<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
MODTECH HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] Fee not required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
MODTECH HOLDINGS, INC.
2830 Barrett Avenue
Perris, California 92571
(909) 943-4014
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 4, 1999
To the Holders of Common Stock of Modtech Holdings, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Modtech
Holdings, Inc. will be held at the Sheraton Hotel, 4545 MacArthur Boulevard,
Newport Beach, California 92660 on August 4, 1999 at 2:00 P.M., local time, for
the following purposes:
1. To elect a board of eight (8) directors, with each director so
elected to hold office until the next Annual Meeting and until
their successors have been duly elected and qualified;
2. To approve the Company's 1999 Nonstatutory Stock Option Plan;
and
3. To transact such other business as may properly come before the
Annual Meeting and any continuation or adjournment thereof.
The Board of Directors has fixed the close of business on June 15, 1999 as
the record date for the determination of the shareholders entitled to notice of
and to vote at the Annual Meeting, and only shareholders of record at the close
of business on that date will be entitled to vote at the Annual Meeting.
All shareholders are cordially invited to attend the Annual meeting in
person. YOU ARE URGED TO PROMPTLY COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED
PROXY IN THE ACCOMPANYING PRE-ADDRESSED, STAMPED ENVELOPE. Your proxy will not
be used if you are present at the Annual Meeting and desire to vote your shares
personally.
By Order of the Board of Directors,
Evan M. Gruber, Chief Executive Officer
Perris, California
June 30, 1999
IMPORTANT: IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON, IT IS
IMPORTANT THAT YOUR SHARES BE REPRESENTED SO THAT THE PRESENCE
OF A QUORUM MAY BE ASSURED. PLEASE SIGN AND DATE THE ENCLOSED
PROXY AND MAIL IT PROMPTLY. NO POSTAGE REQUIRED IF MAILED IN THE
UNITED STATES.
1
<PAGE> 3
MODTECH HOLDINGS, INC.
2830 Barrett Avenue
Perris, California 92571
-------------------
PROXY STATEMENT
-------------------
ANNUAL MEETING OF SHAREHOLDERS
To Be Held August 4, 1999
This Proxy Statement is being furnished to the shareholders of Modtech
Holdings, Inc., a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Company's Board of Directors for use at the
Annual Meeting of Shareholders of the Company to be held at the Sheraton Hotel,
4545 MacArthur Boulevard, Newport Beach, California 92660, on August 4, 1999 at
2:00 P.M., local time, and at any continuation or adjournment thereof.
This Proxy Statement, and the accompanying Notice of Annual Meeting and proxy
card, are first being mailed on or about June 30, 1999 to shareholders of record
on June 15, 1999, the record date for the determination of the stockholders
entitled to notice of and to vote at the Annual Meeting. A copy of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998, which
contains audited financial statements of the Company's predecessor, Modtech,
Inc., as filed with the Securities and Exchange Commission, is concurrently
being mailed to all shareholders of record as of June 15, 1999.
The cost of soliciting proxies will be borne by the Company. In addition to
the solicitation of proxies by mail, solicitation may be made by telephone,
telegraph or personal interview by Directors, officers and other regular
employees of the Company, without extra compensation. Brokerage houses,
nominees, fiduciaries and other custodians will be requested to forward
soliciting material to the beneficial owners of shares and will be reimbursed
for their expenses.
VOTING RIGHTS
As of June 15, 1999, the record date for the determination of the
shareholders of the Company entitled to notice of and to vote at the Annual
Meeting, there were 12,622,158 shares of the Company's Common Stock outstanding.
Each share of Common Stock entitles the holder to one vote on each matter to
come before the Annual Meeting.
Properly executed and returned proxies, unless revoked, will be voted as
directed by the shareholder, or in the absence of such direction, by the persons
named therein FOR the election of the eight director nominees listed below and
FOR approval of the 1999 Nonstatutory Stock Option Plan. As to any other
business which may properly come before the Annual Meeting, the proxy holders
will vote in accordance with their best judgment. A proxy may be revoked at any
time before it is voted by delivery of written notice of revocation to the
Secretary of the Company or by delivery of a subsequently dated proxy, or by
attendance at the Annual Meeting and voting in person. Attendance at the Annual
Meeting without also voting will not in and of itself constitute the revocation
of a proxy.
2
<PAGE> 4
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information regarding the ownership of the
Company's Common Stock as of April 15, 1999, by (i) each of the current
directors and nominees for election as a director of the Company, (ii) each
person or group known by the Company to be the beneficial owner of more than 5%
of the Company's outstanding Common Stock, and (iii) all current directors and
executive officers of the Company as a group. Except as otherwise noted and
subject to community property laws where applicable, each beneficial owner has
sole voting and investment power with respect to all shares shown as
beneficially owned by them. Except as otherwise indicated, the address of each
holder identified below is in care of the Company, 2830 Barrett Avenue, Perris,
California 92571.
<TABLE>
<CAPTION>
Name and Address Shares Percent of
of Beneficial Owner Beneficially Owned (1) Class (1)
- ------------------- ---------------------- ----------
<S> <C> <C>
Evan M. Gruber(2) 517,748 3.7%
Patrick Van Den Bossche(3) 239,077 1.7
Michael G. Rhodes(4) 202,916 1.5
Daniel J. Donahoe III 6,381 *
Robert W. Campbell 16,165 *
Charles R. Gwirtsman(5) 362,183 2.6
Charles A. Hamilton(6) 1,771,090 12.7
Charles C. McGettigan(7)(12) 1,807,668 13.0
Myron A. Wick III(7)(12) 1,807,668 13.0
Jon D. Gruber(8)(12) 3,528,758 25.3
Gruber & McBaine Capital Management(9)(12) 1,670,114 12.0
Infrastructure and Environmental Private Equity Fund III, L.P. 1,401,161 10.0
J. Patterson McBaine(10)(12) 3,478,390 24.9
Proactive Partners, L.P.(11)(12) 1,773,002 12.7
All directors and officers as a group
(9 people)(2)(3)(4)(5)(6)(7) 4,952,894 35.5
</TABLE>
- --------------------------
* Less than one percent.
(1) In calculating beneficial and percentage ownership, all shares of Common
Stock which a named shareholder will have the right to acquire within 60
days of the record date for the Annual Meeting upon exercise of stock
options are deemed to be outstanding for the purpose of computing the
ownership of such shareholder, but are not deemed to be outstanding for
the purpose of computing the percentage of Common Stock owned by any
other shareholder. As of April 15, 1999, an aggregate of 12,622,158
shares of Common Stock were outstanding. This does not give effect to
the potential issuance of 1,757,571 shares issuable upon exercise of
options granted or which may be granted under the Company's stock option
plans. See "Election of Directors - Stock Options."
(2) Includes 512,748 shares issuable upon exercise of stock options, but
does not include 174,667 shares issuable upon exercise of stock options
which have been granted but currently are not exercisable. Evan M.
Gruber and Jon D. Gruber are not related.
(3) Includes 86,158 shares issuable upon exercise of stock options, but does
not include 30,525 shares issuable upon exercise of stock options which
have been granted but currently are not exercisable.
(4) Includes 188,452 shares issuable upon exercise of stock options, but
does not include 108,000 shares issuable upon exercise of stock options
which have been granted but currently are not exercisable.
3
<PAGE> 5
(5) Includes 182,669 shares held by Capital Resources Growth, Inc., an
entity of which Mr. Gwirtsman is the sole stockholder, and 179,514
shares held directly by Mr. Gwirtsman and his wife and trusts formed for
the benefit of their children.
(6) Includes 19,637 shares held by Mr. Hamilton, 1,401,161 shares held by
Infrastructure and Environmental Private Equity Fund III, L.P. ("IEPEF")
and 350,292 shares held by Environmental & Information Technology
Private Equity Fund III ("EITPEF"). Mr. Hamilton is a principal of one
of the members of a limited liability company that serves as general
partners of IEPEF and the investment manager of EITPEF. Mr. Hamilton
disclaims beneficial ownership of all shares held by IEPEF and the
investment manager of EITPEF except to the extent of his pecuniary
interest therein.
(7) Includes 17,650 shares owned of record directly by each of Messrs.
McGettigan and Wick, and 1,773,002 shares owned of record by Proactive
Partners, L.P. and affiliates of which Messrs. McGettigan and Wick are
general partners. Also includes options to purchase 17,016 shares which
have been granted to each of Messrs. McGettigan and Wick for serving on
the Company's Board of Directors.
(8) Includes 87,841 shares owned of record directly by Mr. Gruber, all
shares owned of record by Proactive Partners, L.P. and affiliates of
which Mr. Gruber is a general partner, and all shares owned of record by
Gruber & McBaine Capital Management and affiliates, of which Mr. Gruber
is a general partner. Jon D. Gruber and Evan M. Gruber are not related.
(9) Includes 93,758 shares owned of record directly by Gruber & McBaine
Capital Management, all shares owned of record by Proactive Partners,
L.P. and affiliates, and all shares owned of record by Lagunitas
Partners, Gruber & McBaine International and GMJ Investments, affiliated
entities.
(10) Includes 37,473 shares owned of record directly by Mr. McBaine, all
shares owned of record by Proactive Partners, L.P. and affiliates, of
which Mr. McBaine is a general partner, and all shares owned of record
by Gruber & McBaine Capital Management and affiliates, of which Mr.
McBaine is a general partner.
(11) Includes 1,773,002 shares owned of record by Proactive Partners, L.P.
and the shares owned of record by Fremont Proactive Partners, an
affiliated entity.
(12) The address of each of Charles C. McGettigan, Myron A. Wick III, Jon D.
Gruber, J. Patterson McBaine, Gruber & McBaine Capital Management and
Proactive Partners, L.P. is 50 Osgood Place, San Francisco, CA 94133.
4
<PAGE> 6
ELECTION OF DIRECTORS
The Company's current Board of Directors has nominated eight (8)
individuals, Evan M. Gruber, Robert W. Campbell, Daniel J. Donahoe III, Charles
R. Gwirtsman, Charles A. Hamilton, Charles C. McGettigan, Patrick Van Den
Bossche and Myron A. Wick III, for election as directors of the Company at the
Annual Meeting, each to serve as such until the next annual meeting of the
Company's shareholders and until their respective successors are elected and
qualified. Each of the nominees is a current member of the Company's Board of
Directors. Although it is not presently contemplated that any nominee will
decline or be unable to serve as a Director, in either such event, the proxies
will be voted by the proxy holder for such other persons as may be designated by
the present Board of Directors should any nominee become unavailable to serve.
NOMINEES
Certain information concerning the eight individuals nominated by the
Company's Board of Directors for election at the Annual Meeting to serve as
directors of the Company for the ensuing year is set forth below:
Evan M. Gruber, age 45, joined the Company's predecessor, Modtech, Inc. in
January 1989 as its Chief Financial Officer and was elected Chief Executive
Officer in January 1990. Prior to joining Modtech, Inc., Mr. Gruber, who is a
certified public accountant, founded his own public accounting firm in Costa
Mesa, California in 1978.
Robert W. Campbell, age 42, is the Managing Director of Corporate Finance at
L.H. Friend, Weinress, Frankson & Presson, Inc. From 1993 to 1995, Mr. Campbell
was Senior Vice President - Investment Banking at Baraban Securities,
Incorporated. From 1982 to 1993, Mr. Campbell was employed by the Seidler
Companies, Inc. as Senior Vice President - Corporate Finance.
Daniel J. Donahoe III, age 65, who was elected to the Board of Directors of
Modtech, Inc. in 1998, is co-founder and President of Red Rock Resorts, which
operated special, unique boutique resorts in the Western United States. He also
serves as Chairman of Daybreak Investments, a privately-held investment company.
Mr. Donahoe has been actively involved in the commercial and residential real
estate market in the southwest over the past 25 years.
Charles R. Gwirtsman, age 44, has been a director of the Company since
February 1999. He is Managing Director of KRG Capital Partners, LLC. Prior to
joining KRG Capital in 1996, Mr. Gwirtsman served as Senior Vice President of
FCM Fiduciary Capital Management Company, the manager of two mezzanine debt
funds, from January 1994 to June 1996. Prior to this, Mr. Gwirtsman was employed
as a Corporate Vice President at PaineWebber, Incorporated from 1988 to 1993 as
a member of the Private Finance Group. Mr. Gwirtsman serves on the Board of
Directors of a number of privately held companies. From September 1995 through
January 1996, at the request of his then employer, FCM Fiduciary Capital
Management Company, Mr. Gwirtsman served as a director of Canadian's Corp., a
women's specialty clothing retailer. This company filed for bankruptcy
protection in February 1996 and was liquidated under Chapter 7 of the federal
bankruptcy code in December 1997.
Charles A. Hamilton, age 50, has been a director of the Company since
February 1999. Mr. Hamilton has over 27 years of investment experience in the
fields of securities analysis, corporate finance and venture capital. He is
currently a principal in the private equity group at Robertson, Stephens Funds,
which has been a wholly-owned subsidiary of BancAmerica since October 1997. He
had previously served as managing director of Robertson, Stephens & Company
since 1981. Mr. Hamilton has served as a director of numerous venture-financed
companies in recent years and he is presently on the board of White Cap
Industries, Inc., a public company, and ten private companies.
Charles C. McGettigan, age 54, has been a director of Modtech, Inc. since
June 1994. Mr. McGettigan is a co-founder and managing director of the
investment banking firm of McGettigan, Wick & Co., Inc. and a co-founder and
general partner of Proactive Investment Managers, L.P., the general partner of
Proactive Partners, L.P., a merchant banking fund. Prior to founding McGettigan,
Wick & Co., Inc., he was a Principal, Corporate Finance of Hambrecht & Quist and
a Senior Vice President of Dillon, Read & Co. Mr. McGettigan serves on the
boards of directors of Cuisine Solutions, Inc., Digital Dictation, Inc.; I-Flow
Corporation; Onsite Energy, PMR Corporation, Sonex Research Corporation,
Tanknology-NDE, and Wray-Tek Instruments, Inc.
5
<PAGE> 7
Patrick Van Den Bossche, age 37, served as Chief Executive Officer,
President and a director of SPI Holdings, Inc., a manufacturer of commercial and
light industrial modular buildings, since February 1997 until its acquisition by
the Company in February 1999. Mr. Van Den Bossche joined SPI in 1991 and was
appointed as Vice President of Operations in 1993. Mr. Van Den Bossche also
serves as a director of Modular Building Institute ("MBI"), a national trade
organization for the modular building industry, and is a member of MBI's
statistics committee.
Myron A. Wick III, age 55, became a director of Modtech, Inc. in June 1994.
Mr. Wick is currently a managing director and founder of McGettigan, Wick & Co.,
Inc., an investment banking firm formed in 1988, and a general partner of the
general partner of Proactive Partners, L.P., a merchant banking fund formed in
1991. Mr. Wick is a director of Children's Discovery Centers, Digital Dictation,
Inc., Electrostatic Devices, Sonex Research Corporation, Tanknology-NDE, and
Wray-Tek Instruments, Inc.
STRUCTURE AND FUNCTION OF THE BOARD OF DIRECTORS
During the last fiscal year, the Board of Directors of the Company's
predecessor, Modtech, Inc. held four regular and special meetings or otherwise
took action by written consent. The Board has established both an Audit
Committee, which is comprised of Messrs. Gwirtsman, Campbell and McGettigan, and
a Compensation Committee, which is comprised of Messrs. Donahoe, Hamilton and
Wick. The Audit Committee meets to consult with the Company's independent
auditors concerning their engagement and audit plan, and thereafter concerning
the auditor's report and management letter and with the assistance of the
independent auditors, also monitors the adequacy of the Company's internal
accounting controls. With respect to compensation, the Compensation Committee
determines the compensation of corporate officers, and will determine the
persons entitled to participate in stock option, bonus and other similar plans.
The Board of Directors continues to meet as a whole to nominate the individuals
to be proposed by the Board of Directors for election as directors of the
Company, and has no separate nominating committee.
Each non-employee director is paid an annual retainer of $4,000 plus $1,000
for each board and board committee meeting attended. Each non-employee director
will be granted an option to purchase 5,000 shares of Common Stock at the end of
each year of service on the Board of Directors. The Company reimburses the
expenses of its non-employee directors in attending Board meetings. No
compensation is paid to any of the employee directors.
There is no family relationship between any nominee and any other nominee or
executive officer of the Company.
EXECUTIVE OFFICERS
The executive officers of the Company are Evan M. Gruber, Chief Executive
Officer; Patrick Van Den Bossche, President; and Michael G. Rhodes, Chief
Operating Officer and Chief Financial Officer. Subject to the terms of
applicable employment agreements, officers serve at the pleasure of the Board of
Directors.
Mr. Rhodes joined Modtech, Inc. in 1988 and was its controller through 1992.
In 1993 he was elected Chief Financial Officer, and in 1996 was elected Chief
Operating Officer. Prior to joining Modtech, Inc., Mr. Rhodes worked for a
public accounting firm.
6
<PAGE> 8
COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes the annual and long term compensation paid by
the Company's predecessor, Modtech, Inc. during fiscal years ended December 31,
1996, 1997 and 1998 to those persons who were, as of December 31, 1998 (i) the
Chief Executive Officer of Modtech, Inc. and (ii) the other compensated
executive officers of Modtech, Inc., whose total annual salary and bonus
exceeded $100,000 during the year ended December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------ -------------------- -------
RESTRICTED
STOCK ALL OTHER
SALARY BONUS OTHER AWARDS OPTIONS LTIP COMPENSATION
NAME AND PRINCIPAL POSITION YEAR $ $ $ $ # PAYOUTS $(1)
- --------------------------- ---- ------- ------- ----- --------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Evan M. Gruber 1998 200,000 547,546 -- -- 66,778 -- 5,000
Chief Executive Officer 1997 200,000 459,000 -- -- 133,000 -- 4,750
and Director 1996 158,000 137,000 -- -- 110,000 -- 4,615
Michael G. Rhodes 1998 125,000 153,216 -- -- 51,591 -- 5,000
Chief Operating Officer and 1997 125,000 142,500 -- -- 82,500 -- 4,750
Chief Financial Officer 1996 90,000 24,000 -- -- 105,000 -- 4,827
</TABLE>
(1) The figures shown in the column designated "All Other Compensation"
represent the executive officer's share of Modtech Inc.'s contribution to
the 401(k) plan, see "401(k) Plan."
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements in February 1999 with Messrs.
Gruber, Van Den Bossche and Rhodes. These agreements are for five years each,
provide for early severance payments of between one and two years salary and
include, among other provisions, base annual salary of $300,000 for Mr. Gruber,
$250,000 for Mr. Van Den Bossche, and $200,000 for Mr. Rhodes. The base salaries
are subject to annual percentage increases and each individual is entitled to
earn bonuses of up to 100% of annual base salary. The bonuses are based on
performance and include a cash component and a stock option component based on
performance. Concurrently with the acquisition of SPI Holdings, Inc., Mr. Gruber
received an option to purchase 50,000 shares of Common Stock. The option became
immediately vested for 10,000 shares and will continue to vest at the rate of
10,000 shares per year. The option will be credited against the stock option
component of any bonuses earned by Mr. Gruber in the first year of the
employment agreement. Mr. Gruber's new employment agreement also includes a
buy-out of his previous employment agreement with Modtech, Inc.
401(k) PLAN
Under the Company's 401(k) Plan, officers and other employees of the Company
may elect to defer up to 12% of their compensation, subject to limitations under
the Internal Revenue Code. The Company makes annual contributions on a 50%
matching basis. Amounts deferred are deposited by the Company in a trust account
for distribution to employees upon retirement, attainment of age 59-1/2,
permanent disability, death, termination of employment or the occurrence of
conditions constituting extraordinary hardship. For the year ended December 31,
1998, Modtech, Inc. contributed $5,000 and $5,000 as matching contributions for
the accounts of Mr. Gruber and Mr. Rhodes, respectively.
7
<PAGE> 9
STOCK OPTIONS
Modtech, Inc. granted stock options under its 1989 Stock Option Plan (the "1989
Plan"), its March 1994 Stock Option Plan (the "March 1994 Plan"), its May 1994
Option Plan (the "May 1994 Plan") and its 1996 Stock Option Plan (the "1996
Plan"). As of December 31, 1998, options to purchase 167,600 shares, at a
weighted average exercise price of $1.88 per share, were outstanding under the
1989 Plan, options to purchase an aggregate of 634,850 shares at exercise prices
ranging from $1.19 to $20.57 were outstanding under the two 1994 Plans, and
options to purchase 482,577 shares at a weighted average exercise price of
$10.82 per share were outstanding under the 1996 Plan.
In connection with the acquisition of Del-Tec in 1989, options to purchase
shares of the Company's Common Stock were granted. As of December 31, 1998,
options to purchase 75,000 shares at the exercise price of $1.83 per share were
outstanding as a result of such acquisition.
.
The following table sets forth certain information regarding options granted
by Modtech, Inc. during the year ended December 31, 1998 to the executive
officers of the Company identified in the Summary Compensation Table set forth
above:
OPTIONS GRANTED IN FISCAL YEAR 1998
<TABLE>
<CAPTION>
Potential Realized
Value at Assumed
No. of % of Annual Rates of Stock
Shares Total Price Appreciation
Name Subject to Options For Option Term(3)
of Options Granted to Exercise Expiration ------------------------
Optionee Granted(1) Employees Price(2) Date 5% 10%
-------- ----------- --------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Evan M. Gruber 66,778 44% $ 19.50 12/31/2007 $359,766 $794,988
Michael G. Rhodes 51,591 34% 19.50 12/31/2007 277,946 614,188
</TABLE>
- -----------------------------
(1) Options are exercisable starting 12 months after the grant date with 25%
vesting each year.
(2) The exercise price was the market price of a share of the Common Stock of
Modtech, Inc. on the date of grant.
(3) On December 31, 1998, the closing price for a share of the Common Stock of
Modtech, Inc was $15.25.
The following table sets forth information regarding options exercised
during the year ended December 31, 1998 by the executive officers of Modtech,
Inc. identified in the Summary Compensation Table set forth above, as well as
the aggregate value of unexercised options held by such executive officers at
December 31, 1998. The Company has no outstanding stock appreciation rights,
either freestanding or in tandem with options.
AGGREGATED OPTION EXERCISES LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised in-the-money Options
Shares Options at Fiscal Year End at Fiscal Year End($)(1)
Acquired on Value ---------------------------- ---------------------------
Name Exercise(#) Realized Exercisable Unexercisable Exercisable Unexercisable
---- ------------ --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Evan M. Gruber 35,000 852,950 472,083 228,028 $6,291,564 $1,540,600
Michael G. Rhodes -- -- 118,125 173,966 1,400,906 1,190,529
</TABLE>
- -----------------------------
(1) Calculated based on the closing price of the Common Stock of Modtech, Inc.
as reported on the NASDAQ National Market System on December 31, 1998, which
was $15.25 per share.
8
<PAGE> 10
CERTAIN TRANSACTIONS
Modtech, Inc. leases its two facilities located in Perris, California, and
the land on which the manufacturing facility is located in Lathrop, California,
from general partnerships of which Mr. Gruber owns an approximate 20% interest,
pursuant to standard industrial leases. Under the terms of these leases,
Modtech, Inc. is obligated to pay aggregate annual rentals of $487,000, subject
to escalation in accordance with changes in applicable cost of living indices.
Mr. Gruber owns 20% of the capital stock of Class Leasing, Inc., a
California corporation, in which the Company has no ownership interest. Class
Leasing purchases modular relocatable classrooms from Modtech, Inc., upon
standard terms and at standard wholesale prices, and leases them to third
parties primarily under three-year leases, cancelable yearly. During the years
ended December 31, 1996, 1997, and 1998, Modtech, Inc. sold modular relocatable
classrooms to Class Leasing, Inc. and predecessor entities for aggregate
purchase prices of $1,452,868, $2,942,313 and $2,675,457, respectively, which
represented approximately 3%, 2% and 2% of the its net sales for each of those
years.
Messrs. Gruber and Rhodes have personally guaranteed certain of the
obligations of Modtech, Inc. and the repayment of amounts which surety companies
may be required to expend under the terms of performance bonds issued in
connection with manufacturing contracts. No payments have been made to Messrs.
Gruber and Rhodes for the guarantees provided by them.
COMPENSATION COMMITTEE REPORT
Report on Annual Compensation of Executive Officers
It is the policy of the Company's Compensation Committee to establish
compensation levels for the executive officers, which reflect the Company's
overall performance and their performance, responsibilities and contributions to
the long-term growth and profitability of the Company. The committee determines
compensation based on its evaluation of the Company's overall performance,
including various quantitative factors, primarily the Company's financial
performance, sales and earnings against the Company's operating plan, as well as
various qualitative factors such as new product development, the Company's
product and service quality, the extent to which the executive officers have
contributed to forming a strong management team and other factors which the
committee believes are indicative of the Company's ongoing ability to achieve
its long-term growth and profit objectives.
The principal component of the compensation of the executive officers is
their base salaries. The committee also retains the discretion to award bonuses
based on corporate or individual performance. The committee evaluates the
practices of various industry groups, market data, including data obtained from
time to time from outside compensation consultants, and other economic
information to determine the appropriate ranges of base salary levels which will
enable the Company to retain and incentivize the executive officers. Throughout
the year, the committee members review the corporate and individual performance
factors described above. The committee, based upon its review of performance for
the previous year and its review of the Company's operating plan, establishes
salary levels and awards any bonuses to the executive officers.
The Compensation Committee also considers grants of stock options for the
Company's key employees, including executive officers. The purpose of the stock
option program is to provide incentives to the Company's management to work to
maximize shareholder value. The option program also utilizes vesting periods to
encourage key employees to continue in the employ of the Company. Individual
amounts of annual stock option grants are derived based upon review of
competitive compensation practices with respect to the same or similar executive
positions, overall corporate performance and individual performance.
9
<PAGE> 11
STOCK PERFORMANCE GRAPH
The graph set forth below compares the stock price of the Company's
predecessor, Modtech, Inc. since January 1, 1994 against (1) the S&P 500, and
(2) the composite of the companies listed by Media General Financial Services in
its non-residential building construction ("Peer Group"). The graph is based
upon information provided to the Company by Media General Financial Services.
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
---------------------------------------------------------------------------
12/31/1993 12/30/1994 12/29/1995 12/31/1996 12/31/1997 12/31/1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Modtech Holdings Inc. 100.00 366.67 566.67 2100.00 5200.00 4066.67
Nonresidential Building Constr 100.00 87.63 63.03 87.48 122.47 109.82
S&P Composite 100.00 101.32 139.40 171.41 228.59 293.92
</TABLE>
THE INDUSTRY INDEX CHOSEN WAS:
SIC CODE 154 -- NONRESIDENTIAL BUILDING CONSTRUCTION
THE BROAD MARKET INDEX CHOSEN WAS:
AN INDEX OF THE COMPANIES ON THE S&P 500
THE CURRENT COMPOSITION OF THE INDUSTRY INDEX IS AS FOLLOWS:
ABRAMS INDUSTRIES INC
BLOUNT INTERNAT INC A
BLOUNT INTERNAT INC B
GIBBS CONSTRUCTION INC
OLS ASIA HLDG LTD ADR
PERINI CORP
TURNER CORP
SOURCE: MEDIA GENERAL FINANCIAL SERVICES
P.O. BOX 85333
RICHMOND, VA 23293
PHONE: 1-(800) 446-7922
FAX: 1-(804) 649-6826
[COMPARE 5-YEAR CUMULATIVE TOTAL RETURN GRAPH]
10
<PAGE> 12
PROPOSAL TO APPROVE THE 1999 NONSTATUTORY STOCK OPTION PLAN
The Company's shareholders are being asked to approve the 1999 Modtech
Holdings, Inc. Nonstatutory Stock Option Plan (the "1999 Plan"), which the Board
of Directors adopted effective as of February 16, 1999.
Background
On February 16, 1999, the Company acquired SPI Holdings, Inc., a Colorado
corporation, pursuant to an Agreement and Plan of Reorganization and Merger
dated September 28, 1998 (the "Merger Agreement"). The acquisition was
accomplished by merging two separate subsidiaries of the Company into Modtech,
Inc. and SPI Holdings, Inc., respectively. Upon completion of the merger
transaction, Modtech, Inc. and SPI Holdings, Inc. became wholly-owned
subsidiaries of the Company. At the time of the merger transaction, both
Modtech, Inc. and SPI Holdings, Inc. had outstanding stock options that had been
issued pursuant to their respective stock option plans (the "Predecessor
Plans"). These options were assumed in the merger transaction by the Company
pursuant to the Merger Agreement. The merger transaction and the assumption of
the outstanding options under the Predecessor Plans were approved by the Board
of Directors and shareholders of the Company, Modtech, Inc., and SPI Holdings,
Inc. All outstanding options under the Predecessor Plans will continue to be
governed by the terms and conditions of the existing option agreements for those
grants, except for their assumption by the Company pursuant to the Merger
Agreement. The Predecessor Plans have been terminated and no further option
grants or share issuances will be made under the Predecessor Plans.
The following is a summary of the principal features of the 1999 Plan. The
summary, however, does not purport to be a complete description of all the
provisions of the 1999 Plan. Any shareholder of the Company who wishes to obtain
a copy of the actual plan document may do so upon written request to the
Secretary of the Company at the Company's principal executive offices in Perris,
California.
Purpose
The 1999 Plan is designed to serve as a comprehensive equity incentive
program to attract and retain the services of individuals essential to the
Company's long-term growth and financial success.
Eligibility
Employees, officers, directors, consultants, independent contractors, and
advisors of the Company (and any of its subsidiaries or parent companies) are
eligible to receive awards under the 1999 Plan; provided such consultants,
contractors, and advisors render bona fide services not in connection with the
offer and sale of securities in a capital raising transaction.
Number of Shares Subject to the 1999 Plan
The stock subject to issuance under the 1999 Plan consists of shares of the
Company's authorized but unissued common stock. The number of shares of common
stock currently reserved for issuance under the 1999 Plan is 1,250,000. This
number of shares is subject to proportional adjustment to reflect stock splits,
stock dividends and other similar events. If any option granted pursuant to the
1999 Plan expires or terminates for any reason without being exercised in whole
or in part, then the shares released from such option will again become
available for grant and purchase under the 1999 Plan.
As of April 15, 1999, options for 1,571,072 shares were outstanding under
the Predecessor Plans, options for 279,631 shares were outstanding under the
1999 Plan, and 970,369 shares remained available for future option grants under
the 1999 Plan.
11
<PAGE> 13
Administration
A committee of two or more members of the Board (the "Committee") will be
responsible for administering the 1999 Plan. Each member of the committee must
be both a "non-employee director" as contemplated by Rule 16b-3 under the
Securities and Exchange Act of 1934 and an "outside director" within the meaning
of Treasury Regulation Section 1.162-27(e)(3). Subject to the terms of the 1999
Plan, the Committee will have complete discretion to determine the persons who
are to receive awards, the number of shares of each such award, and the terms
and conditions of such awards. The Committee will have the authority to effect
the repricing of outstanding options which have exercise prices in excess of the
then current market price of the Company's common stock so that the exercise
price is not in excess of the market price of the common stock at the time of
the repricing. The Committee will also have the authority to construe and
interpret any of the provisions of the 1999 Plan or any awards granted
thereunder.
Types of Award
The 1999 Plan only permits the granting of Nonstatutory Stock Options
("NSSO"). No other form of stock option, stock grant or stock bonus may be
granted under the 1999 Plan. The option exercise price for each option share
must be no less than 100% of the "fair market value" (as defined in the 1999
Plan) of a share of the Company's common stock at the time the option is
granted.
The exercise price of options granted under the 1999 Plan may be paid as
approved by the Committee at the time of grant: (1) in cash (by check); (2) by
cancellation of indebtedness of the Company to the option holder; (3) by
surrender of shares of Company Common Stock owned by the option holder; (4) by
tender of a full recourse promissory note; (5) by waiver of compensation due to
or accrued by the option holder for services rendered; (6) by a "same-day sale"
commitment from the option holder and a National Association of Securities
Dealers, Inc. ("NASD") broker; (7) by a "margin" commitment from the option
holder and an NASD broker; or (8) by any combination of the foregoing.
Mergers, Consolidations, Change of Control
In the event of a merger, consolidation, dissolution or liquidation of the
Company, the sale of substantially all of the assets of the Company or any other
similar corporate transaction, the successor corporation may assume, replace or
substitute equivalent awards in exchange for those granted under the 1999 Plan
or provide substantially similar consideration, shares or other property as was
provided to shareholders of the Company in such transaction (after taking into
account the provisions of the awards). In the event that the successor
corporation in such transaction does not assume or substitute the options
awarded, such options will expire upon the closing of such transaction at such
time and upon such conditions as the Board determines. The Board may elect to
fully or partially accelerate the vesting of options prior to the closing of the
transaction.
In the event the Company acquires another company, it may substitute or
assume outstanding options granted by the acquired company by either granting
replacement options under the 1999 Plan, or assuming the options as if they had
been granted under the 1999 Plan.
Amendment of the 1999 Plan
The Board may at any time terminate or amend the 1999 Plan, subject to
obtaining such shareholder approval, if any, as may be required under applicable
laws or regulations.
Term of the 1999 Plan
The 1999 Plan does not have a specified term and will remain in effect
indefinitely, subject to being terminated by the Board or options being granted
and exercised on all shares of common stock reserved under the 1999 Plan.
12
<PAGE> 14
Federal Income Tax Information
THE FOLLOWING IS A BRIEF SUMMARY AS OF THE DATE OF THIS PROXY STATEMENT OF THE
FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND OPTION HOLDERS UNDER THE 1999
PLAN. THE FEDERAL TAX LAWS MAY CHANGE AND THE FEDERAL, STATE AND LOCAL TAX
CONSEQUENCES FOR ANY OPTION HOLDER WILL DEPEND UPON HIS OR HER INDIVIDUAL
CIRCUMSTANCES.
Option Holder. An option holder will not recognize any taxable income at the
time an NSSO is granted. However, upon exercise of an NSSO, the option holder
must include in income as compensation an amount equal to the difference between
the fair market value of the purchased shares on the date of exercise and the
option holder's exercise price for these shares. The included amount must be
treated as ordinary income by the option holder and may be subject to
withholding by the Company (either by payment in cash or withholding out of the
option holder's salary). Upon resale of the shares by the option holder, any
subsequent appreciation or depreciation in the value of the shares will be
treated as capital gain or loss.
Any acceleration of the vesting or payment of awards under the plan in the
event of a change in control in the Company may cause part or all of the
consideration involved to be treated as an "excess parachute payment" under the
Internal Revenue Code, which may subject the option holder to a 20% excise tax
and which may not be deductible by the Company.
Withholding of Taxes. The Company may deduct, from any payment or distribution
of shares under the plan, the amount of any tax required by law to be withheld
with respect to such payment, or may require the option holder to pay such
amount to the Company prior to, and as a condition of, making such payment or
distribution. Subject to rules and limitations established by the Committee, an
option holder may elect to satisfy the withholding required, in whole or in
part, either by having the Company withhold shares of Company common stock from
any payment under the plan or by the option holder delivering shares of Company
common stock to the Company. Any election must be made in writing on or before
the date when the amount of taxes to be withheld is determined. The portion of
the withholding that is so satisfied will be determined using the fair market
value of the Company common stock on the date when the amount of taxes to be
withheld is determined.
Deductibility of Executive Compensation. The Company anticipates that any
compensation deemed paid by it in connection with exercises of options granted
under the 1999 Plan with exercise prices equal to the fair market value of the
option shares on the grant date will qualify as performance-based compensation
for purposes of Internal Revenue Code Section 162(m) and will not have to be
taken into account for purposes of the $1 million limitation per covered
individual on the deductibility of the compensation paid to certain executive
officers of the Company. Accordingly, all compensation deemed paid with respect
to those options is expected to remain deductible by the Company without
limitation under Internal Revenue Code Section 162(m).
Accounting Treatment
Option grants at 100% of fair market value will not result in any charge to
the Company's earnings. However, the Company must disclose in footnotes and pro
forma statements to the Company's financial statements, the impact those options
would have upon the Company's reported earnings were the value of those options
at the time of grant treated as a compensation expense. The number of
outstanding options may be a factor in determining the Company's earnings per
share on a fully-diluted basis.
Under a recently-proposed amendment to the current accounting principles,
option grants made to non-employee Board members or consultants after December
15, 1998 will result in a direct charge to the Company's reported earnings based
upon the fair value of the option measured on the vesting date of each
installment of the underlying option shares. Such charge will accordingly
include the appreciation in the value of the option shares over the period
between the grant date of the option (or, if later, the effective date of the
final amendment) and the vesting date of each installment of the option shares.
In addition, if the proposed amendment is adopted, any options which are
repriced after December 15, 1998 will also trigger a direct charge to the
Company's reported earnings measured by the appreciation in the value of
13
<PAGE> 15
the underlying shares over the period between the grant date of the option (or,
if later, the effective date of the final amendment) and the date the option is
exercised for those shares.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL
OF THE 1999 NONSTATUTORY STOCK OPTION PLAN
14
<PAGE> 16
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
'Exchange Act"), requires the Company's officers and Directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership (Forms 3, 4
and 5) with the Securities and Exchange Commission, and to furnish the Company
with copies of all such forms which they file.
To the Company's knowledge, based solely on the Company's review of such
reports or written representations from certain reporting persons that no Forms
5 were required to be filed by those persons, the Company believes that during
the year ended December 31, 1998 filing requirements applicable to the officers
and directors of Modtech, Inc., and other persons subject to Section 16 of the
Exchange Act were complied with.
INDEPENDENT ACCOUNTANTS
KPMG LLP has been retained to serve as the Company's independent certified
public accountants for the fiscal year ending December 31, 1999. A
representative of KPMG LLP is expected to be present at the Annual Meeting, and
to be available to respond to any shareholder questions directed to KPMG LLP.
This representative will have an opportunity to make a statement if KPMG LLP so
desires.
SHAREHOLDER PROPOSALS
In order to be considered for inclusion in the Company's proxy statement and
form of proxy relating to the Company's next annual meeting of shareholders,
proposals by the Company's shareholders intended to be presented at such annual
meeting must be received by the Company no later than March 3, 2000.
ANNUAL REPORTS
The Company's 1998 Annual Report on Form 10-K, which includes audited
financial statements for Modtech, Inc.'s fiscal year ended December 31, 1998, is
concurrently being mailed with this proxy statement to shareholders of record on
June 15, 1998. A copy of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998, and any amendments thereto, is available without
charge to any shareholder of the Company upon written request to Evan Gruber,
Chief Executive Officer, Modtech Holdings, Inc., Post Office Box 1240, Perris,
California 92572.
OTHER MATTERS
The Board of Directors knows of no other matters to be presented for action
at the meeting. However, if any matters not included in this Proxy Statement
properly come before the meeting, it is the intention of the person named in the
enclosed proxy to vote under the authority therein given in accordance with his
best judgment.
By Order of the Board of Directors,
Evan M. Gruber, Chief Executive Officer
June 30, 1999.
15
<PAGE> 17
[ Front of Proxy Card ]
MODTECH HOLDINGS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Evan M. Gruber as attorney-in-fact and
proxy for the undersigned, with full power of substitution, to represent the
undersigned and vote, as designated below, all of the shares of Common Stock of
Modtech Holdings, Inc. (the "Company") which the undersigned is entitled to vote
at the Company's Annual Meeting of Shareholders to be held on August 4, 1999, or
at any adjournment or continuation thereof.
1. ELECTION OF DIRECTORS:
[ ] FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY
(except as marked to the to vote for the nominees
contrary below) listed below
Evan M. Gruber, Robert W. Campbell, Daniel J. Donahoe III, Charles R. Gwirtsman,
Charles A. Hamilton, Charles C. McGettigan, Patrick Van Den Bossche and
Myron A. Wick III.
(INSTRUCTION: To withhold authority to vote for any nominee, write the
nominee's name in the space provided below.)
----------------------------------------------------------------------------
2. To approve the Company's 1999 Nonstatutory Stock Option Plan; and
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, upon such other business as may properly come before the
Annual Meeting or any adjournment or continuation thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER HEREIN SPECIFIED
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS INDICATED, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF EACH OF THE EIGHT NOMINEES LISTED ABOVE TO THE
COMPANY'S BOARD OF DIRECTORS, AND IN ACCORDANCE WITH THE DISCRETION OF THE
PROXIES ON ANY OTHER MATTERS TO COME BEFORE THE ANNUAL MEETING.
<PAGE> 18
[ Back of Proxy Card ]
Please sign exactly as name appears below, date
and return this card promptly using the enclosed
envelope. Executors, administrators, guardians,
officers of corporations, and others signing in a
fiduciary capacity should state their full titles
as such.
Dated . . . . . . . . . . . . . . . . . . . , 1999
--------------------------------------------------
Signature
--------------------------------------------------
Signature (if held jointly)
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO MARK,
SIGN, DATE AND PROMPTLY RETURN THIS PROXY, USING THE ENCLOSED ENVELOPE.
