Exhibit 10.6

 

SEPARATION AND CONSULTING AGREEMENT – MICHAEL G. RHODES

 

This Separation and Consulting Agreement (“Separation and Consulting
Agreement”), is entered as of the 22nd day of September 2004, by and between
Michael G. Rhodes, an individual (“Rhodes”), and Modtech Holdings, Inc., a
corporation (the “Company”).

 

WHEREAS, Rhodes has been employed as President and Chief Operating Officer of
the Company, pursuant to an Employment Agreement, entered into as of December
22, 2003 (the “Employment Agreement”);

 

WHEREAS, Rhodes and the Company have mutually agreed to terminate their
employment relationship upon the terms set forth herein; and

 

WHEREAS, Rhodes and the Company have mutually agreed that Rhodes will provide
consulting services to the Company for a specified period after the termination
of his employment relationship with the Company.

 

NOW, THEREFORE, in consideration of the covenants undertaken and the releases
contained in this Separation and Consulting Agreement, Rhodes and the Company
agree as follows:

 

XIX. Resignation as President and Chief Operating Officer. Rhodes hereby resigns
as President and Chief Operating Officer of the Company effective September 22,
2004 (the “Separation Date”), and the Company hereby accepts such resignation.

 

XX. Resignation as an Employee. Rhodes hereby resigns as an employee of the
Company effective as of the Separation Date, and the Company hereby accepts such
resignation.

 

XXI. Resignation as a Director. The Board of Directors of the Company may
require Rhodes to resign from the Board (and Rhodes shall resign) and Rhodes may
resign from the Board at any time after September 21, 2004. On the date hereof,
the Company counsel shall confirm in writing to Rhodes that he is, and will be
following the Separation Date, covered under the Company’s current D&O policy.

 

XXII. Termination of Employment Agreement. The Employment Agreement shall
terminate and shall have no further force or effect upon the execution of this
Agreement. All payments due to Rhodes from the Company after the effective date
hereof shall be determined under this Separation and Consulting Agreement, and
no payments shall be made under the Employment Agreement. Notwithstanding the
foregoing, Sections 9, 10 and 11 of the Employment Agreement shall continue in
force and effect as they relate to Rhodes’s past and future services to the
Company as a Director and as an employee and Chief Operating Officer of the
Company and as a consultant.

 

XXIII. Transition and Final Paycheck. From and after the Separation Date, Rhodes
shall assist in the transition of his duties and business contacts as a
consultant pursuant to the terms set forth below. On or before the Separation
Date, the Company shall pay to Rhodes all earned, but unpaid compensation
through the Separation Date, including salary through the Separation Date and a
number of days of accrued but unused vacation that will be determined by close
of business, September 22, 2004.

 

(15) Severance Payment. On or before the Separation Date, the Company shall pay
to Rhodes severance pay in the lump sum amount of $ 514,583.33, less tax
withholdings and authorized deductions, in lieu of any severance payments or
other termination payments provided under the Employment Agreement.

 

XXIV. Benefit Continuation.

 

A. Medical and Dental Coverage. Rhodes hereby elects continuation of his and his
eligible dependents medical and dental insurance coverage under COBRA. The
Company will pay for the premium for such continuation coverage until the
earlier to occur of the following: (i) expiration of nineteen (19) months from
the Separation Date or (ii) until Rhodes or his eligible dependents cease to
qualify for such extension of coverage under COBRA.

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B. Life Insurance and Long Term Disability. To the extent permitted by the
Company’s group insurance policies, the Company will cause to be continued
Rhodes’s life insurance coverage and long term disability insurance coverage
substantially equivalent to the coverage maintained by the Company for Rhodes
prior to his separation at no premium cost to Rhodes. Such coverage will
terminate upon the expiration of nineteen (19) months following the Separation
Date. If such continuation is not permitted by the Company’s group insurance
policies, the Company for a period of nineteen (19) months following the
Separation Date will reimburse Rhodes for the premium cost incurred to obtain
comparable life insurance and long term disability insurance under private
policies, up to the amount the Company would have paid to provide such coverage
to Rhodes had he remained an employee of the Company.

 

C. Other Benefits. Nothing in this Agreement is intended to deprive Rhodes of
any vested rights, payments, benefits or service credit for benefits which he
earned during employment with respect to any welfare, pension, deferred
compensation, or other benefit plan.

 

XXV. Stock Options. On the Separation Date, Rhodes shall receive Eighteen (18)
months of vesting credit with respect to all stock options granted prior to the
date hereof as if he had provided services to the Company during such Eighteen
(18) month period. In addition, Rhodes shall have twenty-one (21) months from
the Separation Date to exercise all or any portion of his vested stock options
in accordance with the terms and conditions of such options and the Company’s
Stock Option Plan.

 

XXVI. Non-Disparagement. Rhodes and the Company agree they shall not, directly
or indirectly, make or ratify any statement, public or private, oral or written,
to any person that disparages, either professionally or personally, the other.

 

XXVII. Mutual Releases.

 

A. Rhodes, on behalf of himself and his heirs, executors, administrators,
successors and assigns, hereby knowingly, voluntarily and irrevocably releases
and discharges the Company and its subsidiaries, and any and all of their
respective affiliates, current and former officers, employees, agents,
directors, legal representatives, attorneys, and any successor or assign or
predecessor of any of the foregoing, from any and all claims, charges, actions
or causes of action he may have against any such released person, whether known
or unknown, from the beginning of time through the date hereof based upon any
matter, cause or thing whatsoever related to or arising out of (1) Rhodes’s
employment with the Company, or any subsidiary or predecessor entity prior to
the Separation Date, (2) Rhodes’s service as a director of the Company, or any
subsidiary or predecessor entity prior to the Separation Date, or (3) the
termination of Rhodes’s positions with the Company, or any subsidiary or
predecessor entity as of or prior to the Separation Date as contemplated by this
Agreement; provided, however, that this release shall not limit in any way or
constitute a waiver of any rights or claims Rhodes may have (i) under this
Agreement, (ii) under any applicable insurance policy, (iii) that arise after
the Separation Date, (iv) under any stock option, deferred compensation or other
similar compensation plan, program, agreement or arrangement, or (v) under any
pension, retirement or welfare benefit plan, program, agreement or arrangement.

 

B. Except as set forth herein, the Company, on behalf of itself and each
subsidiary, and any successor or assign of any of the foregoing, hereby
knowingly, voluntarily and irrevocably releases and discharges Rhodes, his
family, estate, legal representatives, agents, attorneys, heirs, executors,
successors and assigns, from any and all claims, charges, actions or causes of
action any of them may have against any such released person, whether known or
unknown, from the beginning of time through the date hereof based upon any
matter, cause or thing whatsoever related to or arising out of (1) Rhodes’s
employment with

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the Company, or any subsidiary or predecessor entity prior to the Separation
Date, (2) his service as a director of the Company, or any subsidiary or
predecessor entity prior to the Separation Date, or (3) the termination of
Rhodes’s positions with the Company, or any subsidiary or predecessor entity
prior to or as of the Separation Date as contemplated by this Agreement;
provided, however, that this release shall not limit or waive any rights or
claims of the Company or any subsidiary (i) under this Agreement, or (ii) as a
result of any acts or omissions by Rhodes that constitute fraud or willful
misconduct.

 

C. Waiver of Civil Code Section 1542. It is a further condition of the
consideration hereof and is the intention of Rhodes and the Company in executing
this instrument that the same shall be effective as a bar as to each and every
claim, demand, and cause of action hereinabove specified and, in furtherance of
this intention, Rhodes and the Company hereby expressly waive any and all rights
or benefits conferred by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL
CODE and expressly consent that this Agreement shall be given full force and
effect according to each and all of its express terms and conditions, including
those relating to unknown and unsuspected claims, demands and causes of actions,
if any, as well as those relating to any other claims, demands and causes of
actions hereinabove specified. SECTION 1542 provides:

 

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”

 

Rhodes and the Company acknowledge that they may hereafter discover claims or
facts in addition to or different from those that they now know or believe to
exist with respect to the subject matter of this Agreement and that, if known or
suspected at the time of executing this Agreement, may have materially affected
this settlement. Nevertheless, Rhodes and the Company hereby waive any right,
claim or cause of action that might arise as a result of such different or
additional claims or facts.

 

XXVIII. Confidentiality. Rhodes and the Company agree that the terms and
conditions of this Separation and Consulting Agreement shall remain confidential
and shall not (except as required by law), disclose them to any other person
other than (i) attorneys or any other professional providing advice to Rhodes or
the Company, or (ii) Rhodes’s spouse. Rhodes will not respond to or in any way
participate in or contribute to any public discussion, notice or other publicity
concerning, or in any way relating to, execution of this Separation and
Consulting Agreement or the events (including any negotiations) which led to its
execution. The parties hereby agree that disclosure of any of the terms and
conditions of the Separation and Consulting Agreement in violation of the
foregoing shall constitute and be treated as a material breach of this
Separation and Consulting Agreement.

 

XXIX. Consulting Engagement. The Company hereby engages Rhodes and Rhodes hereby
accepts such engagement, upon the terms and conditions hereinafter set forth,
for a twelve (12) month period commencing on the Separation Date (the
“Consulting Period”), unless earlier terminated by mutual agreement of the
parties.

 

XXX. Consulting Services.

 

Rhodes shall perform reasonable consulting services during the course of his
engagement under this Separation and Consulting Agreement which shall include
providing advice to and consultation with the Company and its affiliates as the
Company may request from time to time (and agreed to by Rhodes) on matters with
which Rhodes was familiar and/or about which Rhodes acquired knowledge,
expertise and/or experience during the time that Rhodes was employed by the
Company. Rhodes shall not undertake any consulting project for the Company
except as requested by the CEO or CFO of the Company.

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XXXI. Consulting Compensation. The Company shall pay to Rhodes a consulting fee
of $1,750 per day of consulting services to the Company (the “Consulting Fee”).
Rhodes shall submit invoices monthly in arrears for the consulting services
provided the prior month, and such invoices shall be promptly paid by the
Company. Rhodes agrees that he will be solely responsible for any taxes due as a
result of the payment of such Consulting Fee, and Rhodes will defend and
indemnify the Company from and against any and all losses or liabilities,
including defense costs, arising out of Rhodes’s failure to pay any taxes due
with respect to such Consulting Fee. If the Company determines that applicable
law requires that taxes should be withheld from the Consulting Fee, the Company
reserves the right to withhold, as legally required, and to notify Rhodes
accordingly. All services provided by Rhodes under Section XVII. E. shall be
considered consulting services hereunder, and subject to the terms and
conditions of providing such services set forth herein, and the Company shall be
required to pay Rhodes the Consulting Fee in connection therewith.

 

XXXII. Expenses. Rhodes shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by him in performance of the services under
this Separation and Consulting Agreement upon the presentation of documentary
evidence of such expenses.

 

XXXIII. Relationship. Rhodes shall operate at all times as an independent
contractor of the Company. This Separation and Consulting Agreement does not
authorize Rhodes to act for the Company as its agent or to make commitments on
behalf of the Company. Rhodes and the Company intend that an independent
contractor relationship be created by this Separation and Consulting Agreement,
and nothing herein shall be construed as creating an employer/employee
relationship, partnership, joint venture, or other business group or concerted
action. Rhodes at no time shall hold himself out as an agent of the Company for
any purpose, including reporting to any governmental authority or agency, and
shall have no authority to bind the Company to any obligation whatsoever.

 

XXXIV. Miscellaneous

 

A. Successors.

 

1. This Separation and Consulting Agreement is personal to Rhodes and shall not,
without the prior written consent of the Company, be assignable by Rhodes.

 

2. This Separation and Consulting Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns and any such successor
or assignee shall be deemed substituted for the Company under the terms of this
Separation and Consulting Agreement for all purposes. As used herein,
“successor” and “assignee” shall include any person, firm, corporation or other
business entity which at any time, whether by purchase, merger or otherwise,
directly or indirectly acquires the stock of the Company or to which the Company
assigns this Separation and Consulting Agreement by operation of law or
otherwise. This Agreement shall not be terminated by the Company merging with or
otherwise being acquired by another entity, whether or not the Company is the
surviving entity, or by the Company transferring all or substantially all of its
assets (any such event, an “Acquisition”). In the event of an Acquisition, the
surviving entity or transferee, as the case may be, shall be bound by and shall
have the benefits of this Agreement, and the Company shall not enter into any
Acquisition unless the surviving entity or transferee, as the case may be,
agrees to be bound by the provisions of the Agreement.

 

B. Waiver. No waiver of any breach of any term or provision of this Separation
and Consulting Agreement shall be construed to be, nor shall be, a waiver of any
other breach of this Separation and Consulting Agreement. No waiver shall be
binding unless in writing and signed by the party waiving the breach.

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C. Modification. This Separation and Consulting Agreement may not be amended or
modified other than by a written agreement executed by Rhodes and the Chief
Executive Officer of the Company.

 

D. Complete Agreement. This Separation and Consulting Agreement constitutes and
contains the entire agreement and final understanding concerning Rhodes’s
relationship with the Company and the other subject matters addressed herein
between the parties, and supersedes and replaces all prior negotiations and all
agreements proposed or otherwise, whether written or oral, concerning the
subject matters hereof. Any representation, promise or agreement not
specifically included in this Separation and Consulting Agreement shall not be
binding upon or enforceable against either party. This is an integrated
agreement.

 

E. Litigation and Investigation Assistance. As a part of the consulting services
described in Section XIII, Rhodes may be required to provide reasonable
cooperation in the Company’s defense against any threatened or pending
litigation or in any investigation or proceeding by any governmental agency or
body that relates to any events or actions which occurred during the term of
Rhodes’s employment.

 

F. Severability. If any provision of this Separation and Consulting Agreement or
the application thereof is held invalid, the invalidity shall not affect other
provisions or applications of the Separation and Consulting Agreement which can
be given effect without the invalid provisions or applications and to this end
the provisions of this Separation and Consulting Agreement are declared to be
severable.

 

G. Choice of Law. This Separation and Consulting Agreement shall be deemed to
have been executed and delivered within the State of California, and the rights
and obligations of the parties hereunder shall be construed and enforced in
accordance with, and governed by, the laws of the State of California without
regard to principles of conflict of laws.

 

H. Cooperation in Drafting. Each party has cooperated in the drafting and
preparation of this Separation and Consulting Agreement. Hence, in any
construction to be made of this Separation and Consulting Agreement, the same
shall not be construed against any party on the basis that the party was the
drafter.

 

I. Counterparts. This Separation and Consulting Agreement may be executed in
counterparts, and each counterpart, when executed, shall have the efficacy of a
signed original. Photographic copies of such signed counterparts may be used in
lieu of the originals for any purpose.

 

J. Arbitration. Any controversy arising out of or relating to this Separation
and Consulting Agreement, its enforcement or interpretation, or because of an
alleged breach, default, or misrepresentation in connection with any of its
provisions, shall be submitted to final and binding arbitration, to be held in
Orange County, California in accordance with California Civil Procedure Code §§
1282-1284.2, provided, however, that provisional injunctive relief may, but need
not, be sought in a court of law while arbitration proceedings are pending, and
any provisional injunctive relief granted by such court shall remain effective
until the matter is finally determined by the Arbitrator. In the event either
party institutes arbitration under this Separation and Consulting Agreement, the
party prevailing in any such proceeding shall be entitled, in addition to all
other relief, to reasonable attorneys’ fees relating to such arbitration. The
non-prevailing party shall be responsible for all costs of the arbitration,
including but not limited to, the arbitration fees, court reporter fees, etc.

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K. Supplementary Documents. All parties agree to cooperate fully and to execute
any and all supplementary documents and to take all additional actions that may
be necessary or appropriate to give full force to the basic terms and intent of
this Separation and Consulting Agreement and which are not inconsistent with its
terms.

 

L. Headings. The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.

 

M. Attorneys Fees. The Company shall pay up to $5,000 of the attorney’s fees of
Rhodes in connection with the preparation, negotiation, and execution of this
Agreement.

 

I have read the foregoing Separation and Consulting Agreement and I accept and
agree to the provisions it contains and hereby execute it voluntarily with full
understanding of its consequences.

 

EXECUTED this 22nd day of September 2004, at Riverside County, California.

 

“Rhodes”

/s/ Michael G. Rhodes

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Michael G. Rhodes

 

EXECUTED this 22nd day of September 2004, at Riverside County, California.

 

“Company” Modtech Holdings, Inc.

/s/ David M. Buckley

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By:   David M. Buckley Its:   Chief Executive Officer