to comply with the securities laws of some states, if applicable, the common stock may be sold in these jurisdictions only through registered or licensed brokers or dealers. In addition, in some states the common stock may not be sold unless it has been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with.

We have advised the selling stockholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of the selling stockholders and their affiliates. In addition, to the extent applicable we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the selling stockholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The selling stockholders may indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities arising under the Securities Act.

We have agreed to indemnify the selling stockholders against liabilities, including liabilities under the Securities Act and state securities laws, relating to the registration of the shares offered by this prospectus.

We have agreed with the selling stockholders to keep the registration statement of which this prospectus constitutes a part effective until the earlier of (1) such time as all of the shares covered by this prospectus have been disposed of pursuant to and in accordance with the registration statement or (2) the date on which the shares may be sold without restriction pursuant to Rule 144 of the Securities Act.

EX-10.67

Exhibit 10.67

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO MODTECH HOLDINGS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

Right to Purchase up to 2,537,657 Shares of Common Stock of

Modtech Holdings, Inc.

(subject to adjustment as provided herein)

AMENDED AND RESTATED COMMON STOCK PURCHASE WARRANT

No. 5 Issue Date: March 21, 2008

MODTECH HOLDINGS, INC., a corporation organized under the laws of the State of Delaware (the “Company”), hereby certifies that, for value received, LAURUS MASTER FUND, LTD., or assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company (as defined herein) from and after the Issue Date of this Amended and Restated Warrant (as may be amended, restated, modified and/or supplemented from time to tine, this “Warrant”) and at any time or from time to time before 5:00 p.m., New York time, through the close of business February 28, 2015 (the “Expiration Date”), up to 2,537,657 fully paid and nonassessable shares of Common Stock (as hereinafter defined), $0.01 par value per share, at the applicable Exercise Price per share (as defined below). The number and character of such shares of Common Stock and the applicable Exercise Price per share are subject to adjustment as provided herein.

This Warrant amends and restates in its entirety, and is given in substitution for that certain Common Stock Purchase Warrant dated February 29, 2008 issued to Holder by the Company (as amended, restated, modified and/or supplemented from time to time).

As used herein the following terms, unless the context otherwise requires, have the following respective meanings:

(a)The term “Company” shall include Modtech Holdings, Inc. and any person or entity which shall succeed, or assume the obligations of, Modtech Holdings, Inc. hereunder.

(b)The term “Common Stock” includes (i) the Company’s Common Stock, par value $0.01 per share; and (ii) any other securities into which or for which any of the securities described in the preceding clause (i) may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise.

(c)The term “Other Securities” refers to any stock (other than Common Stock) and other securities of the Company or any other person (corporate or otherwise) which the holder of the Warrant at any time shall be entitled to receive, or shall have received, on the exercise of the Warrant, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 4 or otherwise.

(d)The “Exercise Price” applicable under this Warrant shall be $0.40.

1.Exercise of Warrant.

1.1.Number of Shares Issuable upon Exercise. From and after the date hereof through and including the Expiration Date, the Holder shall be entitled to receive, upon exercise of this Warrant in whole or in part, by delivery of an original or fax copy of an exercise notice in the form attached hereto as Exhibit A (the “Exercise Notice”), shares of Common Stock of the Company, subject to adjustment pursuant to Section 4.

1.2.Fair Market Value. For purposes hereof, the “Fair Market Value” of a share of Common Stock as of a particular date (the “Determination Date”) shall mean:

(a)If the Company’s Common Stock is traded on the American Stock Exchange or another national exchange or is quoted on the Global or Capital Market of The Nasdaq Stock Market, Inc.(“Nasdaq”), then the closing or last sale price, respectively, reported for the last business day immediately preceding the Determination Date.

(b)If the Company’s Common Stock is not traded on the American Stock Exchange or another national exchange or on the Nasdaq but is traded on the NASD Over the Counter Bulletin Board, then the mean of the average of the closing bid and asked prices reported for the last business day immediately preceding the Determination Date.

(c)Except as provided in clause (d) below, if the Company’s Common Stock is not publicly traded, then as the Holder and the Company agree or in the absence of agreement by arbitration in accordance with the rules then in effect of the American Arbitration Association, before a single arbitrator to be chosen from a panel of persons qualified by education and training to pass on the matter to be decided.

(d)If the Determination Date is the date of a liquidation, dissolution or winding up, or any event deemed to be a liquidation, dissolution or winding up pursuant to the Company’s charter, then all amounts to be payable per share to holders of the Common Stock pursuant to the charter in the event of such liquidation, dissolution or winding up, plus all other amounts to be payable per share in respect of the Common Stock in liquidation under the charter, assuming for the purposes of this clause (d) that all of the shares of Common Stock then issuable upon exercise of the Warrant are outstanding at the Determination Date.

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1.3.Company Acknowledgment. The Company will, at the time of the exercise of this Warrant, upon the request of the holder hereof acknowledge in writing its continuing obligation to afford to such holder any rights to which such holder shall continue to be entitled after such exercise in accordance with the provisions of this Warrant. If the holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such holder any such rights.

1.4.Trustee for Warrant Holders. In the event that a bank or trust company shall have been appointed as trustee for the holders of this Warrant pursuant to Subsection 3.2, such bank or trust company shall have all the powers and duties of a warrant agent (as hereinafter described) and shall accept, in its own name for the account of the Holder or Holder such successor person as may be entitled thereto, all amounts otherwise payable to the Company or such successor, as the case may be, on exercise of this Warrant pursuant to this Section 1.

2.Procedure for Exercise.

2.1.Delivery of Stock Certificates, Etc., on Exercise. The Company agrees that the shares of Common Stock purchased upon exercise of this Warrant shall be deemed to be issued to the Holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such shares in accordance herewith. As soon as practicable after the exercise of this Warrant in full or in part, and in any event within three (3) business days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Holder, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct in compliance with applicable securities laws, a certificate or certificates for the number of duly and validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities) to which such Holder shall be entitled on such exercise, plus, in lieu of any fractional share to which such holder would otherwise be entitled, cash equal to such fraction multiplied by the then Fair Market Value of one full share, together with any other stock or other securities and property (including cash, where applicable) to which such Holder is entitled upon such exercise pursuant to Section 1 or otherwise.

2.2.Exercise. Payment shall be made either in cash or by certified or official bank check payable to the order of the Company equal to the applicable aggregate Exercise Price for the number of Common Shares specified in such Exercise Notice (as such exercise number shall be adjusted to reflect any adjustment in the total number of shares of Common Stock issuable to the Holder per the terms of this Warrant) and the Holder shall thereupon be entitled to receive the number of duly authorized, validly issued, fully-paid and non-assessable shares of Common Stock (or Other Securities) determined as provided herein.

3.Effect of Reorganization, Etc.; Adjustment of Exercise Price.

3.1.Reorganization, Consolidation, Merger, Etc. In case at any time or from time to time, the Company shall (a) effect a reorganization, (b) consolidate with or merge into any other person, or (c) transfer all or substantially all of its properties or assets to any other person under any plan or arrangement contemplating the dissolution of the Company, then, in each such case, as a condition to the consummation of such a transaction, if applicable, proper and adequate provision shall be made by the Company whereby the Holder, on the exercise hereof as provided in Section 1 at any time after the consummation of such reorganization, consolidation or merger or the effective date of such dissolution, as the case may be, shall receive, in lieu of the Common Stock (or Other Securities) issuable on such exercise prior to such consummation or such effective date, the stock and other securities and property (including cash) to which such Holder would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if such Holder had so exercised this Warrant, immediately prior thereto, all subject to further adjustment thereafter as provided in Section 4.

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3.2.Dissolution. In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, concurrently with any distributions made to holders of its Common Stock, shall at its expense deliver or cause to be delivered to the Holder the stock and other securities and property (including cash, where applicable) receivable by the Holder pursuant to Section 3.1 to the extent the Holder has exercised the warrant following the transfer of assets, or, if the Holder shall so instruct the Company, to a bank or trust company specified by the Holder and having its principal office in New York, NY as trustee for the Holder (the “Trustee”).

3.3.Continuation of Terms. Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in this Section 3, this Warrant shall continue in full force and effect and the terms hereof shall be applicable to the shares of stock and other securities and property receivable on the exercise of this Warrant after the consummation of such reorganization, consolidation or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any such stock or other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company, whether or not such person shall have expressly assumed the terms of this Warrant as provided in Section 4. In the event this Warrant does not continue in full force and effect after the consummation of the transactions described in this Section 3, then the Company’s securities and property (including cash, where applicable) receivable by the Holder will be delivered to the Holder or the Trustee as contemplated by Section 3.2.

4.Extraordinary Events Regarding Common Stock. In the event that the Company shall (a) issue additional shares of the Common Stock as a dividend or other distribution on outstanding Common Stock or any preferred stock issued by the Company (b) subdivide its outstanding shares of Common Stock, or (c) combine its outstanding shares of the Common Stock into a smaller number of shares of the Common Stock, then, in each such event, the Exercise Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Exercise Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Exercise Price then in effect. The Exercise Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein in this Section 4. The number of shares of Common Stock that the Holder shall thereafter, on the exercise hereof as provided in Section 1, be entitled to receive shall be adjusted to a number determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this Section 4) be issuable on such exercise by a fraction of which (a) the numerator is the Exercise Price that would otherwise (but for the provisions of this Section 4) be in effect, and (b) the denominator is the Exercise Price in effect on the date of such exercise (taking into account the provisions of this Section 4). Notwithstanding the foregoing, in no event shall the Exercise Price be less than the par value of the Common Stock.

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5.Certificate as to Adjustments. In each case of any adjustment or readjustment in the shares of Common Stock (or Other Securities) issuable on the exercise of this Warrant, the Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional shares of Common Stock (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant. The Company will forthwith mail a copy of each such certificate to the Holder and any Warrant agent of the Company (appointed pursuant to Section 11 hereof).

6.Reservation of Stock, Etc., Issuable on Exercise of Warrant. The Company will at all times reserve and keep available, solely for issuance and delivery on the exercise of this Warrant, shares of Common Stock (or Other Securities) from time to time issuable on the exercise of this Warrant.

7.Assignment; Exchange of Warrant. Subject to compliance with applicable securities laws, this Warrant, and the rights evidenced hereby, may be transferred by any registered holder hereof (a “Transferor”) in whole or in part. On the surrender for exchange of this Warrant, with the Transferor’s endorsement in the form of Exhibit B attached hereto (the “Transferor Endorsement Form”) and together with evidence reasonably satisfactory to the Company demonstrating compliance with applicable securities laws, which shall include, without limitation, the provision of a legal opinion from the Transferor’s counsel (at the Company’s expense) that such transfer is exempt from the registration requirements of applicable securities laws, the Company at its expense (but with payment by the Transferor of any applicable transfer taxes) will issue and deliver to or on the order of the Transferor thereof a new Warrant of like tenor, in the name of the Transferor and/or the transferee(s) specified in such Transferor Endorsement Form (each a “Transferee”), calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant so surrendered by the Transferor.

8.Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of this Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.

5

9.Registration Rights. The Holder has been granted certain registration rights by the Company. These registration rights are set forth in a Registration Rights Agreement entered into by the Company and Holder dated as of February 29, 2008, as the same may be amended, restated, modified and/or supplemented from time to time.

10.Maximum Exercise. Notwithstanding anything herein to the contrary, in no event shall the Holder be entitled to exercise any portion of this Warrant in excess of that portion of this Warrant upon exercise of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its Affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unexercised portion of this Warrant or the unexercised or unconverted portion of any other security of the Holder subject to a limitation on conversion analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the exercise of the portion of this Warrant with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its Affiliates of any amount greater than 9.99% of the then outstanding shares of Common Stock (whether or not, at the time of such exercise, the Holder and its Affiliates beneficially own more than 9.99% of the then outstanding shares of Common Stock). As used herein, the term “Affiliate” means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act of 1933, as amended.   For purposes of the second preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such sentence. For any reason at any time, upon written or oral request of the Holder, the Company shall within one (1) business day confirm orally and in writing to the Holder the number of shares of Common Stock outstanding as of any given date.  The limitations set forth herein (x) shall automatically become null and void following notice to the Company upon the occurrence and during the continuance of an Event of Default (as defined in the Additional Secured Term Notes referred to in the Amendment and Waiver Agreement dated as of the date hereof among the Holder, Valens U.S. SPV I, LLC, Valens Offshore SPV I, Ltd. and the Company) and (y) may be waived by the Holder upon provision of no less than sixty-one (61) days prior written notice to the Company; provided, however, that, such written notice of waiver shall only be effective if delivered at a time when no indebtedness (including, without limitation, principal, interest, fees and charges) of the Company of which the Holder or any of its Affiliates was, at any time, the owner, directly or indirectly is outstanding.

11.Warrant Agent. The Company may, by written notice to the each Holder of the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other Securities) on the exercise of this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section 7, and replacing this Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such agent.

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12.Transfer on the Company’s Books. Until this Warrant is transferred on the books of the Company, the Company may treat the registered holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

13.Notices, Etc. All notices and other communications from the Company to the Holder shall be mailed by first class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder who has so furnished an address to the Company.

14.Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION BROUGHT CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS WARRANT SHALL BE BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE HOLDER MAY CHOOSE TO WAIVE THIS PROVISION AND BRING AN ACTION OUTSIDE THE STATE OF NEW YORK. The individuals executing this Warrant on behalf of the Company agree to submit to the jurisdiction of such courts and waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorneys’ fees and costs. In the event that any provision of this Warrant is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Warrant. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision hereof. The Company acknowledges that legal counsel participated in the preparation of this Warrant and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Warrant to favor any party against the other party.

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

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IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above.

	MODTECH HOLDINGS, INC.
WITNESS:
	By: /s/ Kenneth S. Cragun
/s/ Lori Lopez	Name: Kenneth S. Cragun
Lori Lopez	Title: Chief Financial Officer

Exhibit A

FORM OF SUBSCRIPTION

(To Be Signed Only On Exercise Of Warrant)

TO:Modtech Holdings, Inc.

Attention:Chief Financial Officer

The undersigned, pursuant to the provisions set forth in the attached Warrant (No.____), hereby irrevocably elects to purchase (check applicable box):

________ shares of the Common Stock covered by such Warrant; or

the maximum number of shares of Common Stock covered by such Warrant pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned herewith makes payment of the full Exercise Price for such shares at the price per share provided for in such Warrant, which is $___________. Such payment takes the form of (check applicable box or boxes):

$__________ in lawful money of the United States; and/or

the cancellation of such portion of the attached Warrant as is exercisable for a total of _______ shares of Common Stock (using a Fair Market Value of $_______ per share for purposes of this calculation); and/or

the cancellation of such number of shares of Common Stock as is necessary, in accordance with the formula set forth in Section 2.2, to exercise this Warrant with respect to the maximum number of shares of Common Stock purchasable pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned requests that the certificates for such shares be issued in the name of, and delivered to ________________________________ whose address is _____________________________________________________.

The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable upon exercise of the within Warrant shall be made pursuant to registration of the Common Stock under the Securities Act of 1933, as amended (the “Securities Act”) or pursuant to an exemption from registration under the Securities Act.

Dated: ________________________
	(Signature must conform to name of holder as specified on the face of the Warrant)
	Address:

A-1

Exhibit B

FORM OF TRANSFEROR ENDORSEMENT

(To Be Signed Only On Transfer Of Warrant)

For value received, the undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading “Transferees” the right represented by the within Warrant to purchase the percentage and number of shares of Common Stock of Modtech Holdings, Inc. into which the within Warrant relates specified under the headings “Percentage Transferred” and “Number Transferred,” respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to transfer its respective right on the books of Modtech Holdings, Inc. with full power of substitution in the premises.

Transferees Address Percentage Transferred Number Transferred

Dated:
	(Signature must conform to name of holder as specified on the face of the Warrant)
	Address:
	SIGNED IN THE PRESENCE OF:
	(Name)
ACCEPTED AND AGREED:
[TRANSFEREE]
(Name)

B-1

EX-10.68

Exhibit 10.68

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO MODTECH HOLDINGS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

Right to Purchase up to 266,408 Shares of Common Stock of

Modtech Holdings, Inc.

(subject to adjustment as provided herein)

AMENDED AND RESTATED COMMON STOCK PURCHASE WARRANT

No. 6 Issue Date: March 21, 2008

MODTECH HOLDINGS, INC., a corporation organized under the laws of the State of Delaware (the “Company”), hereby certifies that, for value received, VALENS OFFSHORE SPV I, LTD., or assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company (as defined herein) from and after the Issue Date of this Amended and Restated Warrant (as may be amended, restated, modified and/or supplemented from time to time, this “Warrant”) and at any time or from time to time before 5:00 p.m., New York time, through the close of business February 28, 2015 (the “Expiration Date”), up to 266,408 fully paid and nonassessable shares of Common Stock (as hereinafter defined), $0.01 par value per share, at the applicable Exercise Price per share (as defined below). The number and character of such shares of Common Stock and the applicable Exercise Price per share are subject to adjustment as provided herein.

This Warrant amends and restates in its entirety, and is given in substitution for that certain Common Stock Purchase Warrant dated February 29, 2008 issued to Holder by the Company (as amended, restated, modified and/or supplemented from time to time).

As used herein the following terms, unless the context otherwise requires, have the following respective meanings:

(a)The term “Company” shall include Modtech Holdings, Inc. and any person or entity which shall succeed, or assume the obligations of, Modtech Holdings, Inc. hereunder.

(b)The term “Common Stock” includes (i) the Company’s Common Stock, par value $0.01 per share; and (ii) any other securities into which or for which any of the securities described in the preceding clause (i) may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise.

(c)The term “Other Securities” refers to any stock (other than Common Stock) and other securities of the Company or any other person (corporate or otherwise) which the holder of the Warrant at any time shall be entitled to receive, or shall have received, on the exercise of the Warrant, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 4 or otherwise.

(d)The “Exercise Price” applicable under this Warrant shall be $0.40.

1.Exercise of Warrant.

1.1.Number of Shares Issuable upon Exercise. From and after the date hereof through and including the Expiration Date, the Holder shall be entitled to receive, upon exercise of this Warrant in whole or in part, by delivery of an original or fax copy of an exercise notice in the form attached hereto as Exhibit A (the “Exercise Notice”), shares of Common Stock of the Company, subject to adjustment pursuant to Section 4.

1.2.Fair Market Value. For purposes hereof, the “Fair Market Value” of a share of Common Stock as of a particular date (the “Determination Date”) shall mean:

(a)If the Company’s Common Stock is traded on the American Stock Exchange or another national exchange or is quoted on the Global or Capital Market of The Nasdaq Stock Market, Inc.(“Nasdaq”), then the closing or last sale price, respectively, reported for the last business day immediately preceding the Determination Date.

(b)If the Company’s Common Stock is not traded on the American Stock Exchange or another national exchange or on the Nasdaq but is traded on the NASD Over the Counter Bulletin Board, then the mean of the average of the closing bid and asked prices reported for the last business day immediately preceding the Determination Date.

(c)Except as provided in clause (d) below, if the Company’s Common Stock is not publicly traded, then as the Holder and the Company agree or in the absence of agreement by arbitration in accordance with the rules then in effect of the American Arbitration Association, before a single arbitrator to be chosen from a panel of persons qualified by education and training to pass on the matter to be decided.

(d)If the Determination Date is the date of a liquidation, dissolution or winding up, or any event deemed to be a liquidation, dissolution or winding up pursuant to the Company’s charter, then all amounts to be payable per share to holders of the Common Stock pursuant to the charter in the event of such liquidation, dissolution or winding up, plus all other amounts to be payable per share in respect of the Common Stock in liquidation under the charter, assuming for the purposes of this clause (d) that all of the shares of Common Stock then issuable upon exercise of the Warrant are outstanding at the Determination Date.

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1.3.Company Acknowledgment. The Company will, at the time of the exercise of this Warrant, upon the request of the holder hereof acknowledge in writing its continuing obligation to afford to such holder any rights to which such holder shall continue to be entitled after such exercise in accordance with the provisions of this Warrant. If the holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such holder any such rights.

1.4.Trustee for Warrant Holders. In the event that a bank or trust company shall have been appointed as trustee for the holders of this Warrant pursuant to Subsection 3.2, such bank or trust company shall have all the powers and duties of a warrant agent (as hereinafter described) and shall accept, in its own name for the account of the Holder or Holder such successor person as may be entitled thereto, all amounts otherwise payable to the Company or such successor, as the case may be, on exercise of this Warrant pursuant to this Section 1.

2.Procedure for Exercise.

2.1.Delivery of Stock Certificates, Etc., on Exercise. The Company agrees that the shares of Common Stock purchased upon exercise of this Warrant shall be deemed to be issued to the Holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such shares in accordance herewith. As soon as practicable after the exercise of this Warrant in full or in part, and in any event within three (3) business days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Holder, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct in compliance with applicable securities laws, a certificate or certificates for the number of duly and validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities) to which such Holder shall be entitled on such exercise, plus, in lieu of any fractional share to which such holder would otherwise be entitled, cash equal to such fraction multiplied by the then Fair Market Value of one full share, together with any other stock or other securities and property (including cash, where applicable) to which such Holder is entitled upon such exercise pursuant to Section 1 or otherwise.

2.2.Exercise. Payment shall be made either in cash or by certified or official bank check payable to the order of the Company equal to the applicable aggregate Exercise Price for the number of Common Shares specified in such Exercise Notice (as such exercise number shall be adjusted to reflect any adjustment in the total number of shares of Common Stock issuable to the Holder per the terms of this Warrant) and the Holder shall thereupon be entitled to receive the number of duly authorized, validly issued, fully-paid and non-assessable shares of Common Stock (or Other Securities) determined as provided herein.

3.Effect of Reorganization, Etc.; Adjustment of Exercise Price.

3.1.Reorganization, Consolidation, Merger, Etc. In case at any time or from time to time, the Company shall (a) effect a reorganization, (b) consolidate with or merge into any other person, or (c) transfer all or substantially all of its properties or assets to any other person under any plan or arrangement contemplating the dissolution of the Company, then, in each such case, as a condition to the consummation of such a transaction, if applicable, proper and adequate provision shall be made by the Company whereby the Holder, on the exercise hereof as provided in Section 1 at any time after the consummation of such reorganization, consolidation or merger or the effective date of such dissolution, as the case may be, shall receive, in lieu of the Common Stock (or Other Securities) issuable on such exercise prior to such consummation or such effective date, the stock and other securities and property (including cash) to which such Holder would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if such Holder had so exercised this Warrant, immediately prior thereto, all subject to further adjustment thereafter as provided in Section 4.

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3.2.Dissolution. In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, concurrently with any distributions made to holders of its Common Stock, shall at its expense deliver or cause to be delivered to the Holder the stock and other securities and property (including cash, where applicable) receivable by the Holder pursuant to Section 3.1 to the extent the Holder has exercised the warrant following the transfer of assets, or, if the Holder shall so instruct the Company, to a bank or trust company specified by the Holder and having its principal office in New York, NY as trustee for the Holder (the “Trustee”).

3.3.Continuation of Terms. Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in this Section 3, this Warrant shall continue in full force and effect and the terms hereof shall be applicable to the shares of stock and other securities and property receivable on the exercise of this Warrant after the consummation of such reorganization, consolidation or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any such stock or other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company, whether or not such person shall have expressly assumed the terms of this Warrant as provided in Section 4. In the event this Warrant does not continue in full force and effect after the consummation of the transactions described in this Section 3, then the Company’s securities and property (including cash, where applicable) receivable by the Holder will be delivered to the Holder or the Trustee as contemplated by Section 3.2.

4.Extraordinary Events Regarding Common Stock. In the event that the Company shall (a) issue additional shares of the Common Stock as a dividend or other distribution on outstanding Common Stock or any preferred stock issued by the Company (b) subdivide its outstanding shares of Common Stock, or (c) combine its outstanding shares of the Common Stock into a smaller number of shares of the Common Stock, then, in each such event, the Exercise Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Exercise Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Exercise Price then in effect. The Exercise Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein in this Section 4. The number of shares of Common Stock that the Holder shall thereafter, on the exercise hereof as provided in Section 1, be entitled to receive shall be adjusted to a number determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this Section 4) be issuable on such exercise by a fraction of which (a) the numerator is the Exercise Price that would otherwise (but for the provisions of this Section 4) be in effect, and (b) the denominator is the Exercise Price in effect on the date of such exercise (taking into account the provisions of this Section 4). Notwithstanding the foregoing, in no event shall the Exercise Price be less than the par value of the Common Stock.

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5.Certificate as to Adjustments. In each case of any adjustment or readjustment in the shares of Common Stock (or Other Securities) issuable on the exercise of this Warrant, the Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional shares of Common Stock (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant. The Company will forthwith mail a copy of each such certificate to the Holder and any Warrant agent of the Company (appointed pursuant to Section 11 hereof).

6.Reservation of Stock, Etc., Issuable on Exercise of Warrant. The Company will at all times reserve and keep available, solely for issuance and delivery on the exercise of this Warrant, shares of Common Stock (or Other Securities) from time to time issuable on the exercise of this Warrant.

7.Assignment; Exchange of Warrant. Subject to compliance with applicable securities laws, this Warrant, and the rights evidenced hereby, may be transferred by any registered holder hereof (a “Transferor”) in whole or in part. On the surrender for exchange of this Warrant, with the Transferor’s endorsement in the form of Exhibit B attached hereto (the “Transferor Endorsement Form”) and together with evidence reasonably satisfactory to the Company demonstrating compliance with applicable securities laws, which shall include, without limitation, the provision of a legal opinion from the Transferor’s counsel (at the Company’s expense) that such transfer is exempt from the registration requirements of applicable securities laws, the Company at its expense (but with payment by the Transferor of any applicable transfer taxes) will issue and deliver to or on the order of the Transferor thereof a new Warrant of like tenor, in the name of the Transferor and/or the transferee(s) specified in such Transferor Endorsement Form (each a “Transferee”), calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant so surrendered by the Transferor.

8.Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of this Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.

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9.Registration Rights. The Holder has been granted certain registration rights by the Company. These registration rights are set forth in a Registration Rights Agreement entered into by the Company and Holder dated as February 29, 2008, as the same may be amended, restated, modified and/or supplemented from time to time.

10.Maximum Exercise. Notwithstanding anything herein to the contrary, in no event shall the Holder be entitled to exercise any portion of this Warrant in excess of that portion of this Warrant upon exercise of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its Affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unexercised portion of this Warrant or the unexercised or unconverted portion of any other security of the Holder subject to a limitation on conversion analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the exercise of the portion of this Warrant with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its Affiliates of any amount greater than 9.99% of the then outstanding shares of Common Stock (whether or not, at the time of such exercise, the Holder and its Affiliates beneficially own more than 9.99% of the then outstanding shares of Common Stock). As used herein, the term “Affiliate” means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act of 1933, as amended.   For purposes of the second preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such sentence. For any reason at any time, upon written or oral request of the Holder, the Company shall within one (1) business day confirm orally and in writing to the Holder the number of shares of Common Stock outstanding as of any given date.  The limitations set forth herein (x) shall automatically become null and void following notice to the Company upon the occurrence and during the continuance of an Event of Default (as defined in the Additional Secured Term Notes referred to in the Amendment and Waiver Agreement dated as of the date hereof among the Holder, Valens U.S. SPV I, LLC, Laurus Master Fund, Ltd. and the Company) and (y) may be waived by the Holder upon provision of no less than sixty-one (61) days prior written notice to the Company; provided, however, that, such written notice of waiver shall only be effective if delivered at a time when no indebtedness (including, without limitation, principal, interest, fees and charges) of the Company of which the Holder or any of its Affiliates was, at any time, the owner, directly or indirectly is outstanding.

11.Warrant Agent. The Company may, by written notice to the each Holder of the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other Securities) on the exercise of this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section 7, and replacing this Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such agent.

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12.Transfer on the Company’s Books. Until this Warrant is transferred on the books of the Company, the Company may treat the registered holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

13.Notices, Etc. All notices and other communications from the Company to the Holder shall be mailed by first class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder who has so furnished an address to the Company.

14.Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION BROUGHT CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS WARRANT SHALL BE BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE HOLDER MAY CHOOSE TO WAIVE THIS PROVISION AND BRING AN ACTION OUTSIDE THE STATE OF NEW YORK. The individuals executing this Warrant on behalf of the Company agree to submit to the jurisdiction of such courts and waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorneys’ fees and costs. In the event that any provision of this Warrant is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Warrant. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision hereof. The Company acknowledges that legal counsel participated in the preparation of this Warrant and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Warrant to favor any party against the other party.

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

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IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above.

	MODTECH HOLDINGS, INC.
WITNESS:
	By: /s/ Kenneth S. Cragun
/s/ Lori Lopez	Name: Kenneth S. Cragun
Lori Lopez	Title: Chief Financial Officer

Exhibit A

FORM OF SUBSCRIPTION

(To Be Signed Only On Exercise Of Warrant)

TO:Modtech Holdings, Inc.

Attention:Chief Financial Officer

The undersigned, pursuant to the provisions set forth in the attached Warrant (No.____), hereby irrevocably elects to purchase (check applicable box):

________ shares of the Common Stock covered by such Warrant; or

the maximum number of shares of Common Stock covered by such Warrant pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned herewith makes payment of the full Exercise Price for such shares at the price per share provided for in such Warrant, which is $___________. Such payment takes the form of (check applicable box or boxes):

$__________ in lawful money of the United States; and/or

the cancellation of such portion of the attached Warrant as is exercisable for a total of _______ shares of Common Stock (using a Fair Market Value of $_______ per share for purposes of this calculation); and/or

the cancellation of such number of shares of Common Stock as is necessary, in accordance with the formula set forth in Section 2.2, to exercise this Warrant with respect to the maximum number of shares of Common Stock purchasable pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned requests that the certificates for such shares be issued in the name of, and delivered to _______________________________ whose address is _____________________________________________________.

The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable upon exercise of the within Warrant shall be made pursuant to registration of the Common Stock under the Securities Act of 1933, as amended (the “Securities Act”) or pursuant to an exemption from registration under the Securities Act.

Dated: ________________________
	(Signature must conform to name of holder as specified on the face of the Warrant)
	Address:

A-1

Exhibit B

FORM OF TRANSFEROR ENDORSEMENT

(To Be Signed Only On Transfer Of Warrant)

For value received, the undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading “Transferees” the right represented by the within Warrant to purchase the percentage and number of shares of Common Stock of Modtech Holdings, Inc. into which the within Warrant relates specified under the headings “Percentage Transferred” and “Number Transferred,” respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to transfer its respective right on the books of Modtech Holdings, Inc. with full power of substitution in the premises.

Transferees Address Percentage Transferred Number Transferred

Dated:
	(Signature must conform to name of holder as specified on the face of the Warrant)
	Address:
	SIGNED IN THE PRESENCE OF:
	(Name)
ACCEPTED AND AGREED:
[TRANSFEREE]
(Name)

B-1

EX-10.69

Exhibit 10.69

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO MODTECH HOLDINGS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

Right to Purchase up to 195,935 Shares of Common Stock of

Modtech Holdings, Inc.

(subject to adjustment as provided herein)

AMENDED AND RESTATED COMMON STOCK PURCHASE WARRANT

No. 4 Issue Date: March 21, 2008

MODTECH HOLDINGS, INC., a corporation organized under the laws of the State of Delaware (the “Company”), hereby certifies that, for value received, VALENS U.S. SPV I, LLC, or assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company (as defined herein) from and after the Issue Date of this Amended and Restated Common Stock Purchase Warrant (as may be amended, restated, modified and/or supplemented from time to time, this “Warrant”) and at any time or from time to time before 5:00 p.m., New York time, through the close of business February 28, 2015 (the “Expiration Date”), up to 195,935 fully paid and nonassessable shares of Common Stock (as hereinafter defined), $0.01 par value per share, at the applicable Exercise Price per share (as defined below). The number and character of such shares of Common Stock and the applicable Exercise Price per share are subject to adjustment as provided herein.

This Warrant amends and restates in its entirety, and is given in substitution for that certain Common Stock Purchase Warrant dated February 29, 2008 issued to Holder by the Company (as amended, restated, modified and/or supplemented from time to time).

As used herein the following terms, unless the context otherwise requires, have the following respective meanings:

(a)The term “Company” shall include Modtech Holdings, Inc. and any person or entity which shall succeed, or assume the obligations of, Modtech Holdings, Inc. hereunder.

(b)The term “Common Stock” includes (i) the Company’s Common Stock, par value $0.01 per share; and (ii) any other securities into which or for which any of the securities described in the preceding clause (i) may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise.

(c)The term “Other Securities” refers to any stock (other than Common Stock) and other securities of the Company or any other person (corporate or otherwise) which the holder of the Warrant at any time shall be entitled to receive, or shall have received, on the exercise of the Warrant, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 4 or otherwise.

(d)The “Exercise Price” applicable under this Warrant shall be $0.40.

1.Exercise of Warrant.

1.1.Number of Shares Issuable upon Exercise. From and after the date hereof through and including the Expiration Date, the Holder shall be entitled to receive, upon exercise of this Warrant in whole or in part, by delivery of an original or fax copy of an exercise notice in the form attached hereto as Exhibit A (the “Exercise Notice”), shares of Common Stock of the Company, subject to adjustment pursuant to Section 4.

1.2.Fair Market Value. For purposes hereof, the “Fair Market Value” of a share of Common Stock as of a particular date (the “Determination Date”) shall mean:

(a)If the Company’s Common Stock is traded on the American Stock Exchange or another national exchange or is quoted on the Global or Capital Market of The Nasdaq Stock Market, Inc.(“Nasdaq”), then the closing or last sale price, respectively, reported for the last business day immediately preceding the Determination Date.

(b)If the Company’s Common Stock is not traded on the American Stock Exchange or another national exchange or on the Nasdaq but is traded on the NASD Over the Counter Bulletin Board, then the mean of the average of the closing bid and asked prices reported for the last business day immediately preceding the Determination Date.

(c)Except as provided in clause (d) below, if the Company’s Common Stock is not publicly traded, then as the Holder and the Company agree or in the absence of agreement by arbitration in accordance with the rules then in effect of the American Arbitration Association, before a single arbitrator to be chosen from a panel of persons qualified by education and training to pass on the matter to be decided.

(d)If the Determination Date is the date of a liquidation, dissolution or winding up, or any event deemed to be a liquidation, dissolution or winding up pursuant to the Company’s charter, then all amounts to be payable per share to holders of the Common Stock pursuant to the charter in the event of such liquidation, dissolution or winding up, plus all other amounts to be payable per share in respect of the Common Stock in liquidation under the charter, assuming for the purposes of this clause (d) that all of the shares of Common Stock then issuable upon exercise of the Warrant are outstanding at the Determination Date.

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1.3.Company Acknowledgment. The Company will, at the time of the exercise of this Warrant, upon the request of the holder hereof acknowledge in writing its continuing obligation to afford to such holder any rights to which such holder shall continue to be entitled after such exercise in accordance with the provisions of this Warrant. If the holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such holder any such rights.

1.4.Trustee for Warrant Holders. In the event that a bank or trust company shall have been appointed as trustee for the holders of this Warrant pursuant to Subsection 3.2, such bank or trust company shall have all the powers and duties of a warrant agent (as hereinafter described) and shall accept, in its own name for the account of the Holder or Holder such successor person as may be entitled thereto, all amounts otherwise payable to the Company or such successor, as the case may be, on exercise of this Warrant pursuant to this Section 1.

2.Procedure for Exercise.

2.1.Delivery of Stock Certificates, Etc., on Exercise. The Company agrees that the shares of Common Stock purchased upon exercise of this Warrant shall be deemed to be issued to the Holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such shares in accordance herewith. As soon as practicable after the exercise of this Warrant in full or in part, and in any event within three (3) business days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Holder, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct in compliance with applicable securities laws, a certificate or certificates for the number of duly and validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities) to which such Holder shall be entitled on such exercise, plus, in lieu of any fractional share to which such holder would otherwise be entitled, cash equal to such fraction multiplied by the then Fair Market Value of one full share, together with any other stock or other securities and property (including cash, where applicable) to which such Holder is entitled upon such exercise pursuant to Section 1 or otherwise.

2.2.Exercise. Payment shall be made either in cash or by certified or official bank check payable to the order of the Company equal to the applicable aggregate Exercise Price for the number of Common Shares specified in such Exercise Notice (as such exercise number shall be adjusted to reflect any adjustment in the total number of shares of Common Stock issuable to the Holder per the terms of this Warrant) and the Holder shall thereupon be entitled to receive the number of duly authorized, validly issued, fully-paid and non-assessable shares of Common Stock (or Other Securities) determined as provided herein.

3.Effect of Reorganization, Etc.; Adjustment of Exercise Price.

3.1.Reorganization, Consolidation, Merger, Etc. In case at any time or from time to time, the Company shall (a) effect a reorganization, (b) consolidate with or merge into any other person, or (c) transfer all or substantially all of its properties or assets to any other person under any plan or arrangement contemplating the dissolution of the Company, then, in each such case, as a condition to the consummation of such a transaction, if applicable, proper and adequate provision shall be made by the Company whereby the Holder, on the exercise hereof as provided in Section 1 at any time after the consummation of such reorganization, consolidation or merger or the effective date of such dissolution, as the case may be, shall receive, in lieu of the Common Stock (or Other Securities) issuable on such exercise prior to such consummation or such effective date, the stock and other securities and property (including cash) to which such Holder would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if such Holder had so exercised this Warrant, immediately prior thereto, all subject to further adjustment thereafter as provided in Section 4.

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3.2.Dissolution. In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, concurrently with any distributions made to holders of its Common Stock, shall at its expense deliver or cause to be delivered to the Holder the stock and other securities and property (including cash, where applicable) receivable by the Holder pursuant to Section 3.1 to the extent the Holder has exercised the warrant following the transfer of assets, or, if the Holder shall so instruct the Company, to a bank or trust company specified by the Holder and having its principal office in New York, NY as trustee for the Holder (the “Trustee”).

3.3.Continuation of Terms. Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in this Section 3, this Warrant shall continue in full force and effect and the terms hereof shall be applicable to the shares of stock and other securities and property receivable on the exercise of this Warrant after the consummation of such reorganization, consolidation or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any such stock or other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company, whether or not such person shall have expressly assumed the terms of this Warrant as provided in Section 4. In the event this Warrant does not continue in full force and effect after the consummation of the transactions described in this Section 3, then the Company’s securities and property (including cash, where applicable) receivable by the Holder will be delivered to the Holder or the Trustee as contemplated by Section 3.2.

4.Extraordinary Events Regarding Common Stock. In the event that the Company shall (a) issue additional shares of the Common Stock as a dividend or other distribution on outstanding Common Stock or any preferred stock issued by the Company (b) subdivide its outstanding shares of Common Stock, or (c) combine its outstanding shares of the Common Stock into a smaller number of shares of the Common Stock, then, in each such event, the Exercise Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Exercise Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Exercise Price then in effect. The Exercise Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein in this Section 4. The number of shares of Common Stock that the Holder shall thereafter, on the exercise hereof as provided in Section 1, be entitled to receive shall be adjusted to a number determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this Section 4) be issuable on such exercise by a fraction of which (a) the numerator is the Exercise Price that would otherwise (but for the provisions of this Section 4) be in effect, and (b) the denominator is the Exercise Price in effect on the date of such exercise (taking into account the provisions of this Section 4). Notwithstanding the foregoing, in no event shall the Exercise Price be less than the par value of the Common Stock.

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5.Certificate as to Adjustments. In each case of any adjustment or readjustment in the shares of Common Stock (or Other Securities) issuable on the exercise of this Warrant, the Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional shares of Common Stock (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant. The Company will forthwith mail a copy of each such certificate to the Holder and any Warrant agent of the Company (appointed pursuant to Section 11 hereof).

6.Reservation of Stock, Etc., Issuable on Exercise of Warrant. The Company will at all times reserve and keep available, solely for issuance and delivery on the exercise of this Warrant, shares of Common Stock (or Other Securities) from time to time issuable on the exercise of this Warrant.

7.Assignment; Exchange of Warrant. Subject to compliance with applicable securities laws, this Warrant, and the rights evidenced hereby, may be transferred by any registered holder hereof (a “Transferor”) in whole or in part. On the surrender for exchange of this Warrant, with the Transferor’s endorsement in the form of Exhibit B attached hereto (the “Transferor Endorsement Form”) and together with evidence reasonably satisfactory to the Company demonstrating compliance with applicable securities laws, which shall include, without limitation, the provision of a legal opinion from the Transferor’s counsel (at the Company’s expense) that such transfer is exempt from the registration requirements of applicable securities laws, the Company at its expense (but with payment by the Transferor of any applicable transfer taxes) will issue and deliver to or on the order of the Transferor thereof a new Warrant of like tenor, in the name of the Transferor and/or the transferee(s) specified in such Transferor Endorsement Form (each a “Transferee”), calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant so surrendered by the Transferor.

8.Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of this Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.

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9.Registration Rights. The Holder has been granted certain registration rights by the Company. These registration rights are set forth in a Registration Rights Agreement entered into by the Company and Holder dated as of February 29, 2008, as the same may be amended, restated, modified and/or supplemented from time to time.

10.Maximum Exercise. Notwithstanding anything herein to the contrary, in no event shall the Holder be entitled to exercise any portion of this Warrant in excess of that portion of this Warrant upon exercise of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its Affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unexercised portion of this Warrant or the unexercised or unconverted portion of any other security of the Holder subject to a limitation on conversion analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the exercise of the portion of this Warrant with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its Affiliates of any amount greater than 9.99% of the then outstanding shares of Common Stock (whether or not, at the time of such exercise, the Holder and its Affiliates beneficially own more than 9.99% of the then outstanding shares of Common Stock). As used herein, the term “Affiliate” means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act of 1933, as amended.   For purposes of the second preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such sentence. For any reason at any time, upon written or oral request of the Holder, the Company shall within one (1) business day confirm orally and in writing to the Holder the number of shares of Common Stock outstanding as of any given date.  The limitations set forth herein (x) shall automatically become null and void following notice to the Company upon the occurrence and during the continuance of an Event of Default (as defined in the Additional Secured Term Notes referred to in the Amendment and Waiver Agreement dated as of the date hereof among the Holder, Laurus Master Fund, Ltd., Valens Offshore SPV I, Ltd. and the Company) and (y) may be waived by the Holder upon provision of no less than sixty-one (61) days prior written notice to the Company; provided, however, that, such written notice of waiver shall only be effective if delivered at a time when no indebtedness (including, without limitation, principal, interest, fees and charges) of the Company of which the Holder or any of its Affiliates was, at any time, the owner, directly or indirectly is outstanding.

11.Warrant Agent. The Company may, by written notice to the each Holder of the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other Securities) on the exercise of this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section 7, and replacing this Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such agent.

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12.Transfer on the Company’s Books. Until this Warrant is transferred on the books of the Company, the Company may treat the registered holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

13.Notices, Etc. All notices and other communications from the Company to the Holder shall be mailed by first class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder who has so furnished an address to the Company.

14.Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION BROUGHT CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS WARRANT SHALL BE BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE HOLDER MAY CHOOSE TO WAIVE THIS PROVISION AND BRING AN ACTION OUTSIDE THE STATE OF NEW YORK. The individuals executing this Warrant on behalf of the Company agree to submit to the jurisdiction of such courts and waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorneys’ fees and costs. In the event that any provision of this Warrant is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Warrant. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision hereof. The Company acknowledges that legal counsel participated in the preparation of this Warrant and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Warrant to favor any party against the other party.

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

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IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above.

	MODTECH HOLDINGS, INC.
WITNESS:
	By: /s/ Kenneth S. Cragun
/s/ Lori Lopez	Name: Kenneth S. Cragun
Lori Lopez	Title: Chief Financial Officer

Exhibit A

FORM OF SUBSCRIPTION

(To Be Signed Only On Exercise Of Warrant)

TO:Modtech Holdings, Inc.

Attention:Chief Financial Officer

The undersigned, pursuant to the provisions set forth in the attached Warrant (No.____), hereby irrevocably elects to purchase (check applicable box):

________ shares of the Common Stock covered by such Warrant; or

the maximum number of shares of Common Stock covered by such Warrant pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned herewith makes payment of the full Exercise Price for such shares at the price per share provided for in such Warrant, which is $___________. Such payment takes the form of (check applicable box or boxes):

$__________ in lawful money of the United States; and/or

the cancellation of such portion of the attached Warrant as is exercisable for a total of _______ shares of Common Stock (using a Fair Market Value of $_______ per share for purposes of this calculation); and/or

the cancellation of such number of shares of Common Stock as is necessary, in accordance with the formula set forth in Section 2.2, to exercise this Warrant with respect to the maximum number of shares of Common Stock purchasable pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned requests that the certificates for such shares be issued in the name of, and delivered to ________________________________ whose address is _____________________________________________________.

The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable upon exercise of the within Warrant shall be made pursuant to registration of the Common Stock under the Securities Act of 1933, as amended (the “Securities Act”) or pursuant to an exemption from registration under the Securities Act.

Dated: ________________________
	(Signature must conform to name of holder as specified on the face of the Warrant)
	Address:

A-1

Exhibit B

FORM OF TRANSFEROR ENDORSEMENT

(To Be Signed Only On Transfer Of Warrant)

For value received, the undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading “Transferees” the right represented by the within Warrant to purchase the percentage and number of shares of Common Stock of Modtech Holdings, Inc. into which the within Warrant relates specified under the headings “Percentage Transferred” and “Number Transferred,” respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to transfer its respective right on the books of Modtech Holdings, Inc. with full power of substitution in the premises.

Transferees Address Percentage Transferred Number Transferred

Dated:
	(Signature must conform to name of holder as specified on the face of the Warrant)
	Address:
	SIGNED IN THE PRESENCE OF:
	(Name)
ACCEPTED AND AGREED:
[TRANSFEREE]
(Name)

B-1

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Modtech Holdings Inc.:

We consent to the incorporation by reference in the registration statements (No. 333-102933, No. 333-91204, No. 333-79023 and No. 333-81169) on form S-8 of Modtech Holdings, Inc. of our report dated April 14, 2008, with respect to the consolidated balance sheets of Modtech Holdings, Inc. and Subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years ended December 31, 2007, 2006 and 2005, and the related financial statement schedule II for the years ended December 31, 2007, 2006 and 2005, which report appears in the December 31, 2007 Annual Report on form 10-K of Modtech Holdings, Inc.

/s/ Squar, Milner, Peterson, Miranda & Williamson, LLP

San Diego, California

April 14, 2008

EX-31.1

Exhibit 31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Dennis L. Shogren, certify that:

1 I have reviewed this annual report on Form 10-K of Modtech Holdings, Inc.;

2 Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3 Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4 The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the registrant’s internal control over financial reporting; and

5 The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ DENNIS L. SHOGREN

Dennis L. Shogren

President and Chief Executive Officer

April 14, 2008

EX-31.2

Exhibit 31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Kenneth S. Cragun, certify that:

1 I have reviewed this annual report on Form 10-K of Modtech Holdings, Inc.;

2 Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3 Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4 The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the registrant’s internal control over financial reporting; and

5 The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ KENNETH S. CRAGUN

Kenneth S. Cragun

Chief Financial Officer and Chief Accounting Officer

April 14, 2008

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned hereby certifies, in his capacity as Chief Executive Officer of Modtech Holdings, Inc. (the “Company”), for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on his knowledge:

• the Annual Report on Form 10-K of the Company for the year ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

• the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: April 14, 2008

/s/ DENNIS L. SHOGREN

Dennis L. Shogren

President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned hereby certifies, in his capacity as Chief Financial Officer of Modtech Holdings, Inc. (the “Company”), for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on his knowledge:

• the Annual Report on Form 10-K of the Company for the year ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

• the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: April 14, 2008

/s/ KENNETH S. CRAGUN

Kenneth S. Cragun

Chief Financial Officer and Chief Accounting Officer