<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, 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:
------------------------------------------------------------------------
<PAGE> 2
MODTECH, INC.
2830 Barrett Avenue
Perris, California 92571
(909) 943-4014
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 17, 1997
To the Holders of Common Stock of Modtech, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Modtech, Inc. will be held at The Sutton Place Hotel, 4500 MacArthur Boulevard,
Newport Beach, California 92660 on June 17, 1997 at 2:00 P.M., local time, for
the following purposes:
1. To elect a board of seven (7) directors, with each director
so elected to hold office until the next Annual Meeting and
until their successors have been duly elected and qualified;
and
2. 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 April 30,
1997 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
May 16, 1997
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.
<PAGE> 3
MODTECH, INC.
2830 Barrett Avenue
Perris, California 92571
-------------------
PROXY STATEMENT
-------------------
ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 17, 1997
This Proxy Statement is being furnished to the shareholders of
Modtech, Inc., a California 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 offices of The
Sutton Place Hotel, 4500 MacArthur Boulevard, Newport Beach, California 92660,
on June 17, 1997 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 May 16, 1997 to shareholders
of record on April 30, 1997, 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 to on Form 10-K for the fiscal year ended December
31, 1996, which contains audited financial statements, as filed with the
Securities and Exchange Commission, is concurrently being mailed to all
shareholders of record as of April 30, 1997.
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 April 30, 1997, 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 8,670,306 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, except that shareholders may be entitled to
cumulative voting rights in the election of directors as describe below.
Cumulative voting rights entitle a shareholder to give one nominee that
number of votes equal to the number of directors to be elected multiplied by the
number of shares of Common Stock he or she is entitled to vote, or to distribute
such number of votes among two or more nominees in such proportion as the
shareholder may choose. The seven nominees receiving the highest number of votes
at the Annual Meeting will be elected. In order for all shareholders to cumulate
votes, one shareholder must give notice to the Secretary prior to commencement
of voting that of his or her intention to cumulate his or her votes.
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 seven director nominees listed below. 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 30, 1997, 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>
Gerald B. Bashaw 633,674 7.3
James D. Goldenetz (2) 159,531 1.8
Evan M. Gruber (3) 310,495 3.5
Charles C. McGettigan (5)(8) 3,014,186 34.7
James M. Phillips, Jr. (4) 10,000 *
Robert W. Campbell (4) 16,000 *
Michael G. Rhodes 62,000 *
Myron A. Wick, III (5)(8) 3,014,186 34.7
Jon D. Gruber (6)(8) 5,259,096 60.7
J. Patterson McBaine (6)(8) 5,199,896 60.0
Proactive Partners, L.P. (8) 2,828,884 32.6
Gruber & McBaine Capital Management (7)(8) 2,129,910 24.6
Lagunitas Partners (8) 2,014,210 23.2
All directors and officers as a group (2)(3)(4)(5) 4,236,631 46.6
</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 and stock purchase warrants 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 30, 1997, an aggregate of
8,670,306 shares of Common Stock were outstanding. Does not give effect to
the potential issuance of up to 1,900,000 shares issuable upon exercise of
options granted or which may be granted under the Company's stock option
plans. See "Election of Directors Stock Option Plans."
(2) Includes 95,000 shares issuable upon exercise of stock options.
(3) Includes 201,250 shares issuable upon exercise of stock options.
(4) Includes 10,000 shares issuable upon exercise of stock options which have
been granted to Mr. Phillips and 15,000 shares issuable upon exercise of
stock options which have been granted to Mr. Campbell.
(5) Includes 2,983,441 shares owned of record by one or more of Proactive
Partners, L.P. and Fremont Proactive Partners, L.P. (collectively, the
"Limited Partnerships"), limited partnerships of which Messrs. McGettigan
and Wick are general partners.
(6) Includes 5,045,651 shares owned of record by one or more of the Limited
Partnerships of which Mr. Gruber is a general partner, and 110,200 shares
owned by Gruber & McBaine Capital Management of which Mr. Gruber is a
general partner. Jon D. Gruber and Evan M. Gruber are not related.
(7) Includes 2,019,710 shares owned of record by one or more of the Limited
Partnerships of which Gruber & McBaine Capital Management is a general
partner.
(8) The address of each of Charles C. McGettigan, Myron A. Wick, III, Jon D.
Gruber, J. Patterson McBaine, Proactive Partners, L.P., Gruber & McBaine
Capital Management, Lagunitas Partners, and Fremont Proactive Partners,
L.P., is 50 Osgood Place, San Francisco, CA 94133.
3
<PAGE> 5
ELECTION OF DIRECTORS
The Company's current Board of Directors has nominated seven (7)
individuals, Gerald B. Bashaw, James D. Goldenetz, Evan M. Gruber, James M.
Phillips, Jr., Robert W. Campbell, Charles C. McGettigan 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 holders for such
other persons as may be designated by the present Board of Directors should any
nominee become unavailable to serve. In the event that anyone other than the
seven nominees listed below should be nominated for election as a director, the
persons named in the accompanying proxy will have the authority, to be exercised
in their discretion, to vote cumulatively for less than all of the nominees. The
seven nominees receiving the highest number of votes at the Annual Meeting will
be elected.
NOMINEES
Certain information concerning the seven 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:
Gerald B. Bashaw, age 62, founded the Company in 1982. Prior to that time
he served as the Vice President of Operations and then President of Aurora
Modular Industries, a manufacturer of modular classrooms, mobile homes, office
trailers, and modular houses and buildings, which he co-founded in 1965.
Robert W. Campbell, age 40, 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.
James D. Goldenetz, age 47, President of Class Leasing, Inc., joined the
Company as a director in January 1988, after previously serving as the President
of Aurora Modular Industries since January 1982. He began work in the modular
classroom industry in 1969 in production at Aurora Modular Industries.
Evan M. Gruber, age 43, joined the Company in January 1989 as its Chief
Financial Officer and was elected Chief Executive Officer of the Company in
January 1990. Prior to joining the Company, Mr. Gruber, who is a certified
public accountant, founded his own public accounting firm in Costa Mesa,
California in 1978.
Charles C. McGettigan, age 52, was elected to the Board of Directors in
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 Digital Dictation, Inc.; I-Flow Corporation; NDE
Environmental Corporation; Onsite Energy, PMR Corporation, Sonex Research
Corporation, and Wray-Tek Instruments Inc.
James M. Phillips, Jr., age 49, became a director of the Company upon the
consummation of the initial public offering of the Company in July 1990. Mr.
Phillips has been an attorney for the last 20 years, practicing primarily in the
areas of corporate and securities law. Mr. Phillips established a predecessor of
his current firm, Phillips & Haddan, as of January 1, 1990, upon leaving the
firm of Brobeck, Phleger & Harrison, of which he was a partner in the Newport
Beach, California office, at the end of 1989.
Myron A. Wick III, age 53, became a director of the Company 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, NDE Environmental, Inc, Sonex Research Corporation
and Wray-Tek Instruments Inc.
4
<PAGE> 6
STRUCTURE AND FUNCTION OF UHE BOARD OF DIRECTORS
During the last fiscal year, the Company's Board of Directors held 4
regular and special meetings or otherwise took action by written consent. The
Board has established both an Audit Committee and a Compensation Committee, each
of which is comprised of Messrs. McGettigan, Campbell and Phillips. 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 per each board meeting attended and each board committee meeting attended
for each committee of which they are a member. The Company has and will continue
to pay 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; and Michael G. Rhodes, Chief Operating Officer and Chief Financial
Officer. Subject to the terms of applicable employment agreement, officers serve
at the pleasure of the Board of Directors.
Mr. Rhodes joined the Company in 1988 and was the Corporation's controller
through 1992. In 1993 he was elected Chief Financial Officer, and in 1996 was
elected Chief Operating Officer. Prior to his joining the Company, Mr. Rhodes
worked for a public accounting firm.
COMPENSATION OF EXECUTIVE OFFICER AND DIRECTORS
The following table summarizes the annual and long term compensation paid
by the Company during fiscal years ended December 31, 1994, 1995 and 1996 to
those persons who were, as of December 31, 1996 (i) the Chief Executive Officer
of the Company, and (ii) the other compensated executive officers of the
Company, if any, whose total annual salary and bonus exceeded $100,000 during
the year ended December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------- -------------------- -----------------------
RESTRICTED
STOCK
SALARY BONUS OTHER AWARDS OPTIONS LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR $ $ $ $ # PAYOUTS COMPENSATION
- --------------------------- ---- ------- ------- ----- ------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Evan M. Gruber 1996 158,000 137,000 -- -- 110,000 -- 4,615
Chief Executive Officer 1995 150,000 15,000 -- -- 25,000 -- 3,654
and Director 1994 125,000 -- -- -- 350,000 -- 4,030
Michael G. Rhodes 1996 90,000 24,000 -- -- 105,000 -- 4,827
Chief Operating Officer, 1995 87,000 12,100 -- -- 20,000 -- 129
Chief Financial Officer 1994 85,000 -- -- -- 10,000 -- 4,124
</TABLE>
- -------
(1) The figures shown in the column designated "All Other Compensation"
represent the executive officer's share of the Company's contribution to the
401(K) plan, see "401(K) Plan."
5
<PAGE> 7
EMPOYMENT AGREEMENTS
In connection with Company's May 1994 refinancing, the Company entered
into a new employment agreement with Mr. Gruber. The terms of the agreement
include, among other items, a term continuing until June 30, 1997, a base annual
salary of not less than $150,000 per year through the full term, with periodic
increases equal to the rate increase in the Consumer Price Index, and provision
for the grant of an option to purchase 200,000 shares of the Company's Common
Stock at $1.50 per share. Additionally, Mr. Gruber is entitled to receive a
bonus equal to two and one-half percent of the amount, if any, by which the net
income before taxes of the Company for the year in question exceed $1,000,000.
In September 1996, the Compensation Committee voted unanimously to extend the
agreement through 1999. The base annual salary was increased to $200,000 in
October 1996.
401(K) PLAN
Under the Company's 401(k) Plan, officers and other employees of the
Company may elect to defer up to 15% 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, 1995, the Company contributed $4,615 and $4,827 as
matching contributions for the accounts of Mr. Gruber and Mr. Rhodes,
respectively.
STOCK OPTIONS
In June 1989, the Company's Board of Directors adopted, and the Company's
shareholders approved, the Modtech, Inc. 1989 Stock Option Plan (the "1989
Plan"). The 1989 Plan provides for the grant of both incentive and nonstatutory
options to purchase up to an aggregate of 400,000 shares of the Company's Common
Stock. Incentive stock options can be granted only to employees, including
officers, of the Comqany, while nonstatutory stock options can be granted to
employees, non-employee officers and directors, consultants, vendors, customers
and others expected to provide significant services to the Company. Participants
in the 1989 Plan are selected by the Board of Directors of the Company, or by a
committee of directors selected by the Board as a whole. The Board or the
committee is empowered to determine the terms and conditions of each option
granted under the 1989 Plan, subject to the limitations that the exercise price
of incentive stock options cannot be less than the fair market value of the
Common Stock on the date of grant (110% if granted to an employee who owns 10%
or more of the Common Stock), no option can have a term in excess of ten years
(five years if granted to an employee owning 10% or more of the Common Stock)
and no incentive stock option can be granted to anyone other than a full-time
employee of the Company or its subsidiaries. Nonstatutory options may be granted
under the 1989 Plan with an exercise price of not less than 85% of the fair
market value of the Common Stock at the date of grant. As of December 31, 1996,
options to purchase 290,000 shares, at a weighted average exercise price of
$1.82, were outstanding under the 1989 Plan.
In connection with the acquisition of Del-Tec in 1989, options to purchase
shares of the Company's Common Stock were granted, of which options to purchase
50,000 shares at the exercise price of $1.83 per share are currently outstanding
and exercisable.
In March 1994, the Company's Board of Directors authorized the grant of
options to purchase up to 200,000 shares of the Company's Common Stock, and, in
connection with the private placement of Series A Preferred Stock in May 1994,
authorized the grant of options to purchase up to an additional 500,000 shares
of the Company's Common Stock (collectively, the "1994 Plans"). Since approval
of these options by the shareholders of the Company has not and will not be
sought, all options granted under the 1994 Plans will be deemed nonstatutory
options which will not entitle the recipients thereof the special federal income
tax treatment afforded to the recipients of incentive stock options. The
Company's Board of Directors, with Mr. Gruber abstaining, approved the grant to
Mr. Gruber of an option to purchase up to 150,000 shares of Common Stock at
$1.19 per share, and in May 1994, again with Mr. Gruber abstaining, approved the
grant of an option to Mr. Gruber to purchase up to an additional 200,000 shares
of Common Stock under the 1994 Plans, at $1.50 per share, as required by his new
employment agreement. See "Management-Employment Agreements." As of December 31,
1996, options to purchase a total of 620,000 of these shares, at exercise prices
ranging from $1.19 to $4.50, were outstanding.
6
<PAGE> 8
In July 1996, the Company's Board of Directors authorized the grant of
options to purchase up to 500,000 shares of the Company's Common Stock. These
non-statutory options may be 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
cannot be less than the fair market value at the date of the grant (110% if
granted to an employee who owns 10% or more of the common stock). Additionally,
each non-employee director will be granted a non-statutory stock option to
purchase 5,000 shares at fair market value per share on the date of grant, for
each year of continuous service on the Company's Board of Directors. At December
31, 1996, options to purchase an aggregate of 110,000 of these shares had been
granted at the exercise price of $4.50 per share, of which options to purchase
30,000 shares were currently exercisable.
The following table sets forth certain information regarding options
granted by the Company during the year ended December 31, 1996 to the executive
officers of the Company identified in the Summary Compensation Table set forth
above:
OPTIONS GRANTED IN CALENDAR YEAR 1996
<TABLE>
<CAPTION>
Potential Realized
No. of Value at Assumed
Shares % of Annual Rates of Stock
Subject to Total Price Appreciation
Name Options Options For Option Term (3)
of Granted Granted to Exercise Expiration ---------------------
Optionee (1)(2) Employees Price Date 5%($) 10%($)
-------- ---------- ---------- -------- ---------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Evan M. Gruber 110,000 35% $2.13 12/31/2005 129,000 318,000
Michael G. Rhodes 105,000 33% 2.13-4.50 7/11/2006 188,500 464,500
</TABLE>
- ----------------
(1) The exercise price was the market price of a share of the Company's Common
Stock on the date of grant.
(2) Options are exercisable starting 12 months after the grant date with 25%
vesting each year.
(3) On December 31, 1996, the closing price for a share of the Company's Common
Stock was $7.875
The following table sets forth information regarding options exercised
during the year ended December 31, 1996 by the executive officers of the Company
identified in the Summary Compensation Table set forth above, as well as the
aggregate value of unexercised options held by such executive officer at
December 31, 1996. The Company has no outstanding stock appreciation rights,
either freestanding or in tandem with options.
AGGREGATED OPTION EXERCISES LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised in-the-money Options
Options at Fiscal Year End at Fiscal Year End ($) (1)
Shares ---------------------------- ---------------------------
Acquired on Value
Name Exercise (#) Realized Exercisable Unexercisable Exercisable Unexercisable
---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Evan M. Gruber - - 201,250 333,750 $1,312,000 $2,095,000
Michael G. Rhodes - - 62,000 148,000 248,000 760,000
</TABLE>
- ------------------
(1) Calculated based on the closing price of the Company's Common Stock as
reported on the NASDAQ National Market System on December 31, 1996, which
was $7.875 per share.
7
<PAGE> 9
CERTAIN TRANSACTIONS
The Company leases its two facilities located in Perris, California,
and the land on which the manufacturing facility is located in Lathrop,
California, from Mr. Bashaw and general partnerships of which Messrs. Bashaw,
Goldenetz and Gruber together own a controlliog interest, pursuant to standard
industrial leases. Under the terms of these leases, the Company is obligated to
pay aggregate annual rentals of $804,000, subject to escalation in accordance
with changes in applicable cost of living indices. Due to the recent declines in
real estate values, Mr. Bashaw and the general partnerships reduced the monthly
lease rates for the year ending December 31, 1994, for the manufacturing
facilities to an aggregate of $36,250.
Messrs. Goldenetz and Gruber together own 60% of the capital stock of
Class Leasing, Inc., a California corporation, in which the Company has no
ownership interest. Mr. Gruber spent less than 20 hours per month in connection
with the affairs of Class Leasing, Inc. Class Leasing purchases modular
relocatable classrooms from the Company, 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, 1994, 1995, and
1996, the Company sold modular relocatable classrooms to Class Leasing, Inc. and
predecessor entities for aggregate purchase prices of $1,008,577, $600,228 and
$1,452,868, respectively, which represented approximately 1.2%, 5% and 3% of the
Company's net sales for each of those years.
Messrs. Bashaw, Goldenetz and Gruber have personally guaranteed certain
of the Company's obligations and the repayment by the Company of amounts which
surety companies may be required to expend under the terms of performance bonds
issued in connection with manufacturing contracts undertaken by the Company. No
payments have been made to Messrs. Bashaw, Goldenetz and Gruber 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.
8
<PAGE> 10
STOCK PERFORMANCE GRAPH
The graph set forth below compares the Company's stock price since July
1990 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
-------------------------------------------------------
Company 1991 1992 1993 1994 1995 1996
- ------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
MODTECH INC. 100 100.00 13.64 50.00 77.27 286.36
INDUSTRY INDEX 100 105.56 136.59 119.69 86.10 119.49
BROAD MARKET 100 107.64 118.50 120.06 165.18 203.11
</TABLE>
9
<PAGE> 11
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 an changes in ownership (Forms 3, 4 and
5) with the Securities and Exchange Commission. Officers, directors and
greater-than-ten-percent shareholders are required 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, 1996 filing requirements applicable to its
officers, directors, and other persons subject to Section 16 of the Exchange Act
were in compliance.
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP has been retained to serve as the Company's
independent certified public accountants for the fiscal year ending December 31,
1997. A representative of KPMG Peat Marwick LLP is expected to be present at the
Annual Meeting, and to be available to respond to any shareholder questions
directed to KPMG Peat Marwick LLP. This representative will have an opportunity
to make a statement if KPMG Peat Marwick 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 ninety (90)
days prior to April 30, 1998.
ANNUAL REPORTS
The Company's 1996 Annual Report on Form 10-K, which includes audited
financial statements for the Company's fiscal year ended December 31, 1996, is
concurrently being mailed with this proxy statement to shareholders of record on
April 30, 1997. A copy of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, and any amendments thereto, also may be
obtained by any shareholder of the Company, without charge, upon written request
to Evan Gruber, Chief Executive Officer, Modtech, Inc., Post Office Box 1240,
Perris, California 92370.
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 persons
named in the enclosed proxy to vote under the authority therein given in
accordance with his or their best judgment.
By Order of the Board of Directors,
Evan M. Gruber, Chief Executive Officer
May 16, 1997.
10
<PAGE> 12
[ Front of Proxy Card ]
MODTECH, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Gerald B. Bashaw and Evan M. Gruber,
and each of them, 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, Inc. (the "Company") which
the undersigned is entitled to vote at the Company's Annual Meeting of
Shareholders to be held on June17, 1997, or at any adjournment or continuation
thereof.
1. ELECTION OF DIRECTORS:
[ ] FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for the
nominees listed below
Gerald B. Bashaw, James D. Goldenetz, Evan M. Gruber, James M. Phillips, Jr.
Robert W. Campbell, Charles C. McGettigan 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. 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 SEVEN 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> 13
[ 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 ______________________, 1997
----------------------------------
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.
