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EXHIBIT 10.13
[McGETTIGAN, WICK & CO., INC. LETTERHEAD]
June 10, 1998
Mr. Evan M. Gruber
Chief Executive Officer
Modtech, Inc.
P.O. Box 1240
Perris, California 92570
Dear Evan:
This letter is to confirm the retention by Modtech Inc. ("Modtech" or the
"Company") of the firm of McGettigan, Wick & Co., Inc. ("McGettigan Wick") to
provide financial advisory services to you, as the chief executive officer of
Modtech, and to the Board of Directors of Modtech, when appropriate, relative
to the structuring, evaluation, negotiation, documentation, and closing of
(i) the acquisition another company having a purchase price to Modtech of less
than $40 million, (ii) the acquisition of SPI Manufacturing, Inc., and/or (iii)
the sale or merger of Modtech (the contemplated "transactions"). Upon the
completion of the negotiations of the terms and conditions of any or all of the
transactions, we will oversee the documentation and closing process. In
addition, if the form of consideration is anything other than cash, we will
provide the Board of Directors with an opinion as to the actual value of the
proposed consideration, if such an evaluation is requested by Modtech's Board of
Directors.
If the ultimate transaction is the sale of the Company, we will establish,
from the purchase price for the Company, a pool that will be made available to
senior management of Modtech. The amount of this pool will be determined by
Mike Wick, you and me, and its allocation will be solely up to you. The purpose
of the creation of this bonus pool is to properly involve the Company's senior
management in this sale process and to provide an incentive to the senior
management to remain in place during the period from the announcement of the
sale of the Company until the closing of the sale. The actual amount of the
pool will be approximately equal to the closing fee to be paid to McGettigan
Wick.
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Mr. Evan M. Gruber
June 10, 1998
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If required by the specific contemplated transaction, we will assist
Modtech in preparing an Executive Summary of the Company and its historical,
current and prospective operations and financials. This Executive Summary will
be structured for use as the lead-in to a package that will include the 1997
10-K, Proxy Statement, recent press releases, and other pertinent publicly
available data. This descriptive package will be shared with a limited number
of potential acquirors identified by you and me. Based on our ownership in
Modtech and our positions as directors of Modtech, McGettigan Wick will, as
concerned principals and where mutually agreed with you, initiate the approach
to these potential acquirors.
Our fee for providing the aforementioned financial advisory services
will be determined by the specific transaction:
If the transaction is the acquisition of a company at a purchase
price of less than $40 million, our free, payable upon closing,
will be $600,000.
If the transaction is an acquisition of SPI Manufacturing, our
fee, payable upon closing, will be $1,250,000.
If the transaction is a sale of all of Modtech, our fee, payable
upon closing, will be equal to $1,250,000, plus an incentive fee
equal to (i) 3% of the increment in the sale proceeds if the price
per share is greater than $20, but less than $22.50; (ii) 4% of
the increment in the sale proceeds if the price per share is
greater than $22.50 but less than $25; and (iii) 5% of the
increment in the sale proceeds if the price per share is greater
than $25.
There will be no up-front retainer fee.
It is understood that Modtech will reimburse us within 15 days after
receipt of documentation for any reasonable out-of-pocket expenses we might
incur in connection with our services to the Company pursuant to this
agreement. Such expenses are expected to include, but are not limited to,
travel, telephone and courier expenses. The Company will also reimburse
McGettigan Wick for reasonable professional fees, such as attorneys' and
accountants' fees, as they become necessary and are authorized in advance by
Modtech.
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Mr. Evan M. Gruber
June 10, 1998
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In connection with the services which McGettigan Wick has agreed to
render to the Company hereunder, the Company shall indemnify McGettigan
Wick and hold us harmless against any losses, claims, damages or
liabilities to which McGettigan Wick may become subject in connection with
our rendering of such services, and reimburse McGettigan Wick for any
reasonable legal or other expenses reasonably incurred by us in connection
with investigating, preparing to defend or defending any lawsuits, claims
or other proceedings arising in any manner out of or in connection with the
rendering of such services, unless such losses, claims, damages,
liabilities or expenses arise out of the negligence or bad faith of
McGettigan Wick. The Company agrees that the indemnification and
reimbursement commitments set forth in this agreement shall apply whether
or not McGettigan Wick is a formal party to any such lawsuits or other
proceedings, that such commitments shall be in addition to any liability
that the Company may have to McGettigan Wick at common law or otherwise,
and that such commitments shall extend upon the terms set forth in this
agreement to any controlling person, director, officer, owner, partner,
employee or agent of McGettigan Wick and shall survive any termination of
this agreement.
McGettigan Wick shall indemnify Modtech and hold Modtech harmless
against any losses, claims, damages or lawsuits (including reasonable
attorney's fees) arising out of gross negligence or malfeasance of
McGettigan Wick, its employees or its agents.
In case any proceeding shall be instituted involving any person
indemnified by this agreement, such person (the "indemnified party") shall
promptly notify the Company and the Company, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and others the Company
may designate in such proceeding and shall pay as incurred the fees and
expenses of counsel relating to such proceeding. In any such proceeding,
any indemnified party shall have the right to retain its own counsel at its
own expense, except that the Company shall pay the reasonable fees and
expenses of counsel retained by the indemnified party in the event that (i)
the Company and the indemnified party shall have mutually agreed to the
retention of such counselor, or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the Company and
the indemnified party and representation of both parties by the same
counsel would be inappropriate, in the reasonable opinion of the
indemnified party, due to actual or potential differing interests between
them. In no event shall
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Mr. Evan M. Gruber
June 10, 1998
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the Company be liable for the fees and expenses of more than one counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. The Company shall not be liable for any settlement
of any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the Company agrees to
indemnify the indemnified party to the extent set forth in this agreement.
This agreement may be terminated by Modtech or McGettigan Wick at any time
with or without cause beginning six months after the date of the signing of this
agreement, effective upon receipt of written notice to that effect by the other
party. Any such termination will not affect the compensation, reimbursement or
indemnification provisions above, which will continue in full force and effect
in accordance with their terms, with respect to obligations incurred or actions
taken prior to termination of this agreement. We shall be entitled to full
compensation in the event that, at any time prior to the expiration of one year
after termination of this agreement. Modtech enters into any one of the
contemplated transactions.
Any advice, written or oral, rendered by McGettigan Wick pursuant to this
letter may not be disclosed publicly without our prior written consent.
This agreement shall be governed by the laws of the State of California
without giving effect to that State's conflict of laws principles.
Any offer for or sale of Modtech must be approved by Modtech's Board of
Directors and/or Modtech's shareholders.
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Mr. Evan M. Gruber
June 10, 1998
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We look forward to assisting you in this effort. If the foregoing
correctly sets forth the understanding between us, please so indicate by
executing the enclosed copy of this letter and returning it to us.
Very truly yours,
McGETTIGAN, WICK & CO., INC.
By: /s/ Charles C. McGettigan
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Charles C. McGettigan
Agreed to and accepted this 11 day of June, 1998
MODTECH INC.
BY: /S/ Evan M. Gruber
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Evan M. Gruber
Chief Executive Officer