MODTECH HOLDINGS, INC.
Exchange of Senior Subordinated Secured Convertible Notes
TERMS AND CONDITIONS OF EXCHANGE TRANSACTION
 
May 3, 2006
 

Issuer:
Modtech Holdings, Inc. (the "Company").

 

Holder: 
Amphora Limited ("Amphora").

 

Exchange:
In a transaction to take effect as of May 4, 2006, $8,333,333.33 principal
amount of Senior Subordinated Secured Convertible Notes which would otherwise be
subject to repurchase by the Company at the option of the Holder on August 31,
2006 (the "Notes") shall be exchanged (the "Exchange") for a number of the
Company's common shares equal to the sum of (a) the quotient of the principal
amount of the Notes divided by the Conversion Price of the Notes in effect as of
closing of the Exchange (the "Conversion Shares") plus (b) the quotient of (x)
$1,750,000.00 divided by (y) the price at which the Holder sells 400,000 of the
Company's common shares pursuant to a trade confirmation entered into prior to
the closing of the Exchange (such sale by the Holder, the "Pre-Exchange Sale",
and such quotient of (x) divided by (y), "Exchange Shares"), the sale of the
common shares by the Holder being referred to as the "Common Stock Sale." The
Conversion Shares will be delivered in accordance with the terms of the Notes as
if the conversion date were the date of the closing of the Exchange.
 
The Exchange Shares will be issued by the Company in consideration for early
conversion by the Holder. To the extent the Exchange cannot be consummated in
its entirety due to the application of the Maximum Percentage, as provided in
the Notes and the Warrant to Purchase Common Stock issued by the Company to
Amphora on December 30, 2004 (such circumstance, a "Conversion Limitation"), the
Holder will have the option to effect the remainder of the Exchange in whole or
in part at such time or times as such Conversion Limitation no longer applies
(the amount of Conversion Shares to be delivered at any such time to be
determined with reference to the market price of the Company's common shares at
such time, as provided in the Notes) by delivering notice of such election to
the Company, settlement of which will occur on the third trading day following
the Company's receipt of Amphora's election notice. The Notes that are not
subject to the Exchange shall remain outstanding and the terms of such Notes
shall remain unchanged.

 
Reduction of  Letter of
Credit Amount:
The Letter of Credit Amount shall be reduced by $5,000,000 in accordance with
the terms of the Note as if the Company had achieved the Profitability Target on
an Optional Redemption Date.

 
Documentation of Exchange: 
The Exchange will by documented on terms reasonably satisfactory to Amphora and
the Company.

 

Regulatory Approvals: In the event that any regulatory approval, stockholder
approval or other consents are required in connection with the Exchange, the
Company shall use its best efforts to obtain such approvals as quickly as
possible following the Exchange and any failure to obtain the requisite
approvals to consummate the Exchange will result in cash payment to the Holder
by the Company of $1,750,000.00 in lieu of delivery of the Exchange Shares.

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Public Disclosure: Prior to completion of the Exchange, this document and the
documents associated with the transaction will not be disclosed to any parties
other than the Company and its advisors without the prior written consent of
Amaranth, except as may be required by law or to satisfy regulatory
requirements. Promptly following execution of this Term Sheet and prior to the
Pre-Exchange Sale by the Holder, the Company shall file a Current Report on Form
8-K announcing the Exchange and describing the material details thereof.

 
Costs and Expenses:
The Company will be responsible for all costs and expenses incurred by Amaranth,
including all legal fees and disbursements in connection with this Term Sheet
and the documentation and implementation of the transaction irrespective of
whether the transaction contemplated herein closes.
   
Binding Obligation:
This document is intended to summarize the terms that will be provided in the
definitive documentation relating to the Exchange. This document shall be
binding and irrevocable upon the Company. Amaranth may withdraw or modify this
Agreement at any time prior to the filing by the Company of the Current Report
on Form 8-K referred to in "Public Disclosure" above.

 
 
MODTECH HOLDINGS, INC
AMPHORA LIMITED,
BY AMARANTH ADVISORS L.L.C.
   

By: /s/ Dennis L. Shogren
Name: Dennis L. Shogren
Title: Chief Financial Officer
By: /s/ James G. Glynn
Name: James G. Glynn
Title: Authorized Signatory

 
 
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