Exhibit 10.55
 
SECURED TERM NOTE
 
FOR VALUE RECEIVED, MODTECH HOLDINGS, INC., a Delaware corporation (the
“Company”), promises to pay to VALENS OFFSHORE SPV I, LTD., c/o Valens Capital
Management, LLC, 335 Madison Avenue, 10th Floor, New York, New York 10017, Fax:
212-541-4410 (the “Holder”) or its registered assigns or successors in interest,
the sum of SIXTY-SIX THOUSAND SIX HUNDRED TWO and 06/100 DOLLARS ($66,602.06),
together with any accrued and unpaid interest hereon, on December 28, 2009 (the
“Maturity Date”) if not sooner indefeasibly paid in full.
 
Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in the Purchase Agreements (as defined in the Amendment
and Waiver Agreement (the “Amendment Agreement”) dated as of the date hereof
among the Company, the Holder, Laurus Master Fund, Ltd. (“Laurus”) and Valens
U.S. SPV I, LLC (“Valens US”)).
 
The following terms shall apply to this Secured Term Note (this “Note”):
 
ARTICLE I
CONTRACT RATE AND AMORTIZATION
 
1.1 Contract Rate. Subject to Sections 3.2 and 4.10, interest payable on the
outstanding principal amount of this Note (the “Principal Amount”) shall accrue
at a rate per annum equal to the “prime rate” published in The Wall Street
Journal from time to time (the “Prime Rate”), plus two and one half percent
(2.5%) (the “Contract Rate”). The Contract Rate shall be increased or decreased
as the case may be for each increase or decrease in the Prime Rate in an amount
equal to such increase or decrease in the Prime Rate; each change to be
effective as of the day of the change in the Prime Rate is announced in The Wall
Street Journal. The Contract Rate shall not at any time be less than eight
percent (8%). Interest shall be (a) calculated on the basis of a 360 day year,
and (b) payable monthly, in arrears, commencing on March 1, 2008 and then on the
first business day of each consecutive calendar month thereafter through and
including the Maturity Date, and on the Maturity Date, whether by acceleration
or otherwise.
 
1.2 Contract Rate Payments. The Contract Rate shall be calculated on the last
business day of each calendar month hereafter (other than for increases or
decreases in the Prime Rate which shall be calculated and become effective in
accordance with the terms of Section 1.1) until the Maturity Date and shall be
subject to adjustment as set forth herein.
 
1.3 Principal Payments. The aggregate principal amount outstanding under this
Note at any time (the “Principal Amount”) together with any accrued and unpaid
interest and any and all other unpaid amounts which are then owing by the
Company to the Holder under this Note shall be due and payable on the Maturity
Date.

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ARTICLE II
REDEMPTION
 
2.1 Optional Redemption in Cash. The Company may prepay this Note (“Optional
Redemption”) by paying to the Holder a sum of money equal to one hundred
twenty-four percent (124%) (the “Redemption Rate”) of the aggregate amount of
(a) the Principal Amount together with accrued but unpaid interest hereon, (b)
the principal amount outstanding pursuant to that certain Secured Term Note
dated as of the date hereof, made by the Company in favor of Laurus, in the
original principal amount of $634,414.36 together with accrued but unpaid
interest thereon (c) the principal amount outstanding pursuant to that certain
Secured Term Note dated as of the date hereof, made by the Company in favor of
Valens US, in the original principal amount of $48,983.58 together with accrued
but unpaid interest thereon (d) the principal amount outstanding pursuant to
that certain Secured Term Note dated as of December 28, 2006, made by the
Company in favor of the Holder, in the original principal amount of $5,000,000
together with accrued but unpaid interest thereon and (e) the principal amount
outstanding pursuant to that certain Secured Term Note dated as of
October 31, 2006, made by the Company in favor of the Holder, in the original
principal amount of $13,000,000, together with accrued but unpaid interest
thereon and any and all other sums due, accrued or payable to the Holder arising
under this Note, the Purchase Agreements or any other Related Agreement (the
“Redemption Amount”) outstanding on the Redemption Payment Date (as defined
below). Notwithstanding the foregoing, if the Company prepays in full the
amounts set forth in items (a) through (e) above within twelve (12) months of
the date hereof, the Redemption Rate shall be reduced to one hundred five
percent (105%). The Company shall deliver to the Holder a written notice of
redemption (the “Notice of Redemption”) specifying the date for such Optional
Redemption (the “Redemption Payment Date”), which date shall be within seven (7)
business days after the date of the Notice of Redemption (the “Redemption
Period”). On the Redemption Payment Date, the Redemption Amount must be paid in
good funds to the Holder. In the event the Company fails to pay the Redemption
Amount on the Redemption Payment Date as set forth herein, then such Redemption
Notice will be null and void.
 
ARTICLE III
EVENTS OF DEFAULT
 
3.1 Events of Default. The occurrence of any of the following events set forth
in this Section 3.1 shall constitute an event of default (“Event of Default”)
hereunder:
 
(a) Failure to Pay. The Company fails to pay when due any installment of
principal, interest or other fees hereon in accordance herewith, or the Company
fails to pay any of the other Obligations (under and as defined in the Security
Agreement as reaffirmed under and defined in the Reaffrimation and Ratification
Agreement dated as of the date hereof between the Company, the Holder, Laurus
and Valens US) when due, and, in any such case, such failure shall continue for
a period of three (3) Business Days following the date upon which any such
payment was due.

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(b) Breach of Covenant. The Company or any of its Subsidiaries breaches any
covenant or any other term or condition of this Note in any material respect and
such breach, if subject to cure, continues for a period of twenty (20) days
after the occurrence thereof.
 
(c) Breach of Representations and Warranties. Any representation, warranty or
statement made or furnished by the Company or any of its Subsidiaries in this
Note, the Purchase Agreements or any other Related Agreement shall at any time
be false or misleading in any material respect on the date as of which made or
deemed made.
 
(d) Default Under Other Agreements. The occurrence of any default (or similar
term) in the observance or performance of any other agreement or condition
relating to any indebtedness or contingent obligation of the Company or any of
its Subsidiaries in excess of $200,000 in the aggregate (including, without
limitation, the indebtedness evidenced by the Subordinated Debt Documentation)
beyond the period of grace (if any), the effect of which default is to cause, or
permit the holder or holders of such indebtedness or beneficiary or
beneficiaries of such contingent obligation to cause, such indebtedness to
become due prior to its stated maturity or such contingent obligation to become
payable;
 
(e) Default Under Subordinated Debt Documentation. The Company or any of its
Subsidiaries shall take or participate in any action which is prohibited under
the provisions of any subordination agreement (each, a “Subordination
Agreement”) entered into in connection with any indebtedness (all such
indebtedness, “Subordinated Debt”) among the Company, the Holder, Laurus and/or
Valens US and the lender of such Subordinated Debt (or make any payment on the
Subordinated Debt to a Person that was not entitled to receive such payments
under the provisions of the applicable Subordination Agreement.
 
(f) Material Adverse Effect. Any change or the occurrence of any event which
could reasonably be expected to have a Material Adverse Effect;
 
(g) Bankruptcy. The Company or any of its Subsidiaries shall (i) apply for,
consent to or suffer to exist the appointment of, or the taking of possession
by, a receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its property, (ii) make a general assignment for the benefit
of creditors, (iii) commence a voluntary case under the federal bankruptcy laws
(as now or hereafter in effect), (iv) be adjudicated a bankrupt or insolvent,
(v) file a petition seeking to take advantage of any other law providing for the
relief of debtors, (vi) acquiesce to, without challenge within ten (10) days of
the filing thereof, or failure to have dismissed, within thirty (30) days, any
petition filed against it in any involuntary case under such bankruptcy laws, or
(vii) take any action for the purpose of effecting any of the foregoing;
 
(h) Judgments. Attachments or levies in excess of $200,000 in the aggregate are
made upon the Company or any of its Subsidiary’s assets or a judgment is
rendered against the Company’s property involving a liability of more than
$500,000 which shall not have been vacated, discharged, stayed or bonded within
forty (40) days from the entry thereof;
 
(i) Insolvency. The Company or any of its Subsidiaries shall admit in writing
its inability, or be generally unable, to pay its debts as they become due or
cease operations of its present business;

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(j) Change of Control. A Change of Control (as defined below) shall occur with
respect to the Company, unless Holder shall have expressly consented to such
Change of Control in writing. A “Change of Control” shall mean any event or
circumstance as a result of which (i) any “Person” or “group” (as such terms are
defined in Sections 13(d) and 14(d) of the Exchange Act, as in effect on the
date hereof), other than the Holder, is or becomes the “beneficial owner” (as
defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or
indirectly, of 51% or more on a fully diluted basis of the then outstanding
voting equity interest of the any Company, (ii) the Board of Directors of the
Company shall cease to consist of a majority of the Company’s Board of Directors
on the date hereof (or directors appointed by a majority of the Board of
Directors in effect immediately prior to such appointment) or (iii) the Company
or any of its Subsidiaries merges or consolidates with, or sells all or
substantially all of its assets to, any other person or entity;
 
(k) Indictment; Proceedings. The indictment of the Company or any of its
Subsidiaries or any executive officer of the Company or any of its Subsidiaries
under any criminal statute, or commencement of criminal or civil proceeding
against the Company or any of its Subsidiaries or any executive officer of the
Company or any of its Subsidiaries pursuant to which statute or proceeding
penalties or remedies sought or available include forfeiture of any of the
property of the Company or any of its Subsidiaries;
 
(l) The Purchase Agreements and Related Agreements. (i) An Event of Default
shall occur under and as defined in the Purchase Agreements or any other Related
Agreement, (ii) the Company or any of its Subsidiaries shall breach any term or
provision of the Purchase Agreements or any other Related Agreement in any
material respect and such breach, if capable of cure, continues unremedied for a
period of twenty (20) days after the occurrence thereof, (iii) the Company or
any of its Subsidiaries attempts to terminate, challenges the validity of, or
its liability under, the Purchase Agreements or any Related Agreement, (iv) any
proceeding shall be brought to challenge the validity, binding effect of the
Purchase Agreements or any Related Agreement or (v) the Purchase Agreements or
any Related Agreement ceases to be a valid, binding and enforceable obligation
of the Company or any of its Subsidiaries (to the extent such persons or
entities are a party thereto);
 
3.2 Default Interest. Following the occurrence and during the continuance of an
Event of Default, the Company shall pay additional interest on the outstanding
principal balance of this Note in an amount equal to two percent (2%) per month,
and all outstanding obligations under this Note, the Purchase Agreements and
each other Related Agreement, including unpaid interest, shall continue to
accrue interest at such additional interest rate from the date of such Event of
Default until the date such Event of Default is cured or waived.
 
3.3 Default Payment. Following the occurrence and during the continuance of an
Event of Default, the Holder, at its option, may demand repayment in full of all
obligations and liabilities owing by Company to the Holder under this Note, the
Purchase Agreements and/or any other Related Agreement and/or may elect, in
addition to all rights and remedies of the Holder under the Purchase Agreements
and the other Related Agreements and all obligations and liabilities of the
Company under the Purchase Agreements and the other Related Agreements, to
require the Company to make a Default Payment (“Default Payment”). The Default
Payment shall be one hundred five percent (105%) of the outstanding principal
amount of the Note, plus accrued but unpaid interest, all other fees then
remaining unpaid, and all other amounts payable hereunder. The Default Payment
shall be applied first to any fees due and payable to the Holder pursuant to
this Note, the Purchase Agreements, and/or the other Related Agreements, then to
accrued and unpaid interest due on this Note and then to the outstanding
principal balance of this Note. The Default Payment shall be due and payable
immediately on the date that the Holder has demanded payment of the Default
Payment pursuant to this Section 3.3.

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ARTICLE IV
MISCELLANEOUS
 
4.1 Issuance of New Note. Upon any partial redemption of this Note, a new note
containing the same date and provisions of this Note shall, at the request of
the Holder, be issued by the Company to the Holder for the principal balance of
this Note and interest which shall not have been paid as of such date. Subject
to the provisions of Article III of this Note, the Company shall not pay any
costs, fees or any other consideration to the Holder for the production and
issuance of a new note.
 
4.2 Cumulative Remedies. The remedies under this Note shall be cumulative.
 
4.3 Failure or Indulgence Not Waiver. No failure or delay on the part of the
Holder hereof in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege. All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.
 
4.4 Notices. Any notice herein required or permitted to be given shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party notified, (b) when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient, if not, then on the next business day,
(c) five days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the Company
at the address provided in the Purchase Agreement executed in connection
herewith, and to the Holder at the address provided in the Purchase Agreement
for the Holder, with a copy to Valens Capital Management, LLC, Attn: Portfolio
Services, 335 Madison Avenue, 10th Floor, New York, New York 10017, facsimile
number (212) 541-4410, or at such other address as the Company or the Holder may
designate by ten days advance written notice to the other parties hereto.
 
4.5 Amendment Provision. The term “Note” and all references thereto, as used
throughout this instrument, shall mean this instrument as originally executed,
or if later amended or supplemented, then as so amended or supplemented, and any
successor instrument as such successor instrument may be amended or
supplemented.
 
4.6 Assignability. This Note shall be binding upon the Company and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder in accordance with the
requirements of the Purchase Agreement. The Company may not assign any of its
obligations under this Note without the prior written consent of the Holder, any
such purported assignment without such consent being null and void.

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4.7 Cost of Collection. In case of any Event of Default under this Note, the
Company shall pay the Holder the Holder’s reasonable costs of collection,
including reasonable attorneys’ fees.
 
4.8 Governing Law, Jurisdiction and Waiver of Jury Trial.
 
(a) THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW.
 
(b) THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS
LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY,
ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE OR
ANY OF THE OTHER RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED
TO THIS NOTE OR ANY OF THE RELATED AGREEMENTS; PROVIDED, THAT THE COMPANY
ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND
FURTHER PROVIDED, THAT NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO
PRECLUDE THE HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY
OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF THE HOLDER. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT,
AND THE COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. THE COMPANY
HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS
ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS,
COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN THE PURCHASE AGREEMENT AND
THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY’S
ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
POSTAGE PREPAID.
 
(c) THE COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF
THE JUDICIAL SYSTEM AND OF ARBITRATION, THE COMPANY HERETO WAIVES ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE HOLDER AND/OR THE
COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, ANY OTHER
RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

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4.9 Severability. In the event that any provision of this Note is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Note.
 
4.10 Maximum Payments. Nothing contained herein shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the
maximum permitted by applicable law. In the event that the rate of interest
required to be paid or other charges hereunder exceed the maximum rate permitted
by such law, any payments in excess of such maximum rate shall be credited
against amounts owed by the Company to the Holder and thus refunded to the
Company.
 
4.11 Security Interest and Guarantee. The Holder has been granted a security
interest (a) in certain assets of the Company and its Subsidiaries as more fully
described in the Master Security Agreement dated as of the date hereof and
various mortgages covering the real property owned by the Company and (b) in the
equity interests of the Company’s Subsidiaries pursuant to the Stock Pledge
Agreement dated as of the date hereof. The obligations of the Company under this
Note are guaranteed by certain Subsidiaries of the Company pursuant to the
Subsidiary Guaranty dated as of the date hereof.
 
4.12 Construction. Each party acknowledges that its legal counsel participated
in the preparation of this Note and, therefore, stipulates that the rule of
construction that ambiguities are to be resolved against the drafting party
shall not be applied in the interpretation of this Note to favor any party
against the other.
 
4.13 Registered Obligation. This Note is intended to be a registered obligation
within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i) and the
Company (or its agent) shall register this Note (and thereafter shall maintain
such registration) as to both principal and any stated interest. Notwithstanding
any document, instrument or agreement relating to this Note to the contrary,
transfer of this Note (or the right to any payments of principal or stated
interest thereunder) may only be effected by (a) surrender of this Note and
either the reissuance by the Company of this Note to the new holder or the
issuance by the Company of a new instrument to the new holder, or (b) transfer
through a book entry system maintained by the Company (or its agent), within the
meaning of Treasury Regulation Section 1.871-14(c)(1)(i)(B).
 
[Balance of Page Intentionally Left Blank; Signature Page Follows]

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

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

WITNESS:
 
/s/ Lori Lopez
Lori Lopez

 
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