Modtech Inc – ‘S-4’ on 10/27/98

As of:  Tuesday, 10/27/98   ·   Accession #:  892569-98-2841   ·   File #:  333-66209   ·   Deletion:  This Filing was Deleted by the SEC on 12/16/98.

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Registration of Securities Issued in a Business-Combination Transaction   —   Form S-4
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-4         Registration of Securities Issued in a               288   1.25M 
                          Business-Combination Transaction                       
 2: EX-3.1      Cerificate of Incorporation of Modtech Holding,Inc     5     21K 
 3: EX-3.2      Bylaws of Modtech Holdings, Inc                       13     53K 
 4: EX-3.5      Articles of Incorporation of Spi Holdings, Inc         3     16K 
 5: EX-3.6      Bylaws of Spi Holdings, Inc.                          17     70K 
 6: EX-3.7      Certificate of Designation of Modtech Holdings         6     27K 
 7: EX-3.8      Designation of Spi Holdings, Inc.                     61    211K 
 8: EX-4        Registration Rights Agreement                         12     49K 
 9: EX-10.1     Transaction Advisory Agreement                         6     28K 
11: EX-10.10    Lease Between Baron Homes, Inc. & David V. Homme      26    132K 
12: EX-10.11    Lease Between Ronfran Incorporation                   29    135K 
13: EX-10.12    Lease Between Arizona Millwork, Inc.                  35    152K 
10: EX-10.9     Lease Between Office Master of Texas, Inc.            14     39K 
14: EX-23.1     Consent of Kpmg Peat Marwick LLP                       1      7K 
15: EX-23.2     Consent of Arthur Andersen LLP                         1      7K 
17: EX-99.1     Form of Modtech, Inc Proxy                             2±    10K 
18: EX-99.2     Form of Spi, Holdings, Inc. Proxy                      2±    10K 
16: EX-27       Financial Data Schedule {Pre-XBRL/IDEA}                1      9K 

S-4   —   Registration of Securities Issued in a Business-Combination Transaction
Document Table of Contents

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        As filed with the Securities and Exchange Commission on October 27, 1998
                                             Registration No. 333-
================================================================================

SECURITIES AND EXCHANGE COMMISSION

FORM S-4
Registration Statement
 Under
the Securities Act of 1933

MODTECH HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

DELAWARE                                      33-0825386  
  (State of Incorporation)                  (I.R.S. Employer Identification No.)

 2830 BARRETT AVENUE, PERRIS, CALIFORNIA 92571, (909) 943-4014
 (Address, including zip code, and telephone number, including
 area code, of registrant's principal executive offices)

 EVAN M. GRUBER, CHIEF EXECUTIVE OFFICER
 2830 BARRETT AVENUE, PERRIS, CALIFORNIA 92571, (909) 943-4014
 (Name, address, including zip code, and telephone number,
 including area code, of agent for service of process)

COPIES TO:
Jon R. Haddan, Esq.                                  Kevin A. Cudney, Esq.      
Haddan & Zepfel LLP                                  Dorsey & Whitney LLP       
4675 MacArthur Court, Suite 710                      370 17th Street, Suite 4400
Newport Beach, California 92660                      Denver, Colorado 80202     

         APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes effective and the 
effective time of the proposed mergers described in the enclosed Joint Proxy    
Statement/Prospectus.                                                           

          If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with 
General Instruction G, check the following box. [ ]                             

        If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended   
(the "Securities Act"), check the following box and list the Securities Act     
registration statement number of the earlier effective registration statement   
for the same offering. [ ]                                                      

       If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration         
statement for the same offering. [ ]                                            

CALCULATION OF REGISTRATION FEE 

                                                        [Enlarge/Download Table]

====================================================================================================================================
Title of Each Class                                                      Proposed Maximum    Proposed Maximum                       
   of Securities                                         Amount to        Offering Price         Aggregate           Amount of      
 to be Registered                                    Be Registered (1)     Per Share (2)    Offering Price (2)  Registration Fee (2)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    
Common Stock, par value $0.01 per share                 12,622,158            $17.00           $221,188,649           $61,490       
Series A Preferred Stock, par value $0.01 per share        388,939                                                                  
====================================================================================================================================

(1)        Represents the estimated maximum number of shares of Modtech         
        Holdings, Inc. Common Stock and Series A Preferred Stock which are
issuable upon consummation of the mergers.                

(2)        Pursuant to Rule 457(f)(1) promulgated under the Securities Act, the 
          registration fee is based on the market value of the Common Stock of
Modtech, Inc. as of October 23, 1998.                     

         The Registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant   
shall file a further amendment which specifically states that this registration 
statement shall thereafter become effective in accordance with Section 8(a) of  
the Securities Act of 1933, or until this registration statement shall become   
effective on such date as the Commission, acting pursuant to Section 8(a), may  
determine.                                                                      

================================================================================

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CROSS-REFERENCE SHEET TO FORM S-4 OF
MODTECH HOLDINGS, INC.

PART I. INFORMATION REQUIRED IN THE PROSPECTUS

                                                        [Enlarge/Download Table]

        ITEM NUMBER IN FORM S-4                                      LOCATION IN JOINT PROXY STATEMENT/PROSPECTUS    
        -----------------------                                      --------------------------------------------    
                                                                                                                     
A. INFORMATION ABOUT THE TRANSACTION                                                                                 

   1.   Forepart of Registration Statement and              Facing Page; Outside Front Cover Page of Prospectus      
          Outside Front Cover Page of Prospectus                                                                     

   2.   Inside Front and Outside Back Cover                 Table of Contents; Where You Can Find More Information;  
          Pages of Prospectus                                                                                        

   3.   Risk Factors, Ratio of Earnings to                  Outside Front Cover Page of Prospectus; Summary; Certain 
          Fixed Charges and Other Information                     Risk Factors                                       

   4.   Terms of the Transaction                            Summary; The Mergers; Certain Provisions of the Merger   
                                                                  Agreement; Directors and Officers of Holdings      
                                                                  Following the Mergers; Description of Holdings     
                                                                  Capital Stock; Comparison of Rights of Stockholders

   5.   Pro Forma Financial Information                     Summary; Unaudited Pro Forma Combined                    
                                                                  Condensed Financial Statements                     

   6.   Material Contacts with the Company Being            Summary; The Mergers; Certain Provisions of the          
          Acquired                                                Merger Agreement                                   

   7.   Additional Information Required for Reoffering      *                                                        
          by Persons and Parties Deemed to be                                                                        
          Underwriters.                                                                                              

   8.   Interests of Named Experts and Counsel              Experts; Legal Matters                                   

   9.   Disclosure of Commission Position on Indemni-       *                                                        
          fication for Securities Act Liabilities                                                                    

B. INFORMATION ABOUT THE REGISTRANT                                                                                  

   10.  Information with Respect to S-3 Registrants         Summary; Where You Can Find More Information             

   11.  Incorporation of Certain Information by Reference   Where You Can Find More Information                      

   12.  Information with Respect to S-2 or S-3 Registrants  *                                                        

   13.  Incorporation of Certain Information by Reference                                                            

   14.  Information with Respect to Registrants Other       Summary; The Mergers; The Business of Modtech; Modtech   
          Than S-2 or S-3 Registrants                             Common Stock Prices and Dividends; Modtech         
                                                                  Management's Discussion and Analysis of Financial  
                                                                  Condition and Results of Operations                

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                                                        [Enlarge/Download Table]
                                                                                                                     
C.   INFORMATION ABOUT THE COMPANY BEING                                                                             
     ACQUIRED                                                                                                        

     15.  Information with Respect to S-3 Companies         *                                                        

     16.    Information with Respect to S-2 or S-3          *                                                        
              Companies                                                                                              

     17.    Information with Respect to Companies Other     Summary; The Mergers; The Business of SPI; SPI           
              than S-2 or S-3 Companies                           Management's Discussions and Analysis of           
                                                                  Financial Condition and Results of Operations      

D. VOTING AND MANAGEMENT INFORMATION                                                                                 

     18.    Information if Proxies, Consents or Authoriza-  Outside Front Cover of Prospectus; Summary; Certain Risk 
              tions are to be Solicited                           Factors; The Mergers; The Special Meetings; Certain
                                                                  Provisions of the Merger Agreement; Description of 
                                                                  Holdings Capital Stock; Comparison of Rights of    
                                                                  Stockholders; Where You Can Find More Information  

     19.    Information if Proxies, Consents or Authoriza-  *                                                        
              tions are not to be Solicited in an Exchange                                                           
              Offer                                                                                                  

----------                                                                      

* Not applicable.                                                               

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MODTECH, INC.                                                 SPI HOLDINGS, INC.

MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT

     The Boards of Directors of Modtech, Inc. and SPI Holdings, Inc. have both
unanimously approved the merger of Modtech and SPI. We are planning to          
accomplish the combination through concurrent mergers of Modtech and SPI into   
separate subsidiaries of a new holding company, named Modtech Holdings, Inc.,   
which is called "Holdings" in this Joint Proxy Statement/Prospectus.            

    SPI stockholders will receive 1.8785 shares of Holdings Common Stock for
each share of SPI Common or Preferred Stock they own. Subject to certain        
adjustments described in this Joint Proxy Statement/Prospectus, they may elect  
to receive $49.4097 per share of SPI stock in place of Holdings Common Stock for
up to 5.9176% of their SPI stock. Modtech stockholders will receive 0.8508      
shares of Holdings common stock and $3.7293 in exchange for each share of       
Modtech Common Stock held. Subject to certain adjustments described in this     
Joint Proxy Statement/Prospectus, they may elect to receive up to 3.94% of their
shares from Holdings as Series A Preferred Stock instead of Holdings Common     
Stock. Holdings' Common Stock is substantially identical to the Modtech Common  
Stock currently outstanding.                                                    

    The merger cannot be completed unless the stockholders of both companies
approve the merger agreement. We have each scheduled special meetings for our   
stockholders to vote on the merger agreement. The Boards of Directors of Modtech
and SPI have unanimously determined that the merger of their respective         
companies is in the best interest of their stockholders, and each Board         
unanimously recommends that you vote FOR approval of the merger agreement. YOUR 
VOTE IS VERY IMPORTANT.                                                         

IN DECIDING HOW TO VOTE, YOU SHOULD CONSIDER VARIOUS RISKS WHICH ARE
DESCRIBED IN THIS JOINT PROXY STATEMENT/PROSPECTUS UNDER THE HEADING, "CERTAIN  
RISK FACTORS," BEGINNING AT PAGE 15.                                            

     Whether or not you plan to attend your meeting, please vote by completing
the enclosed proxy card and mailing it to us. If you sign, date, and mail your  
proxy card without indicating how you want to vote, your proxy will be counted  
as a vote in favor of the proposals submitted at your meeting. If your shares   
are held in "street name," you must instruct your broker in order to vote. If   
you fail to return your proxy card or fail to instruct your broker, you will in 
effect vote against the merger agreement.                                       

The date, times and places of the special meetings are as follows:  

FOR MODTECH STOCKHOLDERS:                                                       

___________, December __, 1998, 10:00 a.m.                                      
Sheraton Newport Hotel                                                          
4545 MacArthur Boulevard                                                        
Newport Beach, California 92660                                                 

FOR SPI STOCKHOLDERS:                                                           

___________, December __, 1998, 10:00 a.m.                                      
9550 Hermosa Avenue                                                             
Rancho Cucamonga, California 91730                                              

This Joint Proxy Statement/Prospectus provides you with detailed    
information about the proposed merger. Again, we encourage you to read it       
carefully and understand it before you vote. You may obtain additional          
information about Modtech from documents that it has filed with the Securities  
and Exchange Commission.                                                        

___________________________________        _____________________________________
Evan M. Gruber                             Patrick Van Den Bossche              
Chief Executive Officer                    President and Chief Executive Officer
Modtech, Inc.                              SPI Holdings, Inc.                   

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES         
REGULATORS HAVE APPROVED THE SECURITIES TO BE ISSUED IN THIS TRANSACTION OR     
DETERMINED THAT THIS JOINT PROXY STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE.  
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.                       

     This Joint Proxy Statement/Prospectus is dated October _____, 1998 and is
first being sent or given to stockholders on or about __________, 1998.         

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 MODTECH, INC.
 2830 BARRETT AVENUE
PERRIS, CALIFORNIA 92571

 NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO THE STOCKHOLDERS OF MODTECH, INC.:                                           

NOTICE IS HEREBY GIVEN that a Special Meeting of the Stockholders of
Modtech, Inc., a California corporation ("Modtech"), will be held at 10:00 a.m.,
on December __, 1998, at the Sheraton Newport Beach Hotel, 4545 MacArthur       
Boulevard, Newport Beach, California 92660, for the following purposes:         

     1. Mergers. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Reorganization and Merger, dated as of September 28, 1998 
(the "Merger Agreement"), between SPI Holdings, Inc., a Colorado corporation    
("SPI"), and Modtech, and the mergers contemplated therein. The Merger Agreement
provides for the merger of Modtech with a subsidiary of Modtech Holdings, Inc.  
("Holdings"), a newly formed Delaware corporation (the "Modtech Merger"), and   
the concurrent merger of SPI with a separate subsidiary of Holdings (the "SPI   
Merger" and, together with the Modtech Merger, the "Mergers"). Pursuant to the  
Mergers, both SPI and Modtech will become wholly owned subsidiaries of Holdings.
At the effective time of the Mergers, each outstanding share of Modtech Common  
Stock other than shares owned by SPI, Modtech or their respective subsidiaries, 
will be converted into the right to receive $3.7293 and 0.8508 of a share of    
Holdings Common Stock. Subject to adjustments described in the Merger Agreement,
each Modtech stockholder may elect to receive 0.8508 shares of Holdings Series A
Preferred Stock in place of Holdings Common Stock at the same 0.8508 exchange   
ratio for up to 3.94% of their shares of Modtech Common Stock.                  

Details of the Mergers and other important information concerning   
Holdings, SPI and Modtech are more fully described in the accompanying Joint    
Proxy Statement/Prospectus, which includes a copy of the Merger Agreement.      
Please review this material carefully.                                          

   2. Other Business. To transact such other business as may properly come
before the Special Meeting or any postponements or adjournments thereof.        

      The Board of Directors has fixed the close of business on ________________
_______, 1998 as the record date for the determination of the holders of Modtech
Common Stock entitled to notice of, and to vote at, the Special Meeting. Only   
stockholders of record at the close of business on such date are entitled to    
notice of and to vote at the Special Meeting and any adjournment or postponement
thereof. The affirmative vote of a majority of the outstanding shares of Modtech
Common Stock entitled to vote thereon is necessary for approval and adoption of 
the Merger Agreement and approval of the Mergers.                               

   All stockholders are cordially invited to attend the Special Meeting in
person; however, to ensure your representation at the Special Meeting, you are  
urged to mark, sign, date and return the enclosed proxy card as promptly as     
possible in the postage prepaid envelope enclosed for that purpose.             

    THE VOTE OF ALL HOLDERS OF MODTECH COMMON STOCK IS IMPORTANT. WHETHER OR
NOT YOU ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE  
ACCOMPANYING PROXY CARD IN THE POSTAGE PREPAID ENVELOPE AS SOON AS POSSIBLE.    

 YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE ACCOMPANYING
JOINT PROXY STATEMENT/PROSPECTUS AT ANY TIME BEFORE IT HAS BEEN VOTED AT THE    
SPECIAL MEETING.                                                                

      IF YOU ATTEND THE SPECIAL MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR
SHARES OF MODTECH COMMON STOCK IN PERSON.                                       

     The Board of Directors unanimously recommends that the holders of Modtech
Common Stock vote for approval and adoption of the Merger Agreement and the     
Mergers.                                                                        

                    Sincerely,

                            /s/ EVAN M. GRUBER
                                             -----------------------------------
                        Evan M. Gruber
                                 CHIEF EXECUTIVE OFFICER

Perris, California                                                              
November __, 1998                                                               

HOLDERS OF MODTECH COMMON STOCK SHOULD NOT SEND IN THEIR STOCK CERTIFICATES WITH
THEIR PROXY CARD AT THIS TIME. RECORD HOLDERS OF MODTECH COMMON STOCK AT THE    
EFFECTIVE TIME OF THE MERGER WILL RECEIVE A LETTER OF TRANSMITTAL WITH WHICH TO 
MAKE AN ELECTION TO RECEIVE A PORTION OF THE MERGER CONSIDERATION IN PREFERRED  
STOCK.                                                                          

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SPI HOLDINGS, INC.
 9550 HERMOSA AVENUE
RANCHO CUCAMONGA, CALIFORNIA 91730

 NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO THE STOCKHOLDERS OF SPI HOLDINGS, INC:                                       

    Notice is hereby given that a Special Meeting of the Stockholders of SPI
Holdings, Inc., a Colorado corporation ("SPI"), will be held at 10:00 a.m.,     
December __, 1998, at 9550 Hermosa Avenue, Rancho Cucamonga, California 91730,  
for the following purposes:                                                     

     1. Mergers. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Reorganization and Merger dated as of September 28, 1998  
(the "Merger Agreement"), between SPI and Modtech, Inc., a California           
corporation ("Modtech"), and the mergers contemplated therein. The Merger       
Agreement provides for the merger of SPI with a subsidiary of Modtech Holdings, 
Inc. ("Holdings"), a newly formed Delaware corporation (the "SPI Merger"), and  
the concurrent merger of Modtech with a separate subsidiary of Holdings (the    
"Modtech Merger" and, together with the SPI Merger, the "Mergers"). Pursuant to 
the Mergers, both SPI and Modtech will become wholly owned subsidiaries of      
Holdings. At the effective time of the Mergers, each outstanding share of SPI   
Common Stock, and each outstanding share of SPI's several series of preferred   
stock ("SPI Preferred Stock" and, together with SPI Common Stock, "SPI Capital  
Stock"), other than shares owned by SPI, Modtech or their respective            
subsidiaries, will be converted into the right to receive 1.8785 shares of      
Holdings Common Stock. Each SPI stockholder may elect to receive in place of    
Holdings Common Stock $49.4097 per share for up to 5.9176% of their shares of   
SPI Capital Stock. If such elections do not total $8,076,133, additional shares 
will be converted to cash, first pro rata among those SPI stockholders who      
elected to receive cash and then pro rata among those SPI stockholders who did  
not make such an election, until the cash being paid equals $8,076,133.         

      Details of the proposed Mergers and other important information concerning
Holdings, SPI and Modtech are more fully described in the accompanying Proxy    
Statement/Prospectus, which includes a copy of the Merger Agreement. Please     
review this material carefully.                                                 

  2. Other Business. To consider and act upon any other matters that may
properly come before the Special Meeting or any postponement or adjournment     
thereof.                                                                        

      The SPI Board of Directors has fixed the close of business on ___________,
1998 as the record date for determining the stockholders having the right to    
vote at the meeting or any adjournment thereof. Only stockholders of record at  
the close of business on that date are entitled to notice of and to vote at the 
Special Meeting and any postponement or adjournment thereof. The affirmative    
vote of 70% of the outstanding shares of SPI Common Stock and SPI Preferred     
Stock entitled to vote thereon, voting together as a single class, is required  
to approve and adopt the Merger Agreement and the Mergers.                      

THE VOTE OF ALL HOLDERS OF SPI COMMON STOCK AND PREFERRED STOCK IS  
IMPORTANT. WHETHER OR NOT YOU ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND RETURN THE ACCOMPANYING PROXY CARD IN THE POSTAGE PREPAID ENVELOPE AS  
SOON AS POSSIBLE.                                                               

 YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE ACCOMPANYING
JOINT PROXY STATEMENT/PROSPECTUS AT ANY TIME BEFORE IT HAS BEEN VOTED AT THE    
SPECIAL MEETING.                                                                

      IF YOU ATTEND THE SPECIAL MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR
SHARES OF SPI COMMON STOCK OR PREFERRED STOCK IN PERSON.                        

 The Board of Directors unanimously recommends that the holders of SPI
Common Stock and Preferred Stock vote for approval and adoption of the Merger   
Agreement and the Mergers at the SPI Special Meeting.                           

                    Sincerely,

                                     /s/ PATRICK VAN DEN BOSSCHE
                                             -----------------------------------
                                  Patrick Van Den Bossche,
                                       PRESIDENT AND CHIEF EXECUTIVE
                 OFFICER

Rancho Cucamonga, California                                                    
November __, 1998                                                               

SPI STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARD AT    
THIS TIME. RECORD HOLDERS OF SPI COMMON OR PREFERRED STOCK AT THE EFFECTIVE TIME
OF THE MERGER WILL RECEIVE A LETTER OF TRANSMITTAL WITH WHICH TO MAKE AN        
ELECTION TO RECEIVE COMMON STOCK OR A COMBINATION OF COMMON STOCK AND CASH.     

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 TABLE OF CONTENTS

                                                                [Download Table]
                                                                              
QUESTIONS AND ANSWERS ABOUT THE                                               
           MODTECH/SPI MERGER...............................................1 

SUMMARY.....................................................................6 
           The Companies....................................................6 
           The Special Meetings.............................................7 
           Record Date; Voting Power........................................7 
           Nasdaq Listing of Holdings Common Stock..........................7 
           Share Ownership of Management and Certain                          
             Stockholders...................................................7 
           Conflicts of Interest............................................8 
           Board of Directors Following the Mergers.........................8 
           Comparative Per Share Market Price                                 
             Information....................................................8 
           Approvals........................................................8 
           Conditions to the Mergers........................................8 
           Termination of the Merger Agreement..............................9 
           Termination Fee..................................................9 
           Dissenters' Rights...............................................9 
           Opinion of Modtech's Financial Advisor..........................10 
           Forward-Looking Statements May Prove                               
             Inaccurate....................................................10 
           Comparative Historical and Pro Forma                               
             Per Share Data................................................11 
           Modtech Selected Financial                                         
             Data..........................................................12 
           SPI Selected Financial Data.....................................13 
           Modtech and SPI Selected Unaudited                                 
             Pro Forma Combined Condensed                                     
             Financial Information.........................................14 

CERTAIN RISK FACTORS.......................................................15 
           Risks Related to Mergers........................................15 
           Risks Related to Modtech........................................17 
           Risks Related to SPI............................................18 

THE MERGERS................................................................20 
           General.........................................................20 
           Background of the Mergers.......................................20 
           Reasons for the Mergers; Recommen-                                 
             dations of the Boards of Directors............................22 
           Form of the Mergers.............................................24 
           Merger Consideration............................................24 
           Opinion of Modtech's Financial Advisor..........................25 
           Procedures for Election of Merger                                  
             Consideration and Surrender of Stock                             
             Certificates; Fractional Shares...............................28 
           Effective Time..................................................29 
           Effect on SPI Stock Plan........................................29 
           Effect on SPI Warrants..........................................30 
           Effect on Modtech Stock Plans...................................30 
           Certain Federal Income Tax Consequences.........................30 
           Conflicts of Interest...........................................34 
           Accounting Treatment............................................36 
           Approvals and Consents..........................................36 
           Nasdaq Listing..................................................37 
           Resales of Stock................................................37 
           Dissenters' Rights..............................................37 
           Cautionary Statement Concerning Forward-                           
             Looking Statements............................................40 

THE SPECIAL MEETINGS.......................................................42 
           Purpose, Time and Place.........................................42 
           Record Date; Voting Power.......................................42 
           Votes Required..................................................43 
           Share Ownership of Management and Certain                          
             Stockholders..................................................43 
           Voting of Proxies...............................................43 
           Revocability of Proxies.........................................44 
           Solicitation of Proxies.........................................44 

CERTAIN PROVISIONS OF THE MERGER                                              
           AGREEMENT.......................................................45 
           Conditions to Consummation of the                                  
             Mergers.......................................................45 
           Conduct of Business Pending the Mergers.........................46 
           Termination.....................................................46 
           Termination Fee.................................................47 
           Certain Representations and Warranties..........................48 
           Indemnification.................................................48 
           Fees and Expenses...............................................49 
           Amendment and Waiver............................................49 

THE BUSINESS OF HOLDINGS...................................................51 

THE BUSINESS OF MODTECH....................................................52 

MODTECH MANAGEMENT'S DISCUSSION AND                                           
ANALYSIS OF FINANCIAL CONDITION AND                                           
RESULTS OF OPERATIONS......................................................59 

MODTECH COMMON STOCK PRICES                                                   
  AND DIVIDENDS............................................................63 

THE BUSINESS OF SPI........................................................64 

SPI MANAGEMENT'S DISCUSSION AND                                               
 ANALYSIS OF FINANCIAL CONDITION                                              
 AND RESULTS OF OPERATIONS.................................................68 

UNAUDITED PRO FORMA COMBINED                                                  
           CONDENSED FINANCIAL                                                
           STATEMENTS......................................................74 

DIRECTORS AND OFFICERS OF HOLDINGS                                            
           FOLLOWING THE MERGERS...........................................84 
           Directors.......................................................84 

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                                                                [Download Table]
                                                                             
           Compensation of Holdings' Directors                               
            and Committees of the Board of                                   
            Directors......................................................87
           Holdings' Executive Officers....................................87
           Compensation of Holdings Executive                                
             Officers......................................................87
           Compensation of Modtech's Directors                               
             and Executive Officers........................................87
           Compensation of SPI's Directors and                               
             Executive Officers............................................87

SECURITY OWNERSHIP OF CERTAIN                                                
           BENEFICIAL OWNERS AND                                             
           MANAGEMENT OF HOLDINGS..........................................91

SECURITY OWNERSHIP OF CERTAIN                                                
           BENEFICIAL OWNERS AND                                             
           MANAGEMENT OF MODTECH...........................................93

SECURITY OWNERSHIP OF CERTAIN                                                
           BENEFICIAL OWNERS AND                                             
           MANAGEMENT OF SPI...............................................95

DESCRIPTION OF HOLDINGS CAPITAL                                              
           STOCK...........................................................97

COMPARISON OF RIGHTS OF                                                      
           STOCKHOLDERS....................................................99

EXPERTS...................................................................104

LEGAL MATTERS.............................................................104

OTHER MATTERS.............................................................104

WHERE YOU CAN FIND MORE                                                      
           INFORMATION....................................................104

INDEX TO FINANCIAL STATEMENTS.............................................F-1

ANNEXES                                                                      
           Annex I   -   Agreement and Plan of                               
                         Reorganization and Merger                           
           Annex II  -   Opinion of Donaldson, Lufkin &                      
                         Jenrette Securities Corporation                     
           Annex III -   Chapter 13 of the California General                
                         Corporation Law Relating to                         
                         Dissenters' Rights                                  
           Annex IV  -   Article 113 of the Colorado Business                
                         Corporation Act Relating to                         
                         Dissenters' Rights                                  

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 QUESTIONS AND ANSWERS
ABOUT THE MODTECH/SPI MERGER

1.    Q:    WHY ARE THE TWO COMPANIES PROPOSING TO MERGE?                       

      A:    Modtech and SPI believe that their combination will create value for
both companies' stockholders through:                   

-     Product diversification -- At present, Modtech makes modular  
            relocatable classrooms and SPI makes commercial and light industrial
modular buildings.                                      

      -     Geographic expansion -- Modtech currently does business primarily in
     California and also in Nevada and Arizona. SPI currently does
            business in California, Arizona, Nevada, Colorado, Texas, New Mexico
and other neighboring states.                           

     -     Greater efficiencies in operation -- We plan to consolidate certain
        manufacturing and administrative functions of both companies. We
            will seek purchasing, shipping and other efficiencies as a result of
the Mergers.                                            

-     Liquidity -- Modtech stockholders will receive a total of     
          $39,923,742 in cash. SPI stockholders will receive publicly traded
           stock in Holdings in exchange for their investment in SPI, which is
            a privately held company. SPI stockholders will also receive a total
of $8,076,133 in cash.                                  

2.    Q:    HOW ARE THE COMPANIES MERGING?                                      

A:    They are merging through concurrent mergers with separate     
subsidiaries of Holdings.                               

3.    Q:    HOW DOES HOLDINGS DIFFER FROM MODTECH?                              

     A:    Once the Mergers occur, Holdings will be the holding company owning
      both Modtech and SPI. Holdings will be a Delaware corporation.
          Modtech is a California corporation. Holdings common stock will be
      substantially the same as Modtech's existing common stock. The
           Holdings Board of Directors will consist of nine members, including
     four current directors of Modtech (Evan M. Gruber, Charles C.
        McGettigan, Myron A. Wick III, and Daniel J. Donahoe III); three
      current directors of SPI, (Patrick Van Den Bossche, Charles A.
         Hamilton and Charles R. Gwirtsman); and two outside directors who
           have not yet been selected. Evan M. Gruber, Chief Executive Officer
          of Modtech, will serve as the Chief Executive Officer of Holdings,
       and Michael G. Rhodes, Chief Operating Officer of Modtech, will
       serve as Chief Operating Officer and Chief Financial Officer of
           Holdings. They will be joined by Patrick Van Den Bossche, President
of SPI, who will hold the same position at Holdings.    

4.    Q:    WHAT WILL I RECEIVE FOR MY STOCK?                                   

A:    Modtech stockholders will receive $3.7293 and 0.8508 shares of
         Holdings Common Stock for each share of Modtech Common Stock they
      own at the time of the Mergers. In place of shares of Holdings
        Common Stock, Modtech stockholders may elect to receive the same
       number of shares of Holdings Series A Preferred Stock for up to
           3.94% of their shares of Modtech Common Stock. The number of shares
          of Holdings Series A Preferred Stock that Modtech stockholders may
elect to receive will be                                

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adjusted in accordance with the Merger Agreement.       

            SPI stockholders will receive 1.8785 shares of Holdings Common Stock
           for each share of SPI Common or Preferred stock that they own. Each
         SPI stockholder may elect to receive, in place of Holdings Common
       Stock, $49.4097 per share of SPI stock for up to 5.9176% of the
          total shares of SPI Common Stock and SPI Preferred Stock they own.

         The cash to be paid and the shares to be issued in the Mergers is
         sometimes referred to in this Joint Proxy Statement/Prospectus as
           the "Merger Consideration." With respect to the Modtech Merger, the
       cash and shares is sometimes referred to as the "Modtech Merger
        Consideration," and, with respect to the SPI Merger, as the "SPI
Merger Consideration."                                  

5.    Q:    WILL HOLDINGS COMMON STOCK BE LISTED FOR TRADING ON THE NASDAQ      
NATIONAL MARKET?                                        

  A:    Yes, Holdings Common Stock will be listed on the Nasdaq National
         Market, but Holdings Series A Preferred Stock will not be listed.

6.    Q:    HOW DO I ELECT TO RECEIVE CASH FOR A PORTION OF MY SHARES?          

A:    SPI Stockholders: You will make your election on the letter of
       transmittal we will send to you through ChaseMellon Shareholder
           Services LLC, our Exchange Agent for the Mergers. In order for your
 election to be effective, you must send in your SPI stock
       certificates along with the letter of transmittal. You may make
           different elections for each share of SPI Common or Preferred Stock
            (collectively, "SPI Capital Stock") that you own. If you do not make
         an election on the letter of transmittal, you will receive 1.8785
           shares of Holdings Common Stock for each share of SPI Capital Stock
that you own.                                           

       Modtech Stockholders: You may not make an election to receive a
     different proportion of cash and securities. You will receive
            $3.7293 and 0.8508 shares of Holdings Common Stock for each share of
       Modtech Common Stock you own. However, you may elect to receive
           Holdings Series A Preferred Stock in place of Holdings Common Stock
        for up to 3.94% of your shares of Modtech Common Stock. You will
           make your elections when you send in your Modtech stock certificate
           with the letter of transmittal that the Exchange Agent will send to
you shortly after the Mergers are completed.            

7.    Q:    WHY ARE MODTECH STOCKHOLDERS BEING OFFERED THE RIGHT TO SELECT      
            HOLDINGS SERIES A PREFERRED STOCK IN PLACE OF HOLDINGS COMMON STOCK?

     A:    Holdings Series A Preferred Stock is being offered in order for the
     Modtech Merger to meet the requirements of Section 351 of the
 Internal Revenue Code and is being offered to all Modtech
          stockholders because California law requires all stockholders in a
      merger be offered the same consideration. Because the Holdings
            Series A Preferred Stock does not have voting rights and will not be
    listed on any exchange (See "Description of Holdings Capital
           Stock"), it is anticipated that no Modtech stockholders, other than
    Proactive Partners, L.P. and Lagunitas Partners, will select
            Holdings Series A Preferred Stock in place of Holdings Common Stock.
       Proactive Partners, L.P., and Lagunitas Partners have agreed to
            accept all of Holdings Series A Preferred Stock offered in order for
the Modtech Merger to meet the requirements             

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of Section 351 of the Internal Revenue Code.            

8.    Q:    IF I AM AN SPI STOCKHOLDER AND ELECT TO RECEIVE $49.4097 A SHARE FOR
          UP TO 5.9176% OF MY SHARES, CAN I BE REQUIRED TO ACCEPT MORE CASH?

   A:    Yes. The Merger Agreement requires that the total cash elected by
          SPI stockholders must equal $8,076,133. If the total cash does not
       equal $8,076,133, additional shares of SPI Common and Preferred
            Stock will be converted to cash at $49.4097 per share pro rata among
      SPI stockholders who elected to receive cash for some of their
           shares until the total cash to be paid for SPI Capital Stock equals
            $8,076,133. In such a case, stockholders who elected to receive cash
        for less than 5.9176% of the shares, as well as stockholders who
            elected to receive cash for 5.9176% of their shares, may be required
to accept more cash.                                    

9.    Q:    IF I AM AN SPI STOCKHOLDER, CAN I ELECT TO RECEIVE $49.4097 A SHARE 
FOR MORE THAN 5.9176% OF MY SHARES?                     

 A:    No. You may not voluntarily elect to receive cash for more than
           5.9176% of your shares, although you may be required to accept cash
for more shares as stated in the preceding answer.      

10.   Q:    IF I AM AN SPI STOCKHOLDER AND DO NOT ELECT TO RECEIVE $49.4097 A   
     SHARE FOR ANY OF MY SHARES, CAN I BE REQUIRED TO ACCEPT CASH?

     A:    Yes. If all those SPI stockholders who elected to convert a portion
            of their shares to cash have all of their remaining shares converted
       to cash and the total cash to be paid for shares of SPI Capital
          Stock is still less than $8,076,133, then stockholders who did not
         elect to have any shares converted to cash will have their shares
        converted to cash pro rata based on all remaining shares not yet
            converted to cash until the total cash to be paid equals $8,076,133.

11.   Q:    HOW WILL FRACTIONAL SHARES BE HANDLED?                              

   A:    Holdings will not issue fractional shares. Instead, Holdings will
          pay cash to each SPI stockholder and Modtech stockholder who would
       otherwise be entitled to receive a fractional share of Holdings
       Common Stock. The payment will be based on the closing price of
           Modtech Common Stock on the last trading day on the Nasdaq National
   Market prior to the completion of the Mergers. Each Modtech
           stockholder who would otherwise be entitled to receive a fractional
         share of Holdings Series A Preferred Stock will receive shares of
       Holdings Series A Preferred Stock rounded upward to the nearest
number of whole shares.                                 

12.   Q:    WHAT ARE THE TAX CONSEQUENCES OF THE MERGERS?                       

   A:    We have been advised by tax counsel that (1) the cash received in
           the Mergers will be taxable to the stockholders, and (2) the shares
           of Holdings Common Stock and Holdings Series A Preferred Stock will
be received tax free.                                   

        Tax matters are very complicated and the tax consequences of the
          Mergers will depend on the facts of your own situation. You should
     consult your tax advisors for a full understanding of the tax
       consequences of the Mergers to you. See "The Mergers -- Certain
Federal Income Tax Consequences."                       

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13.   Q:    SHOULD I SEND IN MY SPI OR MODTECH STOCK CERTIFICATES NOW?          

   A:    No. After the Mergers are completed, the Exchange Agent will send
          SPI stockholders and Modtech stockholders written instructions for
exchanging their stock certificates.                    

14.   Q:    WHAT DO I NEED TO DO NOW?                                           

    A:    Please mail your signed proxy card in the enclosed postage prepaid
       return envelope as soon as possible, so that your shares may be
            represented and voted at the appropriate stockholders' meeting. YOUR
VOTE IS VERY IMPORTANT.                                 

           If you sign and send in your proxy and do not indicate how you want
     to vote, your proxy will be counted as a vote in favor of the
      proposals. If you do not vote or you abstain, it will have the
           effect of a vote against the proposals. You may withdraw your proxy
           up to and on the day of your stockholders' meeting by following the
directions on page 44.                                  

           Modtech's meeting will take place on ___________, December __, 1998
       at 10:00 a.m. and SPI's meeting will take place on ___________,
           December __, 1998 at 10:00 a.m. You should sign and mail your proxy
       card even if you are planning to attend your meeting as you can
          still withdraw your proxy, change your vote or attend your meeting
and vote in person.                                     

15.   Q:    WHAT AM I BEING ASKED TO VOTE UPON?                                 

A:    SPI stockholders: You are being asked to approve the Merger   
        Agreement which provides that SPI will become, through merger, a
         wholly owned subsidiary of Holdings. It is intended that you will
         receive Holdings' Common Stock tax free, but you will be taxed on
       any cash you may receive. You are urged to consult your own tax
advisors.                                               

       Modtech stockholders: You are being asked to approve the Merger
            Agreement which provides that Modtech will become, through merger, a
         wholly owned subsidiary of Holdings. It is intended that you will
          receive Holdings Common Stock and, if you elect, Holdings Series A
    Preferred Stock, tax free. You will be taxed on any cash you
receive. You are urged to consult your own tax advisors.

16.   Q:    HOW MANY SHARES OF HOLDINGS STOCK WILL BE OUTSTANDING AFTER THE     
MERGERS ARE COMPLETED?                                  

A:    After the Mergers, Holdings is expected to have approximately 
    14,844,519 shares outstanding on a fully diluted basis. This
         includes approximately 12,622,158 shares of Common Stock, 388,939
           shares of Series A Preferred Stock and options to acquire 1,833,422
         shares of Common Stock. The options will be currently exercisable
for approximately 1,325,851 shares.                     

17.   Q:    WHAT VOTE IS REQUIRED FOR APPROVAL?                                 

A:    The Mergers must be approved:                                 

      -     by holders of 70% of the votes entitled to be cast by holders of the
         outstanding shares of SPI Common Stock and SPI's Series A-1, A-2,
            A-3, A-4, A-5 and A-6 Preferred Stock, with the Common and Preferred
Stock voting together as a single class, and            

      -     by holders of a majority of the votes entitled to be cast by holders
of the outstanding shares of Modtech Common Stock.      

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18.   Q:    WHAT DO THE MODTECH AND SPI BOARDS OF DIRECTORS RECOMMEND?          

   A:    Each Board of Directors unanimously approved the Merger Agreement
     and recommends that their company's stockholders vote FOR the
 proposal to approve the Merger Agreement and the Mergers.

19.   Q:    WHAT RISKS SHOULD I CONSIDER?                                       

     A:    The exchange ratios of cash and Holdings shares for SPI and Modtech
           shares are fixed. These exchange ratios will not change even if the
         market price of Modtech Common Stock decreases before the Mergers
        occur. Accordingly, the value of the Holdings stock and cash you
           receive when the Mergers occur may be lower than the current market
        value of Modtech's Common Stock. You should review "Certain Risk
      Factors" on pages 15 through 19, as well as the countervailing
         factors considered by each company's Board of Directors described
           under "The Mergers--Reasons for the Mergers; Recommendations of the
Boards of Directors."                                   

20.   Q:    WHEN ARE THE MERGERS EXPECTED TO OCCUR?                             

A:    We are working to complete the Mergers by the end of 1998.    

21.   Q:    WHAT WILL HOLDINGS DIVIDEND POLICY BE?                              

   A:    Holdings will continue Modtech's dividend policy. Modtech has not
          declared a cash dividend to common stockholders since 1990 and has
no present intention to pay a dividend in the future.   

22.   Q:    IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER 
VOTE MY SHARES FOR ME?                                  

    A:    Your broker will vote your shares only if you provide instructions
         on how to vote. Otherwise, without instructions, your shares will
       not be voted. Shares that are not voted will have the effect of
votes against the proposals.                            

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 SUMMARY

The Mergers described in this document are complex. This summary    
highlights selected information from this document, but may not contain all the 
information that is important to you. For a more complete understanding of the  
Mergers and for a more complete description of the legal terms of the Mergers,  
you should read this entire document carefully, as well as the additional       
documents we refer you to. See "Where You Can Find More Information" (page 104).

THE COMPANIES                                                                   

MODTECH, INC.                                                                   
2830 Barrett Avenue                                                             
Perris, California 92571                                                        
(909) 943-4014                                                                  

   Modtech designs, manufactures, markets and installs modular relocatable
classrooms. Based upon 1997 net sales, Modtech believes that it is the largest  
manufacturer of modular relocatable classrooms in California. Modtech's         
classrooms are sold primarily to California school districts directly and to    
third parties and the State of California primarily for lease to California's   
school districts. Modtech's classrooms are engineered and constructed in        
accordance with structural and seismic safety specifications adopted by the     
California Department of State Architects which regulates all school            
construction on public land. These standards are more rigorous than the         
requirements for other portable units.                                          

Modtech currently operates a total of seven production lines at five
plants, which serve Arizona and the Northern and Southern California markets.   

   Organized in 1982, Modtech maintains an Internet Web site that contains
information concerning its products and personnel and copies of its most recent 
press releases at the address "http://www.modt.com."                            

SPI HOLDINGS, INC.                                                              
9550 Hermosa Avenue                                                             
Rancho Cucamonga, California 91730                                              
(909) 484-4280                                                                  

    SPI is a leading designer, manufacturer and wholesaler of commercial and
light industrial modular buildings in the United States. Through its four       
manufacturing plants, SPI designs and builds modular buildings to customer      
specifications for a wide array of uses, including corporate and professional   
office space; governmental, educational, recreational and religious facilities; 
and construction site offices. SPI's end users include a number of Fortune 500  
companies. SPI's modular buildings serve as temporary, semi-permanent and       
permanent facilities and can function as free-standing buildings or additions to
existing structures.                                                            

SPI's modular buildings range in size and complexity from a basic   
720-square foot module to a 50,000-square foot building combining several       
structures and may contain multiple stories. SPI distributes its products       
through national dealers, such as GE Capital Modular Space and Williams         
Scotsman, and through multiple regional and local dealers. These dealers lease  
(or, less frequently, sell) modular buildings to a diverse end user market.     
SPI's operations and sales are presently concentrated in the State of California
and the Southwestern United States.                                             

      SPI's predecessor was founded in 1972. Since August 1997, SPI, through its
operating subsidiary, SPI Manufacturing, Inc., has completed three strategic    

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acquisitions. In its first acquisition, the Company converted the manufacturing 
facility of a mobile home builder to a fully operational modular construction   
facility to provide additional manufacturing capacity in California. It then    
acquired Office Master of Texas, Inc., located in Glen Rose, Texas, and Rosewood
Enterprises, Inc., located in Phoenix, Arizona, both of which are leading       
modular building manufacturers in their respective regional markets.            

MODTECH HOLDINGS, INC.                                                          
2830 Barrett Avenue                                                             
Perris, California 92571                                                        
(909) 943-4014                                                                  

 Holdings is a newly formed Delaware corporation. Holdings has not yet
conducted any business. Following the Mergers, Modtech stockholders will own    
about 65.9% of Holdings Common Stock and SPI stockholders will own about 34.1%  
of Holdings Common Stock. Since Modtech and SPI will become wholly-owned        
subsidiaries of Holdings through the Mergers, the business of Holdings will     
consist of the businesses of Modtech and SPI. Holdings will be a leading        
manufacturer of modular classrooms and commercial and light industrial modular  
buildings. Holdings will seek to achieve increased product and geographic       
diversification, as well as increased operating efficiencies. Over the next     
several years, Holdings will selectively pursue acquisition opportunities in    
high-growth geographic areas of the United States.                              

THE SPECIAL MEETINGS (PAGE 42)                                                  

    The Special Meeting of Modtech Stockholders will be held at the Sheraton
Newport Hotel, 4545 MacArthur Boulevard, Newport Beach, California, on          
___________, December __, 1998 at 10:00 a.m. At the meeting, Modtech            
stockholders will be asked to approve the Merger Agreement and the Mergers.     

The Special Meeting of SPI Stockholders will be held at 9550 Hermosa
Avenue, Rancho Cucamonga, California 91730, on _________, ___________, 1998 at  
10:00 a.m. At the meeting, SPI stockholders will be asked to approve the Merger 
Agreement and the Mergers.                                                      

RECORD DATE; VOTING POWER (PAGE 42);                                            

      You are entitled to vote at your stockholders' meeting if you owned shares
as of the close of business on ___________, 1998, the Record Date.              

  On the Record Date, there were ___________ shares of SPI Capital Stock
entitled to vote at the Meeting of SPI Stockholders. Holders of SPI Capital     
Stock each are entitled to one vote for each share of SPI Capital Stock held of 
record on the Record Date .                                                     

    On the Record Date, there were __________ shares of Modtech Common Stock
entitled to vote at the Special Meeting of Modtech Stockholders. Holders of     
Modtech Common Stock are entitled to one vote for each share of stock held of   
record on the Record Date.                                                      

NASDAQ LISTING OF HOLDINGS COMMON STOCK (PAGE 37)                               

 Holdings will apply to list the Holdings Common Stock to be issued in
connection with the Mergers on the Nasdaq National Market. Holdings Series A    
Preferred Stock will not be listed on any exchange.                             

SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN STOCKHOLDERS (PAGE 43)                

     On the Record Date, directors and executive officers of Modtech owned and
will be entitled to vote ____________ shares of Modtech Common Stock, or        
approximately _____% of the voting power of the Modtech Common Stock outstanding
on the Record Date.                                                             

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      On the Record Date, directors and executive officers of SPI owned and will
be entitled to vote __________ shares of SPI Capital Stock , or approximately   
_______% of the voting power of SPI voting stock outstanding on the Record Date.

CONFLICTS OF INTEREST (PAGE 34)                                                 

     Directors and executive officers of SPI and Modtech have interests in the
Mergers as employees and/or directors that are different from, or in addition   
to, yours as a stockholder, including transaction advisory fees, employment     
agreements, stock options, and other employment benefits.                       

   The Board of Directors of Modtech and SPI each independently determined
that these conflicts of interest did not affect the benefits of the Mergers to  
their company and stockholders.                                                 

BOARD OF DIRECTORS FOLLOWING THE MERGERS (PAGE 86)                              

The Board Directors of Holdings will be comprised of Evan M. Gruber,
Charles C. McGettigan, Myron A. Wick, Daniel J. Donahoe III (all of whom are    
currently members of the Modtech Board), Patrick Van Den Bossche, Charles A.    
Hamilton and Charles R. Gwirtsman (all of whom are currently members of the SPI 
Board), and two outside directors to be nominated at a later date.              

COMPARATIVE PER SHARE MARKET PRICE INFORMATION (PAGE 63)                        

    Shares of Modtech Common Stock are listed on the Nasdaq National Market.
On September 28, 1998, the last full trading day on the Nasdaq National Market  
prior to the public announcement of the Mergers, the last reported sales price  
was $20.125. On ___________, 1998, the last full trading day prior to the date  
of first mailing of this Joint Proxy Statement/Prospectus, the last reported    
sales price was $_________ a share. The shares of SPI Capital Stock are         
privately held. There were no reported sales of these shares during 1998.       

APPROVALS (PAGE 36)                                                             

      We are prohibited by U.S. antitrust laws from completing the Mergers until
after we have furnished certain information and materials to the Antitrust      
Division of the Department of Justice and the Federal Trade Commission and a    
required waiting period has ended. We each filed the required forms and         
accompanying information and requested early termination of the waiting period. 
On __________1998, the Federal Trade Commission granted our request and the     
waiting period expired.                                                         

CONDITIONS TO THE MERGERS (PAGE 45)                                             

We will complete the Mergers only if we satisfy several conditions, 
including the following:                                                        

-     holders of 70% of the voting power of the SPI Capital Stock and holders of
    a majority of the voting power of the Modtech Common Stock vote to adopt
the Merger Agreement and the Mergers;                               

-     no legal restraints or prohibitions prevent the consummation of the       
Mergers;                                                            

-     all material approvals and authorizations are received;                   

-     not more than 5% of the Modtech or SPI stockholders exercise their        
dissenters' rights.                                                 

-     certain agreements relating to the employment of key employees, the       
  registration and temporary restriction of resale of shares of Holdings
     held by affiliates and the engagement of, and payment of fees to, certain
financial advisors are executed; and                                

-     our lawyers deliver certain tax opinions.                                 

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   Unless prohibited by law, either SPI or Modtech could waive a condition
that has not been satisfied and complete the Mergers anyway.                    

TERMINATION OF THE MERGER AGREEMENT PAGE 46)                                    

      We can jointly agree to call off the Mergers at any time before completing
them. Either of us can call off the Mergers if:                                 

-     the other party's stockholders fail to approve the Mergers;               

-     the Mergers have not been completed by March 28, 1999;                    

-     any government or court issues an order or takes another action enjoining 
or prohibiting one or both of the Mergers;                          

-     the other party materially breaches any of its representations, warranties
  or agreements under the Merger Agreement, and such breach is not cured
within 10 days; or                                                  

-     the other party's Board of Directors withdraws or adversely modifies its  
approval or recommendation of the Merger Agreement or the Mergers.  

      Either party may call off the Mergers in order to pursue another merger or
similar transaction proposed by a third party before completion of the Mergers, 
if that party's Board of Directors determines the third-party proposal is       
superior to the Mergers.                                                        

TERMINATION FEE (PAGE 47)                                                       

      If either party terminates the Merger Agreement to enter into an agreement
with a third party to sell or to merge with another company, it must pay to the 
other party to the Merger Agreement, a termination fee of $2 million and must   
reimburse the other party's transaction expenses. If either party terminates the
Merger Agreement because                                                        

-     the other party's stockholders fail to approve the Mergers;               

-     the other party materially breaches any of its representations, warranties
or agreements under the Merger Agreement and the breach is not cured
within 10 days; or                                                  

-     the other party's Board of Directors withdraws or adversely modifies its  
approval or recommendation of the Merger Agreement or the Mergers,  

the other party must pay to the terminating party a fee of $2 million and must  
reimburse the terminating party's expenses.                                     

DISSENTERS' RIGHTS (PAGE 37)                                                    

  As a stockholder of Modtech or SPI, you may have dissenters' rights as
described below. If you are considering whether to assert dissenters' rights,   
you should be aware that the value for your shares could be determined under    
applicable law to be greater than, equal to, or less than the consideration you 
would receive in the Mergers if you did not elect to assert dissenters' rights. 

MODTECH                                                                         

Modtech is organized under California law. Modtech stockholders who 
properly "dissent" from the Mergers by not voting in favor of the Mergers and   
otherwise following the procedures required by California law will have the     
right to have their shares purchased for their "fair market value" instead of   
participating in the Mergers, but only if either their shares are subject to    
restrictions on transfer imposed by Modtech or by law or regulation, or if the  
holders of 5% or more of Modtech's Common Stock dissent.                        

SPI                                                                             

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SPI is organized under Colorado law. SPI stockholders who properly  
"dissent" from the Mergers will have the right to have their shares purchased   
for their "fair value" rather than participating in the Mergers. SPI            
stockholders may dissent by not voting in favor of the Mergers and by otherwise 
following the procedures required by Colorado law.                              

OPINION OF MODTECH'S FINANCIAL ADVISOR (PAGE 25)                                

In deciding to approve the Mergers, the Modtech Board considered an 
opinion from its financial advisor, Donaldson, Lufkin & Jenrette Securities     
Corporation, as to the fairness of the consideration to be received by the      
Modtech stockholders under the Merger Agreement from a financial point of view. 
This opinion is attached as Annex II to this Joint Proxy Statement/Prospectus.  
We encourage you to read and consider this opinion carefully, as well as the    
information under "The Mergers -- Opinion of Modtech's Financial Advisor." SPI  
did not obtain a fairness opinion.                                              

FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE (PAGE 40)                       

      Modtech and SPI have each made forward-looking statements in this document
(and in documents that are incorporated by reference) that are subject to risks 
and uncertainties. Forward-looking statements include the information concerning
possible or assumed future results of operations of Modtech, SPI or Holdings.   
Also, when we use words such as "believes," "expects," "anticipates," "intends,"
"plans," "estimates" or similar expressions, we are making forward-looking      
statements. Stockholders should note that actual events and results may differ  
materially from those expressed in forward-looking statements due to a number of
factors, including changes in legislation relating to funding for modular       
classrooms, changes in building code laws or regulations, changes in Federal    
income tax laws and general economic and market factors.                        

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 COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA

  The table below sets forth (a) the historical earnings per share, cash
dividends per share and book value per share data of Modtech for the six months 
ended June 30, 1998 (unaudited) and the year ended December 31, 1997, and (b)   
the unaudited pro forma per share data of SPI for the six months ended June 30, 
1998 and the year ended December 31, 1997. It also sets forth the unaudited pro 
forma combined per share data of Modtech and SPI for the six months ended June  
30, 1998 and for the year ended December 31, 1997. The data should be read in   
conjunction with the historical financial statements and notes thereto and the  
selected historical financial data elsewhere in this Joint Proxy                
Statement/Prospectus. The data should also be read in conjunction with the      
Unaudited Pro Forma Combined Condensed Financial Statements included elsewhere  
in this Joint Proxy Statement/Prospectus.                                       

                                                                [Download Table]

                                         YEAR ENDED         SIX MONTHS ENDED
MODTECH - HISTORICAL:                 DECEMBER 31, 1997      JUNE 30, 1998  
---------------------                 -----------------     ----------------
                                                                            
Earnings per share................          $1.47                $0.93      
Cash dividends per share..........            -                     -       
Book value per share..............          $5.43                $5.78      

                                         YEAR ENDED         SIX MONTHS ENDED
SPI - PRO FORMA                       DECEMBER 31, 1997      JUNE 30, 1998  
---------------                       -----------------     ----------------
Earnings per share................          $1.05                 $0.47     
Cash dividends per share..........            -                     -       
Book value........................          5.29                   5.7      

MODTECH AND SPI PRO FORMA                                                   
COMBINED GIVING EFFECT                   YEAR ENDED         SIX MONTHS ENDED
TO THE MERGERS                        DECEMBER 31, 1997       JUNE 30, 1998 
-------------------------             -----------------     ----------------
Earnings per share................          $1.09                 $0.74     
Cash dividends per share..........            -                     -       

                                                                [Download Table]

  MODTECH AND SPI   
 COMBINED PRO FORMA 
BOOK VALUE PER SHARE
FOR SIX MONTHS ENDED
   JUNE 30, 1998    
------------------- 
                    
      $6.96(A)      

-----------                                                                     
(A)  Includes goodwill of approximately $8.37 per share.                        

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 MODTECH SELECTED FINANCIAL DATA

   The selected financial data which follows should be read in conjunction
with the audited financial statements and accompanying notes, the unaudited     
condensed financial statements and accompanying notes of Modtech and "Modtech   
Management's Discussion and Analysis of Results of Operations and Financial     
Condition" included elsewhere in this Joint Proxy Statement/Prospectus. The     
condensed consolidated financial statements of Modtech as of June 30, 1998 and  
1997 and for the periods then ended are unaudited; however, in Modtech's        
opinion, they reflect all adjustments, consisting only of normal recurring      
items, necessary for a fair presentation of the financial position and results  
of operations for such periods. See "Where You Can Find More Information."      

                                                        [Enlarge/Download Table]

                                                                                                             SIX MONTHS ENDED  
                                                                YEAR ENDED DECEMBER  31,                         JUNE 30,      
                                              ---------------------------------------------------------   ---------------------
INCOME STATEMENT DATA:                           1993       1994         1995        1996       1997        1997         1998  
                                              ---------   ---------   ---------   ---------   ---------   ---------   ---------
                                                                                                                               
Net sales ................................... $  19,658   $  20,355   $  19,386   $  49,886   $ 134,050   $  58,906   $  75,876
Cost of goods sold...........................    21,764      17,766      16,401      42,629     107,367      47,688      58,675
                                              ---------   ---------   ---------   ---------   ---------   ---------   ---------
                                                                                                                         16,401
Gross profit (loss) .........................    (2,106)      2,589       2,985       7,257      26,683      11,218      17,201
Selling, general & administrative expenses ..     1,871       1,554       1,613       2,345       5,156       2,182       2,741
Restructuring charge (A) ....................     2,470          --          --          --          --          --          --
                                              ---------   ---------   ---------   ---------   ---------   ---------   ---------

Income (loss) from operations ...............    (6,447)      1,035       1,372       4,912      21,527       9,036      14,460
Interest income (expense), net ..............      (565)       (471)       (387)       (422)       (909)       (549)        389
Other income (expense) ......................        47          42          (1)        (13)         92          64          15
                                              ---------   ---------   ---------   ---------   ---------   ---------   ---------
Income (loss) before income taxes ...........    (6,965)        606         984       4,477      20,711       8,551      14,864
Provision for income taxes ..................        (1)         (4)        (19)       (208)      7,703       3,356       5,649
                                              ---------   ---------   ---------   ---------   ---------   ---------   ---------
Net income (loss) ...........................    (6,966)        602         965       4,269      13,008       5,195       9,215
                                              =========   =========   =========   =========   =========   =========   =========
Net income (loss) available for Common                                                                                         
  Stock (B) ................................. $  (6,966)  $     602   $     799   $   4,221   $  13,008   $   5,195   $   9,215
                                              =========   =========   =========   =========   =========   =========   =========
Basic earnings (loss) per share (C) ......... $   (2.02)  $    0.19   $    0.25   $    0.77   $    1.47        0.60        0.93
Weighted average shares outstanding (C) .....     3,455       3,209       3,170       5,461       8,854       8,670       9,856
Diluted earnings (loss) per common                                                                                             
   share (C)(G) ............................. $   (2.02)  $    0.11   $    0.14   $    0.47   $    1.31        0.55        0.83
Weighted average shares outstanding (C) .....     3,455       5,294       6,712   $   9,041       9,898       9,370      11,100

                                                        [Enlarge/Download Table]

                                                                   AS OF DECEMBER 31,                        AS OF JUNE 30,   
                                              ---------------------------------------------------------  ---------------------
BALANCE SHEET DATA:                             1993         1994       1995        1996        1997       1997        1998   
                                              ---------   ---------   ---------   ---------   ---------  ---------   ---------
                                                                                                                              
Working capital ............................. $   3,063   $   4,403   $   4,383   $  14,069   $  36,417  $  26,647   $  44,473
Total assets ................................    16,620      15,919      15,154      34,029      68,220     58,387      83,536
Total liabilities ...........................    11,889       7,900       6,411      18,716      20,177     37,800      26,563
Long-term debt, excluding current portion (D)     6,506       4,400       3,590       7,844          --     15,132          --
Stockholders' equity ........................     4,732       8,019       8,743      15,313      48,043     20,587      56,973

                                                        [Enlarge/Download Table]

                                                                                                             SIX MONTHS ENDED   
                                                               YEAR ENDED DECEMBER  31,                          JUNE 30,       
                                              ---------------------------------------------------------   --------------------- 
SELECTED OPERATING DATA:                        1993        1994        1995        1996        1997         1997       1998    
                                              ---------   ---------   ---------   ---------   ---------   ---------   --------- 
                                                                                                                                
Gross margin ................................     (10.7%)      12.7%       15.4%       14.5%       19.9%       19.0%       22.7%
Operating margin ............................     (32.8%)       5.1%        7.1%        9.8%       16.1%       15.3%       19.1%
Standard classrooms sold (E) ................       680         698         605       1,610       4,514       2,066       2,600 
Backlog at period end (F) ................... $   6,000   $   7,000   $   4,100   $  58,000   $  71,000   $  80,400   $  60,100 

----------                                                                      

(A)   Reflects the write-off of intangible assets related to the Company's 1989 
  purchase of "Del-Tec", which manufactured more extensively customized,
    higher priced units. Del Tec's operations were discontinued in the third
quarter of 1993.                                                    

(B)   After deduction of preferred stock dividends paid or accrued of $166,000  
     and $48,000 for the years ended December 31, 1995 and 1996, respectively.
      No shares of the Company's preferred stock were outstanding during the six
    months ended June 30, 1997, and no shares currently are outstanding. See
Note 11 of Notes to Modtech's Financial Statements.                 

(C)   Effective December 31, 1997, the Company adopted Statement of Financial   
     Accounting Standards No. 128 "Earnings per Share." All prior periods have
been restated accordingly.                                          

(D)   For a description of the Company's long-term debt, see Notes 5 and 6 of   
Notes to Modtech's Financial Statements.                            

(E)   Determined by dividing the total square footage of floors sold during the 
year or six months by 960 square feet, the floor area of a standard 
classroom. See "The Business of Modtech--General."                  

(F)   The Company manufactures classrooms to fill existing orders only, and not 
    for inventory. Backlog consists of sales orders scheduled for completion
during the next 12 months.                                          

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 SPI SELECTED FINANCIAL DATA

   The selected financial data which follows should be read in conjunction
with the audited financial statements and accompanying notes of SPI, the        
unaudited condensed financial statements and accompanying notes of SPI, and the 
"SPI Management's Discussion and Analysis of Financial Condition and Results of 
Operations" included elsewhere in this Joint Proxy Statement/Prospectus. The    
condensed consolidated financial statements of SPI as of June 30, 1998 and for  
the three months ended June 30, 1997 and 1998 are unaudited; however, in SPI    
management's opinion, they reflect all adjustments, consisting of only normal   
recurring items, necessary for a fair presentation of the financial position and
results of operations for such periods. The information presented below does not
give pro forma effect to acquisitions completed by SPI during any of the periods
presented.                                                                      

                                                        [Enlarge/Download Table]

                                                        PREDECESSOR                                         SPI (A)                 
                              ----------------------------------------------------------------------------------------------------- 
                                                                                    Two                             Three           
                                                                                   Months        Year               Months          
                                                 YEAR ENDED                        Ended        Ended               Ended           
                                                 JANUARY 31,                      March 27,    March 31,     June 30,     June 30,  
                              -------------------------------------------------  -----------  -----------  -----------  ----------- 
                                 1994         1995        1996          1997         1997        1998         1997           1998   
                              ----------  -----------  -----------  -----------  -----------  -----------  -----------  ----------- 
                                      (dollars in thousands, except per share data and operating data)            (unaudited)       

                                                                                                                                    
STATEMENT OF OPERATIONS DATA:                                                                                                       
   Net sales ................ $    8,873  $    17,132  $    13,429  $    24,113  $     6,033  $    42,180  $     9,837  $    20,925 
   Cost of sales ............      7,378       13,113       10,541       19,035        4,106       32,458        7,526       16,588 
                                          -----------  -----------  -----------  -----------  -----------  -----------  ----------- 
   Gross profit (B) .........      1,495        4,019        2,888        5,078        1,927        9,722        2,261        4,337 
   Selling, general and                                                                                                             
     administrative expenses.      1,312        2,383        2,609        1,644          507        2,667          499        1,183 
    Management and monitoring                                                                                                       
     fees ...................         --           --           --           --           --          225           56           84 
   Depreciation and                                                                                                                 
     amortization ...........         26           43           49           78           13        1,751          306          667 
                              ----------  -----------  -----------  -----------  -----------  -----------  -----------  ----------- 
   Income from operations ...        157        1,593          230        3,356        1,407        5,079        1,400        2,403 
   Interest income (expense),                                                                                                       
     net ....................         10           21           80           78           21       (1,439)        (382)         835 
   Other income (expense) ..          --           --           34           (6)          90           36            2           (1)
                              ----------  -----------  -----------  -----------  -----------  -----------  -----------  ----------- 
   Income before income                                                                                                             
     taxes ..................        167        1,614          344        3,428        1,518        3,676        1,020        1,569 
   Income tax provision .....         57          518          141        1,409          660        1,580          439          550 
                              ----------  -----------  -----------  -----------  -----------  -----------  -----------  ----------- 
   Net income (loss) ........ $      110  $     1,096  $       203  $     2,019  $       858  $     2,096  $       581  $     1,019 
                              ==========  ===========  ===========  ===========  ===========  ===========  ===========  =========== 
PER SHARE DATA (C):                                                                                                                 
   Basic net income                                                                                                                 
     per share...............                                                                 $      1.30  $       .36  $       .47 
                                                                                              ===========  ===========  =========== 

   Diluted net income per                                                                                                           
     share ..................                                                                 $      1.12  $       .31  $       .40 
                                                                                              ===========  ===========  =========== 

   Number of shares used in                                                                                                         
     computing basic net                                                                                                            
     income per share .......                                                                   1,612,785    1,600,000    2,190,616 

   Number of shares used in                                                                                                         
     computing diluted net                                                                                                          
     income (loss)                                                                                                                  
     per share...............                                                                    1,877,928    1,856,931    2,527,088

SELECTED OPERATING DATA:                                                                                                            
   Number of structures sold                                                                                                        
     during period ..........        505        1,165          879        1,560          404        2,659          632        1.295 
   Average price per                                                                                                                
     structure .............. $   17,570  $     4,705  $    15,277  $    15,457  $    14,933  $    15,863       15,565       16,284 

BALANCE SHEET DATA:                                                                                                                 
   Working capital                                                                                                                  
     (deficit)............... $      842  $     1,920  $     1,701  $     3,671  $     4,547  $     1,170  $       531  $    (1,138)
   Total assets .............      1,921        3,517        4,511        7,648        9,250       25,768       19,483       53,271 
   Long-term debt, net ......         --           --           --           13           --       11,624        9,691       26,023 
   Total stockholders'                                                                                                              
     equity..................      1,062        2,158        2,361        4,380        5,238        6,702        4,700       13,157 

----------                                                                      

(A)   SPI applied purchase accounting upon its acquisition by management and an 
      investor group on March 27, 1997. Accordingly, the financial statements of
    SPI are not comparable to its statements prior to the acquisition. Also,
 SPI adopted a March 31 year-end upon consummation of the acquisition.

(B)   SPI's historical presentation and allocation of expenses is not consistent
     with the presentation of Modtech's gross profit. SPI has not adjusted its
gross profit calculation to conform with Modtech's presentation.    

(C)   Per share data is computed in accordance with SFAS No. 128. See Note 2 to 
SPI's Consolidated Financial Statements.                            

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MODTECH AND SPI SELECTED UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL 
 INFORMATION

  The summary unaudited pro forma combined condensed financial
information has been derived from, or prepared on a basis consistent with, the  
unaudited pro forma combined condensed financial statements of Modtech and SPI  
included elsewhere in this Joint Proxy Statement/Prospectus. This data is       
presented for illustrative purposes only and is not necessarily indicative of   
the combined results of operations or financial position that would have        
occurred if the Mergers had occurred at the beginning of each period presented  
or on the dates indicated, nor is it necessarily indicative of future operating 
results or financial position of the combined companies.                        

                                                        [Enlarge/Download Table]

                                                                                     SIX MONTHS   
                                                                                   ENDED JUNE 30, 
                                                               YEAR ENDED          1998 OR AS OF  
                                                               DECEMBER 31,           JUNE 30,    
                                                                   1997                 1998      
                                                               -----------          -----------   
                                                                (dollars in thousands, except     
                                                                       per share data)            
                                                                                                  
INCOME STATEMENT DATA:                                                                            
Revenues ..................................................... $   214,547          $   117,802   
Net income ................................................... $    13,830          $     9,361   
Basic earnings per share ..................................... $      1.09          $      0.74   
Diluted earnings per share ................................... $      0.93          $      0.63   

BALANCE SHEET DATA:                                                                               
Total assets .................................................                      $   183,584   
Borrowings under investment agreements and other debt ........                      $    61,510   
Stockholders' equity .........................................                      $    87,907   
Book value per share .........................................                      $      6.96(A)

-----------                                                                     

(A) Includes goodwill of approximately $8.37 per share.                         

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CERTAIN RISK FACTORS

 In considering whether to approve and adopt the Merger Agreement, the
stockholders of SPI and Modtech should consider, among other risk factors, the  
following:                                                                      

RISKS RELATED TO THE MERGERS                                                    

FIXED MERGER CONSIDERATION DESPITE POTENTIAL CHANGE IN MODTECH STOCK PRICE      

  The share exchange ratios and the cash payment price to be paid in the
Modtech Merger and the SPI Merger as described elsewhere in this Joint Proxy    
Statement/Prospectus (See "The Mergers -- Merger Consideration") will not be    
adjusted despite any increase or decrease in the price of Modtech Common Stock. 
The price of Modtech Common Stock when the Mergers occur may vary from its price
at the date of this Joint Proxy Statement/Prospectus and at the date of the     
Special Meetings. For example, during the 12-month period ending on September   
30, 1998, 1998, the closing price of Modtech Common Stock varied from a low of  
$11.625 to a high of $29.750 and ended that period at $17.500. (See "Modtech    
Common Stock Prices and Dividends" for further information). Further variations 
in the price of Modtech's Common Stock from the date of this Joint Proxy        
Statement/Prospectus may be the result of changes in the business or operations 
of Modtech or the prospects of its businesses, changes in market assessments of 
Modtech or SPI's business, operations, or prospects, or in market assessments of
the effects of the Mergers, or the likelihood they will be consummated, the tax 
effects of the Mergers, and the timing thereof, as well as general market and   
economic conditions and other factors. At the time of the SPI Special Meeting   
and the Modtech Special Meeting, the holders of Modtech and SPI shares will not 
know the exact value of the Holdings shares that they will receive when the     
Mergers are completed. Modtech and SPI stockholders are urged to obtain current 
market quotations for Modtech Common Stock.                                     

INTEGRATION OF OPERATIONS                                                       

      For the Mergers to result in the anticipated long-term strategic benefits,
the management of Holdings must integrate the administrative, production,       
engineering and accounting functions of the two companies and coordinate their  
separate sales and marketing systems in a profitable manner. SPI has not yet    
fully integrated the operations of its recent acquisitions, Rosewood            
Enterprises, Inc. and Office Master of Texas, Inc. Any difficulties encountered 
in integrating the businesses of Modtech and SPI, or in completing the          
integration of Rosewood and Office Master, could adversely impact the operations
of one or both companies.                                                       

DECREASE IN CASH AND INCREASE IN DEBT                                           

As of June 30, 1998, Modtech had about $25 million in cash and no   
long-term debt. Almost all of Modtech's cash reserves will be used to partially 
pay the cash portion of the Merger Consideration to Modtech and SPI             
stockholders. Following the Mergers, Modtech's assets, together with the assets 
of SPI, will be encumbered by approximately $45 million of new debt. The        
proceeds from this debt will be used to pay the balance of the cash portion of  
the Merger Consideration, refinance SPI's existing debt, pay transaction        
expenses of the Mergers and fund working capital needs. As a result of the      
decrease in cash, the debt must be serviced by cash from operations. If current 
levels of operations of Modtech or SPI decrease, cash from operations may not be
sufficient to service Holdings' debt.                                           

CHANNELS OF DISTRIBUTION                                                        

 Modtech has historically sold most of its products through its direct
sales force, while SPI has historically sold most of its products through its   
independent dealer network. There is a conflict between these two channels of   
distribution. While SPI does not intend to alter its relationship with its      

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independent dealers, it must be able to assure its dealers that they will not be
displaced by Modtech's internal sales force. The failure to provide such        
assurances, or the perception by one or more significant independent dealers    
that SPI will rely on Modtech's direct sales force, could adversely affect SPI's
future sales.                                                                   

CONTROL BY PRINCIPAL STOCKHOLDERS                                               

Upon completion of the Mergers, the current executive officers and  
directors of Modtech and the current executive officers and directors of SPI    
will, together, continue to own or have voting control over about 36.2% of the  
shares of Holdings Common Stock then outstanding. See "Security Ownership of    
Certain Beneficial Owners and Management of Holdings." They will be able to     
substantially control the outcome of all matters presented to the stockholders  
for approval if they choose to vote together. These matters include election of 
directors, mergers, consolidations or the sale of all or substantially all of   
the assets of Holdings.                                                         

POTENTIAL FOR TAXATION OF MERGER CONSIDERATION                                  

      Neither Modtech nor SPI have asked the Internal Revenue Service ("IRS") to
rule on the tax consequences of the Mergers. Modtech and SPI are relying on the 
opinions of their tax lawyers that the Mergers will not be taxable to the       
Modtech or SPI stockholders, except for the cash received. A lawyer's tax       
opinion is not binding on the IRS. If the IRS disagrees with the tax position   
taken by Modtech and SPI, it may assess taxes (plus penalties and interest), in 
addition to the taxes described in the opinion of tax counsel. Modtech's and    
SPI's position might not be upheld by the courts if challenged by the IRS. See  
"The Mergers-- Certain Federal Income Tax Consequences."                        

DEPENDENCE ON KEY PERSONNEL                                                     

   Holdings will be dependent upon its executive officers, Evan M. Gruber,
Patrick Van Den Bossche and Michael G. Rhodes. Although Holdings has employment 
agreements with each of these individuals, any of its executive officers can    
terminate their employment if they choose to do so. If this occurred, operations
could be disrupted.                                                             

SHARES ELIGIBLE FOR FUTURE SALE                                                 

Of the 12,622,158 shares of Holdings Common Stock to be outstanding 
immediately following the Mergers, approximately 8,466,676 shares will be held  
by "affiliates" as determined under Rule 145 of the Securities Act of 1933. The 
exact number of shares held by affiliates will be determined by the elections   
the SPI stockholders make in the type of Merger Consideration they wish to      
receive. See "The Mergers -- Merger Consideration." Certain affiliates have     
executed "lock up" agreements which would restrict their ability to resell      
approximately 8,172,676 shares received in the Mergers for a period of 90 days  
following the closing of the Mergers. Following the expiration of such 90-day   
period, the parties to these lock-up agreements, in addition to any other       
affiliates, subject to Rule 145, may immediately resell their shares subject to 
the volume limitations of Rule 144. In addition to their Rule 145 resale rights,
Holdings has granted these affiliates "piggyback" registration rights, which    
entitle them to have a portion of their shares included in any future registered
offerings Holdings may make. Finally, there will be 1,833,422 shares of Holdings
Common Stock registered for sale upon exercise of stock options granted and to  
be granted under the stock option plans Holdings will adopt in connection with  
the Mergers.                                                                    

    Sales of substantial amounts of shares of Holdings Common Stock, or even
the potential for such sales, could lower the market price of the Common Stock  
and impair the ability of Holdings to raise capital through the sale of equity  
securities.                                                                     

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RISKS RELATED TO MODTECH                                                        

LEGISLATION AND SCHOOL FUNDING                                                  

      The demand for modular relocatable classrooms in California is affected by
various statutes which, among other things, prescribe the way in which all      
school classrooms to be constructed on public lands must be designed and        
engineered, the methods by which Modtech's customers, primarily individual      
school districts, obtain funding for the construction of new facilities, and the
manner in which available funding is spent. As a result, Modtech's business is  
heavily dependent upon the legislative and educational policies and financial   
condition of the State of California. Funding for new school construction and   
rehabilitation of existing schools by California school districts currently is  
provided primarily at the State level, through annual allocations of funds      
derived from general revenue sources and statewide bond issues. In addition,    
school districts obtain funding for the purchase or lease of school facilities  
through the imposition of developers' fees and local bond issuances. The        
availability of this funding is subject to financial and political              
considerations which vary from district to district. The use of funding provided
by the State is also affected by the legislative policies of the State of       
California. For example, existing legislation requires, with certain exceptions,
that 30% of new classroom space added using state funds must be relocatable     
structures. Modtech's classroom units qualify as relocatable structures. There  
are, however, alternative structures that are less relocatable in nature than   
Modtech's classrooms that may also satisfy this legislative requirement.        
Shortages of financial resources at either State or local levels, or changes in 
the legislative or educational policies of the State of California, could have a
material adverse effect upon Modtech. A bill recently passed the California     
Legislature, which, if approved by the voters, will eliminate the requirement   
that 30% of all classroom space added using California state funds be           
relocatable classrooms. The legislation would replace this provision with a     
requirement that, in order for school districts to increase the amount of funds 
to be received from developers in excess of the statutory level, school         
districts must show that 20% of all classroom space, not just space to be added,
consists of relocatable classrooms.                                             

CYCLICAL INDUSTRY                                                               

Modtech's modular classrooms are purchased predominately by school  
districts in California. The ability of California school districts to finance  
the acquisition of Modtech's products is largely dependent upon the level of    
funding available from the State, which is not tied to demand. Despite a growing
student population, Modtech reported losses from 1991 through 1993 when certain 
school districts experienced budget shortfalls.                                 

CONCENTRATION OF CUSTOMERS                                                      

     Modtech's sales to date have been limited almost exclusively to customers
in California. Modtech markets and sells its modular classrooms primarily to    
California school districts, as well as to the State of California and leasing  
companies who lease the classrooms to school districts. During the year ended   
December 31, 1997, approximately 98.1% of Modtech's net sales was attributable  
to the sale of classrooms, with sales of classrooms to individual school        
districts and third party lessors to school districts representing approximately
90.2% of Modtech's net sales, and sales of classrooms to the State of California
accounting for approximately 7.9% of net sales for the year.                    

PRODUCT SPECIFICATIONS AND REGULATION                                           

      Most of Modtech's contracts require Modtech to build classrooms which meet
certain established state mandated function and manufacturing specifications.   
Under such contracts, which are typically fixed-price contracts, Modtech assumes
the liability for                                                               

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correcting, without additional compensation, any deficiencies which cause its   
classrooms to fail inspection and certification tests. Modtech relies upon its  
experience and expertise to evaluate the potential for such liability and to    
price its bids accordingly. In addition, Modtech attempts to minimize the risk  
of additional exposure by adopting strict quality control standards and         
subjecting its units under construction to extensive testing under the          
supervision of inspectors hired by Modtech's customers. To date, Modtech's      
operating performance has not been materially impacted by such potential        
liability. However, should Modtech incur such liability significantly in excess 
of that estimated, its profitability would be adversely affected.               

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; SEASONALITY                        

    Modtech's quarterly revenue typically has been highest in the second and
third quarters of the year when school districts generally place a large number 
of orders for modular classrooms to be delivered in time for the upcoming school
year. Additionally, first and fourth quarter revenues are typically lower due to
a greater number of holidays and days of inclement weather during such periods. 

RISKS RELATED TO SPI                                                            

ABSENCE OF COMBINED OPERATING HISTORY                                           

   The SPI pro forma combined financial results cover periods during which
Office Master and Rosewood were not under common control or management with SPI 
and, therefore, may not be indicative of SPI's future financial or operating    
results. The success of SPI will depend on management's ability to complete the 
integration of Office Master and Rosewood. The inability of SPI to successfully 
integrate Office Master and Rosewood and to coordinate and integrate certain    
operational, administrative, and accounting functions and computer systems would
have a material adverse effect on SPI.                                          

RELIANCE ON INDEPENDENT DEALERS                                                 

SPI's products are sold primarily through a network of independent  
dealers. SPI has few formal marketing or other agreements with its dealers, and 
substantially all of SPI's dealers also market and sell products of other       
manufacturers. During the pro forma 12-month period ended December 31, 1997, one
of SPI's dealers, GE Capital Modular Space, accounted for about 48.9% of SPI's  
revenues, and another dealer, Williams Scotsman, accounted for about 20.3% of   
SPI's revenues. GE Capital Modular Space accounted for about 33.1% of SPI's     
revenues during the pro forma six-month period ended June 30, 1998, and Williams
Scotsman accounted for about 30.2% of SPI's revenues during the same period. The
pro forma revenues of SPI include all revenues of SPI, Rosewood and Office      
Master for the referenced periods. Product demand from any specific dealer may  
fluctuate. Any prolonged downturn in demand from one major dealer, or a         
coincidental downturn from a combination of dealers could have a material       
adverse effect on SPI. In addition, an adverse change in SPI's relationship with
any of its major dealers, any change in the manner in which any of these dealers
conduct business with SPI, including increased pricing pressures from SPI's     
larger dealers, or any exclusive or preferred provider arrangements between     
these dealers and any of SPI's competitors, could have a material adverse effect
on SPI.                                                                         

LOW BARRIERS TO ENTRY                                                           

  The barriers to entry into the commercial and light industrial modular
building industry are relatively low, consisting primarily of capital required  
to develop manufacturing facilities and the availability of a qualified labor   
pool. Manufacturers of other modular buildings, including housing and           
classrooms, who possess a skilled work force and manufacturing facilities, could
easily adapt their                                                              

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manufacturing facilities to produce modular structures, and might choose to do  
so, during an economic downturn in their industry.                              

AVAILABILITY OF MANUFACTURING EMPLOYEES                                         

      SPI's assembly line process requires a significant number of manufacturing
employees, many of whom are employed at relatively low wages. In periods of low 
unemployment, SPI has experienced difficulty in finding suitable replacements   
for its workforce when turnover occurs. Additionally, the remote location of    
SPI's Office Master facility in Glen Rose, Texas, may make it difficult to hire 
employees at that facility. SPI's inability to hire and retain sufficient       
numbers of manufacturing employees at any of its operating facilities could have
a material adverse effect on SPI.                                               

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; SEASONALITY                        

Historically, SPI's quarterly sales in the fourth calendar quarter  
(October through December) are lowest, and quarterly sales in the third calendar
quarter (July through September) are highest. Fourth quarter revenues typically 
are lower due to customer budget and fiscal constraints and as a result of the  
reduction in demand due to adverse weather conditions during such period.       

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 THE MERGERS

GENERAL                                                                         

  Modtech, Inc., a California corporation ("Modtech"), and SPI Holdings,
Inc., a Colorado corporation ("SPI"), are furnishing this Joint Proxy           
Statement/Prospectus to holders of shares of (i) SPI common stock, no par value 
("SPI Common Stock"), (ii) SPI Series A-1, A-2, A-3, A-4, A-5, and A-6          
Convertible Preferred Stock, no par value ("SPI Preferred Stock" and, together  
with the SPI Common Stock, "SPI Capital Stock"), in connection with the         
solicitation of proxies by the Board of Directors of SPI (the "SPI Board") for  
use at the special meeting of stockholders of SPI to be held on December __,    
1998, or any adjournment or postponement thereof (the "SPI Special Meeting"),   
and to holders of shares of Modtech Common Stock, no par value ("Modtech Common 
Stock"), in connection with the solicitation of proxies by the Board of         
Directors of Modtech (the "Modtech Board") for use at the special meeting of    
stockholders of Modtech to be held on December __, 1998, or any adjournment or  
postponement thereof (the "Modtech Special Meeting" and, together with the SPI  
Special Meeting, the "Special Meetings").                                       

    At the Special Meetings, holders of Modtech Common Stock and SPI Capital
Stock will be asked to vote upon proposals to approve and adopt                 

-     the Agreement and Plan of Reorganization and Merger, dated as of September
28, 1998, between Modtech and SPI (the "Merger Agreement"), which   
   provides, among other things, that Modtech and SPI will each merge with
   separate subsidiaries of Modtech Holdings, Inc., a Delaware corporation
("Holdings");                                                       

-     in the case of the Modtech Special Meeting, the merger of a wholly owned  
   subsidiary of Holdings, "Modtech Merger Sub" into Modtech (the "Modtech
Merger"); and                                                       

-     in the case of the SPI Special Meeting, the merger of another wholly owned
 subsidiary of Holdings, "SPI Merger Sub" into SPI (the "SPI Merger").

The mergers contemplated by the Merger Agreement are referred to herein as the  
"Mergers." As a result of the Mergers, Modtech and SPI will each become a       
wholly-owned subsidiary of Holdings.                                            

This Joint Proxy Statement/Prospectus also serves as a prospectus of
Holdings with respect to the shares of its Common Stock, par value $0.01 per    
share ("Holdings Common Stock"), and its Series A Preferred Stock, par value    
$0.01 per share ("Holdings Series A Preferred Stock") that will be issued to (1)
holders of outstanding shares of Modtech Common Stock upon completion of the    
Modtech Merger and (2) holders of outstanding shares of SPI Capital Stock upon  
completion of the SPI Merger. See "The Mergers--Merger Consideration."          

BACKGROUND OF THE MERGERS                                                       

  Following completion of its second public offering of shares of common
stock in November 1997, Modtech has sought to increase its sales of             
non-classroom products and to expand outside of the California marketplace. Its 
initial goal was to commence operations in Arizona as soon as possible, and, in 
January and February 1998, its Chief Executive Officer, Evan M. Gruber, met with
the management of Rosewood Enterprises, Inc., a                                 

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modular commercial builder located in Phoenix, Arizona, concerning Modtech's    
potential acquisition of that company. However, unknown to Modtech at the time, 
Rosewood was already in acquisition discussions with SPI. In March 1998, Modtech
completed the purchase of Trac Modular Manufacturing, Inc., a modular commercial
builder located in Glendale, Arizona. SPI closed the acquisition of Rosewood in 
April 1998.                                                                     

   Following SPI's acquisition of Rosewood, Evan Gruber called Patrick Van
Den Bossche, President of SPI, to introduce himself. This led to a meeting on   
May 4, 1998 at SPI's facility in Rancho Cucamonga, California. At the meeting,  
Mr. Gruber and Mr. Van Den Bossche discussed the modular building industry in   
general. Mr. Gruber mentioned the possibility of a merger between the two       
companies. Mr. Gruber and Mr. Van Den Bossche discussed operating philosophies  
and objectives and the potential strategic benefits to the two companies of a   
business combination. They agreed to give additional thought to such a          
combination and to meet again in the near future.                               

On May 22, 1998, Mr. Gruber and two directors of Modtech, Charles   
McGettigan and Myron Wick III, met with Mr. Van Den Bossche and four directors  
of SPI, Mark King, Bruce Rogers, Charles Gwirtsman, and Charles Hamilton, in San
Francisco, California, to further discuss a possible business combination. A    
number of proposals were considered, but none were seriously pursued. SPI       
informed Modtech that SPI intended to proceed with an initial public offering   
that had been in preparation since the end of April 1998.                       

     While SPI continued to pursue a possible public offering, Modtech and SPI
continued to discuss a business combination on a periodic basis through early   
July 1998. In the second week of July, SPI was informed by its underwriters that
market conditions were not conducive to the completion of SPI's public offering.
Based on these discussions, SPI and its underwriters decided to postpone its    
offering.                                                                       

On July 13, 1998, a senior management team from SPI, including two  
directors, met with Modtech's senior management, including two directors, at    
Modtech's headquarters in Perris, California to further discuss terms of a      
potential merger and to initiate SPI's due diligence review of Modtech. The     
following day, a senior management team from Modtech traveled to SPI's          
headquarters in Rancho Cucamonga, California to commence Modtech's due diligence
review of SPI. Negotiations and due diligence reviews, including on-site visits 
of each company's facilities by the other company's management team, continued  
through late July 1998.                                                         

    On August 11, 1998, SPI's attorneys delivered a draft form of the Merger
Agreement to Modtech and its attorneys. On August 19, 1998, senior management   
and certain directors of Modtech and SPI, and the attorneys for SPI and Modtech 
met to negotiate certain specific terms of the Merger Agreement. Further        
negotiations continued into early September 1998.                               

   During this period, Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") was asked by Modtech to advise it in connection with the proposed       
transaction and to render a fairness opinion.                                   

On September 9, 1998, the Modtech Board of Directors and Modtech's  
attorneys met and discussed in detail the terms of the proposed business        
combination, the exchange ratio and cash consideration to be paid, the reasons  
for the transaction, and the due diligence findings by Modtech's management     
concerning SPI. Representatives from DLJ participated in a portion of the       
meeting by telephone during which Modtech's Board of Directors discussed with   
them the fairness of the proposed transaction to the Modtech stockholders.      
Modtech's Board authorized senior management to proceed with further            
negotiations.                                                                   

     On September 10, 1998, the SPI Board of Directors and SPI's attorneys met
and discussed in detail the terms of the proposed business                      

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combination, the exchange ratio and cash consideration to be paid, the reasons  
for the transaction, and the due diligence findings by SPI's management         
concerning Modtech. SPI's Board unanimously approved the terms of the Merger    
Agreement and Mergers presented to it, subject to final changes to the merger   
documentation and completion of the due diligence by management.                

The merger documentation and due diligence were completed in late   
September. On September 28, 1998, Modtech's Board of Directors held a special   
telephonic meeting to further consider and vote on the proposed transaction.    
Representatives of DLJ reviewed with the Board certain financial analyses       
relating to the transaction and rendered an oral fairness opinion, which it     
confirmed in writing later that day. After considering and discussing the       
various presentations at the meeting, and at prior meetings, the Modtech Board  
of Directors unanimously approved the Merger Agreement and the Mergers. The     
Merger Agreement was signed and delivered that evening by both Modtech and SPI  
after the close of business. The signing was publicly announced shortly after   
the opening of the securities markets on September 29, 1998.                    

REASONS FOR THE MERGERS; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS             

     Modtech and SPI believe that their combination will create value for both
companies' stockholders by providing opportunities to achieve substantial       
benefits that would not be available to either company alone. Specifically, the 
combination allows for substantial synergy in three identified areas:           

-     Product Diversification. Modtech currently manufactures modular           
     relocatable classrooms. SPI makes commercial and light industrial modular
   buildings. The Mergers move Modtech towards accomplishing its goal of a
      decreased dependency on the California Public School System. Additionally,
      the Mergers enhance Modtech's capability for the production of other types
of modular structures for commercial customers.                     

-     Geographic Diversification. At present, Modtech manufactures modular      
     relocatable classrooms, of which approximately 98% are sold to California
 public schools. Modtech's strategy for the past few years has been to
   increase its efforts to expand the market for its classrooms to include
   neighboring states. SPI currently does business in California, Arizona,
Nevada, Colorado Texas, New Mexico and other neighboring states.    

-     Operating Efficiencies. Modtech and SPI plan to consolidate certain of the
manufacturing and administrative functions of both companies.       
     Additionally, efficiencies in purchasing and shipping may be realized due
to increased levels of production.                                  

 The Boards of Directors of each company also considered various other
factors that contributed to their approval and recommendation of the Merger     
Agreement and the Mergers. Those factors include: (1) the terms and conditions  
of the Merger Agreement, including an exchange ratio that provides certainty    
about the number of shares to be issued and received in the Mergers; and (2) the
expected, although not certain, treatment of the Mergers as tax-free exchanges  
of stock, with only the cash received being taxable.                            

   The SPI Board also considered the advantages of obtaining liquidity for
its stockholders through the merger with Modtech, a publicly-traded company, and
also reducing the risk to its stockholders in the combined company. Immediately 
following the Mergers, Holdings will have a lower debt to historical operating  
cash flow ratio than SPI had on a stand-alone basis.                            

  The Modtech Board also considered a number of other items and factors,
including, without limitation, the following:                                   

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-     the financial presentation of DLJ to the Modtech Board and that firm's    
opinion that the Modtech Merger Consideration to be received by the 
    stockholders of Modtech pursuant to the Merger Agreement is fair to such
stockholders from a financial point of view;                        

-     Modtech's business, management, financial performance and condition,      
strategic objectives, prospects and competitive position, and the   
recommendations of Modtech's management;                            

-     a review of strategic alternatives, including other possible business     
      combinations and, based on such review, the belief that a transaction with
      another company may not offer terms with advantages comparable to those of
a business combination with SPI;                                    

-     the value of the cash component of the Modtech Merger Consideration on a  
   per share basis, after adjustments for the number of shares of Holdings
Common Stock and Holdings Series A Preferred Stock to be received by
Modtech stockholders in the Modtech Merger;                         

-     the ability of the stockholders of Modtech to continue to participate in  
   Modtech's business as part of Holdings after the Mergers and to benefit
from the potential appreciation of Holdings Common Stock;           

-     due diligence review of the financial condition, results of operations and
business prospects of SPI;                                          

-     the terms and conditions of the Merger Agreement and the parties'         
respective representations, warranties, covenants, agreements and   
    conditions to their respective obligations, including the condition that
the Mergers be approved by Modtech's stockholders; and              

-     the risk that benefits sought in the Mergers would not be obtained, the   
 risk that the Mergers would not be consummated, the fact that, with a
     fixed exchange ratio, the relative values of Modtech and SPI are fixed by
     the parties in advance and would not take into account subsequent changes
    or changed market perceptions, and the effect of the public announcement
of the Mergers on the trading price of the Modtech Common Stock.    

  The Modtech Board also considered the factors set forth in the section
entitled "Certain Risk Factors."                                                

Each company's Board determined that the potential advantages of the
Mergers far outweighed the disadvantages. Each company's Board concluded that   
the Mergers would result in its company's stockholders realizing greater value  
than its company could deliver to them alone. Based on the consideration of     
these and other relevant matters, each company's Board unanimously determined   
that the Merger Agreement and the Mergers are in the best interests of its      
company and its company's stockholders.                                         

      The foregoing discussion of the factors considered by each company's Board
is not intended to be exhaustive, but is believed to include all material       
factors considered by each company's Board. In reaching its decision to approve 
the Merger Agreement and the Mergers, neither company's Board quantified or     
assigned any relative weights to the factors considered, or considered any one  
factor to be determinative, and individual directors may have given different   
weight to different factors.                                                    

   THE MODTECH BOARD OF DIRECTORS AND THE SPI BOARD OF DIRECTORS HAVE EACH
UNANIMOUSLY CONCLUDED THAT THE MERGERS ARE IN THE BEST INTERESTS OF THEIR       
RESPECTIVE STOCKHOLDERS, AND EACH UNANIMOUSLY RECOMMENDS THAT ITS STOCKHOLDERS  
VOTE FOR APPROVAL AND ADOPTION OF THE MERGER                                    

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AGREEMENT AND THE MERGERS.  SEE "THE MERGERS -- CONFLICTS OF INTERESTS."        

FORM OF THE MERGERS                                                             

      If the approval of the holders of Modtech Common Stock is obtained and all
other conditions to the Modtech Merger are satisfied or waived, pursuant to the 
Modtech Merger Agreement, the Modtech Merger Sub will be merged with and into   
Modtech, with Modtech being the surviving corporation after the Modtech Merger  
and a wholly owned subsidiary of Holdings. If the approval of the holders of SPI
Capital Stock is obtained and all other conditions to the SPI Merger are        
satisfied or waived, pursuant to the SPI Merger Agreement, the SPI Merger Sub   
will be merged into SPI, with SPI being the surviving corporation after the SPI 
Merger and a wholly owned subsidiary of Holdings. The date on which the closing 
of the Mergers occurs is referred to herein as the "Closing Date."              

MERGER CONSIDERATION                                                            

SPI.                                                                

      Except for the shares owned by SPI or any of its subsidiaries, at the time
when the Mergers are completed by the filing of Certificates of Merger with the 
appropriate Secretaries of State (the "Effective Time"), each share of SPI      
Capital Stock will be converted into the right to receive 1.8785 shares of      
Holdings Common Stock. Each SPI stockholder on the Record Date may elect to     
receive $49.4097 per share for up to 5.9176% of the SPI Capital Stock instead of
shares of Holdings Common Stock. If SPI stockholders do not elect to receive a  
total of $8,076,133 in cash in place of shares of Holdings Common Stock, those  
SPI stockholders who have elected to receive cash for some of their SPI Capital 
Stock, including those who have elected to receive cash for the maximum 5.9176% 
of their SPI Capital Stock, will have all or a portion of their remaining SPI   
Capital Stock converted into cash until the cash being paid for SPI Capital     
Stock equals $8,076,133. The conversion will be pro rata among such stockholders
electing to receive cash based on the shares of SPI Capital Stock held by them  
that they did not voluntarily elect to convert to cash. If all such shares are  
converted to cash and the total cash being paid still does not equal $8,076,133,
then all SPI stockholders who did not elect to have any of their shares         
converted to cash will have their shares converted to cash pro rata based on the
number of shares held by each of them until the total cash being paid for shares
of SPI Capital Stock equals $8,076,133.                                         

     Any shares of SPI Capital Stock owned by SPI, or any of its subsidiaries,
will automatically be cancelled and retired at the Effective Time and will cease
to exist, and no Holdings Common Stock or other consideration will be delivered 
in exchange therefor.                                                           

MODTECH.                                                            

 Except for shares owned by Modtech or any of its subsidiaries, at the
Effective Time, without any action on the part of any Modtech stockholder, each 
issued and outstanding share of Modtech Common Stock will be converted into the 
right to receive $3.7293 and 0.8508 shares of Holdings Common Stock. Each       
Modtech stockholder as of the Record Date may elect to receive, in place of     
Holdings Common Stock, 0.8508 shares of Holdings Series A Preferred Stock for   
each share of Modtech Common Stock in an amount up to 3.94% of their shares of  
Modtech Common Stock. If Modtech stockholders do not elect to receive a total of
388,939 shares of Holdings Series A Preferred Stock in place of Holdings Common 
Stock, two major Modtech stockholders, Lagunitas Partners and Proactive         
Partners, L.P. will be allocated shares of Holdings Series A Preferred Stock pro
rata based on their total shares of Modtech Common Stock, until the total number
of shares of Holdings Series A Preferred Stock to be received by Modtech        
stockholders in the Modtech Merger equals 388,939. The number of shares of      
Holdings Series A Preferred Stock to be                                         

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received by Modtech stockholders will be adjusted upward or downward to the     
extent necessary to comply with the minimum requirements of Section 351 of the  
Internal Revenue Code.                                                          

Any shares of Modtech Common Stock owned by Modtech or any of its   
subsidiaries will automatically be cancelled and retired at the Effective Time  
and will cease to exist, and no Holdings Common or Preferred Stock or other     
consideration will be delivered in exchange therefor.                           

OPINION OF MODTECH'S FINANCIAL ADVISOR                                          

      On September 28, 1998, Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") rendered an oral opinion to the Modtech Board to the effect that, as of 
such date and based upon the qualifications and assumptions made and matters    
considered by DLJ described in its written opinion dated September 28, 1998 (the
"Fairness Opinion"), the Merger Consideration to be received in the Mergers by  
holders of shares of Modtech Common Stock pursuant to the Merger Agreement is   
fair from a financial point of view to such holders.                            

     THE FULL TEXT OF THE FAIRNESS OPINION IS ATTACHED HERETO AS ANNEX II. THE
SUMMARY OF THE FAIRNESS OPINION SET FORTH IN THIS JOINT PROXY                   
STATEMENT/PROSPECTUS IS QUALIFIED BY REFERENCE TO THE FULL TEXT OF THE FAIRNESS 
OPINION. MODTECH STOCKHOLDERS ARE URGED TO READ THE FAIRNESS OPINION CAREFULLY  
AND IN ITS ENTIRETY FOR THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, OTHER MATTERS
CONSIDERED AND LIMITS OF THE REVIEW BY DLJ IN CONNECTION WITH SUCH FAIRNESS     
OPINION.                                                                        

    The Fairness Opinion was prepared for the Modtech Board of Directors and
was directed only to the fairness from a financial point of view, as of the date
thereof, of the consideration to be received by the holders of Modtech Common   
Stock pursuant to the Merger Agreement. DLJ expressed no opinion in the Fairness
Opinion as to the prices at which Holdings Common Stock or Holdings Series A    
Preferred Stock would actually trade at any time. DLJ was not asked to opine as 
to the underlying business decision of the Modtech Board to proceed with the    
Mergers, and the Fairness Opinion does not address this decision. The Fairness  
Opinion does not constitute a recommendation to any stockholder as to how such  
stockholder should vote on the Mergers.                                         

   As part of its investment banking business, DLJ is regularly engaged in
the valuation of businesses and securities in connection with mergers,          
acquisitions, underwritings, sales and distributions of listed and unlisted     
securities, private placements and valuations for corporate and other purposes. 
The Modtech Board was informed that DLJ had previously advised SPI and certain  
of its stockholders with respect to possible transactions with Modtech and other
financing alternatives.                                                         

      In arriving at the Fairness Opinion, DLJ reviewed the Merger Agreement and
certain exhibits thereto. DLJ also reviewed financial and other information that
was publicly available or furnished to DLJ by Modtech and SPI, including        
information provided during discussions with their respective managements.      
Included in the information provided during such discussions were certain       
financial projections of Modtech prepared by the management of Modtech and      
certain financial projections of SPI prepared by the management of SPI. In      
addition, DLJ compared certain financial and/or securities data of Modtech and  
SPI with publicly available information concerning various companies whose      
securities are traded in public markets, reviewed the historical stock prices   
and trading volumes of Modtech Common Stock, reviewed prices and premiums paid  
in certain other business combinations and conducted such other financial       
studies, such as discounted cash flow analysis and contribution analysis, and   
investigations as DLJ deemed appropriate for purposes of rendering the Fairness 
Opinion.                                                                        

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In rendering the Fairness Opinion, DLJ relied upon and assumed the  
accuracy and completeness of all of the financial and other information that was
available to it from public sources, that was provided to it by Modtech or SPI  
or their respective representatives, or that was otherwise reviewed by DLJ. With
respect to the financial projections supplied to DLJ, DLJ assumed that they were
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of the managements of Modtech and SPI as to the future operating  
and financial performance of Modtech and SPI, respectively. DLJ did not assume  
responsibility for making any independent evaluation of the assets or           
liabilities of Modtech or SPI, or for making any independent verification of the
information reviewed by DLJ. DLJ also assumed that the cash portion of the      
consideration to be received by the holders of Modtech Common Stock would not   
otherwise be received by such holders in the ordinary course of business.       

     The Fairness Opinion was necessarily based on economic, market, financial
and other conditions as they existed on, and on the information made available  
to DLJ as of, the date of the Fairness Opinion. The Fairness Opinion was based, 
in part, on publicly available information as of September 23, 1998. Although   
subsequent developments may affect its Fairness Opinion, DLJ does not have any  
obligation to update, revise or reaffirm its opinion.                           

     The following is a summary of the presentation made by DLJ to the Modtech
Board of Directors at its September 28, 1998 meeting, in connection with        
rendering the Fairness Opinion.                                                 

  Stock Price History. To provide contextual data and comparative market
data, DLJ reviewed the daily closing prices for the 12-month period ending      
September 22, 1998 of Modtech Common Stock and compared such closing stock      
prices with the closing stock prices of two publicly traded modular building    
companies, Butler Manufacturing Company and Miller Building Systems, Inc. and   
the Russell 2000 Index. The two modular building companies were the only two    
directly comparable companies identified by DLJ which were publicly traded. This
information was presented solely to provide the Modtech Board with background   
information regarding the stock prices of Modtech Common Stock relative to its  
peers and an appropriate index.                                                 

    Comparable Publicly Traded Company Analysis. DLJ believed that this form
of analysis was not meaningful because of an insufficient number of publicly    
traded companies in the modular building industry.                              

   Comparable Merger & Acquisition Transaction Analysis. DLJ believed that
this form of analysis was not meaningful because of an insufficient number of   
recent merger and acquisition transactions in the modular building industry.    

    Earnings Per Share Impact. DLJ analyzed the earnings per share impact of
the Mergers to holders of Modtech Common Stock. For the latest 12-month period  
ending June 30, 1998, and the projected fiscal years ending December 1998, 1999 
and 2000, the Mergers resulted in accretion (dilution) of (22.7%) or ($0.36) per
share, (11.3%) or ($0.18) per share, 4.3% or $0.08 per share and 4.5% or $0.10  
per share, respectively. In arriving at these accretion (dilution) results, DLJ 
compared Holdings' pro forma earnings per share estimates with First Call's     
estimates of Modtech's earnings per share, and assumed the Mergers would not    
result in any synergies.                                                        

      Comparable Premiums Paid Analysis. DLJ determined the implied premium over
the common stock trading prices for one day, one week and four weeks prior to   
the announcement date of 293 selected domestic merger or acquisition            
transactions involving companies not necessarily comparable to Modtech, ranging 
from $200 million to $400 million in transaction value and completed from       
January 1995 through September 17, 1998. The average premiums for the selected  
transactions over the common stock trading prices for : (i) one day prior to the

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announcement date was 29.0%; (ii) one week prior to the announcement date was   
33.1%; and (iii) four weeks prior to the announcement date was 44.3%. Applying  
the above average comparable premiums to the closing price of the Modtech Common
Stock on one day, one week and four weeks prior to September 22, 1998 implies a 
valuation per share of Modtech Common Stock of $25.32, $23.79 and $27.96,       
respectively, as compared to the closing prices of the Modtech Common Stock one 
day, one week and four weeks prior to September 22, 1998 of $19.63, $17.88 and  
$19.38, respectively.                                                           

     Contribution Analysis. DLJ analyzed the relative contributions of Modtech
and SPI to the pro forma combined entity based on selected financial data,      
assuming no synergies. In this analysis, DLJ compared the 65.6% fully diluted   
ownership interest that holders of Modtech Common Stock will have in the pro    
forma combined entity with the relative contribution of Modtech to certain      
financial data for the pro forma combined entity, including revenue, earnings   
before interest, taxes, depreciation and amortization ("EBITDA") and earnings   
before interest and taxes ("EBIT") for the fiscal years ending December 31, 1998
("Fiscal Year 1998") and December 31, 1999 ("Fiscal Year 1999"). In each case,  
the financial data for the pro forma combined entity was determined by adding   
the financial data for Modtech and SPI. This analysis indicated that Modtech    
would contribute: (i) 64.5% and 64.9% of the pro forma combined entity's sales  
for Fiscal Year 1998 and Fiscal Year 1999, respectively; (ii) 69.5% and 67.9% of
the pro forma combined entity's EBITDA for Fiscal Year 1998 and Fiscal Year     
1999, respectively; and (iii) 71.4% and 68.9% of the pro forma combined entity's
EBIT for Fiscal Year 1998 and Fiscal Year 1999, respectively.                   

  DLJ also compared the 65.6% ownership interest that holders of Modtech
Common Stock will have in the pro forma combined entity with the relative       
contribution of Modtech to the estimated net income of the pro forma combined   
entity (determined by adding the net income of Modtech and SPI for Fiscal Year  
1998 and Fiscal Year 1999). This analysis indicated that Modtech would          
contribute 73.5% and 70.2% of the net income of the pro forma combined entity   
for Fiscal Year 1998 and Fiscal Year 1999, respectively.                        

Discounted Cash Flow Analysis. DLJ performed a discounted cash flow 
analysis (i.e., an analysis of the present value of projected cash flows using  
the discount rates and terminal year EBITDA multiples indicated below) of       
Modtech, SPI and Holdings using projections and assumptions provided by the     
management of Modtech. The discounted cash flow for all three entities was      
estimated using discount rates ranging from 9% to 12% and terminal multiples of 
estimated EBITDA for each entity's fiscal year ending December 31, 2003 ranging 
from 6.0x to 8.0x. This analysis assumed no synergies and yielded an implied    
common equity value range for Holdings of $28.70 to $32.29 per fully diluted    
share of Holdings, and an implied equity value range per share (including the   
cash distribution) for Modtech of $28.16 to $31.22 as compared to the price of  
September 23, 1998 of $20.50.                                                   

     The summary set forth above does not purport to be a complete description
of the analyses performed by DLJ but describes, in summary form, the material   
elements of the presentations made by DLJ to the Modtech Board of Directors on  
September 28, 1998. The preparation of a fairness opinion involves various      
determinations as to the most appropriate and relevant methods of financial     
analysis and the application of these methods to the particular circumstances   
and, therefore, such an opinion is not readily susceptible to summary           
description. Each of the analyses conducted by DLJ was carried out in order to  
provide a different perspective on the transaction and to add to the total mix  
of information available. DLJ did not form a conclusion as to whether any       
individual analysis, considered in isolation, supported or failed to support an 
opinion as to fairness from a financial point of view. Rather, in reaching its  
conclusion, DLJ considered the results of the analyses in light of each other   
and ultimately                                                                  

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reached its opinion based on the results of all analyses taken as a whole.      
Accordingly, notwithstanding the separate factors summarized above, DLJ has     
indicated to Modtech that it believes that its analyses must be considered as a 
whole and that selecting portions of its analyses and the factors considered by 
it, without considering all analyses and factors, could create an incomplete    
view of the evaluation process underlying its opinion. The analyses performed by
DLJ are not necessarily indicative of actual values or future results, which may
be significantly more or less favorable than suggested by such analyses.        

      Pursuant to the terms of an engagement agreement dated September 25, 1998,
Modtech agreed to pay DLJ a fee of $750,000, irrespective of the conclusion     
reached therein. In addition, Modtech has agreed to reimburse DLJ promptly for  
all out-of-pocket expenses (including the reasonable fees and expenses of       
counsel) incurred by DLJ in connection with the Fairness Opinion and to         
indemnify DLJ and certain related persons against certain liabilities in        
connection with its engagement, including liabilities under U.S. federal        
securities laws.                                                                

 In the ordinary course of business, DLJ and its affiliates may own or
actively trade the securities of Modtech for their own accounts and for the     
accounts of their customers and, accordingly, may at any time hold a long or    
short position in Modtech securities.                                           

PROCEDURES FOR ELECTION OF MERGER CONSIDERATION AND SURRENDER OF STOCK          
CERTIFICATES; FRACTIONAL SHARES                                                 

      SPI. In order to receive the SPI Merger Consideration (See "The Mergers --
Merger Consideration -- SPI"), SPI stockholders must surrender to ChaseMellon,  
the Exchange Agent, whose address is 400 South Hope Street, 4th Floor, Los      
Angeles, California 90071, the certificate or certificates for their shares of  
SPI Capital Stock. As soon as feasible, after the Effective Time, the Exchange  
Agent will send to each SPI stockholder a letter of transmittal and instructions
for use in surrendering their certificates and making an election to receive    
cash at $49.4097 per share in place of Holdings Common Stock for up to 5.9176%  
of their shares, if they so desire. The method of making adjustments to         
stockholder elections as described above (See "The Mergers -- Merger            
Consideration -- SPI") will be set forth in the letter of transmittal. Any      
necessary adjustments to stockholder elections will be made by the Exchange     
Agent.                                                                          

      SPI stockholders will not receive any fractional shares of Holdings Common
Stock. Instead, they will be paid cash equal to the closing price of a share of 
Modtech Common Stock on the Nasdaq National Market on the last business day     
prior to the closing of the Mergers, multiplied by the fraction of a share they 
otherwise would have received.                                                  

      After the Effective Time, there will be no further transfer on the records
of SPI or its transfer agent of certificates representing shares of SPI Capital 
Stock, and, if such certificates are presented to SPI for transfer, they will be
cancelled against delivery of the SPI Merger Consideration pursuant to the      
Merger Agreement. Until surrendered in accordance with the Merger Agreement,    
each certificate for shares of SPI Capital Stock will be deemed at any time     
after the Effective Time to represent only the right to receive upon such       
surrender the SPI Merger Consideration pursuant to the Merger Agreement. No     
interest will be paid or will accrue on any cash payable as consideration in the
Mergers or in lieu of any fractional shares of Holdings Common Stock.           

HOLDERS OF SPI CAPITAL STOCK SHOULD NOT SEND ANY OF THEIR STOCK CERTIFICATES TO 
SPI OR THE EXCHANGE AGENT AT THIS TIME.                                         

  Modtech. In order to receive the Modtech Merger Consideration, Modtech
stockholders must surrender to ChaseMellon, the Exchange Agent, whose address is
400 South Hope Street, 4th Floor,                                               

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Los Angeles, California 90071, the certificate or certificates, representing    
their shares of Modtech Common Stock. As soon as feasible after the Effective   
Time, the Exchange Agent will send to each Modtech stockholder a letter of      
transmittal and instructions for use in surrendering their certificates and     
making an election to receive Holdings Series A Preferred Stock for up to 3.94% 
of their Modtech Common Stock. NO MODTECH STOCKHOLDER IS REQUIRED TO ELECT TO   
RECEIVE HOLDINGS SERIES A PREFERRED STOCK, SINCE TWO MAJOR MODTECH STOCKHOLDERS,
LAGUNITAS PARTNERS AND PROACTIVE PARTNERS, L.P., HAVE AGREED TO ACCEPT ALL THE  
SHARES OF HOLDINGS SERIES A PREFERRED STOCK TO BE ISSUED IN THE MODTECH MERGER. 
The method of making adjustments to stockholder elections and the amount of     
Holdings Series A Preferred Stock to be allocated as described above (See, "The 
Mergers -- Merger Consideration -- Modtech") will be set forth in the letter of 
transmittal. Any necessary adjustments to stockholder elections or the number of
shares of Holdings Series A Preferred Stock to be allocated will be made by the 
Exchange Agent.                                                                 

   Modtech stockholders will not receive any fractional shares of Holdings
Common Stock or Holdings Series A Preferred Stock. Instead, they will be paid   
cash equal to the closing price of a share of Modtech Common Stock on the Nasdaq
National Market on the last trading day prior to the closing of the Mergers     
multiplied by the fraction of a share of Holdings Common Stock they otherwise   
would have received. Shares of Holdings Series A Preferred Stock will be rounded
upward to the nearest whole number of shares.                                   

     After the Effective Time of the Merger, there will be no further transfer
on the records of Modtech or its transfer agent of certificates representing    
shares of Modtech Common Stock, and, if such certificates are presented to      
Modtech for transfer, they will be cancelled against delivery of the Modtech    
Merger Consideration pursuant to the Merger Agreement. Until surrendered in     
accordance with the Merger Agreement, each certificate for shares of Modtech    
Common Stock will be deemed at any time after the Effective Time to represent   
only the right to receive upon such surrender the Modtech Merger Consideration  
pursuant to the Merger Agreement. No interest will be paid or will accrue on any
cash payable as consideration in the Mergers or in lieu of any fractional shares
of Holdings Common Stock.                                                       

HOLDERS OF MODTECH COMMON STOCK SHOULD NOT SEND ANY OF THEIR STOCK CERTIFICATES 
TO MODTECH OR THE EXCHANGE AGENT AT THIS TIME.                                  

EFFECTIVE TIME                                                                  

      On the Closing Date, the parties will file certificates of merger or other
appropriate documents (in any such case, the "Certificates of Merger") and will 
make all other filings or recordings required under the Delaware General        
Corporation Law ("DGCL"), the California General Corporation Law and the        
Colorado Business Corporation Act. The Mergers will become effective at such    
time as the Certificate of Mergers are duly filed with the Secretary of State of
the State of Delaware, or at such later time as Modtech and SPI specify in the  
Certificates of Merger (the time the Mergers become effective being the         
"Effective Time"). Such filing will be made as promptly as practicable after    
satisfaction or waiver of the conditions to the Mergers set forth in the Merger 
Agreement.                                                                      

EFFECT ON SPI STOCK PLAN                                                        

The Merger Agreement provides that, as a result of the Mergers, the 
vesting of all options outstanding under SPI's Second Amended and Restated 1997 
Stock Option Plan ("SPI Options") that are not then at least 75% vested will be 
accelerated pro rata based on the unvested portion of such options until all SPI
Options are in the aggregate 75% vested. An option is considered 75% vested if  
the number of shares purchased under any prior exercise of the option, plus the 
number of shares the option is exercisable for immediately prior to the         
completion of the                                                               

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Mergers, equals 75% of the total number of shares covered by the original grant 
of the option. 5.9176% of the shares covered by the vested portion of each SPI  
Option will be converted into the right to receive $49.4097 per share in cash,  
less the applicable per share exercise price of each SPI Option. Each remaining 
SPI Option will be converted into and become a right to acquire 1.8785 shares of
Holdings Common Stock for each share of SPI Common Stock previously covered by  
the converted SPI Option.                                                       

EFFECT ON SPI WARRANTS                                                          

   The Merger Agreement provides that all outstanding warrants to purchase
SPI Common Stock ("SPI Warrants") will be deemed exercised immediately prior to 
the Effective Time. At the Effective Time, 5.9176% of the SPI Warrants held by  
each warrant holder will be converted into the right to receive $49.4097 per    
share in cash, less the applicable exercise price of the SPI Warrants. Each     
remaining SPI Warrant will be converted into the right to receive 1.8785 shares 
of Holdings Common Stock upon payment of the adjusted warrant exercise price.   

EFFECT ON MODTECH STOCK PLANS                                                   

The Merger Agreement provides that, as a result of the Mergers, all 
outstanding options to purchase Modtech Common Stock ("Modtech Options") that   
are not then at least 75% vested will be accelerated pro rata based on the      
unvested portion of such options until all Modtech Options are in the aggregate 
75% vested. An option is considered 75% vested if the number of shares purchased
under any prior exercise of the option, plus the number of shares the option is 
exercisable for immediately prior to the completion of the Mergers, equals 75%  
of the total number of shares covered by the original grant of the option.      
14.6709% of the shares covered by the vested portion of each Modtech Option will
be converted into the right to receive $25.00 per share in cash, less the       
applicable per share exercise price. Each remaining Modtech Option will be      
converted into and become a right to acquire 0.8508 shares of Holdings Common   
Stock for each share of Modtech Common Stock previously covered by the converted
Modtech Option.                                                                 

CERTAIN FEDERAL INCOME TAX CONSEQUENCES                                         

   The following is a summary of the material United States federal income
tax considerations generally applicable to holders of Modtech Common Stock and  
holders of SPI Capital Stock who, pursuant to the Mergers, exchange such stock  
holdings for the Merger Consideration. Consummation of the Modtech Merger is    
conditioned upon the receipt by Modtech of an opinion of Gibson, Dunn & Crutcher
LLP, special tax counsel to Modtech, based upon requested representation letters
and dated the Closing Date, to the effect that the Modtech Merger will qualify  
as an exchange governed by Section 351 of the Internal Revenue Code of 1986, as 
amended (the "Internal Revenue Code"). Consummation of the SPI Merger is        
conditioned upon the receipt by SPI of an opinion of Dorsey & Whitney LLP,      
counsel to SPI, based upon requested representation letters and dated the       
Closing Date, to the effect that the SPI Merger will qualify as a reorganization
under Section 368 of the Internal Revenue Code. The summary below assumes that  
the Modtech Merger and the SPI Merger will be treated for United States federal 
income tax purposes in accordance with those opinions.                          

     This summary is based upon the current provisions of the Internal Revenue
Code, currently applicable Treasury regulations thereunder, judicial decisions, 
and current administrative decisions and rulings. There can be no assurance that
the Internal Revenue Service ("IRS") will not take a contrary view, and no      
ruling from the IRS has been or will be sought regarding tax treatment of the   
Modtech Merger and the SPI Merger. Future legislative, judicial or              
administrative changes or interpretations could alter or modify the statements  
and conclusions set forth in this summary, and any such change or               

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interpretations could be retroactive and could affect the tax consequences to   
the stockholders of Modtech and SPI.                                            

The following summary does not address all aspects of federal income
taxation that may be important to particular stockholders in light of their     
personal investment circumstances or to stockholders subject to special         
treatment under the federal income tax laws (including life insurance companies,
foreign persons, tax-exempt entities, and holders who acquired their Modtech    
Common Stock or SPI Capital Stock pursuant to the exercise of employee stock    
options or otherwise as compensation) and does not address any aspect of state, 
local or foreign taxation. This summary also assumes that the Modtech Common    
Stock and the SPI Capital Stock will be held as capital assets on the Closing   
Date.                                                                           

   Treatment of Holders of Modtech Common Stock. Except as discussed below
under "Cash in Lieu of Fractional Shares," a holder of Modtech Common Stock will
recognize gain realized in the transaction but will not recognize any loss      
realized in the transaction. The amount of gain that is recognized will be equal
to the lesser of (i) the amount of gain realized in the transaction (i.e., the  
excess of (a) the sum of the amount of cash and the fair market value of        
Holdings Common Stock and Holdings Series A Preferred Stock received over (b)   
the tax basis of the Modtech Common Stock relinquished) and (ii) the amount of  
cash received. The amount of such recognized gain will be subject to federal    
income tax at capital gain rates or ordinary income rates depending upon whether
the receipt of cash is viewed as a redemption of stock or as a dividend         
distribution under the rules discussed below.                                   

    Because the Modtech stockholders will, as a group, possess more than 50%
of the total value of shares of all classes of stock of Holdings following the  
Mergers, the treatment of any gain recognized by a Modtech stockholder as       
capital gain or as dividend income must be determined by applying the rules of  
Section 302 of the Internal Revenue Code. As to each Modtech stockholder, this  
is determined by viewing Holdings as redeeming a portion of a Modtech           
stockholder's Modtech Common Stock for the amount of cash received by such      
stockholder in the Modtech Merger. To determine whether the redemption is       
treated as a dividend distribution or as a redemption of the stockholder's      
Modtech Common Stock, a Modtech stockholder must compare his or her             
proportionate, percentage interest in Modtech prior to the Modtech Merger with  
such stockholder's indirect proportionate, percentage interest in Modtech after 
the Modtech Merger by reason of such stockholder's direct ownership of Holdings 
Common Stock and Holdings Series A Preferred Stock. Such comparison should take 
into account the Holdings Common Stock issued to the SPI stockholders in the SPI
Merger.                                                                         

      The cash distribution received by a Modtech stockholder will be treated as
a redemption of such stockholder's stock rather than a dividend if, under the   
redemption tests of Section 302 of the Internal Revenue Code, such distribution 
(i) is "not essentially equivalent to a dividend" with respect to the           
stockholder, or (ii) results in a "substantially disproportionate" redemption of
such stockholder's equity interest in Modtech (the "Section 302 Tests").        

  A redemption will be "substantially disproportionate" if (i) after the
redemption the stockholder owns less than 50% of the total combined voting power
of all classes of stock of Modtech entitled to vote, and (ii) the percentage    
ownership of Modtech "common stock" and "voting stock" immediately after the    
redemption is less than 80% of the stockholder's percentage ownership in such   
stock immediately before the redemption. If the redemption from a Modtech       
stockholder fails to satisfy the "substantially disproportionate" test, such    
stockholder may nonetheless satisfy the "not essentially equivalent to a        
dividend" test.                                                                 

    Under the principles established in United States v. Davis, 397 U.S. 301
(1970), a distribution to a                                                     

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Modtech stockholder will not be "essentially equivalent to a dividend" if it    
results in a "meaningful reduction" in such stockholder's proportionate stock   
interest in Modtech. If a stockholder with a relatively minimal stock interest  
in Modtech and no exercise of control over corporate affairs suffers a reduction
in his proportionate interest in Modtech as a result of the redemption, that    
stockholder should be regarded as having suffered a meaningful reduction of his 
or her interest in Modtech. For example, the IRS has held in a published ruling 
that in the case of a less than 1% stockholder who does not have management     
control over the corporation, any reduction in proportionate interest will      
constitute a "meaningful reduction."                                            

     In applying the Section 302 Tests, the constructive stock ownership rules
of Internal Revenue Code Section 318 apply and require that each Modtech        
stockholder take into account not only the Modtech Common Stock directly owned  
by the stockholder, but also Modtech Common Stock owned by certain of the       
stockholder's family members, stock owned by partnerships, trusts, corporations 
and other entities in which the stockholder has an interest, as well as Modtech 
Common Stock the stockholder has a right or option to acquire.                  

     If none of the redemption tests under Section 302 of the Internal Revenue
Code is satisfied, the cash received by a Modtech stockholder will be treated as
a dividend to the extent of such stockholder's allocable portion of the earnings
and profits (as determined for federal income tax purposes) of Modtech and      
Holdings. If the amount of cash exceeds a Modtech stockholder's allocable       
portion of earnings and profits, the excess will be treated first as a return of
capital to the extent of such stockholder's tax basis in his or her shares and  
then as capital gain.                                                           

    Because the determination of whether cash received in the Modtech Merger
will be treated as the distribution of a dividend generally will depend upon the
particular facts and circumstances of each Modtech stockholder, each Modtech    
stockholder is strongly advised to consult their own tax advisor regarding the  
tax treatment of cash received pursuant to the Modtech Merger.                  

      Treatment of Holders of SPI Capital Stock. Except as discussed below under
"Cash in Lieu of Fractional Shares," a holder of SPI Capital Stock that only    
receives Holdings Common Stock will not recognize gain or loss. A holder of SPI 
Capital Stock that receives a combination of Holdings Common Stock and cash will
recognize gain realized in the transaction but will not recognize any loss      
realized in the transaction. The amount of gain that is recognized will be      
calculated separately for each block of SPI Capital Stock, in an amount equal to
the lesser of (i) the amount of gain realized with respect to such block (i.e., 
the excess of (a) the sum of the amount of cash and the fair market value of    
Holdings Common Stock received that is allocable to such block over (b) the tax 
basis of the block of SPI Capital Stock relinquished) and (ii) the amount of    
cash received that is allocable to such block. The amount of such recognized    
gain will be subject to federal income tax at capital gain rates or ordinary    
income rates depending upon whether the receipt of cash is viewed as a          
redemption of stock or as a dividend distribution under the rules discussed     
below.                                                                          

   The determination of whether the exchange of SPI Capital Stock for cash
pursuant to the SPI Merger has the effect of a distribution of a dividend will  
be made by applying the Section 302 Tests that are described above under        
"Treatment of Holders of Modtech Common Stock," and by also taking into account 
any shares of Holdings Common Stock considered to be owned by such SPI          
stockholder by reason of the constructive ownership rules of Internal Revenue   
Code Section 318 that are also described above under "Treatment of Holders of   
Modtech Common Stock."                                                          

     Pursuant to the principles established in Clark v. Commissioner, 489 U.S.
726 (1989), the Section 302                                                     

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Tests are applied to an SPI stockholder by comparing the proportionate,         
percentage interest of an SPI stockholder in Holdings after the SPI Merger with 
the proportionate, percentage interest in Holdings such stockholder would have  
had if such stockholder had received solely Holdings Common Stock in the SPI    
Merger. This comparison is made as though Holdings had issued solely Holdings   
Common Stock to such stockholder in the SPI Merger and in a hypothetical        
redemption Holdings had then redeemed a portion of its Holdings Common Stock for
the amount of cash the stockholder actually received in the SPI Merger. In      
making this comparison, it is likely that the effect of the Modtech Merger would
be taken into account as though Holdings had issued solely Holdings Common Stock
in the Modtech Merger and in a hypothetical redemption Holdings had then        
redeemed a portion of its Holdings Common Stock for the amount of cash received 
by the Modtech stockholders.                                                    

     If receipt of cash by an SPI stockholder has the effect of a distribution
of a dividend, the gain recognized will be treated as a dividend to the extent  
of the stockholder's ratable share of SPI's undistributed earnings and profits, 
as determined for federal income tax purposes. If the amount of cash exceeds an 
SPI stockholder's ratable share of earnings and profits, the excess will be     
treated first as a return of capital to the extent of such stockholder's tax    
basis in his or her shares and then as capital gain. Any gain that does not have
the effect of a distribution of a dividend will be a capital gain.              

     Because the determination of whether cash received in the SPI Merger will
be treated as the distribution of a dividend generally will depend upon the     
particular facts and circumstances of each SPI stockholder, each SPI stockholder
is strongly advised to consult their own tax advisor regarding the tax treatment
of cash received pursuant to the SPI Merger.                                    

   The Merger Agreement provides that, subject to the limits therein, each
SPI stockholder may elect which of such stockholder's SPI Capital Stock, if any,
will be exchanged for cash in the SPI Merger. In the event the receipt of cash  
by an SPI stockholder is not treated as a dividend, as explained above, the tax 
treatment of the cash may be different depending on which shares of SPI Capital 
Stock are deemed to be exchanged for cash and which shares are deemed to be     
exchanged for Holdings Common Stock. While there is some authority suggesting   
that a stockholder's allocation of stock and cash to certain shares of SPI      
Capital Stock should be respected, there can be no assurance that the IRS will  
not take a contrary position. Because of the absence of definitive authority,   
SPI stockholders are strongly advised to consult with their own tax advisors.   

     Basis and Holding Period of the Holdings Common Stock and Holdings Series
A Preferred Stock. The basis of the Holdings Common Stock (including any        
fractional shares for which cash is received described below) received by a     
Modtech stockholder or an SPI stockholder in the Mergers will equal the basis of
the Modtech Common Stock or SPI Capital Stock surrendered by such stockholder in
the respective Merger, decreased by the amount of cash received by such         
stockholder, and increased by the amount of capital gain recognized by such     
stockholder and the amount treated as a dividend to such stockholder. As to any 
Modtech stockholder that receives both Holdings Common Stock and Holdings Series
A Preferred Stock, such basis amount shall be allocated to each class of stock  
based upon the relative fair market value of each class. As to SPI stockholders,
the basis of the Holdings Common Stock received in the SPI Merger will be       
determined separately with respect to each block of SPI Capital Stock           
surrendered in the SPI Merger.                                                  

     The holding period of the Holdings Common Stock and the Holdings Series A
Preferred Stock will include the period during which the Modtech Common Stock or
SPI Capital Stock surrendered in the Mergers was held.                          

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     Cash in Lieu of Fractional Shares. Cash received by a Modtech stockholder
or SPI stockholder in lieu of a fractional share interest of Holdings Common    
Stock will be treated as having been received as a distribution in full payment 
in exchange for the fractional share interest in Holdings Common Stock which    
such stockholder would otherwise be entitled to receive, and will qualify as    
capital gain or loss, or as a dividend under the Section 302 Tests discussed    
above.                                                                          

 Conversion of Holdings Series A Preferred Stock. A holder of Holdings
Series A Preferred Stock will not recognize income, gain or loss upon the       
conversion of such stock into Holdings Common Stock. A holder's basis in the    
Holdings Common Stock received upon conversion will equal the basis of the      
Holdings Series A Preferred Stock so converted, and the holding period of the   
Holdings Common Stock received upon conversion will include the holding period  
of the Holdings Series A Preferred Stock so converted.                          

   Reporting Requirements and Backup Withholding. Each Modtech stockholder
and SPI stockholder will be required to retain records and file with such       
holder's United States federal income tax return a statement setting forth      
certain facts relating to the Modtech Merger and the SPI Merger.                

   Backup withholding at the rate of 31% may apply with respect to certain
payments unless the recipient (i) is a corporation or comes within certain other
exempt categories and, when required, demonstrates this fact or (ii) provides a 
correct taxpayer identification number, certifies as to no loss of exemption    
from backup withholding and otherwise complies with applicable requirements of  
the backup withholding rules. A stockholder who does not provide Holdings with  
its correct taxpayer identification number may be subject to penalties imposed  
by the IRS. Any amounts withheld under the backup withholding rules may be      
allowed as a refund or credit against the stockholder's federal income tax      
liability, provided that certain required information is furnished to the IRS.  

      Holdings will report to stockholders of Holdings and to the IRS the amount
of "reportable payments" and any amount withheld with respect to Holdings Common
Stock and Holdings Series A Preferred Stock during each calendar year.          

      THIS FEDERAL INCOME TAX DISCUSSION IS FOR GENERAL INFORMATION ONLY AND MAY
NOT APPLY TO ALL HOLDERS OF MODTECH COMMON STOCK OR ALL HOLDERS OF SPI CAPITAL  
STOCK. SUCH HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE       
SPECIFIC TAX CONSEQUENCES OF THE MERGERS.                                       

CONFLICTS OF INTEREST                                                           

      In considering the respective recommendations of the Modtech Board and the
SPI Board with respect to the Mergers, stockholders of Modtech and SPI should be
aware that, as described below, certain members of SPI's and Modtech's          
management and Boards may have interests in the Mergers that are different from,
or in addition to, the interests of stockholders of Modtech and SPI, and that   
may create potential conflicts of interest. The Modtech Board and the SPI Board 
have each considered these interests, among other matters, in approving and     
adopting the Merger Agreement and the Mergers.                                  

Holdings Board of Directors. Four of the eight current directors of 
Modtech, Evan M. Gruber, Charles C. McGettigan, Myron A. Wick III and Daniel J. 
Donahoe III, will become directors of Holdings. Three of the six current        
directors of SPI, Patrick Van Den Bossche, Charles A. Hamilton and Charles R.   
Gwirtsman, will become directors of Holdings.                                   

   Holdings Executive Officers. Evan M. Gruber, Chief Executive Officer of
Modtech, Patrick Van Den Bossche, President of SPI, and Michael G. Rhodes, Chief
Operating Officer and Chief Financial Officer of Modtech, will each hold the    
same                                                                            

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positions with Holdings as they presently hold with SPI or Modtech. In          
connection with the Merger Agreement, Holdings will enter into employment       
agreements with these officers. See "Directors and Executive Officers of        
Holdings Following the Mergers -- Compensation of Executive Officers."          

   Transaction Fees. KRG Capital Partners, LLC ("KRG"), Infrastructure and
Environmental Private Equity Management III, LLC ("IEPEM"), Argentum Capital    
Partners II, L.P. ("Argentum") and NationsCredit Commercial Corporation         
("NationsCredit"), which control in the aggregate approximately 96.1% of the    
voting power of SPI, will receive a total of $1,250,000 in transaction fees in  
connection with the Mergers. At the closing of the Mergers, $750,000 of the     
transaction fees will be paid and allocated as follows: KRG - $573,170; IEPEM - 
$126,525; Argentum - $25,305; and NationsCredit - $25,000. The remaining        
$500,000 balance of the fees will be paid to KRG over two years in equal monthly
installments. Upon the closing of a business acquisition by Holdings, during    
each of the first and second years after the closing of the Mergers, all        
remaining monthly payments of the transaction fees for that year will become    
immediately due and payable. KRG will also be retained by Holdings for a period 
of three years to provide transaction advisory services in connection with any  
future acquisitions of Holdings following completion of the Mergers. This       
agreement may be renewed by the parties on a year-to-year basis for a maximum of
two additional years. Holdings may terminate the transaction advisory services  
agreement at any time after its second anniversary upon 90 days' prior written  
notice. Under the transaction advisory agreement, KRG will receive a fee of     
$75,000 for acquisitions under $5 million, a fee of $100,000 for acquisitions   
greater than $5 million but less than $15 million, and a fee of not less than   
$100,000 for acquisitions in excess of $15 million. During the third year of the
agreement and any subsequent extension, KRG will receive an annual base advisory
fee of $250,000.                                                                

The principals of KRG, Mark M. King, Bruce L. Rogers, and Charles R.
Gwirtsman, are presently directors of SPI. Mr. Gwirtsman will serve as a        
director of Holdings following the Mergers.                                     

    McGettigan, Wick & Co., Inc. will receive a $1,250,000 fee in connection
with the completion of the Mergers. The fee will be payable over not more than  
two years, with $750,000 paid at the completion of the Mergers, $250,000 paid   
upon the earlier of the closing of the first business acquisition following the 
Mergers or the first anniversary of the Mergers, and $250,000 paid upon the     
earlier of the closing of the second business acquisition following the Mergers 
or the second anniversary of the Mergers.                                       

    The principals of McGettigan, Wick & Co., Inc. are Charles C. McGettigan
and Myron A. Wick III, who are also principals of Proactive Partners, L.P.,     
which beneficially controls about 23.6% of the voting power of Modtech. Mr.     
McGettigan and Mr. Wick are directors of Modtech and will be directors of       
Holdings.                                                                       

    Indemnification. The Merger Agreement also provides that, from and after
the Effective Time, Holdings and SPI will indemnify, defend, protect and hold   
harmless the present and former officers and directors of SPI, subject to       
certain limitations, for all claims arising as a result of their service to SPI 
or relating to the Merger Agreement and the Mergers. See "Certain Provisions of 
The Merger Agreement--Indemnification."                                         

   Registration Rights Agreement. After the completion of the Mergers, the
current executive officers and directors of Modtech and the beneficial owners of
more than 5% of Modtech Common Stock (See "Security Ownership of Certain        
Beneficial Owners and Management of Modtech"), the current executive officers   
and directors of SPI and the beneficial owners of more than 5% of SPI's Capital 
Stock (See, "Security Ownership of Certain Beneficial Owners and Management of  
SPI"), and certain individual stockholders of SPI or such                       

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beneficial owners, will be entitled to have their shares of Holdings Common     
Stock registered for resale to the public under certain conditions. Under a     
Registration Rights Agreement between Holdings and these stockholders, in the   
event that Holdings determines to register, under the Securities Act of 1933,   
any of its equity securities for its own account, these stockholders will be    
entitled to notice of Holdings' registration and will be entitled to include in 
the registration their shares of Holdings Common Stock specified in a written   
request to Holdings.                                                            

   These "piggyback" registration rights are subject to certain conditions
and limitations, including the right of Holdings not to include any of these    
stockholders' shares among the securities covered by a registration statement if
the aggregate market value of such shares is less than $1 million, or the Board 
of Directors of Holdings determines in good faith that including such shares    
among the securities covered by the registration statement would have a         
materially detrimental effect on the offering and would therefore not be in the 
best interest of Holdings. If the offering is underwritten, the underwriter may 
also exclude some or all of the shares of these stockholders from the           
registration statement, if it determines marketing factors require a limitation 
on the number of shares to be underwritten.                                     

ACCOUNTING TREATMENT                                                            

The SPI Merger will be accounted for under the purchase method of   
accounting, in accordance with generally accepted accounting principles. Under  
the purchase method of accounting, the purchase price of SPI, including direct  
costs of the Mergers, will be allocated among the assets acquired and           
liabilities assumed based upon their estimated fair values, with the excess     
purchase consideration allocated to goodwill. The conversion of Modtech Common  
Stock into Holdings Common Stock and Series A Preferred Stock will be treated as
a reorganization, with no change in the recorded amount of Modtech's assets and 
liabilities. The financial statements of Modtech will become the financial      
statements of Holdings. The results of Holdings' operations will include the    
results of operations of SPI commencing at the Closing Date.                    

     The Unaudited Pro Forma Combined Condensed Financial Statements appearing
elsewhere in this Joint Proxy Statement/Prospectus are based upon certain       
assumptions and allocate the purchase price to assets and liabilities based upon
preliminary estimates of their respective fair values. The unaudited pro forma  
adjustments and combined amounts are included for informational purposes only.  
If the Mergers are consummated, then Holdings's financial statements will       
reflect effects of acquisition adjustments only from the Closing Date. THE      
ACTUAL ALLOCATION OF THE PURCHASE PRICE MAY DIFFER SIGNIFICANTLY FROM THE       
ALLOCATION REFLECTED IN THE UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL    
STATEMENTS.                                                                     

APPROVALS AND CONSENTS                                                          

  The Merger Agreement provides that SPI and Modtech will use their best
efforts and cooperate with one another (i) in promptly determining whether any  
filings are required to be made or consents, approvals, waivers, permits or     
authorizations are required to be obtained under any applicable law or          
regulation or from any governmental authorities or third parties in connection  
with the Mergers, and (ii) in promptly making any such filings, in furnishing   
information required in connection therewith and in timely seeking to obtain any
such consents, approvals, waivers, permits or authorizations.                   

    Under applicable federal anti-trust law, certain acquisitions may not be
consummated unless notice has been given and certain information furnished to   
the Antitrust Division of the United States Department of Justice (the          
"Antitrust Division") and the Federal Trade Commission ("FTC") and specified    
waiting period requirements have been satisfied, unless earlier termination has 
been granted. SPI, Modtech, Proactive Partners, L.P., and Lagunitas Partners    
L.P., each filed with the Antitrust Division                                    

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and the FTC a Notification and Report Form with respect to the Mergers. SPI's   
filing was made October 8, 1998, and the filing of the other three parties were 
made on October 20, 1998. On November 19, 1998, the waiting period will expire. 

NASDAQ LISTING                                                                  

     Holdings will use its best efforts to cause the shares of Holdings Common
Stock issued in the Mergers to be approved for listing on the Nasdaq National   
Market, subject to notice of issuance, prior to the Closing Date. This listing  
is a condition to closing the Mergers. Holdings does not intend to list the     
Holdings Series A Preferred Stock.                                              

     Effective at the Closing Date, Modtech Common Stock will be delisted from
the Nasdaq National Market and deregistered under the Securities Exchange Act of
1934.                                                                           

RESALES OF STOCK                                                                

    Shares of Holdings Common Stock and Holdings Series A Preferred Stock to
be issued in connection with the Mergers will be registered under the Securities
Act of 1933 (the "Securities Act"). Such shares will be freely transferable,    
except that shares received by any person who may be deemed to be an affiliate  
of SPI or Modtech within the meaning of Rule 145 of the Securities Act may not  
be resold except in mergers permitted by such Rule or as otherwise permitted    
under the Securities Act. While the shares of Holdings Common Stock will be     
listed on the Nasdaq National Market, the shares of Holdings Series A Preferred 
Stock will not be listed. There will be no market for Holdings Series A         
Preferred Stock and one is not likely to develop.                               

DISSENTERS' RIGHTS                                                              

SPI Stockholders                                                                

    You, as a record holder of shares of SPI Capital Stock, will be entitled
to assert dissenters' rights under Article 113 of the Colorado Business         
Corporation Act in connection with the Mergers. The following discussion is not 
a complete statement of the law pertaining to dissenters' rights under the      
Colorado Business Corporation Act and is qualified in its entirety by reference 
to the full text of Article 113 reprinted as Annex IV to this Joint Proxy       
Statement/Prospectus.                                                           

  If you do not wish to accept the SPI Merger Consideration, Article 113
authorizes you to dissent from the Mergers and obtain payment of the "fair      
value" for your shares of SPI Capital Stock. To assert dissenters' rights, you  
must: (i) provide written notice to SPI, before the vote is taken on the        
proposed Mergers, of your intention to demand payment of the fair value for your
shares if the Mergers are completed; and (ii) not vote your shares in favor of  
the Mergers. If you do not satisfy these requirements, you will not be entitled 
to receive payment for your shares under Article 113.                           

     "Fair value," with respect to your shares of SPI Capital Stock, means the
value of your shares immediately before the Closing Date of the Mergers,        
excluding any appreciation or depreciation in anticipation of the Mergers,      
unless such exclusion would be inequitable. Interest will accrue on the fair    
value from the Closing Date of the Mergers to the date of payment at the average
rate currently paid by SPI on its principal bank loans.                         

 You should be aware that the fair value of your shares of SPI Capital
Stock as determined under Colorado law could be greater than, equal to, or less 
than the consideration you would receive if you did not elect to assert         
dissenters' rights.                                                             

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      If the Mergers are authorized at the SPI Special Meeting, SPI will mail to
you, and all other stockholders who complied with the requirements of Article   
113 and are entitled to demand payment of the fair value for their shares of SPI
Capital Stock, a written dissenters' notice. The notice will be given no later  
than 10 days after the Closing Date of the Mergers and will be accompanied by a 
copy of Article 113. The notice will also (i) state that the Mergers were       
authorized and state the Closing Date of the Mergers; (ii) state an address at  
which SPI will receive payment demands and the address of a place where         
certificates for certificated shares of SPI Capital Stock must be deposited;    
(iii) supply a form for demanding payment, which form will request that you     
state an address where you would like your payment to be made; (iv) set the date
by which SPI must receive your payment demand and certificates for certificated 
shares of SPI Capital Stock, which date will not be less than 30 days after the 
date your notice is given; and (v) state all other information that is required 
to be given to you under Colorado law.                                          

    In the event that you still wish to assert your dissenters' rights after
receiving your notice from SPI, you must: (i) deliver a completed payment demand
to SPI, which may be on the payment demand form supplied to you by SPI, and (ii)
deposit your certificates for certificated shares of SPI Capital Stock with SPI.
You will still retain all rights of a stockholder, except the right to transfer 
your shares of SPI Capital Stock, until the Closing Date of the Mergers. After  
the Closing Date of the Mergers, however, you will have only the right to       
receive payment of the fair value for your shares of SPI Capital Stock. Except  
as described below, both your demand for payment and deposit of certificates are
irrevocable. If you fail to make your payment demand and deposit the share      
certificates by the date set in the dissenters' notice delivered by SPI, you    
will not be entitled to payment under Article 113.                              

      Upon the Closing Date of the Mergers or upon SPI's receipt of your payment
demand, whichever is later, SPI will pay to you, and each other dissenter who   
complied with the procedures to demand payment under Colorado law, at the       
address you provided in your payment demand, the amount SPI estimates to be the 
fair value of your shares of SPI Capital Stock, plus accrued interest. Your     
payment will be accompanied by SPI's audited balance sheet for the year ended   
March 31, 1998, an audited income statement for that year, and an audited       
statement of cash flow for that year, as well as the latest available unaudited 
financial statements, if any, for the interim period. Also included with your   
payment will be a statement of SPI's estimate of the fair value of your shares, 
an explanation of how the interest on your payment was calculated, and a        
statement of your right to demand additional payment under Article 113. In      
addition, SPI will again provide you with a copy of the full text of Article 113
of the Colorado Business Corporation Act.                                       

    If the Closing Date of the Mergers has not occurred within 60 days after
the date set by which SPI must receive your payment demand, SPI will return your
deposited certificates. If, however, the Closing Date of the Mergers            
subsequently occurs, then SPI will send to you a new dissenters' notice, and all
of the provisions of Article 113 summarized above will again be applicable.     

   As mentioned above, you may have the right under Colorado law to demand
additional payment for your shares of SPI Capital Stock. If you believe that the
amount paid or offered by SPI for your shares is less than the fair value or    
that the interest due was incorrectly calculated, or if SPI fails to make       
payment within 60 days after the date set by which SPI must receive your payment
demand, or if SPI fails to return the deposited certificates as required under  
Article 113, you may give written notice to SPI of your estimate of the fair    
value of your shares, and of the amount of interest due, and you may demand     
payment of such estimate, less any payment already made by SPI. You will waive  
your right to demand payment of your estimate unless you deliver your demand to 
SPI within 30 days after SPI made or                                            

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offered payment of the fair value of your shares of SPI Capital Stock.          

     If your demand for additional payment remains unresolved, SPI may, within
60 days after receiving your demand, commence a court proceeding and petition   
the District Court for Denver County, Colorado, to determine the fair value of  
your shares, plus accrued interest. If SPI does not commence the proceeding     
within the 60-day period, it shall pay to you, and each other dissenter whose   
demand for additional payment remains unresolved, the amount demanded. The court
may assess the costs of the court proceedings between the parties as it deems   
equitable.                                                                      

  Under Colorado law, if you decide to dissent and obtain payment of the
fair value for your shares of SPI Capital Stock, you may not challenge the      
Mergers, unless the Mergers are unlawful or fraudulent with respect to the      
stockholders of SPI.                                                            

Modtech Stockholders                                                            

     Since Modtech's Common Stock is traded on the Nasdaq National Market, you
will not be entitled to dissenters' rights if you object to the Mergers, unless 
your shares are subject to restrictions on transfer imposed by Modtech or by law
or regulation, or unless the holders of at least 5% of Modtech's outstanding    
Common Stock make appropriate demands under Chapter 13 of the California General
Corporation Law (the "California Corporations Code"). The following discussion  
is not a complete statement of the law pertaining to the rights of such         
"dissenting stockholders" under the California Corporations Code and is         
qualified in its entirety by reference to the full text of Chapter 13, which is 
reprinted as Annex III to this Joint Proxy Statement/Prospectus.                

    Under the California Corporations Code, if you do not wish to accept the
Modtech Merger Consideration upon completion of the Merger, you may elect to    
receive payment for the fair market value of your shares if: (1) you meet the   
requirements of the preceding paragraph; (2) your shares were outstanding on the
Record Date; (3) your shares were not voted in favor of the Mergers; (4) you    
make a written demand that Modtech purchase your shares of Modtech Common Stock 
at fair market value; and (5) you submit your stock certificates for            
endorsement. Your shares will then be considered "Dissenting Shares."           

   The fair market value of your Dissenting Shares is determined as of the
day before the first announcement of the terms of the Mergers, excluding any    
appreciation or depreciation as a consequence of the proposed Mergers, but      
adjusted for any stock split, reverse stock split or stock dividend that becomes
effective thereafter.                                                           

   Within 10 days following approval of the Mergers by Modtech stockholders,
Modtech must mail to you and each other holder of shares of Modtech Common Stock
on the Record Date not voted in favor of the Mergers, a notice of the approval  
of the Mergers, a statement of the price determined by Modtech to represent the 
fair market value of the Dissenting Shares (which shall constitute an offer by  
Modtech to purchase such Dissenting Shares at such stated price), and a         
description of the procedures for you and such holders to exercise your rights  
under Chapter 13 of the California Corporations Code as dissenting stockholders.

  Within 30 days after the date on which the notice of the approval of the
Mergers by the outstanding shares of Modtech Common Stock is mailed to you, you 
must demand that Modtech repurchase your Dissenting Shares in a statement       
setting forth the number and class of Dissenting Shares held of record by you   
that you are demanding that Modtech purchase, and a statement of what you claim 
to be the fair market value of the Dissenting Shares as of the day before the   
announcement of the proposed Mergers. The statement of fair market value in your
demand will be treated as an offer by you to sell the Dissenting Shares at such 
price to Modtech. You                                                           

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must also submit to Modtech certificates representing any Dissenting Shares that
you demand Modtech purchase, so that such Dissenting Shares may either be       
stamped or endorsed with the statement that the shares are Dissenting Shares or 
exchanged for certificates of appropriate denomination so stamped or endorsed.  

 If, upon your surrender of the certificates representing the Dissenting
Shares, Modtech and you agree upon the price to be paid for the Dissenting      
Shares and agree that such shares are Dissenting Shares, then the agreed price  
is required by law to be paid to you within the later of 30 days after the date 
of such agreement or 30 days after any statutory or contractual conditions to   
the consummation of the Mergers are satisfied or waived.                        

  If Modtech and you disagree on the price for such Dissenting Shares or
disagree as to whether such shares are entitled to be classified as Dissenting  
Shares, you have the right to bring an action in California Superior Court to   
resolve the dispute. The action must be brought within six months after the date
on which the notice of the approval of the Mergers by Modtech stockholders is   
first mailed. In such action, the California Superior Court may determine       
whether the shares of Modtech Common Stock held by you are Dissenting Shares,   
the fair market value of such shares, or both.                                  

   You should assume that Modtech will not take any action to perfect your
dissenters' rights. To exercise your dissenters' rights, you should strictly    
comply with the procedures set forth in Chapter 13 of the California            
Corporations Code. You should consult with your legal advisor before electing or
attempting to exercise your dissenters' rights. Failure to follow any Chapter 13
procedures may result in termination or waiver of dissenters' rights under      
Chapter 13.                                                                     

   The California Corporations Code provides, among other things, that you
may not withdraw the demand for payment of the fair market value of your        
Dissenting Shares unless Modtech consents to such request for withdrawal. If you
perfect your dissenters' rights you will not be entitled to surrender your      
Modtech Common Stock for payment of the Modtech Merger Consideration.           

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS                      

      Modtech and SPI have each made forward-looking statements in this document
(and in certain documents that are incorporated by reference in this Joint Proxy
Statement/Prospectus) that are subject to risks and uncertainties. These        
statements are based on the beliefs and assumptions of the respective company's 
management, and on information currently available to such management.          
Forward-looking statements include the information concerning possible or       
assumed future results of operations of Modtech, SPI and Holdings set forth     
under "Summary," "The Mergers--Background of the Mergers," "The Mergers--Reasons
for the Mergers; Recommendations of the Boards of Directors" and "Unaudited Pro 
Forma Condensed Combined Financial Statements," and statements preceded by,     
followed by, or that include the words "believes," "expects," "anticipates,"    
"intends," "plans," "estimates" or similar expressions.                         

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      Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. The future results and stockholder values 
of the combined companies following the Mergers may differ materially from those
expressed in these forward-looking statements. Many of the factors that will    
determine these results and values are beyond Modtech's, SPI's, and Holdings'   
ability to control or predict. Stockholders are cautioned not to place undue    
reliance on any forward-looking statements. In addition, Modtech, SPI and       
Holdings do not have any intention or obligation to update forward-looking      
statements after they distribute this Joint Proxy Statement/Prospectus, even if 
new information, future events or other circumstances have made them incorrect  
or misleading.                                                                  

   Actual events and results may differ materially from those expressed or
forecasted in forward-looking statements due to a number of factors. The        
principal important risk factors that could cause the combined companies' actual
performance and future events and actions to differ materially from such        
forward-looking statements, include, but are not limited to, changes in         
legislation relating to funding for modular classrooms, changes in building code
laws or regulations, and changes in general economic and market factors that    
affect the prices of securities or the industries in which Modtech and SPI do   
business.                                                                       

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THE SPECIAL MEETINGS

PURPOSE, TIME AND PLACE                                                         

    This Joint Proxy Statement/Prospectus is being furnished to stockholders
of Modtech in connection with the solicitation of proxies by the Modtech Board  
for use at the Modtech Special Meeting and to stockholders of SPI in connection 
with the solicitation of proxies by the SPI Board for use at the SPI Special    
Meeting.                                                                        

     SPI. The SPI Special Meeting is to be held on December __, 1998, at 10:00
a.m., at 9550 Hermosa Avenue, Rancho Cucamonga, California 91730. At the SPI    
Special Meeting, holders of SPI Common Stock and SPI Preferred Stock will be    
asked to consider and vote upon a proposal to approve the Merger Agreement and  
the Mergers, and such other matters as may properly come before the SPI Special 
Meeting.                                                                        

    MODTECH. The Modtech Special Meeting is to be held on December __, 1998,
at 10:00 a.m., at the Sheraton Newport Hotel, 4545 MacArthur Boulevard, Newport 
Beach, California 92660. At the Modtech Special Meeting, holders of Modtech     
Common Stock will be asked to consider and vote upon a proposal to approve and  
adopt the Merger Agreement and the Mergers, and such other matters as may       
properly come before the Modtech Special Meeting.                               

RECORD DATE; VOTING POWER                                                       

      SPI. The SPI Board has fixed the close of business on _________, 1998 (the
"Record Date") as the record date for determining the holders of SPI Capital    
Stock entitled to notice of, and to vote at, the SPI Special Meeting. Only      
holders of record of SPI Capital Stock at the close of business on the Record   
Date will be entitled to notice of, and to vote at, the SPI Special Meeting.    

     At the close of business on the Record Date, (i) __________ shares of SPI
Common Stock were issued and outstanding and entitled to vote at the SPI Special
Meeting; and (ii) _________ shares of SPI Preferred Stock were issued and       
outstanding and entitled to vote at the SPI Special Meeting. Holders of record  
of SPI Common Stock and SPI Preferred Stock are entitled to one vote for each   
share of SPI Common Stock held of record on the Record Date and one vote for    
each share of SPI Preferred Stock held of record on the Record Date on any      
matter which may properly come before the SPI Special Meeting. Votes may be cast
at the SPI Special Meeting in person or by proxy. See "The Special              
Meetings--Voting of Proxies."                                                   

     The presence at the SPI Special Meeting, either in person or by proxy, of
the holders of a majority of the voting power represented by the SPI Common     
Stock and SPI Preferred Stock (voting together and not as separate classes of   
stock) is necessary to constitute a quorum in order to transact business at the 
SPI Special Meeting. In the event that a quorum is not present at the SPI       
Special Meeting, such meeting will be adjourned or postponed in order to solicit
additional proxies.                                                             

    MODTECH. The Modtech Board has fixed the close of business on _________,
1998 as the record date for determining the holders of Modtech Common Stock     
entitled to notice of, and to vote at, the Modtech Special Meeting. Only holders
of record of Modtech Common Stock at the close of business on the Record Date   
will be entitled to notice of, and to vote at, the Modtech Special Meeting.     

At the close of business on the Record Date, (i) _________ shares of
Modtech Common Stock were issued and outstanding and entitled to vote at the    
Modtech Special Meeting. Holders of record of Modtech Common Stock are entitled 
to one vote per share on any matter which may properly come before the Modtech  
Special Meeting. Votes may be cast at                                           

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the Modtech Special Meeting in person or by proxy. See "The Special             
Meetings--Voting of Proxies."                                                   

      The presence at the Modtech Special Meeting, either in person or by proxy,
of the holders of a majority of the outstanding Modtech Common Stock entitled to
vote, is necessary to constitute a quorum of the Modtech Common Stock, in order 
to transact business at the Modtech Special Meeting. In the event that a quorum 
is not present at the Modtech Special Meeting, it is expected that such meeting 
will be adjourned or postponed in order to solicit additional proxies.          

VOTES REQUIRED                                                                  

SPI. Approval of the proposal to adopt the Merger Agreement and the 
Mergers, including the SPI Merger, will require the affirmative vote of 70% of  
the combined voting power of the outstanding shares of SPI Common Stock and SPI 
Preferred Stock entitled to vote thereon. Under applicable Colorado law, in     
determining whether the proposal to approve and adopt the Merger Agreement and  
the Mergers has received the requisite number of affirmative votes, abstentions 
will be counted and have the same effect as a vote against the proposals.       

    MODTECH. Approval of each of the proposals to adopt the Merger Agreement
and the Mergers, including the Modtech Merger, will require the affirmative vote
of the majority of the voting power of the outstanding shares of Modtech Common 
Stock entitled to vote thereon. Under applicable California law, in determining 
whether either proposal has received the requisite number of affirmative votes, 
abstentions will be counted and have the same effect as a vote against the      
proposals. Brokers who hold shares of Modtech Common Stock as nominees, in the  
absence of instructions from the beneficial owners thereof, will not have       
discretionary authority to vote such shares for the approval and adoption of the
Merger Agreement and the Mergers. Any shares which are not voted because the    
nominee-broker lacks such discretionary authority will be counted and have the  
same effect as a vote against the proposals.                                    

SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN STOCKHOLDERS                          

    SPI. As of the close of business on the Record Date, SPI's directors and
executive officers and their affiliates had the right to vote _______           
outstanding shares of SPI Common Stock and _________ outstanding shares of SPI  
Preferred Stock (collectively representing approximately ______% of the voting  
power of all classes of SPI Capital stock).                                     

MODTECH. As of the close of business on the Record Date, Modtech's  
directors and executive officers and their affiliates had the right to vote     
________________ outstanding shares of Modtech Common Stock (collectively       
representing approximately % of the voting power of the Modtech Common Stock).  

VOTING OF PROXIES                                                               

    Shares represented by properly executed proxies received in time for the
Modtech or SPI Special Meeting will be voted at the meeting in the manner       
specified by such proxies. You should be aware that, if your proxy is properly  
executed but does not contain voting instructions, your proxy will be voted FOR 
approval of the Merger Agreement, including the Mergers. It is not expected that
any matter other than as described herein will be brought before the Modtech    
Special Meeting or the SPI Special Meeting. If other matters are properly       
presented before either of these meetings, the persons named in your proxy will 
have authority to vote on such matters without consulting you. These matters may
include a proposal to adjourn or postpone the meeting in order to solicit       
additional votes in favor of the Merger Agreement and the Mergers.              

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REVOCABILITY OF PROXIES                                                         

   The grant of a proxy on the enclosed Modtech or SPI proxy card does not
preclude a stockholder from voting in person. A stockholder of SPI may revoke a 
proxy at any time prior to its exercise by:                                     

-     delivering, prior to the SPI Special Meeting, to SPI, 9550 Hermosa Avenue,
      Rancho Cucamonga, California 91730, Attention: Secretary, a written notice
of revocation bearing a later date or time than the proxy;          

-     delivering to the Secretary of SPI a duly executed proxy bearing a later  
date or time than the revoked proxy; or                             

-     attending the SPI Special Meeting and voting in person.                   

  A stockholder of Modtech may revoke a proxy at any time prior to its
exercise by:                                                                    

-     delivering, prior to the Modtech Special Meeting, to the Secretary of     
    Modtech, James D. Goldenetz, Modtech, Inc., 2830 Barrett Avenue, Perris,
    California 92571, a written notice of revocation bearing a later date or
time than the proxy;                                                

-     delivering to the Secretary of Modtech a duly executed proxy bearing a    
later date or time than the revoked proxy; or                       

-     attending the Modtech Special Meeting and voting in person.               

     Attendance at the Modtech Special Meeting or the SPI Special Meeting will
not by itself constitute revocation of a proxy. Neither Modtech nor SPI expects 
to adjourn their Special Meeting for a period of time long enough to require the
setting of a new Record Date for the meeting. If an adjournment occurs, it will 
have no effect on the ability of either Modtech's or SPI's stockholders of      
record as of the Record Date to exercise their voting rights or to revoke any   
previously delivered proxies.                                                   

SOLICITATION OF PROXIES                                                         

Modtech will pay 68% of the costs of preparing, filing, printing and
mailing this Joint Proxy Statement/Prospectus, including filing fees, and SPI   
will pay 32% of such costs. Each company shall bear 100% of any additional costs
incurred by it in soliciting proxies from its stockholders. Arrangements will be
made with brokerage houses and other custodians, nominees and fiduciaries for   
the forwarding of solicitation material to the beneficial owners of Modtech     
Common Stock held of record by such persons, and Modtech will reimburse such    
company's custodians, nominees and fiduciaries for their reasonable             
out-of-pocket expenses in connection therewith. In addition to solicitation by  
mail, the directors, officers and employees of each company and their           
subsidiaries may solicit proxies from their stockholders by telephone, telegram 
or in person.                                                                   

   Neither Modtech nor SPI have retained any third party to assist them in
soliciting proxies in connection with the Modtech Special Meeting or the SPI    
Special Meeting.                                                                

DO NOT SEND STOCK CERTIFICATES IN WITH YOUR PROXY CARD.                         

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CERTAIN PROVISIONS OF THE MERGER AGREEMENT

The following is a brief summary of certain provisions of the Merger
Agreement, which is attached as Annex I to this Joint Proxy Statement/Prospectus
and incorporated herein by reference. Other provisions of the Merger Agreement  
are summarized elsewhere in this Joint Proxy Statement/Prospectus. These        
summaries are qualified in their entirety by reference to the Merger Agreement. 

CONDITIONS TO CONSUMMATION OF THE MERGERS                                       

Each party's obligation to complete the Mergers is subject to a number of       
conditions which must be met or waived by the Closing Date. These conditions    
include:                                                                        

-     The approval of the Merger Agreement and the Mergers by the Modtech and   
SPI stockholders;                                                   

-     The approval for listing on the NASDAQ National Market, subject to        
     official notice of issuance, of the shares of Holdings Common Stock to be
issued in the Mergers;                                              

-     The expiration or early termination of the waiting period that applies to 
the Mergers under applicable federal anti-trust laws;               

-     The receipt of all licenses, permits, consents, approvals, authorizations,
 qualifications and orders of governmental authorities and other third
   parties as are necessary in connection with the Mergers contemplated by
the Merger Agreement, except where failure to obtain them would not 
materially dilute the aggregate benefits of the Mergers to SPI and  
Modtech;                                                            

-     The representations and warranties of the other party in the Merger       
Agreement shall be accurate;                                        

-     The registration statement of which this Joint Proxy Statement/Prospectus 
is a part shall be effective, and not subject to a stop order or any
proceedings or threats to suspend its effectiveness;                

-     The receipt of all necessary approvals under state securities laws        
relating to the issuance of Holdings Common Stock;                  

-     Holdings shall have a credit facility mutually agreeable to SPI and       
Modtech, of which about $45 million will be used to refinance SPI's 
   existing credit facility and pay part of the cash portion of the Merger
Consideration and transaction expenses;                             

-     No more than 5% of the shares of Modtech Common Stock and no more than 5% 
     of the shares of SPI Capital Stock can have exercised, and not withdrawn,
their dissenters' rights;                                           

-     The absence of any governmental order, rule or injunction, or any law or  
regulation prohibiting the Mergers or impairing Holdings' ability to
operate the business of Modtech and SPI on a consolidated basis;    

-     The absence of any action or proceeding challenging the Mergers or seeking
material damages in connection with the Mergers;                    

-     The execution of (1) a Registration Rights Agreement providing certain    
   piggyback registration rights to certain affiliates of Modtech and SPI,
  (2) a Transaction Advisory Agreement with KRG retaining it as Holdings
      advisor in connection with future acquisitions following the completion of
  the Mergers for a period of three years, and (3) Employment Agreements
   with Evan M. Gruber, Patrick Van Den Bossche and Michael G. Rhodes; and

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-     Each party must have performed and complied in all material respects with 
     all of its material obligations under the Merger Agreement by the Closing
Date;                                                               

SPI's obligation to complete the Mergers is subject to the following
additional condition:                                                           

-     The receipt of a tax opinion that the SPI Merger will qualify as a        
reorganization under Internal Revenue Code Section 368.             

    Modtech's obligation to complete the Mergers is subject to the following
additional condition:                                                           

-     The receipt of a tax opinion that the Modtech Merger, together with the   
SPI Merger, will qualify as an exchange under Internal Revenue Code 
Section 351.                                                        

CONDUCT OF BUSINESS PENDING THE MERGERS                                         

Modtech and SPI have each agreed in the Merger Agreement to take or 
refrain from taking certain actions from the date of the Merger Agreement until 
the completion of the Mergers. Subject to certain exceptions set forth in the   
Merger Agreement, they have agreed as follows:                                  

Interim Operations. They will (1) conduct and cause each of their   
subsidiaries to conduct their businesses according to their ordinary and usual  
course; and (2) use and cause their subsidiaries to use their best efforts to   
preserve intact their business organizations and good will in all material      
respects, keep available the services of their officers and employees as a      
group, and maintain satisfactory relationships with lessees, suppliers,         
distributors, customers, banks and others having business relationships with    
them.                                                                           

  Capital Stock. They will not (1) declare or pay any dividends on their
outstanding shares of capital stock; (2) amend their organizational documents;  
(3) issue any shares of capital stock (except upon exercise of warrants and     
options issued and outstanding on the date of the Merger Agreement); (3) split  
their stock; (4) issue any debt securities or borrow any money (other than bank 
borrowings in the ordinary course of business consistent with past practices);  
(5) purchase or redeem any shares of their capital stock; (6) grant any options,
warrants or other securities; (7) enter into any agreements that would require  
them to acquire any shares of their capital stock, except pursuant to employee  
benefit plans, programs or arrangements in existence on the date of the Merger  
Agreement; or (8) otherwise change their capitalization.                        

   Communication and Notification. They will confer on a frequent basis to
report on material operational matters and the general status of ongoing        
operations. Each will notify the other party of any emergency or other changes  
in the normal course of its business or the businesses of its subsidiaries or   
any governmental actions which would have a material adverse effect on its      
business and that of their subsidiaries, taken as a whole.                      

    Agreements. They will not enter into or materially amend any employment,
severance or similar agreement or any agreement with respect to any business    
combination, other than the Mergers and one potential acquisition by SPI        
previously disclosed to Modtech's Chief Executive Officer, any acquisition or   
disposition of a material amount of assets or securities, or any release of any 
material contract rights not in the ordinary course of business.                

      Further Assurances. They will use all reasonable efforts to take all other
actions necessary to complete the Mergers.                                      

TERMINATION                                                                     

     The Merger Agreement may be terminated and abandoned at any time prior to
the Effective Time, whether before or after approval of the Mergers by the      
stockholders of SPI and Modtech:                                                

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-     by mutual written consent of Modtech and SPI;                             

-     by either party if (a) any court or other United States governmental body 
    has taken any action enjoining, restraining or otherwise prohibiting one
    or both of the Mergers; (b) the Mergers have not been completed by March
 28, 1999 (other than due to the breach of the Merger Agreement by the
party seeking to terminate the Merger Agreement); (c) any required  
      approval of the stockholders of either party has not been obtained; or (d)
     if the other party materially breaches its representations, warranties or
 agreements under the Merger Agreement and fails to perform any of its
  material obligations under this Agreement and such breach has not been
 cured within 10 days after receipt of written notice of such failure;

-     by either party if the other party's Board withdraws or adversely modifies
 its recommendation to approve the Merger Agreement or the Mergers, or
resolves to do any of the foregoing;                                

-     by Modtech or SPI if they receive a proposal from a third party to merge, 
    consolidate, or enter into a similar transaction , or to sell all or any
significant portion of its assets or equity securities ("Third Party
Acquisition Proposal") and their Board decides that the Third Party 
     Acquisition Proposal is a "Superior Proposal" by determining: (1) in good
      faith that the Third Party Acquisition Proposal is more favorable to their
 stockholders than the Mergers; and (2) upon the advice of their legal
 counsel that to continue to recommend that their stockholders vote in
      favor of the Mergers after receipt of the Third Party Acquisition Proposal
 would not be consistent with their fiduciary duties. After making the
 foregoing determinations, the terminating party's Board must give the
      other party three days prior written notice of its intent to terminate the
     Merger Agreement. The notice must include a detailed summary of the terms
and conditions of the Superior Proposal.                            

Upon termination, the Merger Agreement will become void and have no 
effect, without any liability or obligation on the part of Modtech or SPI, other
than the payment of expenses as described in "Certain Provisions of the Merger  
Agreement -- Fees and Expenses" below, and the payment of the termination fee   
described below. Termination will not relieve any party from any breach of the  
representations, warranties, covenants or agreements set forth in the Merger    
Agreement prior to termination.                                                 

TERMINATION FEE                                                                 

   If Modtech satisfies all conditions to completion of the Mergers within
its control and does not take any action to prevent or unreasonably delay       
completion of the Mergers, it will be entitled to a termination fee from SPI if 
SPI terminates the Merger Agreement because of its receipt of a Superior        
Proposal, or if Modtech terminates the Merger Agreement because:                

-     SPI materially breaches any of its representations, warranties or         
     agreements under the Merger Agreement and fails to cure the breach within
ten days after receipt of notice of the breach;                     

-     the required approval of the SPI stockholders has not been obtained; or   

-     the SPI Board has withdrawn or adversely modified its recommendation of   
approval of the Merger Agreement or the Mergers.                    

     The termination fee to be paid by SPI will be equal to Modtech's fees and
expenses related to the Mergers, plus $2 million.                               

   If SPI satisfies all conditions to completion of the Mergers within its
control and does not take any action to prevent or unreasonably delay completion
of the Mergers, it shall be entitled to a termination                           

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fee from Modtech if Modtech terminates the Merger Agreement because of its      
receipt of a Superior Proposal, or if SPI terminates the Merger Agreement       
because:                                                                        

-     Modtech materially breaches any of its representations, warranties or     
     agreements under the Merger Agreement and fails to cure the breach within
ten days after receipt of notice of the breach;                     

-     the required approval of the Modtech stockholders has not been obtained;  
or                                                                  

-     the Modtech Board has withdrawn or adversely modified its recommendation  
of approval of the Merger Agreement or the Mergers.                 

     The termination fee to be paid by Modtech will be equal to SPI's fees and
expenses related to the Mergers plus $2 million.                                

     The termination fees are the sole remedy of Modtech and SPI if the Merger
Agreement is terminated for any of the reasons described above.                 

CERTAIN REPRESENTATIONS AND WARRANTIES                                          

      The Merger Agreement contains customary and reciprocal representations and
warranties by SPI and Modtech relating to, among other things, to:              

-     their organization, good standing and corporate power and that of their   
subsidiaries;                                                       

-     ownership of subsidiaries;                                                

-     capital structure;                                                        

-     corporate power to enter into, and due authorization, execution and       
delivery of the Merger Agreement;                                   

-     the execution and delivery of the Merger Agreement not violating their    
charter documents, applicable law, and certain material agreements; 

-     accuracy of certain reports and financial statements supplied by them and,
     in the case of Modtech filed with the Securities and Exchange Commission;

-     the absence of undisclosed liabilities;                                   

-     the accuracy of information supplied by them in connection with this Joint
Proxy Statement/Prospectus;                                         

-     the absence of certain changes or events since the date of the most recent
financial statements provided;                                      

-     the absence of pending or threatened litigation, certain labor matters and
compliance with all applicable laws;                                

-     benefit plans and other matters relating to the Employee Retirement Income
Security Act of 1974, as amended, and employment matters;           

-     filing of tax returns and payment of taxes;                               

-     environmental matters;                                                    

-     good title to properties and assets free of liens;                        

-     insurance matters; and                                                    

-     brokers' fees and expenses.                                               

INDEMNIFICATION                                                                 

  The Merger Agreement provides that, after the Effective Time, Holdings
will indemnify, defend and hold harmless the current and former directors,      
officers and employees of Modtech, SPI and their respective subsidiaries (each, 
an "Indemnified Party")                                                         

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against all costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities incurred in connection with any   
claim, action, suit, proceeding or investigation, whether civil, criminal,      
administrative or investigative, arising out of actions or omissions occurring  
at or prior to the Closing Date (including, without limitation, the Mergers) to 
the fullest extent that such persons are indemnified under the laws of the      
States of California or Colorado and the certificates of incorporation and      
bylaws, as in effect on the date thereof, of Modtech, SPI and their respective  
subsidiaries or any existing indemnification agreement with either Modtech or   
SPI. In the event of any such loss, expense, claim, damage or liability,        
Holdings will cooperate in the defense of any such matter and any determination 
required to be made with respect to whether an officer's or director's conduct  
complies with the standards set forth under applicable law and any such         
certificate of incorporation or bylaws will be made by independent counsel      
(which will not be counsel that provides material services to Holdings or its   
subsidiaries) selected by Holdings and reasonably acceptable to such officer or 
director; provided, that in the absence of applicable judicial precedent to the 
contrary, such counsel, in making such determination, will presume such         
officer's or director's conduct complied with such standard and Holdings will   
have the burden to demonstrate that such officer's or director's conduct failed 
to comply with such standard.                                                   

      In addition, the Merger Agreement provides that, for a period of six years
after the Effective Time, Holdings will maintain officers' and directors'       
liability insurance covering those of the Indemnified Parties who are covered,  
in their capacities as current or former officers and directors of Modtech, by  
Modtech's existing officers' and directors' liability insurance policies, and   
those of the Indemnified Parties who are covered in their capacities as current 
or former officers and directors of SPI, by SPI's existing officers' and        
directors' liability insurance policies, on terms substantially no less         
advantageous to such Indemnified Parties than such existing insurance.          
Additionally, Holdings is required to keep in effect provisions in its and      
Modtech's and SPI's organizational documents providing for exculpation of       
director and officer liability and its indemnification of the indemnified       
parties to the fullest extent permitted under the Delaware, California or       
Colorado corporate statutes, as applicable, which provisions will not be amended
except as required by applicable law or except to make changes permitted by law 
that would enlarge the indemnified parties' right of indemnification.           

FEES AND EXPENSES                                                               

Whether or not the Mergers are consummated, all costs and expenses  
incurred in connection with the Merger Agreement and the Mergers contemplated   
thereby will be paid by the party incurring the expenses, except that the       
following expenses will be paid 68% by Modtech and 32% by SPI for:              

-     the filings made under applicable anti-trust laws for Modtech, SPI and    
their affiliates;                                                   

-     the Securities and Exchange Commission's filing fee for the registration  
     statement for Holdings Common Stock on Form S-4 of which this Joint Proxy
Statement/Prospectus is a part; and                                 

-     the expenses incurred in preparing, printing and mailing the registration 
statement and the Joint Proxy Statement/Prospectus.                 

      In addition, SPI will reimburse Modtech for 32% of the fee paid by Modtech
to DLJ for the Fairness Opinion.                                                

AMENDMENT AND WAIVER                                                            

    The Merger Agreement may be amended by the parties at any time before or
after required approval of the Mergers by the stockholders of SPI and of        
Modtech; except that after such approvals,                                      

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changes to the amount of cash and Holdings Common Stock to be received by the   
Modtech stockholders or the SPI stockholders may not be made without further    
approval by such stockholders. Prior to the Effective Time, the parties may (i) 
extend the time for the performance of any obligation or other act of any other 
party to the Merger Agreement, (ii) waive any inaccuracies in the               
representations and warranties contained in the Merger Agreement or in any      
document delivered pursuant thereto and (iii) waive compliance with any of the  
agreements or conditions contained in the Merger Agreement. All waivers must be 
in writing.                                                                     

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THE BUSINESS OF HOLDINGS

Following the Mergers, Holdings will be one of the leading modular  
building manufacturers in the country with substantial product and geographic   
diversification. It will be the leading provider of modular classrooms in the   
State of California and a leading provider of modular buildings to customers in 
California, Nevada, Arizona, New Mexico, Utah, Colorado and Texas and other     
neighboring states.                                                             

      The Mergers will create a company with pro forma revenues of approximately
$215 million for the 12 months ended December 31, 1997 and with the size and    
scope to allow for purchasing efficiencies and other manufacturing and marketing
synergies. The Mergers will also strengthen and deepen the management team of   
the combined enterprise.                                                        

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 THE BUSINESS OF MODTECH

GENERAL                                                                         

 Modtech's modular relocatable classrooms are designed, engineered and
manufactured in accordance with structural and seismic safety specifications    
adopted by the California Department of State Architects. These standards are   
more rigorous than the requirements for other portable units, and supersede all 
local building codes. Modtech subcontracts with structural engineering firms to 
interface with each school district's architect or engineer to process project  
specifications through the Department of State Architects.                      

      Conventional school facilities constructed by school districts using funds
from the State Office of Public School Construction typically require two to    
three years for approval and funding. Standardized factory-built school         
classrooms like Modtech's, based on pre-approved plans and specifications, can  
be approved by the State for construction in as little as 90 days. In all cases,
continuous on-site inspection by a licensed architect or structural engineer is 
required during actual manufacturing of the classrooms, with the school district
obligated to reimburse the Department for the costs of such inspection.         

  In addition to its standard largely pre-fabricated classrooms, Modtech
also manufactures and installs relocatable customized classrooms which are      
modular in design but assembled on-site using components manufactured by        
Modtech, together with components purchased from third-party suppliers.         
Modtech's classrooms vary in size from two modular units containing a total of  
960 square feet to 20 units that can be joined together to produce a facility   
comprising 9,600 square feet. Larger configurations are also possible. Typical  
prices for Modtech's standard classrooms range from $29,000 to $34,000, while   
prices for a custom classroom generally exceed $50,000, depending upon the      
extent of customization required.                                               

CLASSROOM CUSTOMERS                                                             

    Modtech markets and sells its modular classrooms primarily to California
school districts. Modtech also sells its classrooms to the State of California  
and leasing companies, both of which lease the classrooms principally to        
California school districts. Sales of classrooms accounted for 94.2%, 98.1% and 
98.9% of Modtech's total net sales for the years ended December 31, 1996 and    
1997 and the six months ended June 30, 1998, respectively. Modtech's customers  
typically pay cash from general operating funds or the proceeds of local bond   
issues, or lease classrooms through banks, leasing companies and other private  
funding sources.                                                                

   Sales of classrooms to individual California school districts accounted
for approximately 74.5%, 71.1% and 73.2%, respectively, of Modtech's net sales  
during the years ended December 31, 1996 and 1997 and the six months ended June 
30, 1998, with sales of classrooms to third-party lessors to California school  
districts during these periods accounting for approximately 7.2%, 19.1% and     
14.2%, respectively, of Modtech's net sales. The mix of school districts to     
which Modtech sells its products varies somewhat from year to year. Sales of    
classrooms directly to the State of California during the six months ended June 
30, 1998 represented approximately 11.5% of Modtech's net sales for the period, 
compared to approximately 7.9% of Modtech's 1997 net sales and approximately    
12.5% of Modtech's 1996 net sales. Sales of classrooms to private schools, day  
care providers and out-of-state customers accounted for less than 1%of Modtech's
net sales during the years ended December 31, 1996 and 1997 and the six months  
ended June 30, 1998. One of the lessors to which Modtech sells classrooms for   
lease to California school districts is affiliated with Modtech through common  
ownership by two of Modtech's directors. During the years ended December 31,    
1996 and 1997 and the six months ended June 30, 1998, sales of classrooms to    
this affiliated leasing                                                         

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company comprised approximately 2.9%, 2.2% and 2.7, respectively, of Modtech's  
net sales. See "Where You Can Find More Information."                           

OTHER PRODUCTS                                                                  

    In addition to modular relocatable classrooms, Modtech also manufactures
modular, portable buildings which can be used as office facilities and          
construction trailers and for other commercial purposes. During the years ended 
December 31, 1996 and 1997 and the six months ended June 30, 1998, sales of such
modular, portable buildings to commercial customers accounted, in the aggregate,
for approximately 5.8%, 1.9% and 1.1%, respectively, of Modtech's net sales.    
Modtech also manufactures a small number of modular structures that house and   
shelter electronic equipment used in the wireless telecommunications industry.  
During the years ended December 31, 1996 and 1997 and the six months ended June 
30, 1998, sales of modular telecommunications equipment shelters accounted for  
less than 1.0% of Modtech's net sales for each period.                          

SALES AND MARKETING                                                             

     Modtech's classroom sales force is currently divided into three marketing
regions: Northern, Central and Southern California. Modtech currently employs   
three classroom salespersons, each of whom is compensated on a commission basis.
These salespersons maintain contact with the individual school districts in     
their respective marketing regions on a quarterly basis. They are also in       
contact with architects and building inspectors employed by the school          
districts, as well as school officials who may be in a position to influence    
purchasing decisions.                                                           

Most of Modtech's contracts are awarded on an open bid basis. The   
marketing process for many of Modtech's contracts begins prior to the time the  
bid process begins. After Modtech selects bids or contracts that it desires to  
pursue, Modtech's marketing and engineering personnel interface directly with   
various school boards, superintendents or architects during the process of      
formulating bid or contract specifications. Modtech prepares its bids or        
proposals using various criteria, including current material prices, historical 
overhead costs and a targeted profit margin. Substantially all of Modtech's     
contracts are turnkey, including engineering and design, manufacturing,         
transportation, installation and necessary site work. Open bid contracts are    
normally awarded to the lowest responsible bidder.                              

A fourth salesperson is charged with increasing Modtech's sales of  
buildings to the commercial and telecommunications markets. In addition, Modtech
has two salespeople who focus on the sale of classrooms in Nevada and Arizona,  
and to private schools and day care operators in California.                    

MANUFACTURING AND ON-SITE INSTALLATION                                          

Modtech uses an assembly line approach in the manufacture of its    
standardized classrooms.                                                        

   Modtech is vertically integrated in the manufacture of its standardized
modular classrooms, in that Modtech fabricates substantially all of its own     
metal components at its facility in Perris, California. Modtech believes that   
the ability to fabricate its own metal components helps it reduce the costs of  
its products and to control their quality and delivery schedules. Modtech       
maintains a quality control system throughout the manufacturing process, under  
the supervision of its own quality control personnel and inspectors engaged by  
its customers.                                                                  

      Modtech oversees installation of its modular classrooms on-site, using its
own employees for job supervision as a general contractor and, whenever         
possible, for utility hook-ups and other tasks. In many custom projects, Modtech
performs or supervises subcontracted electrical, plumbing, grading, paving and  
foundation work, landscaping and other site preparation work and services.      
Subcontractors are typically used for larger utility, grading, concrete and     
landscaping jobs. Modtech has a general contractor's license in the State of    
California.                                                                     

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    In addition to approvals by the Department of State Architects, licensed
inspectors representing various school districts are on-site at each            
manufacturing facility of Modtech to continuously inspect the construction of   
classrooms for structural integrity. On-site inspections after installation are 
also made by local fire departments for purposes of determining adequate        
accessibility.                                                                  

   Modtech currently has five manufacturing facilities. Two are located in
Perris, California, which is approximately 60 miles east of Los Angeles. Modtech
has two additional facilities near Lathrop, California. Lathrop is located      
approximately 75 miles east of San Francisco. Modtech's fifth facility is       
located in Glendale, Arizona, approximately ten miles from Phoenix. Modtech     
currently has a total of eight production lines in operation. A ninth production
line is scheduled to be added at the Lathrop plant in late 1998.                

WARRANTIES                                                                      

The standard contractual warranty for Modtech's modular relocatable 
classrooms is one year, although it may be varied by contract specifications.   
Purchased equipment installed by Modtech, such as air conditioning units, carry 
the manufacturers' standard warranty. Warranty costs have not been material in  
the past.                                                                       

SUPPLIES                                                                        

      Modtech believes that there are multiple sources of supplies available for
all raw materials and equipment used in manufacturing its classrooms, most of   
which are standard construction items such as steel, plywood and wallboard.     

BACKLOG                                                                         

     Modtech manufactures classrooms to fill existing orders only, and not for
inventory. As of December 31, 1997, the backlog of sales orders was             
approximately $71.0 million, up from approximately $4.1 million at December 31, 
1995 and $58.0 million at December 31, 1996. Backlog at June 30, 1998 was $60.1 
million, compared to backlog of $80.4 million at June 30, 1997. Only orders     
which are scheduled for completion during the following 12-month period are     
included in Modtech's backlog. The rate of booking new contracts can vary from  
month to month, and customer changes in delivery schedules can occur. For these 
reasons, among others, Modtech's backlog as of any particular date may not be   
representative of actual sales for any succeeding period.                       

COMPETITION                                                                     

      The modular relocatable classroom business is highly competitive. Based on
1997 net sales, Modtech believes that it is the largest modular relocatable     
classroom manufacturer in California. The primary competitors of Modtech for    
standardized classrooms are believed to be Aurora Modular Industries in Southern
California and American Modular Systems in Northern California. Profiles        
Structures in Southern California and Design Mobile Systems in Northern         
California are Modtech's primary competitors in the market for higher-priced,   
customized classrooms. Each of these four competitors is a privately-owned      
company. Modtech believes that additional competitors may enter the market in   
the future, some of whom may have significantly greater capital and other       
resources than are available to Modtech, and that competition may therefore     
increase.                                                                       

 Modtech believes its vertically integrated, assembly line approach to
manufacturing enables it to be one of the low-cost producers of standardized,   
modular relocatable classrooms in California. Unlike many of its competitors,   
Modtech manufactures most of its own metal components, which allows Modtech to  
maintain quality control over these components and to produce them at a lower   
average cost than that at which they could be obtained from outside sources.    
Modtech also believes that the quality and appearance of its buildings, and its 
reputation for reliability in completion of its contracts, enable it to maintain
a favorable position among its competition.                                     

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Beyond a radius of approximately 300 miles, Modtech believes that   
transportation costs typically will either significantly increase the prices at 
which it bids for given projects, or will substantially erode Modtech's gross   
profit margins.                                                                 

PERFORMANCE BONDS                                                               

 A substantial portion of Modtech's sales require that Modtech provide
bonds to ensure that the contracts will be performed and completed in accordance
with contract terms and conditions, and to assure that subcontractors and       
materialmen will be paid. In determining whether to issue a performance bond on 
behalf of Modtech, bonding companies consider a variety of factors concerning   
the specific project to be bonded, as well as Modtech's levels of working       
capital, stockholders' equity and outstanding indebtedness. From time to time,  
Modtech has had difficulty in obtaining bonding for a given project. It may     
encounter such difficulty again in the future.                                  

REGULATION OF CLASSROOM CONSTRUCTION                                            

      In 1933, the California Legislature adopted the Field Act, which generally
provides that school facilities must be constructed in accordance with more     
rigorous structural and seismic safety specifications than are applicable to    
general commercial buildings. Under the Field Act, the Department of General    
Services, through the Department of State Architects, has prescribed extensive  
regulations regarding the design and construction of school facilities, and     
reviews all plans for the construction of material modifications to any school  
building. Construction authorization is not given unless the school district's  
architect certifies that a proposed project satisfies construction cost and     
allowable area standards. In addition, the Field Act provides for the submittal 
of complete plans, cost estimates, and filing fees by the school district to the
Department of General Services, for the adoption of regulations setting minimum 
qualifications for the preparation of plans and specifications, and the         
supervision of school construction by a licensed architect or structural        
engineer.                                                                       

FUNDING                                                                         

      The demand for modular relocatable classrooms in California is affected by
various statutes. These statutes prescribe the methods by which Modtech's       
customers, primarily individual school districts, obtain funding for the        
construction of new school facilities, and the manner in which available funding
is to be spent by the school districts.                                         

Financing for new school construction and rehabilitation of existing
schools by California school districts is currently provided, at the state      
level, by funds derived from general revenue sources or statewide bond issues.  
At the local level, financing is provided by local bond issues and fees imposed 
on the developers of residential, commercial and industrial real property.      
Historically, the primary source of financing for the purchase or lease of      
relocatable classrooms has been state funding.                                  

      Class Size Reduction Program. In November 1996, California implemented the
Class Size Reduction Program in response to overcrowding in classrooms in the   
state. Under this program, public schools that reduce class size to 20 students 
in kindergarten through third grade receive additional funds. New classrooms may
be added by reconfiguring existing space, building new conventional classrooms, 
or purchasing or leasing modular relocatable classrooms.                        

    General Obligation Bonds. Until the adoption of the Class Size Reduction
Program in 1996, the most important source of funding at the State level for new
school facilities was through the issuance and sale of statewide general        
obligation bonds which must be placed on statewide ballots and approved by the  
voters.                                                                         

     Bond Financing. Under the School Building Lease - Purchase Law of 1976,
the State Allocation Board is empowered to purchase or lease school facilities  
using funds from the periodic issuance of general obligation bonds of the State 
of California. These purchased or leased school facilities may be made available
by the State Allocation Board to school districts. Certain matching funds,      
usually                                                                         

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derived from fees imposed on real estate developers, are required to be supplied
by the school districts seeking state funded facilities. If the school districts
acquire relocatable structures using these developer fees, the amount of the    
required matching funds is reduced by the cost of such facilities. This         
reduction in matching funds is intended to provide an incentive for school      
districts to lease relocatable classrooms. As a condition of funding any project
under this program, at least 30% of new classroom space to be added must be     
comprised of relocatable structures, unless relocatable structures are not      
available or special conditions of terrain, climate or unavailability of space  
make the use of relocatable structures impractical. In addition, State funds    
under this program are not available to school districts which are determined to
have an adequate amount of square footage available for their student           
population.                                                                     

    Senate Bill 50, which was recently passed by the California Legislature,
revised the School Building Lease -- Purchase Law of 1976 by eliminating the    
requirement that at least 30% of all new classroom space being added using      
California state funds must be relocatable classrooms. In general, it replaced  
this provision with a requirement that, in order for school districts to        
increase the amount of funds to be received from developers in excess of the    
current statutory level, the school districts must show that 20% of all         
classroom space in the district, not just new space to be added, consists of    
relocatable classrooms. The bill also placed a $9.2 billion bond issue on the   
November 1998 ballot. The bill will not become operative unless the $9.2 billion
bond issue is approved by a majority of the California voters. The bill         
allocates from the bond issue $2.9 billion for growth and new construction, and 
$2.2 billion for modernization and reconstruction through the year 2001. In     
addition, it allocates $700 million for class-size reductions to fully implement
the program from kindergarten through third grade. The costs to implement the   
foregoing will include land acquisition costs, hiring of new teachers,          
remodeling of existing structures and construction of new permanent and         
relocatable structures. The bill does not designate the specific usage of funds,
and the actual amount spent on relocatable classrooms will vary among school    
districts.                                                                      

      California Emergency Classroom Law of 1979. Under the California Emergency
Classroom Law of 1979, the State Allocation Board may spend up to $35 million   
per year from available funds to purchase relocatable classrooms to be leased to
school districts. Relocatable classrooms are not available to school districts  
under this program if the school district has available local bond proceeds that
could be used to purchase classroom facilities, unless the district has approved
projects pending under the School Building Lease-Purchase Law of 1976. The State
has, in the past, funded this program primarily from the proceeds of statewide  
bond issues approved by voters.                                                 

    Budget Allocations. Proposition 98, which was approved in 1988, requires
the State to allocate annually from the State's budget, for the support of      
school districts and community college districts, a minimum amount equal to the 
same percentage of funds as was appropriated for the support of those           
institutions in fiscal year 1986-87. While this requirement may be suspended for
a given year by emergency legislation, it has the effect of limiting the ability
of the California legislature to reduce the level of school funding from that in
existence in 1986-87. The State raises the necessary funds through proceeds from
the sale of statewide bond issues, income tax revenues and other revenues. A    
recent reduction in California's corporate tax rates, and a proposed reduction  
of personal income tax rates might affect future levels of the State's income   
tax revenues.                                                                   

   Local Funding. Local school districts in California have the ability to
issue local general obligation bonds for the acquisition and improvement of real
property for school construction. These bond issues require the approval of     
two-thirds of the voters in the district and are repaid using the proceeds of   
increases in local property taxes. A local school district may also levy        
developer fees on new development projects in the district, subject to a maximum
rate set by state law. The developer fees can only be levied if the project can 
be shown to contribute to the need for additional school facilities and the fee 
levied is reasonably related to such need. In addition, California law provides 
for the issuance                                                                

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of bonds by Community Facilities Districts which can be formed by a variety of  
local government agencies, including school districts. These districts, known as
"Mello-Roos" districts, can have flexible boundaries and the tax imposed to     
repay the bonds can be based on property use, acreage, population density or    
other factors.                                                                  

OTHER LEGISLATION                                                               

 California legislation adopted in 1989 provides that school districts
which currently lease any building which does not meet the prescribed structural
standards must have replaced nonconforming buildings with conforming ones by    
September 1, 1990. However, any district has the right to request a one-time    
waiver for a maximum of three years upon presentation of satisfactory evidence  
to the State Allocation Board that the district is proceeding in a timely       
fashion with a program that will eliminate the need for the nonconforming       
facilities within that time period. The State has authorized districts to renew 
these waivers through 2000. Modtech understands that a number of school         
districts have requested and been granted such waivers. Based upon information  
received by the State Allocation Board from school districts and provided to    
Modtech, it is believed that there are more than 4,500 trailers currently being 
used as classrooms by school districts throughout California that eventually    
must be replaced with conforming facilities by these school districts.          

   California has taken steps to encourage local school districts to adopt
year-round school programs to help increase the use of existing school          
facilities and reduce the need for additional school facilities. School         
districts requesting state funding under the School Building Lease-Purchase Law 
of 1976 or the Emergency Classroom Law of 1979 discussed above must submit a    
study examining the feasibility of implementing in the district a year-round    
educational program that is designed to increase pupil capacity in the district 
or in overcrowded high school attendance areas. The feasibility study           
requirement is waived, however, if the district demonstrates that emergency or  
urgent conditions exist in the district that necessitate the immediate need for 
relocatable buildings. The demand for new school facilities, including          
relocatable classrooms, will be adversely affected if a significant number of   
California school districts implement year-round school programs. In addition, a
significant increase in the level of voluntary or mandatory busing of students  
from overcrowded schools to schools with excess capacity could adversely affect 
demand for new school facilities.                                               

LITIGATION                                                                      

    Modtech from time to time is involved in various lawsuits related to its
ongoing business operations, primarily collection actions or vendor disputes. In
the opinion of management, no pending lawsuit will result in any material       
adverse effect upon Modtech.                                                    

ENVIRONMENTAL MATTERS                                                           

    Modtech is subject to a variety of federal, state and local governmental
regulations related to the storage, use and disposal of any hazardous materials 
used by Modtech in connection with the manufacture of its products. Both the    
governmental regulations and the costs associated with complying with such      
regulations are subject to change in the future.                                

EMPLOYEES                                                                       

At September 30, 1998, Modtech had 845 employees, including 793 in  
manufacturing, 6 in sales, 17 in operations and 29 in general management and    
administration. Modtech's employees are not represented by a labor union, and it
has experienced no work stoppages. Modtech believes that its employee relations 
are good.                                                                       

PROPERTIES                                                                      

      Modtech's principal executive and administrative facilities are located in
approximately 11,400 square feet of modular buildings at its primary            
manufacturing facility located in Perris, California. This manufacturing        
facility occupies 25 acres, with approximately 200,000 square feet of covered   
production space under roof, pursuant to a lease expiring in 2014. A second     
facility in Perris                                                              

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occupies approximately 30 acres, with approximately 120,000 square feet of      
covered production space under roof, pursuant to a lease expiring in 2014. This 
second facility also includes approximately 80,000 square feet under roof used  
as a metal working facility. Modtech's third plant consists of a 400,000 square 
foot manufacturing facility on a 30-acre site in Lathrop, California that is    
leased through 2019. The fourth plant, which was purchased in 1997, consists of 
approximately 50,000 square feet of manufacturing areas on a four-acre site in  
Patterson, California. Modtech's fifth plant is approximately 80,000 square feet
on a three-acre site in Glendale, Arizona, that is leased through December 1999.
Each of Modtech's current facilities, other than the Patterson and Glendale     
plants, is leased from an affiliate. See "Where You Can Find More Information." 

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 MODTECH MANAGEMENT'S DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF  OPERATIONS                                                          

      The following table sets forth, for the periods indicated, the percentages
of net sales represented by certain items in Modtech's statements of operations.

                                                        [Enlarge/Download Table]

                                                          PERCENTAGE OF NET SALES                         
                                                                                         SIX MONTHS       
                                            YEARS ENDED DECEMBER 31,                    ENDED JUNE 30,    
                                     --------------------------------------        ---------------------- 
                                      1995            1996            1997          1997            1998  
                                     ------          ------          ------        ------          ------ 
                                                                                                          

Net sales ..........................  100.0%          100.0%          100.0%        100.0%          100.0%

Cost of sales ......................   84.6            85.5            80.1          81.0            77.3 
                                     ------          ------          ------        ------          ------ 

Gross profit .......................   15.4            14.5            19.9          19.0            22.7 

Selling, general &                                                                                        
   administrative expenses .........    8.3             4.7             3.8           3.7             3.6 
                                     ------          ------          ------        ------          ------ 

Income from operations .............    7.1             9.8            16.1          15.3            19.1 

Interest income (expense), net .....   (2.0)           (0.8)           (0.7)         (0.9)            0.5 

Other income .......................     --              --              --           0.1              -- 
                                     ------          ------          ------        ------          ------ 

Income before income taxes .........    5.1             9.0            15.4          14.5            19.6 

Provision for income taxes .........    0.1             0.4             5.7           5.7             7.5 
                                     ------          ------          ------        ------          ------ 

Net income .........................    5.0%            8.6%            9.7%          8.8%           12.1%
                                     ======          ======          ======        ======          ====== 

SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997       

Net sales for the six months ended June 30, 1998 increased to $75.9 
million, an increase of $17.0 million, or approximately 28.8%, from $58.9       
million for the six months ended June 30, 1997. The increase is attributable to 
the growth in the school population, the Class Size Reduction Program, and      
product line diversification.                                                   

     Gross profit was $17.2 million for the six months ended June 30, 1998, an
increase of about $6 million, or 54%, over gross profit of $11.2 million for the
same period in 1997. Gross profit as a percentage of net sales increased to     
22.7% for the six months ended June 30, 1998, compared to 19.0% for the same    
period in 1997. The increase was due principally to the fuller utilization of   
manufacturing efficiencies.                                                     

     Selling, general and administrative expenses totaled $2.7 million for the
six months ended June 30, 1998, representing an increase of $559,000 in selling,
general and administrative expenses incurred for the six months ended June 30,  
1997. The increase is primarily due to the increase in sales expense, as well as
the increase in the number of employees. As a percentage of sales, selling,     
general, and administrative expenses for the six months ended June 30, 1998 was 
3.6%. The percentage was 3.7% for the same period in 1997.                      

      Due to a higher cash balance and reduced line of credit borrowing, the six
months ended June 30, 1998 reflects net interest income of $389,000, compared to
net interest expense of $549,000 for the same period in 1997, a favorable       
increase of $938,000, or 170.9%.                                                

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On March 20, 1998, Modtech purchased an 80% interest in Trac Modular
Manufacturing, Inc. ("Trac"). The purchase price approximated the fair value of 
net assets on the purchase date. Trac is based in Glendale, Arizona. The        
financial activity for this subsidiary has been included in Modtech's financial 
statements for the second quarter of 1998.                                      

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996           

Net sales for the year ended December 31, 1997 increased to $134.0  
million, an increase of $84.1 million, or approximately 169%, from $49.9 million
in 1996. The increase in 1997 was due principally to the continuing amelioration
of the State of California budget deficit and the implementation during the year
of the Class Size Reduction Program for kindergarten through third grade classes
in California's public elementary schools.                                      

    For the year ended December 31, 1997, gross profit was $26.7 million, an
increase of $19.4 million, or approximately 266%, over 1996 gross profit of $7.3
million. Gross profit percentage of net sales increased to 19.9% in 1997 from   
14.5% in 1996. The increase in gross profit as a percentage of net sales was    
primarily attributable to the increased volume, utilization of a previously idle
facility, and the realization of manufacturing efficiencies.                    

   In 1997, selling, general and administrative expenses increased to $5.2
million from $2.3 million, due to increases in the number of employees and an   
increase in selling costs. However, as a percentage of net sales, selling,      
general and administrative expenses decreased to 3.8% in 1997 from 4.7% in 1996.

    Due to increased volume and average borrowings outstanding, net interest
expense increased from $422,000 in 1996 to $909,000 for 1997.                   

     Income tax expense was $7.7 million for the year ended December 31, 1997,
compared to $208,000 for 1996. Modtech's effective tax rate increased to 37.2%  
for the year ended December 31, 1997 from 4.6% for the year ended December 31,  
1996. The effective tax rate in both periods was positively impacted by the     
utilization for federal income tax purposes of net operating loss carryforwards 
generated in prior years.                                                       

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995           

      Net sales for the year ended December 31, 1996 increased to $49.9 million,
an increase of $30.5 million, or approximately 157% from $19.4 million in 1995. 
The increase in 1996 was due principally to the amelioration of the State of    
California budget deficit and the implementation during the year of the Class   
Size Reduction Program for kindergarten through third grade classes in          
California's public elementary schools.                                         

   For the year ended December 31, 1996, gross profit was $7.3 million, an
increase of $4.3 million, or approximately 143%, over 1995 gross profit of 3.0  
million. However, as a percentage of net sales, gross profit declined to 14.5%  
in 1996, from 15.4% in 1995. The decline of gross profit as a percentage of net 
sales was primarily attributable to a change in product mix as Modtech focused  
its resources on manufacturing more standardized classrooms which could be sold 
in greater numbers.                                                             

   In 1996, selling, general and administrative expenses increased to $2.3
million from $1.6 million, due to increases in the number of employees and an   
increase in selling costs. However, because net sales increased substantially   
during the year, selling, general and administrative expenses as a percentage of
net sales decreased to 4.7% in 1996 from 8.3% in 1995.                          

   For the year ended December 31, 1996, net interest expense increased by
$35,000, from $387,000 in 1995 to $422,000 in 1996, due to slightly higher      
borrowings to finance growing levels of accounts receivables and                
work-in-progress inventories attributable to the large 1996 increase in net     
sales.                                                                          

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   The provision for income taxes was $208,000 for the year ended December
31, 1996, compared to $19,000 for the year ended December 31, 1995. Modtech's   
effective tax rate increased to 4.6% for the year ended December 31, 1996, from 
1.9% for the year ended December 31, 1995, due to differences between financial 
and tax accounting treatment of certain items, primarily accrued liabilities.   
The effective tax rate in both periods was positively impacted by the           
utilization for federal income tax purposes of net operating loss carryforwards 
generated in prior years.                                                       

INFLATION                                                                       

Modtech does not believe that inflation had a material effect on its
result of operations during the past two years. However, there can be no        
assurance that Modtech's business will not be affected by inflation in the      
future.                                                                         

LIQUIDITY AND CAPITAL RESOURCES                                                 

  To date, Modtech has generated cash to meet its needs from operations,
bank borrowings and public offerings. At June 30, 1998, Modtech had $25,426,000 
in cash. Most of Modtech's cash reserves will be used to partially pay the cash 
portion of the Merger Consideration. During the six months ended June 30, 1998, 
Modtech provided about $17,000,000 in cash from operating activities.           

 Modtech has a revolving loan facility that expires in September 2000.
Modtech is entitled to borrow from time to time up to $20,000,000, with actual  
borrowings limited to specified percentages of eligible accounts receivables,   
equipment and inventories. On June 30, 1998, no amounts were outstanding under  
this loan.                                                                      

 Holdings is currently in negotiations for a new credit facility to be
effective upon the closing of the Mergers. Modtech and SPI will be co-borrowers 
under the credit facility, which will replace both companies' existing credit   
facilities. The borrowings from the new credit facility will be used to pay the 
balance of the cash portion of the Merger, transaction expenses of the Mergers, 
and fund working capital needs.                                                 

  Management believes Modtech's existing product lines and manufacturing
capacity will enable it to generate sufficient cash through operations,         
supplemented by periodic use of Holdings anticipated bank line of credit, to    
finance its business at current levels over the next 12 months. Additional cash 
resources may be required, if Modtech is able to expand its business beyond     
current levels. For example, it will be necessary for Modtech to construct or   
acquire additional manufacturing facilities in order for it to compete          
effectively in new market areas or states which are beyond a 300-mile radius    
from one of its production facilities. The construction or acquisition of new   
facilities would require significant additional capital. For these reasons,     
among others, Modtech may need additional debt or equity financing in the       
future. There can be, however, no assurance that Modtech will be successful in  
obtaining such additional financing, or that any such financing will be         
available on terms acceptable to it.                                            

NEW ACCOUNTING PRONOUNCEMENTS                                                   

  In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive   
Income" ("SFAS 130"). SFAS 130 establishes standards for the reporting and      
display of comprehensive income and its components (revenues, expenses, gains   
and losses) in a full set of general-purpose financial statements. SFAS 130     
requires all items that are required to be recognized under accounting standards
as components of comprehensive income to be reported in a financial statement   
that is displayed with the same prominence as other financial statements. SFAS  
130 does not require a specific format for that financial statement but requires
that an enterprise display an amount representing total comprehensive income for
the period covered by that financial statement. SFAS 130 requires an enterprise 
to (a) classify items of other comprehensive income by their nature in a        
financial statement and (b) display the accumulated balance of other            
comprehensive income separately from retained earnings and additional paid-in   
capital                                                                         

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in the equity section of a statement of financial position. SFAS 130 is         
effective for fiscal years beginning after December 15, 1997. Management has    
determined the adoption of SFAS 130 will not have a material impact on Modtech's
combined financial position or results of operations.                           

     In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information"  
("SFAS 131"). SFAS 131 establishes standards for public business enterprises to 
report information about operating segments in annual financial statements and  
requires that those enterprises report selected information about operating     
segments in interim financial reports issued to stockholders. It also           
establishes standards for related disclosures about products and services,      
geographic areas and major customers. This statement supersedes FASB Statement  
No. 14, "Financial Reporting for Segments of a Business Enterprise," but retains
the requirement to report information about major customers. It amends FASB     
Statement No. 94, "Consolidation of All Majority-Owned Subsidiaries," to remove 
the special disclosure requirements for previously unconsolidated subsidiaries. 
SFAS 131 requires, among other items, that a public business enterprise report a
measure of segment profit or loss, certain specific revenue and expense items,  
and segment assets, information about the revenues derived from the enterprise's
products or services, and major customers. SFAS 131 also requires that the      
enterprise report descriptive information about the way that the operating      
segments were determined and the products and services provided by the operating
segments. SFAS 131 is effective for financial statements for periods beginning  
after December 15, 1997. In the initial year of application, comparative        
information for earlier years is to be restated. SFAS 131 need not be applied to
interim financial statements in the initial year of its application, but        
comparative information for interim periods in the initial year of application  
is to be reported in financial statements for interim periods in the second year
of application. Management has not determined whether the adoption of SFAS 131  
will have a material impact on Modtech's segment reporting.                     

In February 1998, the FASB issued Statement of Financial Accounting 
Standards No. 132, "Employers' Disclosures about Pensions and Other             
Postretirement Benefits" ("SFAS 132"). SFAS 132 revises employers' disclosures  
about pension and other postretirement benefit plans. It does not change the    
measurement or recognition of those plans. SFAS 132 is effective for fiscal     
years beginning after December 15, 1997. SFAS 132, requiring only additional    
information disclosures, is effective for Modtech's fiscal year ending December 
31, 1998.                                                                       

     In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS  
133"). SFAS 133 establishes accounting and reporting standards for derivative   
instruments, including certain derivative instruments embedded in other         
contracts, and hedging activities. SFAS 133 is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. Application of SFAS 133 is not   
expected to have a material impact on the Company's financial position, results 
of operations or liquidity.                                                     

YEAR 2000                                                                       

 The "year 2000" issue concerns the potential exposures related to the
automated generation of business and financial misinformation resulting from the
application of computer programs which have been written using two digits,      
rather than four, to define the applicable year of business transactions.       
Modtech is in the process of correcting this defect in its program, and it      
expects the defect will be corrected without material cost before the year 2000.
Modtech's customers, suppliers and service providers may use computer programs  
which are not "year 2000" compliant. To the extent this defect is not corrected,
it could adversely affect Modtech's operations, such as the receipt of supplies,
services, purchase orders and payments of account receivable.                   

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 MODTECH COMMON STOCK PRICES AND DIVIDENDS

    Modtech's Common Stock is currently traded on the Nasdaq National Market
under the symbol "MODT." The following table sets forth on a per share basis the
high and low closing sales prices per share for Modtech's Common Stock on the   
Nasdaq National Market for the periods indicated.                               

                                                                [Download Table]

1996                                                HIGH     LOW 
----                                               ------  ------
                                                                 
     First Quarter ...............................  3.625   2.250
     Second Quarter ..............................  6.250   2.875
     Third Quarter ...............................  9.625   3.500
     Fourth Quarter ..............................  9.500   6.875

1997                                                             

     First Quarter ............................... 13.875   7.875
     Second Quarter .............................. 13.000  10.625
     Third Quarter ............................... 25.250  11.625
     Fourth Quarter .............................. 29.750  17.500

1998                                                             

     First Quarter ............................... 29.125  19.125
     Second Quarter .............................. 23.688  18.500
     Third Quarter ............................... 20.500  16.000
     Fourth Quarter (through October 23) ......... 17.250  13.000

 On September 28, 1998, the last full day prior to Modtech's
announcement of the signing of the Merger Agreement, the closing price on the   
Nasdaq National Market for Modtech's Common Stock was $20.125 per share.        

        On _________, 1998, the last trading day for which information was
available prior to the date of the first mailing of this Joint Proxy            
Statement/Prospectus, the closing price on the Nasdaq National Market for a     
share of Modtech's Common Stock was $______.                                    

      On the Record Date, there were approximately ________ holders of
record of Modtech Common Stock.                                                 

 DIVIDEND POLICY

     Modtech has not paid cash dividends on its Common Stock since 1990.
Modtech's Board of Directors has no present intention of changing this policy.  
Holdings' Board of Directors intends to follow Modtech's dividend policy.       

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 THE BUSINESS OF SPI

GENERAL                                                                         

    SPI is a leading designer, manufacturer and wholesaler of commercial and
light industrial modular buildings in the United States. Through its four       
manufacturing plants, SPI designs and builds modular buildings to customer      
specifications for a wide array of uses, including governmental, healthcare,    
educational, airport and correctional facilities; office and retail space;      
daycare centers; libraries; churches; construction trailers; golf clubhouses;   
police stations; convenience stores; fast food restaurants; and sales offices.  

      SPI's single-unit modular buildings are typically 720 square feet in size,
while multi-unit modular buildings range in size from 1,440 square feet to      
50,000 square feet and may consist of multiple stories. The price at which SPI's
modular buildings are sold to dealers ranges from $10,000 to $25,000 per module.
SPI's modular buildings serve as temporary, semi-permanent and permanent        
facilities and can function as free standing buildings or additions to existing 
structures.                                                                     

SPI conducts its business through three operating subsidiaries, SPI 
Manufacturing, Inc., Rosewood Enterprises, Inc. and Office Master of Texas,     
Inc.                                                                            

INDUSTRY OVERVIEW                                                               

     According to data compiled by Automated Builder, a leading industry trade
publication, the nonresidential modular construction market, including SPI, had 
approximately $350 million in annual revenues in 1997, and an 8% growth rate is 
expected for 1998. Automated Builder estimates that the five largest            
nonresidential modular building manufacturers, which includes SPI, accounted for
sales of approximately $177 million during 1997, while the remaining 22         
manufacturers reported by Automated Builder generated approximately $173 million
of sales during the same period. SPI's pro forma consolidated net sales for the 
year ended December 31, 1997 were $80.5 million.                                

     Much of the growth in the nonresidential modular market has resulted from
the widespread acceptance of modular structures as an alternative to traditional
site construction and the increasing number of applications for modular         
buildings across a broad spectrum of industries.                                

    Because modular buildings are constructed in a factory using an assembly
line process, construction is typically not subject to the delays caused by     
weather and site conditions. Modular buildings can, therefore, generally be     
built faster than conventional buildings, at a lower cost and with more         
consistent quality. Modular buildings can generally be relocated more easily to 
meet the changing needs of end users and be quickly joined to other modular     
buildings to meet increased space requirements.                                 

DISTRIBUTION AND MARKETING                                                      

   SPI sells its modular buildings to users through a network of sales and
leasing companies to a wide range of end users. SPI's dealers include national  
dealers such as GE Capital Modular Space and Williams Scotsman, and multiple    
regional and local dealers. Management believes that larger dealers are becoming
increasingly more inclined to do business with fewer manufacturers and to place 
their orders with manufacturers who have a history of consistent performance.   
Certain dealers, such as GE Capital Modular Space, have developed stringent     
quality control programs for the modular buildings they distribute. Management  
believes SPI's products currently meet or exceed existing dealer quality control
standards.                                                                      

      Certain states require SPI's dealers to be licensed to sell or lease SPI's
products. Historically, these dealers have had sufficient capital resources to  
support the purchase of modular structures and the maintenance of the structures
retained in their lease fleets. Typically, dealers arrange for, and bear the    
cost of, transporting and installing structures purchased from SPI.             

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Because of its strong dealer relationships, SPI does not maintain an
extensive internal sales force. Instead, SPI maintains an internal marketing and
estimating staff whose primary responsibility is to maintain contact with the   
dealer community and to respond to requests from dealers for price quotations   
("RFQs") for production of modular buildings for end-users. As a preferred      
supplier to many of its dealers, it is common for SPI to receive RFQs from a    
number of dealers for the same end-user. SPI does not intend to change its      
distribution methods as a result of the Mergers.                                

  In the past, the majority of SPI's business has been in California and
Nevada, with some distribution in Arizona, New Mexico, Utah and Colorado. The   
February 1998 acquisition of Office Master expanded SPI's markets to include    
Texas and contiguous states in the South and Southwest. The April 1998          
acquisition of Rosewood further strengthened SPI's markets and increased SPI's  
market share in Arizona, Utah, Colorado, Nevada and New Mexico. Typically, SPI  
does not seek to distribute its product beyond a radius of approximately 400    
miles from each manufacturing facility due to increased transportation costs.   

DESIGN AND ENGINEERING                                                          

The modular buildings manufactured by SPI are typically planned and 
designed by company engineers using computer aided design technology. This      
allows SPI to produce complete cost data and renderings for most of the modular 
buildings manufactured by SPI. SPI uses a relational database system which      
compiles pricing information, thereby eliminating the time-consuming process of 
pricing modular buildings on a component-by-component basis. The system also    
enables SPI to rapidly design modular buildings and to respond quickly to dealer
RFQs, while pricing projects in a manner that helps SPI achieve desired profit  
margins. SPI employs a staff of engineers and draftsmen to enable SPI to respond
quickly to dealer and end-user needs at each of its manufacturing facilities.   

     SPI's engineering department develops engineering design and construction
drawings to fulfill dealer and end-user order requirements. The engineering     
department ensures that the order, the drawings and the RFQ are in conformity.  
Change orders are developed to correct any discrepancies and to address any     
changes after the order is received. The project is then engineered to meet     
applicable building code requirements, job specific characteristics and customer
specifications. The construction drawings are forwarded to the manufacturing    
plant and become the basis for the manufacture of each modular building.        

MANUFACTURING AND PRODUCTION                                                    

  SPI operates four manufacturing facilities, two in Southern California
(Rancho Cucamonga and Ontario), one in Glen Rose, Texas, which is located       
outside the Dallas-Fort Worth metropolitan area, and one in Phoenix, Arizona.   
Each of SPI's manufacturing facilities is designed to allow for the production  
of either single or multi-unit modular buildings.                               

   SPI's modular buildings are produced by a continuous flow assembly line
process. In each of SPI's manufacturing facilities, multiple structures are     
assembled simultaneously at various stations along the assembly line. Depending 
upon the complexity of the design for a particular modular building, the average
construction time from receipt of the order to shipment ranges from 30 to 45    
days. Once construction of a typical modular building commences, the building   
can be completed in as few as seven to nine days.                               

BACKLOG                                                                         

 SPI manufactures modular structures for sale to dealers only after an
order has been received. As of December 31, 1997, SPI's backlog, including      
backlog for the Office Master and Rosewood operations, was approximately $7.0   
million. As of June 30, 1998, SPI's backlog was approximately $13.7 million. The
increase in backlog at June 30, 1998 is primarily a function of the seasonality 
of SPI's business. Only contracts which are accompanied by customer purchase    
orders are included in SPI's backlog calculations. Due to the                   

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short order to completion cycle which is required by SPI's customers and which  
is prevalent in the commercial modular building industry, the backlog as of any 
particular date may not be representative of actual sales for any succeeding    
period.                                                                         

WARRANTIES                                                                      

      The standard contractual warranty for SPI's modular buildings is a limited
one year warranty from the date of manufacture which covers workmanship and     
materials. In addition, certain components included in SPI's modular buildings  
carry additional warranty protection offered by the manufacturer of those       
components. Occasionally, SPI contracts with third parties to provide warranty  
service when the modular building is located a significant distance from any of 
SPI's manufacturing facilities. Management believes SPI's warranty costs have   
historically been lower than industry averages. Warranty costs have not been    
material in the past.                                                           

SUPPLIERS                                                                       

SPI believes that the materials and key components used in the      
manufacturing of its modular buildings are readily available at competitive     
prices from multiple sources, including local, regional and national suppliers. 
SPI has supply contracts with a number of these suppliers. In the past, SPI has 
been able to pass along to its customers all or a portion of the effects of     
price increases by increasing the selling prices of its modular buildings.      

COMPETITION                                                                     

    The nonresidential modular building industry is highly competitive. With
respect to highly customized modular buildings, the main competitive factor is  
the ability to meet end user requirements in a timely manner, while price is the
main competitive factor for less customized structures. Because the cost of     
transporting completed modular buildings is substantial, most manufacturers     
limit their distribution to dealers located within a 400-mile radius of their   
manufacturing facility. As a result, the nonresidential modular building        
industry is highly fragmented and is composed primarily of small,               
regionally-based private companies maintaining a single manufacturing facility. 
SPI's main competitors include Modular Structures International, Pace Setter,   
Walden Structures, International Structures, Miller Building Systems, Indicom   
Building Systems and several other regional manufacturers.                      

REGULATORY MATTERS                                                              

     SPI's modular buildings are manufactured and installed in accordance with
state building codes or building codes of local regulatory agencies. Many states
have adopted additional codes that apply specifically to the design and         
manufacture of factory-built buildings, such as those manufactured by SPI. These
regulations, which vary from state to state, apply for the state that the       
factory-built structure is installed regardless of where it was manufactured.   

   Obtaining state approvals for the structural portions of a manufactured
building is the responsibility of the manufacturer. SPI works closely with      
various regulatory agencies in order to facilitate the approval process and     
reduce the chance of regulatory delays. To expedite the state approval process, 
SPI has on file with regulatory agencies in various states pre-approved         
engineering and structural drawings, as well as plans for electrical, plumbing  
and lighting systems.                                                           

Most states require dealers to be licensed in order to sell or lease
factory-built buildings. The dealer or the owner is responsible for all on-site 
required approvals and permits. Additionally, certain states require a          
contractor's license from entities involved in the manufacture of modular       
buildings, the construction of the foundation, building installation, and other 
on-site work.                                                                   

PROPERTIES                                                                      

  SPI's principal executive and administrative facilities are located in
approximately 3,000 square feet of office space at its manufacturing facility in
Rancho Cucamonga, California. This manufacturing facility occupies six acres,   
with approximately 60,000 square feet of manufacturing space. A second facility 
in Ontario, California occupies approximately                                   

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seven acres, with approximately 3,300 square feet of office space and           
approximately 50,000 square feet of manufacturing space. SPI's third facility   
consists of approximately 80,000 square feet of manufacturing space and         
approximately 2,880 square feet of office space on a 20-acre site in Glen Rose, 
Texas. The fourth facility consists of approximately 80,000 square feet of      
manufacturing space and approximately 6,600 square feet of office space on a    
20-acre site in Phoenix, Arizona.                                               

   SPI presently leases all of its operating facilities. The lease for the
Rancho Cucamonga facility expires March 31, 2002, and provides for two five-year
extensions thereafter; the lease for the Ontario facility expires January 31,   
2002, and provides for one five-year extension thereafter; the lease for the    
Glen Rose facility expires January 31, 2008; and the lease for the Phoenix      
facility expires August 28, 2002, and provides for one five-year extension      
thereafter. In addition to the operating facilities described above, SPI also   
leases, under short-term leases, approximately two acres of land on properties  
adjacent to the Phoenix facility. SPI believes that its existing facilities are 
well-maintained and in good operating condition and will meet the requirements  
for its immediately foreseeable business needs.                                 

      The Phoenix facility leased by SPI is located within a 25-square-mile area
listed by the Arizona Department of Environmental Quality on the state priority 
list for contaminated sites. According to a recent environmental site assessment
report pertaining to the Phoenix facility and commissioned by SPI, neither SPI  
nor the prior operators or owners of the property have been identified as       
potentially responsible parties at this site. Additionally, the environmental   
site assessment report identifies no historical activity on the property leased 
by SPI that was likely to have been a source of the contaminants at the site.   

EMPLOYEES                                                                       

     As of October 1, 1998, SPI had approximately 550 employees, consisting of
approximately 190 in California and 360 at its other facilities. Of SPI's total 
employees, approximately 9 are management level employees, 475 are manufacturing
employees, 17 are employed in design and engineering positions and 49 are       
employed in administrative, sales and clerical positions. SPI's employees are   
not represented by a labor union or other collective bargaining unit. SPI       
considers its relations with its employees to be satisfactory.                  

LITIGATION                                                                      

  SPI is, from time to time, a party to litigation arising in the normal
course of its business. SPI is not involved in any pending or threatened legal  
proceeding which SPI believes could reasonably be expected to have a material   
adverse effect on SPI's financial position, results of operations and business  
prospects.                                                                      

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SPI MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following table sets forth various items as a percentage of net sales
of SPI for the fiscal years ended January 31, 1996 and 1997, the fiscal year    
ended March 31, 1998 and the three months ended June 30, 1997 and 1998:         

                                                        [Enlarge/Download Table]

                                                                   FISCAL YEAR                        
                                             FISCAL YEAR ENDED        ENDED       THREE MONTHS ENDED  
                                                 JANUARY 31,        MARCH 31,          JUNE 30,       
                                          ----------------------   -----------  ----------------------
                                           1996            1997      1998(A)      1997          1998  
                                          ------          ------     -------     ------        ------ 
                                                                                                      
Net sales ...............................  100.0%          100.0%     100.0%     100.0%         100.0%

Gross profit(B) .........................   21.5            21.1       23.0       23.0           20.7 

Selling, general and administrative                                                                   
   expenses .............................   19.4             6.8        6.3        5.0            5.6 

Management and monitoring fees ..........     --              --        0.5        0.6            0.4 

Depreciation and amortization ...........    0.4             0.3        4.2        3.1            3.2 

Interest income (expense), net ..........    0.6             0.3       (3.4)      (3.9)          (4.0)

Other income (expense) ..................    0.3             0.0        0.1        0.0             -- 

Income tax provision ....................    1.1             5.8        3.8        4.5            2.6 
                                          ------          ------     ------     ------         ------ 

Net income ..............................    1.5%            8.5%       4.9%       5.9%           4.9%
                                          ======          ======     ======     ======         ====== 

----------                                                                      

(A)   The results of operations of SPI for the fiscal year ended March 31, 1998 
  and thereafter are not comparable to those of prior periods due to the
application of purchase accounting upon the acquisition of SPI by   
management and an investor group in March 1997.                     

(B)   SPI's historical presentation and allocation of expenses is not consistent
      with the presentation of Modtech's gross profit. As such, SPI has adjusted
its pro forma gross profit calculation elsewhere in this Joint Proxy
    Statement/Prospectus to conform with Modtech's presentation. As adjusted
     to give effect to Modtech's presentation, the gross profit would be 20.5%
for the fiscal year ended March 31, 1998.                           

THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THE THREE MONTHS ENDED JUNE 30,    
1997                                                                            

     Net Sales. Net sales increased $11.1 million, or 112.7%, to $20.9 million
for the three-month period ended June 30, 1998 from $9.8 million for the        
three-month period ended June 30, 1997. The growth in net sales for the 1998    
period was the result of the inclusion of sales from Office Master, acquired in 
the previous quarter, and of sales from Rosewood, acquired near the end of April
1998, for the last two months of the 1998 period.                               

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Gross Profit. Gross profit increased $2.0 million, or 91.8%, to $4.3
million for the three-month period ended June 30, 1998 from $2.3 million for the
three-month period ended June 30, 1997. The increase in gross profit was a      
result of the increased net sales. The gross profit margin for the three months 
ended June 30, 1998 was 20.7%, compared to 23.0% in the three months ended June 
30, 1997. The decrease in gross profit margin for SPI was a result of lower     
margins due to the higher direct labor costs of Office Master and Rosewood.     

Selling, General and Administrative Expenses. Selling, general and  
administrative expenses increased $684,000, or 137.1%, to $1.2 million in the   
quarter ended June 30, 1998 from $499,000 in the quarter ended June 30, 1997.   
Selling and administrative expenses as a percentage of net sales for the three  
months ended June 30, 1998 increased to 5.6%, as compared to 5.1% for the three 
months ended June 30, 1997. The increase in selling and administrative expenses 
was primarily due to increased senior management and administrative staff to    
accommodate growth and acquisitions, and to the inclusion of selling and        
administrative expenses of the acquired companies.                              

     Management and Monitoring Fees. Pursuant to the management agreement with
KRG, SPI paid a management fee of $75,000 for the three months ended June 30,   
1998, as compared with $50,000 for the three months ended June 30, 1997. An     
additional $9,000 in monitoring fees were paid pursuant to an agreement with the
fund managers of certain of SPI's equity investors for the three months ended   
June 30, 1998, as compared to $6,000 for the three months ended June 30, 1997.  

  Depreciation and Amortization. Depreciation and amortization increased
$361,000, or 117.6%, to $667,000 for the three months ended June 30, 1998 from  
$306,000 for the three months ended June 30, 1997. The increase was primarily   
attributable to the amortization of goodwill, and consulting and non-compete    
agreements arising from the acquisitions.                                       

    Interest Income (Expense), Net. Net interest expense increased $453,000,
or 118.6%, to $835,000 for the three months ended June 30, 1998 from $382,000   
for the three months ended June 30, 1997. The increase in interest expense was  
principally the result of the use of senior and subordinated debt to fund the   
Office Master and Rosewood acquisitions during 1998. Interest income was        
immaterial in both periods.                                                     

    Net Income. Net income increased $438,000, or 75.4%, to $1.0 million for
the three months ended June 30, 1998 from $581,000 for the three months ended   
June 30, 1997. Net income, as a percentage of net sales was 4.9%, as compared to
5.9% for the three-month period ended June 30, 1997. The increase in net income 
was primarily related to the increased net sales. The decrease in net income as 
a percentage of net sales reflects the effect of lower gross profit margins for 
the acquisitions.                                                               

FISCAL YEAR ENDED MARCH 31, 1998 COMPARED TO THE FISCAL YEAR ENDED JANUARY 31,  
1997                                                                            

   Following the acquisition of SPI by management and an investor group in
March 1997, SPI adopted a March 31, fiscal year end, which first ended March 31,
1998. The Office Master acquisition was completed in February 1998.             

   Net Sales. Net sales increased to $42.2 million in the year ended March
31, 1998 from $24.1 million in the year ended January 31, 1997, an increase of  
$18.1 million, or 74.9%. Net sales increased as a result of the increase in     
product demand from SPI's dealers. The addition of production capacity in       
California in August 1997 contributed $8.3 million, or 45.7% of the increase and
the inclusion of Office Master for the last month of 1998 contributed $1.1      
million, or 6.1% of the increase. See "The Business of SPI."                    

      Gross Profit. The major components of cost of sales are materials and to a
lesser extent, direct labor and overhead costs. SPI's gross profit increased to 
$9.7 million in the year ended March 31, 1998 from $5.1 million in the year     
ended January 31, 1997, an increase of $4.6 million, or 90.2%. As a percentage  

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of net sales, gross profit increased to 23.0% in the year ended March 31, 1998  
from 21.1% in the year ended January 31, 1997. The increase in gross profit is  
primarily the result of a reduction in raw material costs as a percent of net   
sales, as SPI benefitted from volume purchasing discounts, partially offset by  
an increase in overhead costs associated with the addition of the new Office    
Master manufacturing facility.                                                  

Selling, General and Administrative Expenses. Selling, general and  
administrative expenses include executive salaries, group insurance premiums,   
legal and accounting fees and various other overhead costs. Selling and         
administrative expenses increased to $2.7 million in the year ended March 31,   
1998 from $1.6 million in the year ended January 31, 1997, an increase of $1.1  
million, or 68.8%. The addition of senior management and administrative staff to
accommodate growth, the completed Office Master acquisition, and the Rosewood   
acquisition in progress, contributed to an increase of $568,000 in salaries and 
wages, or 45.5% of the increase. As a percent of net sales, selling and         
administrative expenses decreased to 6.3% in the year ended March 31, 1998 from 
6.8% in the year ended January 31, 1997. This decrease was primarily due to the 
significant growth in net sales.                                                

Management and Monitoring Fees. Management and monitoring fees were 
incurred in connection with the financing of the management buyout of SPI and   
SPI's acquisition of Office Master following the buyout. Pursuant to the        
management agreement with KRG, SPI paid a management fee of $200,000 in the     
fiscal year ended March 31, 1998. An additional $25,000 in monitoring fees were 
paid pursuant to an agreement with the fund managers of certain of SPI's equity 
investors. During the fiscal year ended March 31, 1998, SPI capitalized a total 
of $350,000 in transaction closing fees in conjunction with the SPI management  
buyout and the subsequent acquisition of Office Master.                         

     Depreciation and Amortization. Depreciation and amortization increased to
$1.8 million in the year ended March 31, 1998 from $78,000 in the year ended    
January 31, 1997, an increase of $1.7 million, or 2,144.9%. The increase was    
primarily attributable to the amortization of goodwill, and consulting and      
non-compete agreements arising from the management buyout of SPI and subsequent 
acquisition of Office Master by SPI. Depreciation expense increased primarily   
due to the addition of fixed assets as a result of these acquisitions which both
occurred during the fiscal year ended March 31, 1998.                           

   Interest Income (Expense), Net. Net interest expense increased to a net
interest expense of $1.4 million in the year ended March 31, 1998 from a net    
interest income of $0.1 million for the year ended January 31, 1997. The        
increase in interest expense was principally the result of the use of senior and
subordinated debt to fund the management buyout of SPI in March 1997 and SPI's  
subsequent acquisition of Office Master during the fiscal year ended March 31,  
1998.                                                                           

 Other Income and Expense. Other income and expense increased to a net
income of $36,000 in the fiscal year ended March 31, 1998 from a net other      
expense of $6,000 in the fiscal year ended January 31, 1997. The net other      
income in fiscal 1998 was entirely due to miscellaneous income. In the prior    
fiscal year, the net other expense was due to penalties and interest on income  
taxes payable by the former owners of SPI prior to the management buyout in the 
amount of $117,000, partially offset by miscellaneous income totaling $111,000  
primarily from a gain on sale of fixed assets.                                  

      Net Income. Net income increased $77,000, or 3.8%, to $2.1 million for the
fiscal year ended March 31, 1998 from $2.0 million for the fiscal year ended    
January 31, 1997. Net income as a percentage of net sales was 4.9%, as compared 
to 8.5% for the fiscal year ended January 31, 1997. The increase in net income  
reflects the increase in gross profit, offset by the increase in operating      
expenses and provision for income taxes and the increase in net interest        
expense.                                                                        

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FISCAL YEAR ENDED JANUARY 31, 1997 COMPARED TO THE FISCAL YEAR ENDED JANUARY 31,
1996                                                                            

     Net Sales. Net sales increased to $24.1 million in the year ended January
31, 1997 from $13.4 million in the year ended January 31, 1996, an increase of  
$10.7 million, or 79.6%. Net sales increased as a result of an increase in      
product demand by SPI's dealers. In order to meet the increasing product        
demands, SPI moved to its current facility in Rancho Cucamonga, California in   
late 1995.                                                                      

     Gross Profit. The major components of cost of sales are materials and, to
a lesser extent, direct labor and overhead costs. SPI's gross profit increased  
to $5.1 million in the year ended January 31, 1997 from $2.9 million in the year
ended January 31, 1996, an increase of $2.2 million, or 75.9%. Gross profit as a
percentage of net sales decreased to 21.1% in the fiscal year ended January 31, 
1997 from 21.5% in the fiscal year ended January 31, 1996. This decrease was    
primarily the result of higher direct labor and overhead costs.                 

Selling, General and Administrative Expenses. Selling, general and  
administrative expenses include executive salaries, group insurance premiums,   
legal and accounting fees and various other overhead costs. Selling and         
administrative expenses decreased to $1.6 million in the year ended January 31, 
1997, from $2.6 million in the year ended January 31, 1996, a decrease of $1.0  
million, or 62.5%. Selling and administrative expenses decreased as a percent of
net sales to 6.8% from 19.4% in the year ended January 31, 1996. Selling and    
administrative expenses decreased primarily due to lower bonuses paid to        
executive management of SPI in the year ended January 31, 1997. Other selling   
and administrative expenses also decreased in the year ended January 31, 1997,  
including sales salaries, automobile and travel expenses, outside services and  
legal and accounting fees.                                                      

     Depreciation and Amortization. Depreciation and amortization increased to
$78,000 in the year ended January 31, 1997 from $49,000 in the year ended       
January 31, 1996, an increase of $29,000, or 59.2%. Depreciation and            
amortization increased as a result of a full year of depreciation in fiscal 1997
from fixed assets acquired late in fiscal 1996 in connection with the move to   
the Rancho Cucamonga facility. As a percentage of net sales, depreciation and   
amortization decreased to 0.3% in the year ended January 31, 1997 from 0.4% in  
the in the year ended January 31, 1996, primarily due to the increase in net    
sales.                                                                          

    Interest Income (Expense), Net. Net interest income decreased to $78,000
in the year ended January 31, 1997 from $80,000 in the year ended January 31,   
1996. The decrease in net interest income was a result of the substantial growth
in the business requiring the use of available cash.                            

      Other Income and Expense. Other income of $34,000 in the fiscal year ended
January 31, 1996 was replaced by a net expense of $6,000 in the fiscal year     
ended January 31, 1997. The net expense in fiscal 1997 resulted primarily from  
penalties and interest on income taxes payable by the former owners of SPI in   
the amount of $117,000, partially offset by miscellaneous income totaling       
$111,000 primarily from a gain on sale of fixed assets.                         

 Net Income. Net income increased $1.8 million to $2.0 million for the
fiscal year ended January 31, 1997 from $203,000 for the fiscal year ended      
January 31, 1996. Net income as a percentage of net sales was 8.5%, as compared 
to 1.5% for the fiscal year ended January 31, 1996. The increase in net income  
reflects the increase in gross profit and decrease in operating expenses, offset
by the increase in the provision for income taxes.                              

LIQUIDITY AND CAPITAL RESOURCES                                                 

      SPI's primary capital needs have historically been to fund (i) the working
capital requirements necessitated by its sales growth, and (ii) the acquisition 
and operation of acquired companies. SPI's primary sources of financing have    
been senior and subordinated debt, cash from operations and the sale of         
preferred equity. SPI anticipates that its cash flows from operations and       
available lines of credit to be obtained by Holdings in connection with the     

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Mergers will be adequate to support its operations for at least the next 12     
months.                                                                         

 SPI's existing credit facility will be retired upon completion of the
Mergers. A new credit facility will be entered into by Holdings upon completion 
of the Mergers. The terms of the existing credit facility are described below.  

  Under the terms of the existing credit facility, SPI has available the
following: (i) a secured revolving loan of up to $2.3 million; (ii) a secured   
term loan of $21.9 million; and (iii) an unsecured term loan of $8.6 million.   
Revolving loans under the existing credit facility bear interest at 4.00% over  
the agent bank's commercial paper rate. Secured term loans under the existing   
credit facility bear interest at 4.25% over the agent bank's commercial paper   
rate, and unsecured term loans under the existing credit facility bear interest 
at 6.25% over the agent bank's commercial paper rate. The interest rate was     
9.525% on the revolving loan, 9.775% on the secured term loan and 11.775% on the
unsecured term loan at September 30, 1998. The existing credit facility also    
contains certain financial covenants which require SPI to maintain a minimum    
debt coverage ratio and positive net income, to refrain from capital            
expenditures in excess of certain amounts and to limit the payment of dividends.
SPI is in compliance with these financial covenants and expects to continue to  
be in compliance with these covenants until completion of the Mergers. A portion
of the proceeds from the new line of credit to be obtained by Holdings pursuant 
to the Mergers will be used to repay and terminate the above described credit   
facility.                                                                       

   SPI provided net cash from operating activities of $1.4 million for the
fiscal year ended March 31, 1998, compared to net cash provided from operating  
activities of $0.8 million and $0.9 million for the fiscal years ended January  
31, 1997 and January 31, 1996, respectively. During the fiscal year ended March 
31, 1998, net cash from operating activities resulted from adjustments to       
reconcile net income to net cash, primarily depreciation and amortization,      
partially offset by the decrease in income taxes payable.                       

     SPI invested approximately $4.1 million, $1.6 million and $0.4 million in
the fiscal years ended March 31, 1998, January 31, 1997 and January 31, 1996,   
respectively. The cash used in investing activities during the fiscal year ended
March 31, 1998 was utilized primarily for capital expenditures, including the   
purchase of a leasehold interest in a manufacturing facility and certain assets 
from a mobile home manufacturer and the acquisition of Office Master.           

Capital expenditures other than for acquisitions were approximately 
$200,000, $200,000 and $400,000 in the fiscal years ended March 31, 1998,       
January 31, 1997 and January 31, 1996, respectively. SPI expects to spend       
approximately $700,000 on capital expenditures for its existing operations,     
primarily for the purchase of manufacturing equipment, during the fiscal year   
ending March 31, 1999.                                                          

     SPI's external sources of liquidity include debt and, if required, equity
financing. During the fiscal year ended March 31, 1998, approximately $2.2      
million in net borrowings was provided from SPI's existing credit facility and  
$700,000 resulted from the issuance of SPI's capital stock and warrants in      
connection with the asset purchase and the transactions discussed above.        

YEAR 2000 COMPLIANCE                                                            

 The "year 2000" issue concerns the potential exposures related to the
automated generation of business and financial misinformation resulting from the
application of computer programs which have been written using two digits,      
rather than four, to define the applicable year of business transactions. SPI   
has upgraded its information system capabilities such that it does not believe  
that its systems will encounter any material "year 2000" problems. SPI's        
customers, suppliers and service providers may use computer programs which are  
not "year 2000" compliant. To the extent this defect is not corrected, it could 
adversely affect SPI's operations, such as the receipt of supplies, services,   
purchase orders and payments of accounts receivable.                            

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RECENT ACCOUNTING PRONOUNCEMENTS                                                

In June 1997, the FASB issued SFAS Nos. 130 and 131 "Reporting      
Comprehensive Income" and "Disclosures about Segments of an Enterprise and      
Related Information." SFAS No. 130 and No. 131 are effective for fiscal years   
beginning after December 15, 1997, with earlier adoption permitted. SPI does not
believe that adoption of these standards will have a material effect on SPI. SPI
has, to date, reflected no items of comprehensive income in its statement of    
stockholders' equity.                                                           

  In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SPI does not currently have any financial  
instruments addressed by SFAS No. 133.                                          

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 UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

     The following unaudited pro forma combined condensed financial statements
are based on the historical consolidated financial statements of Modtech and    
SPI, combined, and are adjusted to give effect to the Mergers. In addition, pro 
forma adjustments have been made, as discussed below, for the acquisitions      
consummated by SPI prior to the Mergers (the "Pre-Mergers Acquisitions").       
Certain reclassifications have been made to the historical financial statements 
to conform with this pro forma presentation. These statements should be read in 
conjunction with such historical financial statements and notes thereto, which  
are included elsewhere in this Joint Proxy Statement/Prospectus. See "Where You 
Can Find More Information".                                                     

   The unaudited pro forma combined condensed statements of income for the
year ended December 31, 1997 and for the six months ended June 30, 1998 present 
the results for Modtech and SPI as if the Mergers and Pre-Mergers Acquisitions  
had occurred at the beginning of each period presented. The accompanying        
unaudited pro forma combined condensed balance sheet as of June 30, 1998 gives  
effect to the Mergers as of that date.                                          

The pro forma adjustments are based upon preliminary estimates,     
information currently available and certain assumptions that management believes
are reasonable under the circumstances. Holdings' actual consolidated financial 
statements will reflect the effects of the Mergers on and after the Closing Date
rather than the dates indicated above. The unaudited pro forma combined         
condensed financial statements neither purport to represent what the combined   
results of operations or financial condition actually would have been had the   
Mergers, in fact, occurred on the assumed dates, nor to project the combined    
results of operations and financial position for any future period.             

The SPI Merger will be accounted for by the purchase method and,    
therefore, assets and liabilities of SPI will be recorded at their fair values. 
The excess of the purchase cost over the fair value of net assets acquired on   
the Closing Date will be recorded as goodwill. Allocations included in the pro  
forma statements are based on analysis which is not yet completed. Accordingly, 
the final value of the purchase price and its allocation may differ, perhaps    
significantly, from the amounts included in these pro forma statements.         

 The conversion of Modtech Common Stock into Holdings Common Stock and
Series A Preferred Stock will be treated as a reorganization with no change in  
the recorded amount of Modtech's assets and liabilities.                        

 At the Closing Date, each issued and outstanding share of SPI Capital
Stock will be converted into the right to receive 1.8785 shares of Holdings     
Common Stock. Each SPI stockholder may elect to receive $49.4097 per share of   
SPI Capital Stock instead of shares of Holdings Common Stock and elections will 
be adjusted, if necessary, to ensure that 164,735 shares of SPI Capital Stock   
are converted into $8,076,133 in cash.                                          

    At the Closing Date, each issued and outstanding share of Modtech Common
Stock will be converted into the right to receive $3.7293 and 0.8508 shares of  
Holdings Common Stock. The total cash to be received by Modtech stockholders    
will equal $39,923,472. Modtech stockholders will have the right to elect to    
receive 388,939 shares of Holdings Series A Preferred Stock in place of Holdings
Common Stock at the same 0.8508 exchange ratio for up to 3.94% of their Modtech 
Common Stock. To the extent Modtech stockholders do not elect to receive 388,939
of Holdings Series A Preferred Stock, two Modtech stockholders, Proactive       
Partners, L.P. and Lagunitas Partners, will accept such shares pro rata between 
them. The number of shares of Holdings Series A Preferred Stock may be adjusted 
upward or downward in order to meet the minimum requirements of Section 351 of  
the Internal Revenue Code.                                                      

  The total value of the common stock and stock options component of the
Merger Consideration to be received by SPI stockholders was determined using the
average closing price of Modtech Common Stock on the Nasdaq National Market for 
the 10-day trading period ended October 15, 1998. The total consideration for   
the transaction was $81,434,000.                                                

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UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
 AS OF JUNE 30, 1998
(Amounts in thousands)

                                                        [Enlarge/Download Table]

                                             Historical                                           
                                      -----------------------               Pro Forma    Pro Forma
                                       Modtech         SPI        Notes    Adjustments   Combined 
                                      ---------     ---------   ---------  -----------  --------- 
                                                                                                  
              ASSETS                                                                              
Current assets:                                                                                   
   Cash and cash equivalents .......  $  25,426     $   1,524     (B)       $ (26,000)  $     950 
   Contracts receivable, net .......     24,007         7,028                              31,035 
   Costs in excess of billings .....     16,818            --                              16,818 
   Inventories .....................      1,959         3,792                               5,751 
   Due from affiliates .............        504            --                                 504 
   Deferred tax asset ..............      2,094           151                               2,245 
   Other current assets ............        228           458                                 686 
                                      ---------     ---------               ---------   --------- 
      Total current assets .........     71,036        12,953                 (26,000)     57,989 

Property and equipment, net ........     12,266         2.142                              14,408 

Other assets:                                                                                     
   Deferred tax asset ..............         99            50                                 149 
   Other assets ....................        135         4,041    (C,D)          1,232       5,408 
   Costs in excess of net assets                                                                  
      of business acquired, net ....         --        34,085     (E)          71,545     105,630 
                                      ---------     ---------               ---------   --------- 
                                      $  83,536     $  53,271               $  46,777   $ 183,584 
                                      =========     =========               =========   ========= 

LIABILITIES AND STOCKHOLDERS' EQUITY                                                              
Current liabilities:                                                                              
   Accounts payable and accrued                                                                   
      liabilities ..................  $  17,094     $   6,854     (F)       $     750   $  24,698 
   Billings in excess of costs .....      9,469            --                               9,469 
   Revolving credit facility .......         --            --     (G)          16,510      16,510 
   Current portion of long-term                                                                   
      debt .........................        --         7,237    (H,I)         (1,237)      6,000  
                                      ---------     ---------               ---------   --------- 
      Total current liabilities ....     26,563        14,091                  16,023      56,677 
Long-term debt .....................         --        26,023    (H,I)         12.977      39,000 
                                      ---------     ---------               ---------   --------- 
      Total liabilities ............     26,563        40,114                  29,000      95,677 
                                      ---------     ---------                                     
Stockholders' Equity ...............     56,973        13,157  (A,J,K,)        17,777      87,907 
                                      ---------     ---------               ---------   --------- 
                                      $  83,536     $  53,271               $  46,777   $ 183,584 
                                      =========     =========               =========   ========= 

See the accompanying notes to the unaudited pro forma combined condensed
 financial statements.

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 UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1997
(Amounts in thousands, except per share amounts)

                                                        [Enlarge/Download Table]

                                   Historical  Pro Forma               Pro Forma    Pro Forma            
                                    Modtech       SPI       Notes      Adjustments   Combined     Notes  
                                   ----------  ---------  ---------    -----------  ----------  ---------
                                                                                                         
Net sales ........................  $134,050    $80,497                  $           $214,547            
Cost of goods sold ...............   107,367     65,321                               172,688            
                                    --------    -------                  -------     --------            
      Gross profit ...............    26,683     15,176                       --       41,859            
                                    --------    -------                  -------     --------            
Selling, general and admin-                                                                              
  istrative expenses .............     5,156      5,238                                10,394            
Depreciation and amortization ....        --      2,086       (E)          1,789        3,875            
                                    --------    -------                  -------     --------            
      Income from operations .....    21,527      7,852                   (1,789)      27,590            
Interest expense, net ............      (908)    (4,041)  (C,D,H,L,M)       (847)      (5,796)           
Other income .....................        92        195                                   287            
                                    --------    -------                  -------     --------            
      Income before income taxes..    20,711      4,006                   (2,636)      22,081            
Income tax expense ...............     7,703      1,602       (N)         (1,054)       8,251            
                                    --------    -------                  -------     --------            
      Net income .................  $ 13,008    $ 2,404                  $(1,582)    $ 13,830            
                                    ========    =======                  =======     ========            

Basic earnings per share .........  $   1.47                                         $   1.09      (O)   
                                    ========                                         ========            
Number of shares                                                                                         
 used in computing basic                                                                                 
 earnings per share ..............     8,854                                           12,622     (O)    
                                    ========                                         ========            
Diluted earnings per share .......  $   1.31                                         $   0.93     (P)    
                                    ========                                         ========            
Number of shares                                                                                         
 used in computing diluted                                                                               
 earnings per share ..............     9,898                                           14,845     (P)    
                                    ========                                         ========            

See the accompanying notes to the unaudited pro forma combined condensed
 financial statements.

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 UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(Amounts in thousands, except per share amounts)

                                                        [Enlarge/Download Table]

                                   Historical  Pro Forma                Pro Forma   Pro Forma            
                                    Modtech       SPI       Notes      Adjustments   Combined     Notes  
                                   ----------  ---------  ---------    -----------  ----------  ---------
                                                                                                         
Net sales ........................  $75,876     $41,926                  $           $117,802            
Cost of goods sold ...............   58,675      34,359                                93,034            
                                    -------     -------                  -------     --------            
      Gross profit ...............   17,201       7,567                       --       24,768            
                                    -------     -------                  -------    ---------            
Selling, general and admin-                                                                              
 istrative expenses ..............    2,741       2,512                                 5,253            
Depreciation and amortization ....       --       1,326       (E)            894        2,220            
                                    -------     -------                  -------     --------            
      Income from operations .....   14,460       3,729                     (894)      17,295            
Interest income (expense), net ...      389      (1,980)  (C,D,H,L,M)       (665)      (2,256)           
Other income .....................       15          36                                    51            
                                    -------     -------                  -------     --------            
      Income before income taxes..   14,864       1,785                   (1,559)      15,090            
Income taxes .....................    5,649         714       (N)           (624)       5,739            
                                    -------     -------                  -------     --------            
      Net income .................  $ 9,215     $ 1,071                  $  (935)    $  9,351            
                                    =======     =======                  =======     ========            

Basic earnings per share .........  $  0.93                                          $   0.74     (O)    
                                    =======                                          ========            
Number of shares                                                                                         
 used in computing basic                                                                                 
 earnings per share ..............    9,856                                            12,622     (O)    
                                    =======                                          ========            
Diluted earnings per share .......  $  0.83                                          $   0.63     (P)    
                                    =======                                          ========            
Number of shares                                                                                         
 used in computing diluted                                                                               
 earnings per share ..............   11,100                                            14,845     (P)    
                                    =======                                          ========            

See the accompanying notes to the unaudited pro forma combined condensed
 financial statements.

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NOTES TO THE UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS        

A. The unaudited pro forma combined condensed balance sheet has been prepared to
reflect the SPI Merger for an aggregate estimated merger consideration of       
$81,434,000 which is subject to adjustment and expected to be incurred as       
follows:                                                                        

                                                                [Download Table]
                                                                                  
Holdings Common Stock and stock options offered hereby .............. $ 70,858,000
Cash paid to SPI stockholders .......................................    8,076,000
Modtech Merger Costs ................................................    2,500,000
                                                                      ------------

          Total ..................................................... $ 81,434,000
                                                                      ============

B. To record net cash distribution resulting from the following transactions:   

                                                                [Download Table]
                                                                                   
Gross proceeds from New Term Loan ................................... $ 45,000,000 
Gross proceeds from New Revolving Credit facility ...................   16,510,000 
Cash paid to SPI Stockholders .......................................   (8,076,000)
Cash distribution to Modtech Stockholders ...........................  (39,924,000)
Retirement of SPI Indebtedness ......................................  (33,260,000)
Payment of Costs of Mergers and Debt Issuance Costs .................   (6,250,000)
                                                                      ------------ 

          Net cash distribution ..................................... $(26,000,000)
                                                                      ============ 

C.    To eliminate unamortized SPI debt issuance costs of $1,018,000 and related
    amortization of debt issuance costs of $170,000 and $85,000 for the year
ended December 31, 1997 and the six months ended June 30, 1998,     
respectively, associated with the retirement of SPI indebtedness.   

D.    To record (i) estimated debt issuance costs of $2,250,000 to be amortized 
     over the term of the New Term Loan and (ii) amortization of debt issuance
   costs of $450,000 and $225,000 for the year ended December 31, 1997 and
the six months ended June 30, 1998, respectively.                   

E.    To record (i) $71,545,000 for the excess of the consideration paid over   
   the preliminary estimate for the fair value of SPI net assets acquired,
   including $2,500,000 of estimated Modtech Merger costs, to be amortized
   over 40 years, and (ii) amortization of $1,789,000 and $894,000 for the
year ended December 31, 1997 and the six months ended June 30, 1998,
respectively.                                                       

F.    To record the recognition of liabilities related to certain merger costs. 

G.    To record the assumed incurrence of $16,510,000 of indebtedness under a   
     New Revolving Credit Facility, with an assumed effective interest rate of
7.5% utilized to partially finance the cash portion of the Merger   
Consideration and pay certain related transaction costs.            

H.    To eliminate the $33,260,000 of SPI indebtedness, including $7,237,000    
     classified as current, which will be retired by Modtech, and to eliminate
  the related interest expense of $4,046,000 and $1,782,000 for the year
ended December 31, 1997 and the six months ended June 30, 1998.     

I.    To record the assumed incurrence of $45,000,000 of indebtedness, including
    $6,000,000 classified as current, under a New Term Loan, with an assumed
  effective interest rate of 7.5% utilized to partially finance the cash
   portion of the Merger Consideration, retire SPI indebtedness and to pay
certain related transaction costs.                                  

J.    To eliminate the stockholders' equity of SPI of $13,157,000.              

K.    To record the repurchase of Modtech common stock for $39,924,000 cash in  
connection with the Modtech Merger.                                 

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L.    To record interest expense on borrowings under the New Term Loan of       
      $3,375,000 and $1,688,000 for the year ended December 31, 1997 and the six
months ended June 30, 1998, respectively, using an assumed effective
interest rate of 7.5%. A 0.125% increase/decrease in the estimated  
      interest rate incrementally increases/decreases income before income taxes
   by $56,000 and $28,000 for the year ended December 31, 1997 and the six
months ended June 30, 1998, respectively.                           

M.    To record interest expense on borrowings under the New Revolving Credit   
    Facility of $1,238,000 and $619,000 for the year ended December 31, 1997
  and the six months ended June 30, 1998, respectively, using an assumed
effective interest rate of 7.5%. A 0.125% increase/decrease in the  
   estimated interest rate incrementally increases/decreases income before
    income taxes by $21,000 and $10,000 for the year ended December 31, 1997
and the six months ended June 30, 1998, respectively.               

N.    To record the income tax effects of the pro forma adjustments at a pro    
forma effective tax rate of 40%.                                    

O.    Basic shares include 8,034,334 common shares assumed issued to former     
     Modtech stockholders and 4,587,824 common shares assumed issued to former
      SPI stockholders. Net income is reduced by preferred dividends of $104,000
     and $52,000 for the year ended December 31, 1997 and the six months ended
June 30, 1998, respectively.                                        

P.    Diluted shares include basic shares, preferred shares converted into      
     common shares on a one-to-one basis and exercise of stock options reduced
by number of shares purchased with proceeds.                        

RECONCILIATION OF CERTAIN ADJUSTMENTS TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENT ADJUSTMENTS

BALANCE SHEET:                                                                  

(1)   Other assets: (C) $(1,018,000); (D) $2,250,000 = $1,232,000               

(2)   Costs in excess of net assets of business acquired, net: common stock and 
   stock options component of Merger Consideration of (A) $70,858,000 plus
 estimated Modtech Merger costs of (A) $2,500,000 and cash paid to SPI
 stockholders of (A) $8,076,000 less net assets of SPI acquired of (J)
     $(9,889,000), which includes estimated SPI Merger costs of $2,250,000 and
  the elimination of unamortized debt issuance costs of (C) $1,018,000 =
$71,545,000.                                                        

(3)   Current portion of long-term debt: (H) $(7,237,000); (I) $6,000,000 =     
$(1,237,000)                                                        

(4)   Long-term debt, less current portion: (H) $(26,023,000); (I) $39,000,000 =
$12,977,000                                                         

(5)   Stockholders' equity: (A) $70,858,000; (J) $(13,157,000); (K)             
$(39,924,000) = $18,235,000                                         

INCOME STATEMENT (YEAR ENDED DECEMBER 31, 1997):                                

(1)   Interest expense, net: (C) $170,000; (D) $450,000; (H) $4,046,000; (L)    
$(3,375,000); (M) $(1,238,000) = $(847,000)                         

INCOME STATEMENT (SIX MONTHS ENDED JUNE 30, 1998):                              

(1)   Interest income (expense), net: (C) $85,000; (D) $225,000; (H) $1,782,000;
(L) $(1,688,000); (M) $(619,000) = $(665,000)                       

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SPI HOLDINGS, INC.
 UNAUDITED PRO FORMA CONSOLIDATED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                        [Enlarge/Download Table]

                                                       Historical                                                           
                                ------------------------------------------------------                                      
                                    SPI                                                  Acquisition                        
                                Predecessor       SPI                                         and        Notes   Pro Forma  
                                1/1-3/27/97   3/28-12/31/97  Office Master    Rosewood   Consolidation   (A,I)  Consolidated
                                -----------   -------------  -------------    --------   -------------   -----  ------------
                                                                                                                            
Net sales ....................    $  9,039      $ 31,255       $  8,328       $ 31,875     $     --               $ 80.497  
Cost of goods sold ...........       6,490        23,792          7,466         26,482        1,091      (G)        65,321  
                                  --------      --------       --------       --------     --------               --------  
    Gross profit .............       2,549         7,463            862          5,393       (1,091)                15,176  

Selling, general and admin-                                                                                                 
  istrative expenses .........         611         1,837            819          2,704         (901)    (G, H)       5,070  
Management and monitoring                                                                                                   
  fees .......................          --           168             --             --           --                    168  
Depreciation and amorti-                                                                                                    
  zation .....................          19         1,230             17             98          722     (B, G)       2,086  
                                  --------      --------       --------       --------     --------               --------  
    Income (loss) from                                                                                                      
        operations ...........       1,919         4,228             26          2,591         (912)                 7,852  

Interest income (expense), net          42        (1,051)           (40)           (35)      (2,957)     (C)        (4,041) 
Other income .................          34             5              4            152           --                    195  
                                  --------      --------       --------       --------     --------               --------  
    Income (loss) before pro-                                                                                               
      vision for income taxes        1,995         3,182            (10)         2,708       (3,869)                 4,006  
Provision (benefit) for                                                                                                     
  income taxes ...............         851         1,424             (3)         1,077       (1,747)     (F)         1,602  
                                  --------      --------       --------       --------     --------               --------  

      Net income (loss) ......    $  1,144      $  1,758       $     (7)      $  1,631     $ (2,122)              $  2,404  
                                  ========      ========       ========       ========     ========               ========  

Basic earnings per share .....                                                                           (D)      $   1.05  
                                                                                                                  ========  
Number of shares used in                                                                                                    
 computing basic earnings                                                                                                   
 per share ...................                                                                           (E)         2,296  
                                                                                                                  ========  

Diluted earnings per share ...                                                                           (D)      $   0.91  
                                                                                                                  ========  
Number of shares used in                                                                                                    
 computing diluted earnings                                                                                                 
 per share ...................                                                                           (E)         2,643  
                                                                                                                  ========  

----------                                                                      
 See notes on following page

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Notes:                                                                          

(A)   Acquisition adjustments assume the acquisitions occurred as of the        
beginning of the period presented and the application of purchase   
accounting to each of the acquisitions.                             

(B)   Represents the purchase accounting impact of approximately $56,000,       
   $75,000 and $556,000 for SPI, Office Master and Rosewood, respectively,
   primarily for goodwill amortization, as well as approximately $118,000,
     $20,000, and $100,000, for SPI, Office Master and Rosewood, respectively,
   for amortization of covenants not to compete which were entered into in
connection with the acquisition.                                    

(C)   Represents interest on the increased borrowings that financed a portion of
   the purchase price of the acquisitions, and assumes payment of interest
   only on indebtedness, with no reduction in principal during the period.

(D)   Pro forma earnings per share is computed in accordance with SFAS No. 128. 
See Note 2 to the SPI Consolidated Financial Statements.            

(E)   The weighted average number of shares includes actual weighted average    
      number of shares outstanding as well as common stock equivalents resulting
from options and warrants outstanding (applicable to diluted amounts
only).                                                              

(F)   Represents an adjustment made to income tax provision as a result of the  
pro forma adjustments in order to provide income tax expense at the 
effective tax rate.                                                 

(G)   Represents reclassification of certain salaries and production-related    
   depreciation expense totaling $888,000 and $203,000, respectively, from
operating expenses to cost of goods sold in order to conform with   
Modtech's presentation.                                             

(H)   Represents elimination of non-recurring transaction-related expenses      
  related to the acquisition of SPI by management and an investor group.

(I)   The pro forma adjustments do not reflect other anticipated reductions in  
    costs and expenses expected to result from the Mergers. Such anticipated
   savings would include, but not be limited to, approximately $555,000 in
non-recurring compensation expense paid to former owners of acquired
entities.                                                           

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SPI HOLDINGS, INC.
 UNAUDITED PRO FORMA CONSOLIDATED CONDENSED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                        [Enlarge/Download Table]

                                                    Historical                                                     
                                  ---------------------------------------------                                    
                                                                                  Acquisition                      
                                      SPI          Office Master     Rosewood         and       Notes   Pro Forma  
                                  Consolidated      1/1-2/24/98     1/1-4/17/98  Consolidation  (A,I)  Consolidated
                                  ------------     ------------     -----------  -------------  -----  ------------
                                                                                                                   
Net sales .......................   $ 31,850         $  1,206         $  8,870      $     --             $ 41,926  
Cost of goods sold ..............     25,255            1,039            7,532           533     (G)       34,359  
                                    --------         --------         --------      --------             --------  
      Gross profit ..............      6,595              167            1,338          (533)               7,567  
                                    --------         --------         --------      --------             --------  

Selling, general and admin-                                                                                        
 istrative expenses .............      2,013              155            1,098          (894)   (G,H)       2,372  
Management and monitoring fees ..        140               --               --            --                  140  
Depreciation and amortization ...      1,188               --               26           112    (B,G)       1,326  
                                    --------         --------         --------      --------             --------  
      Income from operations ....      3,254               12              214           249                3,729  

Interest income (expense), net ..     (1,223)               5              (61)         (701)    (C)       (1,980) 
Other income ....................         33               --                3            --                   36  
                                    --------         --------         --------      --------             --------  
   Income before income taxes ...      2,064               17              156          (452)               1,785  
Income taxes ....................        876               (5)              64          (221)    (F)          714  
                                    --------         --------         --------      --------             --------  
      Net income ................   $  1,188         $     22         $     92      $   (231)            $  1,071  
                                    ========         ========         ========      ========             ========  

Pro forma earnings per share ...                                                                 (D)     $   0.47  
                                                                                                         ========  
Pro forma number of shares                                                                                         
  used in computing earnings                                                                                       
  per share .....................                                                                (E)        2,296  
                                                                                                         ========  
Pro forma diluted earnings per                                                                                     
  share .........................                                                                (D)     $   0.40  
                                                                                                         ========  
Pro forma number of shares                                                                                         
 used in computing diluted net                                                                                     
 earnings per share .............                                                                (E)        2,645  
                                                                                                         ========  

 See notes on following page

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Notes:                                                                          

(A)   Acquisition adjustments assume the acquisitions occurred as of the        
beginning of the period presented and the application of purchase   
   accounting to each of the acquisitions. The SPI historical consolidated
      amounts include the operations of Office Master and Rosewood from the date
of acquisition.                                                     

(B)   Represents the purchase accounting impact of approximately $11,000 and    
$161,000 for Office Master and Rosewood, respectively, primarily for
  goodwill amortization, as well as approximately $3,000 and $29,000 for
   Office Master and Rosewood, respectively, for amortization of covenants
not to compete which were entered into in connection with the       
acquisitions.                                                       

(C)   Represents interest on the increased borrowings that financed a portion of
   the purchase price of the acquisitions, and assumes payment of interest
   only on indebtedness, with no reduction in principal during the period.

(D)   Pro forma earnings per share is computed in accordance with SFAS No.      
128.--See Note 2 to the Consolidated Financial Statements.          

(E)   The weighted average number of shares includes actual weighted average    
number of shares outstanding, as well as common stock equivalents   
  resulting from options and warrants outstanding (applicable to diluted
amounts only).                                                      

(F)   Represents an adjustment made to income tax provision as a result of the  
pro forma adjustments in order to provide income tax expense at the 
effective tax rate.                                                 

(G)   Represents reclassification of certain salaries and production-related    
   depreciation expense, totaling $441,000 and $92,000, respectively, from
      operating expense to cost of goods sold in order to conform with Modtech's
presentation of these items.                                        

(H)   Represents elimination of non-recurring transaction related expenses      
related to the acquisition of Office Master and Rosewood by SPI.    

(I)   The pro forma adjustments do not reflect other anticipated reductions in  
     costs and expenses expected to result from the Office Master and Rosewood
    acquisitions. Such anticipated savings would include, but not be limited
    to, approximately $135,000 in non-recurring compensation expense paid to
former owners of acquired entities.                                 

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DIRECTORS AND EXECUTIVE OFFICERS OF HOLDINGS
 FOLLOWING THE MERGERS

DIRECTORS                                                                       

The following table sets forth information as to the persons who are
expected to serve as directors of Holdings following the Mergers. Holdings'     
management currently intends, and will use its best efforts, to nominate these  
individuals for election as directors at Holdings' next three Annual Meetings of
Stockholders.                                                                   

                                                        [Enlarge/Download Table]

                                           BUSINESS EXPERIENCE                                      
  NAME AND YEAR FIRST BECAME            DURING THE PAST FIVE YEARS                                  
     A DIRECTOR OF MODTECH    AGE         AND OTHER INFORMATION                                     
  --------------------------  ---       --------------------------                                  
                                                                                                    
Evan M. Gruber (1990)         45   Chief Executive Officer of Modtech since 1990. Mr. Gruber joined 
                                   Modtech as Chief Financial Officer in 1989. Prior to joining     
                                   Modtech, Mr. Gruber worked at his own public accounting firm,    
                                   which he founded in 1978.                                        

Charles C. McGettigan (1994)  53   Mr. McGettigan was elected to the Board of Directors of Modtech  
                                   in June of 1994 in connection with the sale of preferred stock to
                                   several private investors in May 1994, including Proactive       
                                   Partners, L.P. 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 formed in 1991. 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 is a director of  
                                   Onsite Energy; PMR Corporation; Sonex Research, Inc.; Cuisine    
                                   Solutions, Inc.; Tanknology-NDE and Wray-Tech Instruments, Inc.  

Myron A. Wick III (1994)      54   Mr. Wick joined Modtech's Board of Directors in June 1994 in     
                                   connection with the sale of preferred stock to several private   
                                   investors in May 1994, including Proactive Partners, L.P. 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 Proactive Investment Managers, L.P., the    
                                   general partner of Proactive Partners, L.P., a merchant banking  
                                   fund formed in 1991. Mr. Wick is a director of Story First       
                                   Communications, Inc.; Tanknology-NDE; Sonex Research, Inc. and   
                                   Wray-Tech Instruments, Inc.                                      

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                                                        [Enlarge/Download Table]
                                                                                                  
Daniel J. Donahoe III (1998)  64  Mr. Donahoe was elected to Modtech's Board of Directors in 1998.
                                  He is a co-founder and the President of Red Rock Resorts, which 
                                  operates special, unique boutique resorts in the Western United 
                                  States. He also serves as Chairman of Daybreak Investments, a   
                                  privately-held investment company. Mr. Donahoe has been actively
                                  involved in the commercial and residential real estate market in
                                  the southwest over the past 25 years.                           

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                                                        [Enlarge/Download Table]

                                             BUSINESS EXPERIENCE                                        
  NAME AND YEAR FIRST BECAME              DURING THE PAST FIVE YEARS                                    
     A DIRECTOR OF MODTECH      AGE         AND OTHER INFORMATION                                       
  --------------------------    ---       --------------------------                                    
                                                                                                        
Patrick Van Den Bossche (1997)  37   Mr. Van Den Bossche has served as Chief Executive Officer,         
                                     President and a director of SPI since February 1997. Mr. Van Den   
                                     Bossche joined SPI in 1991 and was appointed to Vice President of  
                                     Operations in 1993. In such capacity, he managed the day-to- day   
                                     operations of SPI for its part-time owners/managers. Mr. Van Den   
                                     Bossche also serves a director of Modular Building Institute       
                                     ("MBI"), a national trade organization for the modular building    
                                     industry, and is a member of MBI's statistics committee.           

Charles A. Hamilton (1997)      50   Mr. Hamilton has been a director of SPI since February 1997. Mr.   
                                     Hamilton has over 27 years of investment experience in the fields  
                                     of securities analysis, corporate finance and venture capital. He  
                                     is currently a principal in the private equity group at            
                                     Robertson, Stephens Funds, which has been a wholly- owned          
                                     subsidiary of BancAmerica since October 1997. He had previously    
                                     served as managing director of Robertson, Stephens & Company       
                                     since 1981. Mr. Hamilton has served as a director of numerous      
                                     venture-financed companies in recent years and he is presently on  
                                     the board of White Cap Industries, Inc., a public company, and     
                                     ten private companies.                                             

Charles R. Gwirtsman (1997)     44   Mr. Gwirtsman has been a director of SPI since March 1997. Mr.     
                                     Gwirtsman is a Managing Director of KRG Capital Partners, LLC.     
                                     Prior to joining KRG Capital in 1996, Mr. Gwirtsman served as      
                                     Senior Vice President of FCM Fiduciary Capital Management Company  
                                     from January 1994 to June 1996. Prior to this, Mr. Gwirtsman was   
                                     employed as a Corporate Vice President at PaineWebber, Incorporated
                                     from 1988 to 1993 as a member of the Private Finance Group. Mr.    
                                     Gwirtsman serves on the Board of Directors of a number of privately
                                     held companies. From September 1995 through January 1996, at the   
                                     request of his then employer, FCM Fiduciary Capital Management     
                                     Company, Mr. Gwirtsman served as a director of Canadian's Corp., a 
                                     women's speciality clothing retailer. This company filed for       
                                     bankruptcy protection in February 1996 and was liquidated under    
                                     Chapter 7 of the federal bankruptcy code in December 1997.         

The Merger Agreement provides that, at each of the first three      
stockholders' meetings of Holdings, the Board of Directors will, subject to the 
exercise of its fiduciary duties, use its best efforts to nominate the following
persons for election to the Board of Directors for one-year terms: (1) Evan     
Gruber; (2) Patrick Van den Bossche; (3) two designees of Proactive Partners,   
L.P., (4) two designees of KRG; and (5) three joint designees of Proactive      
Partners, L.P. and KRG, all three of whom will be independent directors.        

COMPENSATION OF HOLDINGS' DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS    

 Each non-employee director will be paid an annual retainer of $4,000,
plus $1,000 for each board and board committee meeting attended, and will be    
granted an option to purchase 5,000 shares of Holdings' Common Stock at the end 
of each year of service on the Board of Directors. Holdings will pay the        
expenses of its non-employee directors in attending Board meetings. No          
additional compensation will be paid to any employee director for serving on    
Holdings' Board of Directors.                                                   

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HOLDINGS' EXECUTIVE OFFICERS                                                    

      Set forth below are the names and titles of certain of the persons who are
expected to serve as executive officers of Holdings following the Mergers.      

                                                                [Download Table]

NAME                            AGE         POSITION WITH REGISTRANT            
----                            ---         ------------------------            
                                                                                
Evan M. Gruber                   44         Chief Executive Officer and Director
Patrick Van Den Bossche          37         President                           
Michael G. Rhodes                36         Chief Operating Officer and Chief   
                                               Financial Officer                

         Each executive officer will serve, in accordance with the bylaws of
Holdings, until the first meeting of the Board of Directors following the next  
annual meeting of stockholders and until his respective successor is chosen and 
qualified.                                                                      

COMPENSATION OF HOLDINGS' EXECUTIVE OFFICERS                                    

Holdings has not yet paid any compensation to any of its executive  
officers, but will enter into employment agreements, effective on the Closing   
Date, with Mr. Gruber, Mr. Van Den Bossche and Mr. Rhodes. These agreements are 
for five years, provide for early severance payments of between one and two     
years and include, among other provisions, base annual salary of $300,000 for   
Mr. Gruber, $250,000 for Mr. Van Den Bossche, and $200,000 for Mr. Rhodes. The  
base salaries are subject to annual percentage increases and each individual is 
entitled to earn bonuses of up to 100% of annual base salary. The bonuses are   
based on performance and include a cash component and a stock option component  
based on performance. Concurrently with the closing of the Mergers, Mr. Gruber  
will receive an option to purchase 50,000 shares of Holdings Common Stock at the
closing price of Modtech's Common Stock on the day prior to the Closing Date.   
The option will be immediately vested for 10,000 shares and will continue to    
vest at the rate of 10,000 shares per year. The option will be credited against 
the stock option component of any bonuses earned by Mr. Gruber in the first year
of the employment agreement. Mr. Gruber's new employment agreement also includes
a buy-out of his existing employment agreement with Modtech.                    

COMPENSATION OF MODTECH'S DIRECTORS AND EXECUTIVE OFFICERS                      

 For information concerning the compensation paid to the directors and
executive officers of Modtech for the 1997 fiscal year, see the 1998 Proxy      
Statements for Modtech, the relevant portions of which are incorporated by      
reference into the Modtech's Annual Report on Form 10-K for the Year Ended      
December 31, 1997. See "Where You Can Find More Information."                   

COMPENSATION OF SPI'S DIRECTORS AND EXECUTIVE OFFICERS                          

The following table sets forth the cash compensation of the Chief   
Executive Officer and the Senior Vice President --Manufacturing, the most highly
compensated executive officers of SPI for the fiscal year ended March 31, 1998  
(the "SPI Named Executives"). No other person who served as an executive officer
of SPI during the fiscal year ended March 31, 1998 received compensation which  
exceeded $100,000 for such year.                                                

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SPI SUMMARY COMPENSATION TABLE

                                                        [Enlarge/Download Table]

                                                            Cash Compensation (A)                       
                                                         -----------------------------      All Other   
         Officers           Capacities in Which Served   Salary              Bonus (B)  Compensation (C)
         --------           --------------------------   ------              ---------  ----------------
                                                                                                        
Patrick Van Den Bossche  President, Chief Executive     $150,020             $275,000        $9,600     
                         Officer and Director                                                           
Ronald West              Senior Vice President--         150,020              275,000         9,600     
                         Manufacturing                                                                  

----------                                                                      

(A)   Amounts shown include compensation for services rendered in all capacities
to SPI during the year ended March 31, 1998.                        

(B)   Includes all cash bonuses earned during the year ended March 31, 1998 and 
paid during the year ended March 31, 1998 or subsequent thereto.    

(C)   Amounts shown include SPI's contribution to the named individual's profit 
sharing plan.                                                       

SPI STOCK OPTION GRANTS                                                         

 OPTION/SAR GRANTS IN LAST FISCAL YEAR

          The following discloses options granted during the fiscal year ended
March 31, 1998 for the SPI Named Executives:                                    

                                                        [Enlarge/Download Table]

                                                                                                    POTENTIAL REALIZABLE VALUE AT   
                                                                                                     ANNUAL RATES OF STOCK PRICE    
                                                                                                     APPRECIATION FOR OPTION TERM   
                                                  INDIVIDUAL GRANTS                                            (D) (E)              
                     ---------------------------------------------------------------------------------------------------------------
                   NUMBER OF            % OF TOTAL                                                                                  
                  SECURITIES           OPTIONS/SARS                                                                                 
                  UNDERLYING            GRANTED TO                                                                                  
                 OPTION/SARS             EMPLOYEES          EXERCISE OR                                                             
                   GRANTED               IN FISCAL          BASE PRICE         EXPIRATION            5% ANNUAL          10% ANNUAL  
     Name            (#)                   YEAR                ($/SH)             DATE (C)           GROWTH RATE        GROWTH RATE 
     ----        ------------          ------------         ------------        ------------        ------------        ------------
                                                                                                         ($)                ($)     
                                                                                                                                    
Patrick Van Den         5,000 (A)               8.2%           $4.725           February 24,           $14,858             $37,652  
Bossche .......                                                                    2008                                             
                        2,538 (B)               4.1            $4.725           February 24,             1,859               2,518  
                 ------------          ------------                                2000                -------             -------  
                        7,538                  12.3%                                                   $16,717             $40,170  

Ronald West ...         5,000 (A)               8.2%           $4.725           February 24,           $14,858             $37,652  
                                                                                   2008                                             

----------                                                                      

(A)   Represent options granted under the 1997 Long Term Incentive Stock Option 
   Plan. Such options vest in equal installments over a three-year period.

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(B)   Represent warrants granted to Mr. Van Den Bossche. Such warrants are      
exercisable immediately upon grant.                                 

(C)   The options and warrants are subject to earlier termination and repurchase
upon the occurrence of certain events related to termination of     
employment.                                                         

(D)   The dollar amounts in these columns represent potential value that might  
      be realized upon exercise of the options and warrants immediately prior to
   the expiration of their term, assuming that the market price of the SPI
      Common Stock appreciates in value from the date of the grant at the 5% and
     10% annual rates prescribed by regulation, and therefore are not intended
     to forecast possible future appreciation, if any, of the price of the SPI
Common Stock.                                                       

(E)   In calculating the potential realizable value, SPI used an estimated      
market price of $4.725 per share as of the grant date.              

SPI OPTION EXERCISES AND HOLDINGS                                               

   The following table provides certain summary information concerning the
shares of SPI Common Stock represented by outstanding warrants and stock options
held by each of the SPI Named Executives as of March 31, 1998. None of the SPI  
Named Executives exercised any options or warrants during the fiscal year ended 
March 31, 1998.                                                                 

                                                        [Enlarge/Download Table]

                                               NUMBER OF SECURITIES              VALUE OF UNEXERCISED       
                                              UNDERLYING UNEXERCISED             IN-THE-MONEY OPTIONS       
                                             OPTIONS AT MARCH 31, 1998           AT MARCH 31, 1998 (1)      
                                          --------------------------------  --------------------------------
                                          EXERCISABLE        UNEXERCISABLE  EXERCISABLE        UNEXERCISABLE
                                          -----------        -------------  -----------        -------------
                                                                                                            
Patrick Van Den Bossche..................   152,832              30,526     $2,341,206(3)         $467,950  
Ronald West..............................    86,157              30,526     $1,320,747(4)         $467,950  

----------                                                                      

(1)   All amounts are calculated to give effect to the transactions contemplated
by the Merger Agreement.                                            

(2)   Value based on the difference between $17.00 (the closing price of Modtech
Common Stock on October 23, 1998) and the option or warrant exercise
     price, multiplied by the number of shares of SPI Capital Stock subject to
such option or warrant.                                             

(3)   Does not include the cash portion of the Merger Consideration             
   (approximately $236,409) to be received upon the conversion of warrants
and vested options held by Mr. Van Den Bossche.                     

(4)   Does not include the cash portion of the Merger Consideration             
 (approximately $133,494) to be received upon the conversion of vested
options held by Mr. West.                                           

COMPENSATION OF SPI DIRECTORS                                                   

Members of SPI's Board of Directors serve without cash compensation.

SPI EMPLOYMENT AGREEMENTS                                                       

    Van Den Bossche Employment Agreement. In March 1997, SPI and Mr. Van Den
Bossche entered into an employment agreement providing for Mr. Van Den Bossche's
employment as Chief Executive Officer and President. The initial employment     
period expires in March 2002. The employment agreement provides for an initial  
base salary of $150,000 plus an annual incentive bonus based upon SPI's         
operating performance. In addition, SPI has taken out a key man life insurance  
policy on Mr. Van Den Bossche's life payable to SPI but assigned to SPI's       
lenders. Mr. Van Den Bossche's employment agreement with SPI will be terminated 
concurrently with the completion of the Mergers.                                

SPI 1997 LONG TERM INCENTIVE STOCK OPTION PLAN                                  

    In 1997, SPI adopted its 1997 Long Term Incentive Stock Option Plan (the
"SPI Plan") designed to provide incentives to present and future officers,      
employees, directors and consultants of SPI and its subsidiaries as may be      
selected in the sole discretion of SPI's Board of Directors. The SPI Plan, as   
amended, provides for aggregate option grants of up to                          

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254,797 shares. As of March 31, 1998, options to purchase an aggregate of       
178,749 shares of SPI Common Stock at an average exercise price of $3.33 per    
share were outstanding under the SPI Plan.                                      

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
 OWNERS AND MANAGEMENT OF HOLDINGS

  The following table sets forth the anticipated beneficial ownership of
Holdings Common Stock, after giving effect to the Mergers, as to each person    
expected to be a Holdings executive officer or director and each person or      
entity anticipated to be the beneficial owner of more than 5% of Holdings Common
Stock. The table assumes each SPI stockholder, including the SPI stockholders   
listed in the following table, elect to convert 5.9176% of their SPI Capital    
Stock into cash. The table also assumes that 388,939 shares of Holdings Series A
Preferred Stock are issued in the Modtech Merger and that Proactive Partners,   
L.P. receives 208,567 shares and Lagunitas Partners receives 180,372 shares.    

                                                                [Download Table]

                                                             SHARES      PERCENT 
                                                          BENEFICIALLY     OF    
              NAME                                           OWNED      CLASS (A)
              ----                                        ------------  ---------
                                                                                 
Evan M. Gruber (B).......................................   512,748        3.7%  
Patrick Van Den Bossche (C)..............................   239,077        1.7   
Michael G. Rhodes (D)....................................   202,916        1.5   
Daniel J. Donahoe III....................................     6,381        *     
Charles R. Gwirtsman (E).................................   362,183        2.6   
Charles A. Hamilton (F).................................. 1,771,090       12.7   
Charles C. McGettigan (G)................................ 1,807,668       13.0   
Myron A. Wick III (G).................................... 1,807,668       13.0   
Jon D. Gruber (H)........................................ 3,528,758       25.3   
Gruber & McBaine Capital Management (I).................. 1,667,914       12.0   
Infrastructure and Environmental Private Equity                                  
     Fund III, L.P....................................... 1,401,161       10.0   
J. Patterson McBaine (J)................................. 3,478,390       24.9   
Proactive Partners, L.P. (K)............................. 1,773,002       12.7   
All directors and officers as a group                                            
     (8 people).......................................... 4,936,729       35.4   

----------                                                                      

*    Less than one percent.                                                   

(A)   In calculating beneficial and percentage ownership, all shares of Holdings
 Common Stock which a named stockholder will have the right to acquire
    within 60 days of the date of this Joint Proxy Statement/Prospectus upon
     exercise of stock options are deemed to be outstanding for the purpose of
 computing the ownership of such stockholder, but are not deemed to be
      outstanding for the purpose of computing the percentage of Holdings Common
  Stock owned by any other stockholder. Upon the closing of the Mergers,
approximately 12,622,158 shares of Holdings Common Stock will be    
  outstanding and options to acquire 1,325,851 shares of Holdings Common
     Stock exercisable within 60 days of this Joint Proxy Statement/Prospectus
  will be outstanding. Does not give effect to the potential issuance of
  507,571 shares of Holdings Common Stock upon exercise of stock options
   that have been granted but currently are not, and within 60 days of the
date of this Joint Proxy Statement/Prospectus                       

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      will not be, exercisable, or of up to 1,250,000 additional shares issuable
    upon exercise of options available for the future grant of options under
Holdings' stock option plans.                                       

(B)   Includes 512,748 shares issuable upon exercise of stock options, but does 
    not include 174,667 shares issuable upon exercise of stock options which
   have been granted but currently are not exercisable. Evan M. Gruber and
Jon D. Gruber are not related.                                      

(C)   Includes 86,158 shares issuable upon exercise of stock options, but does  
   not include 30,525 shares issuable upon exercise of stock options which
have been granted but currently are not exercisable.                

(D)   Includes 188,452 shares issuable upon exercise of stock options, but does 
    not include 108,000 shares issuable upon exercise of stock options which
have been granted but currently are not exercisable.                

(E)   Includes 182,669 shares held by Capital Resources Growth, Inc., an entity 
   of which Mr. Gwirtsman is the sole stockholder, and 179,514 shares held
    directly by Mr. Gwirtsman and his wife and trusts formed for the benefit
of their children.                                                  

(F)   Includes 19,637 shares held by Mr. Hamilton, 1,401,161 shares held by     
    Infrastructure and Environmental Private Equity Fund III, L.P. ("IEPEF")
     and 350,292 shares held by Environmental & Information Technology Private
 Equity Fund III ("EITPEF"). Mr. Hamilton is a principal of one of the
     members of a limited liability company that serves as general partners of
IEPEF and the investment manager of EITPEF. Mr. Hamilton disclaims  
beneficial ownership of all shares held by IEPEF and the investment 
     manager of EITPEF except to the extent of his pecuniary interest therein.

(G)   Includes 17,650 shares owned of record directly by each of Messrs.        
  McGettigan and Wick, and 1,773,002 shares owned of record by Proactive
  Partners, L.P. and affiliates of which Messrs. McGettigan and Wick are
   general partners. Also includes options to purchase 17,016 shares which
   have been granted to each of Messrs. McGettigan and Wick for serving on
Modtech's Board of Directors.                                       

(H)   Includes 87,841 shares owned of record directly by Mr. Gruber, all shares 
    owned of record by Proactive Partners, L.P. and affiliates, of which Mr.
   Gruber is a general partner, and all shares owned of record by Gruber &
McBaine Capital Management and affiliates, of which Mr. Gruber is a 
general partner. Jon D. Gruber and Evan M. Gruber are not related.  

(I)   Includes 93,758 shares owned of record directly by Gruber & McBaine       
      Capital Management, all shares owned of record by Proactive Partners, L.P.
 and affiliates, and all shares owned of record by Lagunitas Partners,
    Gruber & McBaine International and GMJ Investments, affiliated entities.

(J)   Includes 37,473 shares owned of record directly by Mr. McBaine, all shares
      owned of record by Proactive Partners and affiliates, of which Mr. McBaine
    is a general partner, and all shares owned of record by Gruber & McBaine
Capital Management and affiliates, of which Mr. McBaine is a general
partner.                                                            

(K)   Includes 1,773,002 shares owned of record by Proactive Partners, L.P. and 
   all shares owned of record by Fremont Proactive Partners, an affiliated
entity.                                                             

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 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
 AND MANAGEMENT OF MODTECH

     The following table sets forth the beneficial ownership of Modtech Common
Stock as of October 20, 1998, by each executive officer or director of Modtech  
and each person or entity known to Modtech to be the beneficial owner of more   
than 5% of Modtech's Common Stock. The beneficial ownership information set     
forth below gives effect to the acceleration of the vesting of the outstanding  
Modtech Options. See "The Mergers -- Effect on Modtech Stock Plans".            

                                                                [Download Table]

                                                             SHARES     PERCENTAGE
                                                          BENEFICIALLY      OF    
     NAME                                                    OWNED       CLASS (A)
     ----                                                 ------------   ---------
                                                                                  
Gerald B. Bashaw (B).....................................    398,849       4.0%   
Evan M. Gruber (C).......................................    602,666       5.8    
Michael G. Rhodes (D)....................................    238,500       2.4    
Robert W. Campbell (E)...................................     19,000        -     
James D. Goldenetz (F)...................................    129,531       1.3    
Charles C. McGettigan (G) (N)............................  2,369,811      24.0    
Daniel J. Donahoe III....................................      7,500        -     
Myron A. Wick, III (G) (N)...............................  2,369,811      24.0    
Jon D. Gruber (I) (N)....................................  4,604,721      46.6    
Gruber & McBaine                                                                  
     Capital Management (K) (N)..........................  2,172,410      22.0    
Platinum Partners, L.P. (L)..............................    522,000       5.3    
Proactive Partners, L.P. (M) (N).........................  2,329,066      23.6    
All directors and officers                                                        
     as a group (9 persons) (B) (C) (D) (E)                                       
     (F) (G) (H).........................................  3,806,602      35.0    

----------                                                                      

*    Less than one percent.                                                   

(A)   Beneficial ownership is determined in accordance with the rules of the    
Securities and Exchange Commission and generally includes voting or 
 investment power with respect to securities. Shares of Modtech Common
Stock subject to stock options and warrants currently exercisable or
     exercisable within 60 days are deemed to be outstanding for computing the
      percentage ownership of the person holding such options and the percentage
      ownership of any group of which the holder is a member, but are not deemed
     outstanding for computing the percentage of Modtech Common Stock owned by
any other person. Except as indicated by footnote, and subject to   
    community property laws where applicable, the persons named in the table
have sole voting and investment power with respect to all shares of 
     capital stock shown beneficially owned by them. As of September 30, 1998,
      an aggregate of 9,871,409 shares of Modtech Common Stock were outstanding.
  Options to acquire a total of 1,219,244 shares of Modtech Common Stock
    were exercisable within 60 days. This number does not give effect to the
      potential issuance of 406,415 shares of Modtech Common Stock upon exercise
     of stock options that have been granted but currently are not, and within
     60 days of the date of this Joint Proxy Statement/Prospectus will not be,
exercisable.                                                        

(B)   Includes 20,000 shares issuable upon exercise of stock options.           

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(C)   Includes 602,666 shares issuable upon exercise of stock options, but does 
    not include 174,667 shares issuable upon exercise of stock options which
   have been granted but currently are not exercisable. Evan M. Gruber and
Jon D. Gruber are not related.                                      

(D)   Includes 221,500 shares issuable upon exercise of stock options, but does 
    not include 108,000 shares issuable upon exercise of stock options which
have been granted but currently are not exercisable.                

(E)   Includes 20,000 shares issuable upon exercise of stock options.           

(F)   Includes 115,000 shares issuable upon exercise of stock options.          

(G)   Includes 20,745 shares owned of record directly by each of Messrs.        
  McGettigan and Wick, and 2,329,066 shares owned of record by Proactive
  Partners, L.P. and affiliates of which Messrs. McGettigan and Wick are
   general partners. Also includes options to purchase 20,000 shares which
   have been granted to each of Messrs. McGettigan and Wick for serving on
Modtech's Board of Directors.                                       

(H)   All of these shares are issuable upon exercise of stock options.          

(I)   Includes 103,245 shares owned of record directly by Mr. Gruber, all shares
    owned of record by Proactive Partners, L.P. and affiliates, of which Mr.
   Gruber is a general partner, and all shares owned of record by Gruber &
McBaine Capital Management and affiliates, of which Mr. Gruber is a 
general partner. Jon D. Gruber and Evan M. Gruber are not related.  

(J)   Includes 44,045 shares owned of record directly by Mr. McBaine, all shares
      owned of record by Proactive Partners and affiliates, of which Mr. McBaine
    is a general partner, and all shares owned of record by Gruber & McBaine
Capital Management and affiliates, of which Mr. McBaine is a general
partner.                                                            

(K)   Includes 110,200 shares owned of record directly by Gruber & McBaine      
      Capital Management, all shares owned of record by Proactive Partners, L.P.
 and affiliates, and all shares owned of record by Lagunitas Partners,
    Gruber & McBaine International and GMJ Investments, affiliated entities.

(L)   These shares are owned of record by Platinum Partners, L.P., a            
      Massachusetts limited partnership (the "Partnership"), and also are deemed
to be beneficially owned by Hori Capital Management, Inc., the sole 
general partner of the Partnership, and by Calvin G. Hori, the sole 
     shareholder, director and President of Hori Capital Management, Inc., the
address of each of which is One Washington Mall, 7th Floor, Boston, 
Massachusetts 02108.                                                

(M)   Includes 2,329,066 shares owned of record by Proactive Partners, L.P. and 
   all shares owned of record by Fremont Proactive Partners, an affiliated
entity.                                                             

(N)   The address of each of Charles C. McGettigan, Myron A. Wick, III, Jon D.  
 Gruber, J. Patterson McBaine, Gruber & McBaine Capital Management and
 Proactive Partners, L.P. is 50 Osgood Place, San Francisco, CA 94133.

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 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF SPI

The table below sets forth certain information regarding beneficial 
ownership of the SPI Capital Stock as of October 20, 1998, by each executive    
officer or director of SPI and each person or entity who owns of record or      
beneficially 5% or more of the Capital Stock. The beneficial ownership          
information set forth below gives effect to the acceleration of the vesting of  
outstanding SPI Options (see "The Mergers -- Effect on SPI Stock Plans"), but   
does not give effect to the ability of SPI stockholders to elect cash for a     
portion of their SPI Capital Stock in connection with the SPI Merger. See "The  
Mergers -- Merger Consideration-SPI."                                           

                                                                [Download Table]

                                              SHARES      PERCENTAGE
                                            Beneficially     of     
Name (A)                                     Owned (B)      Class   
                                             ---------      -----   
                                                                    
Patrick Van Den Bossche (C) ...............    135,275       4.87%  
Ronald West (D) ...........................     90,165       3.24   
Ronald R. Procunier (E) ...................     46,185       1.66   
Charles A. Hamilton (F) ...................  1,002,123      36.06   
Bret R. Maxwell (G) .......................    991,012      35.66   
Mark M. King (H) (I) ......................  1,031,997      37.13   
Bruce L. Rogers (H) (J) ...................  1,031,997      37.13   
Charles R. Gwirtsman (H) (K) ..............  1,031,997      37.13   
KRG Capital Partners, L.L.C. (H) ..........  1,031,997      37.13   
Infrastructure and Environmental                                    
     Private Equity Fund III, L.P. ........    792,809      28.53   
Environmental & Information Technology                              
     Private Equity Fund III (L) ..........    198,203       7.13   
Argentum Capital Partners II, L.P. ........    198,203       7.13   
NationsCredit Commercial                                            
     Corporation (M) ......................    332,158      11.95   
All Officers and Directors as a Group .....  2,305,745      82.96   
     (8 people)                                                     

---------------------                                                           

(A)    Unless otherwise indicated, the address of the beneficial owner is c/o   
SPI Manufacturing, Inc., 9550 Hermosa Avenue, Rancho Cucamonga,   
California 91730.                                                 

(B)    Beneficial ownership is determined in accordance with the rules of the   
 Securities and Exchange Commission and generally includes voting or
  investment power with respect to securities. Shares of SPI Preferred
  Stock subject to stock options and warrants currently exercisable or
exercisable within 60 days of the date of this Joint Proxy        
 Statement/Prospectus are deemed to be outstanding for computing the
percentage ownership of the person holding such options and the   
    percentage ownership of any group of which the holder is a member, but
    are not deemed outstanding for computing the percentage of SPI Capital
   Stock owned by any other person. Except as indicated by footnote, and
       subject to community property laws where applicable, the persons named in
 the table have sole voting and investment power with respect to all
      shares of capital stock shown beneficially owned by them. At October 20,
    1998, a total of 2,295,667 shares of SPI Capital Stock were issued and
outstanding, options to acquire a total of 162,814 shares of SPI  
       Preferred Stock were exercisable within 60 days and warrants to acquire a
       total of 320,829 shares of SPI Preferred Stock were exercisable within 60
days.                                                             

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(C)    Includes 48,750 shares issuable upon the exercise of immediately         
 exercisable options and 37,471 shares issuable upon the exercise of
       immediately exercisable warrants. Does not include 16,250 shares issuable
      upon the exercise of stock options which have been granted but currently
are not exercisable.                                              

(D)    Includes 48,750 shares issuable upon the exercise of immediately         
   exercisable options. Does not include 16,250 shares issuable upon the
     exercise of stock options which have been granted but currently are not
exercisable.                                                      

(E)    Includes 21,252 shares issuable upon the exercise of immediately         
  exercisable options. Does not include 7,084 shares issuable upon the
     exercise of stock options which have been granted but currently are not
exercisable.                                                      

(F)    Includes 11,111 shares held by Mr. Hamilton, 792,809 shares held by      
      Infrastructure and Environmental Private Equity Fund III, L.P. ("IEPEF")
       and 198,203 shares held by Environmental & Information Technology Private
   Equity Fund III ("EITPEF"). Mr. Hamilton is a principal of one of the
      members of a limited liability company that serves as general partner of
IEPEF and the investment manager of EITPEF. Mr. Hamilton disclaims
    beneficial ownership of all shares held by IEPEF and EITPEF, except to
the extent of his pecuniary interest therein.                     

(G)    Includes 792,809 shares held by IEPEF and 198,203 shares held by EITPEF. 
       Mr. Maxwell is a Vice Chairman of First Analysis Corporation which is the
       majority member of a limited liability company that serves as the general
partner of IEPEF and the investment manager of EITPEF. Mr. Maxwell
   disclaims beneficial ownership of all shares held by IEPEF and EITPEF
except to the extent of his pecuniary interest therein.           

(H)    Includes 1,031,997 shares held by members of KRG Capital Investments III,
      L.L.C., an investment limited liability company ("KRG III") of which KRG
     is the manager. The managing directors of KRG Capital are Mark M. King,
      Bruce L. Rogers and Charles R. Gwirtsman. All the shares held by members
     of KRG III are subject to a voting agreement providing KRG the right to
  vote all of such shares (the "KRG Voting Agreement"). The KRG Voting
Agreement will terminate upon the closing of the Mergers.         

(I)    Mr. King is a Managing Director of KRG Capital and as a result may be    
   deemed to share beneficial ownership of all shares covered by the KRG
 Voting Agreement. See Note (H) above. Mr. King disclaims beneficial
     ownership of all shares covered by the KRG Voting Agreement, other than
       153,954 shares held directly by Mr. King, his wife, trusts formed for the
     benefit of Mr. King and his wife, and a trust formed for the benefit of
their children.                                                   

(J)    Mr. Rogers is a Managing Director of KRG Capital and as a result may be  
   deemed to share beneficial ownership of all shares covered by the KRG
   Voting Agreement. See Note (H) above. Mr. Rogers disclaims beneficial
     ownership of all shares covered by the KRG Voting Agreement, other than
     163,864 shares held directly by Mr. Rogers and his wife, a trust formed
    for the benefit Mr. Rogers' wife and a trust formed for the benefit of
their children.                                                   

(K)    Mr. Gwirtsman is a Managing Director of KRG Capital and as a result may  
      be deemed to share beneficial ownership of all shares covered by the KRG
      Voting Agreement. See Note (H) above. Mr. Gwirtsman disclaims beneficial
     ownership of all shares covered by the KRG Voting Agreement, other than
       103,358 shares held by Capital Resources Growth, Inc., an entity of which
     Mr. Gwirtsman is the sole stockholder, and 101,573 shares held directly
      by Mr. Gwirtsman and his wife and trusts formed for the benefit of their
children.                                                         

(L)    All references to Environmental & Information Technology Private Equity  
      Fund III in this Joint Proxy Statement/Prospectus refer to Environmental
& Information Technology Private Equity Fund III, Gesellschaft    
     Burgarlichen Rechts (mit Haftungsbeschankung), a civil partnership with
limitation of liability established under the laws of the Federal 
Republic of Germany.                                              

(M)    Includes 283,358 shares issuable upon the exercise of immediately        
exercisable warrants.                                             

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 DESCRIPTION OF HOLDINGS CAPITAL STOCK

     The authorized capital stock of Holdings consists of 25,000,000 shares of
common stock, par value $.01 per share ("Holdings Common Stock") and 5,000,000  
shares of preferred stock, par value $.01 per share ("Holdings Preferred        
Stock"), of which 585,000 have been designed Series A Preferred Stock ("Holdings
Series A Preferred Stock").                                                     

    The following summary of certain provisions of the Holdings Common Stock
and Holdings Series A Preferred Stock does not purport to be complete and is    
subject to, and qualified in its entirety by, the provisions of applicable law  
and Holdings' Certificate                                                       
of Incorporation.                                                               

VOTING RIGHTS -- COMMON STOCK                                                   

      The holders of outstanding shares of Holdings Common Stock are entitled to
one vote on all matters submitted to a vote of stockholders.                    

DIVIDENDS -- COMMON STOCK                                                       

 Holders of Holdings Common Stock are entitled to receive ratably such
dividends as may be declared by the Holdings Board out of funds legally         
available therefor. Holdings will continue Modtech's dividend policy. Modtech   
has not declared a cash dividend on Modtech Common Stock since 1990 and has no  
present intention to pay a dividend.                                            

LIQUIDATION -- COMMON STOCK                                                     

     In the event of the liquidation, dissolution or winding-up of Holdings,
holders of Holdings Common Stock are entitled to share ratably in all assets    
remaining after the payment of all liabilities and the liquidation preference of
any outstanding Holdings Series A Preferred Stock.                              

PREFERRED STOCK                                                                 

     No shares of Holdings Series A Preferred Stock are presently outstanding.
The Holdings Series A Preferred Stock will be issued as part of the Modtech     
Merger Consideration. The terms of the Holdings Series A Preferred are          
as follows:                                                                     

      Voting Rights. The Holdings Series A Preferred Stock has no voting rights,
including, without limitation, the right to vote on the election of directors,  
mergers, reorganization or a sale of all or substantially all of Holdings       
assets.                                                                         

     Dividend Rights. Dividends will accrue on each share of Holdings Series A
Preferred Stock at the rate of $0.40 per annum. Dividends may not be paid on    
Holdings Common Stock until all accrued dividends on Holdings Series A Preferred
Stock are paid or declared and set aside for payment.                           

      Liquidation Preference. If Holdings is liquidated, the holders of Holdings
Series A Preferred Stock will have the right to a liquidation preference over   
the holders of Holdings Common Stock in the amount of $5 per share, plus all    
accrued but unpaid dividends, before any payment is made to holders of Holdings 
Common Stock.                                                                   

Conversion. Subject to proportional adjustments due to stock splits,
reverse stock splits and similar transactions, each share of Holdings Series A  
Preferred Stock is convertible into one share of Holdings Common Stock. Shares  
of Holdings Series A Preferred Stock may be converted into Holdings Common Stock
at any time following two years after their date of issuance. Each outstanding  
share of Holdings Series A Preferred Stock will automatically be converted into 
Holdings Common Stock upon the fourth anniversary date of its issuance or upon a
"change in control," whichever occurs first. A "change in control" is defined as
(i) the acquisition of Holdings by another entity by means of any               

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transaction or series of related transactions; (ii) a sale of all or            
substantially all of the assets of Holdings; (iii) the sale of capital stock    
constituting 50% or more of Holdings' outstanding capital stock at the time of  
sale; or (iv) any transaction or series of related transactions in which more   
than 50% of the voting power of the corporation is disposed of.                 

In the future, Holdings may issue one or more additional series of  
Holdings Preferred Stock. The Holdings Board is authorized to determine, with   
respect to each series of Holdings Preferred Stock which may be issued, the     
powers, designations, preferences, and rights of the shares of such series and  
the qualifications, limitations, or restrictions thereof, including any dividend
rate, redemption rights, liquidation preferences, sinking fund terms, conversion
rights, voting rights and any other preferences or special rights and           
qualifications. The effect of any issuance of the additional series of Holdings 
Preferred Stock upon the rights of holders of the Holdings Common Stock depends 
upon the respective powers, designations, preferences, rights, qualifications,  
limitations and restrictions of the shares of the additional series of Holdings 
Preferred Stock as determined by the Holdings Board. Such effects might include:

-      dilution of the voting power of the Holdings Common Stock;               

-      the further subordination of the rights of holders of Holdings Common    
Stock to share in Holdings' assets upon liquidation; and          

-      a further reduction in the amount otherwise available for payment of     
dividends on Holdings Common Stock.                               

ISSUANCE                                                                        

     All shares of Holdings Common Stock and Holdings Series A Preferred Stock
outstanding upon completion of the Mergers will be fully paid and nonassessable.

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COMPARISON OF RIGHTS OF STOCKHOLDERS

  At the Effective Time, the stockholders of Modtech and SPI will become
stockholders of Holdings. As stockholders of Holdings, their rights will be     
governed by the Delaware General Corporation Law ("Delaware Corporation Code")  
and Holdings' Certificate of Incorporation and Bylaws. Following are summaries  
of certain differences between (i) the rights of Modtech stockholders and       
Holdings stockholders and (ii) the rights of SPI stockholders and Holdings      
stockholders. The summaries do not purport to be complete and are qualified in  
their entirety by reference to the Holdings Certificate of Incorporation and    
Bylaws, Delaware law, California law and Colorado law governing corporations,   
the Modtech Articles of Incorporation and Bylaws, and the SPI Articles of       
Incorporation and Bylaws, as applicable. Holdings is organized as a corporation 
under Delaware state law, Modtech is organized under California state law, and  
SPI is organized under Colorado state law. Each corporation is subject to the   
corporations code of its state of incorporation which deals with a variety of   
matters, including:                                                             

-      election of directors                                                    

-      duties and liabilities of officers and directors                         

-      dividends and other distributions                                        

-      meetings of stockholders                                                 

-      amendments to the articles or certificates of incorporation              

-      mergers and sales of all or substantially all of the corporation's assets

-      dissolution.                                                             

 Each corporation is also subject to the provisions of its Articles or
Certificate of Incorporation and Bylaws.                                        

COMPARISON OF STOCKHOLDERS' RIGHTS WITH RESPECT TO HOLDINGS AND MODTECH       

      Authorized Capital. The total number of authorized shares of capital stock
of Modtech is 25,000,000 shares, consisting of 20,000,000 shares of Common      
Stock, and 5,000,000 shares of Preferred Stock. The authorized capital of       
Holdings is 30,000,000 shares, consisting of 25,000,000 shares of Holdings      
Common Stock and 5,000,000 shares of Holdings Preferred Stock, of which 585,000 
have been designated Series A Preferred Stock.                                  

   Standard of Conduct for Directors. Under Delaware law, the standards of
conduct for directors have developed through written opinions of the Delaware   
courts in cases decided by them. Generally, directors of Delaware corporations  
are subject to a duty of loyalty, a duty of care and a duty of full disclosure. 
The duty of loyalty has been said to require directors to refrain from          
self-dealing. According to the Delaware Supreme Court, the duty of care requires
"directors . . . in managing the corporate affairs . . . to use that amount of  
care which ordinarily careful and prudent men would use in similar              
circumstances." Later case law has established "gross negligence" as the        
standard for the duty of care or liability in the process of decision-making by 
directors of Delaware corporations. In addition, the duty of full disclosure    
requires the full disclosure of all material facts when seeking stockholder     
action.                                                                         

   Under California law, the standards of conduct for directors are governed
by statute. Section 309 of the California General Corporations Law ("California 
Corporations Code") requires that a director of a California corporation perform
his duties in "good faith," in a manner he believes is "in the best interests of
the corporation and its stockholders" and with the care of an "ordinarily       
prudent person in a like position . . . under similar circumstances."           

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Number of Directors. Under the Modtech Bylaws, the Modtech Board is 
comprised of between five and nine directors, the exact number to be fixed by   
the Modtech Board or stockholders. The Modtech Board now consists of eight      
directors. The Holdings Board will initially consist of seven directors. The    
Holdings Bylaws provide that the Holdings Board will consist of nine directors, 
which number may be increased or decreased pursuant to the Holdings Bylaws.     

  Removal of Directors. Under Section 303 of the California Corporations
Code and Modtech's charter documents, Modtech's directors may be removed without
cause by the affirmative vote of a majority of the outstanding shares entitled  
to vote; provided, however, that unless the entire board is removed, no director
may be removed if the votes cast against removal would be sufficient to elect   
the director if voted cumulatively at an election at which the same total number
of votes were cast. Under Holdings' charter documents, Holdings stockholders may
remove directors only for cause.                                                

   Voting Rights. Modtech stockholders have cumulative voting rights which
allows each stockholder voting at any election of directors to cast votes equal 
to the number of directors to be elected multiplied by the number of shares held
by the stockholder. The ability to cumulate votes may enable minority           
shareholders to elect one or more directors in situations where, absent         
cumulative voting rights, they could not elect any directors. Holdings          
stockholders will not have cumulative voting rights.                            

  Vacancy on the Board of Directors. Except for a vacancy created by the
removal of a director, vacancies on the Modtech Board may be filled by approval 
of a majority of the Board. If the number of directors then in office is less   
than a quorum, the vacancy may be filled by (i) the unanimous written consent of
the directors then in office, (ii) the affirmative vote of a majority of the    
directors then in office, or (iii) by a sole remaining director. Vacancies on   
the Modtech Board created by removal of directors may be filled only by the     
affirmative vote of a majority of the shares of Modtech Common Stock. The       
Holdings Bylaws provide that vacancies and any newly created directorships      
resulting from any increase in the number of directors may be filled by vote of 
the holders of the particular class or series of stock entitled to elect such   
director at a meeting called for the purpose, or by a majority of the directors 
then in office, although less than a quorum, or by a sole remaining director, in
each case elected by the particular class or series of stock entitled to elect  
such directors.                                                                 

 Limitation of Liability and Indemnification. Pursuant to the Delaware
Corporation Code and the Holdings Certificate of Incorporation, the liability of
directors of Holdings to Holdings or to any stockholder of Holdings for money   
damages for breach of fiduciary duty has been eliminated except for:            

-      breach of the directors' duty of loyalty to Holdings or its stockholders;

-      acts or omissions not in good faith or which involve intentional         
misconduct or a knowing violation of law;                         

-      unlawful dividends or redemptions or purchases of stock; or              

-      any transaction from which the director derived an improper personal     
benefit.                                                          

  In general, the liability of officers may not be eliminated or limited
under Delaware law. The Holdings Certificate of Incorporation provides that     
Holdings will indemnify its officer and directors in any proceeding, except     
those in which such individual was adjudicated as liable for negligence or      
misconduct in the performance of his or her duty. The Holdings Bylaws also      
provide for indemnification of officers and directors of Holdings, but only to  
the extent that such officer or director (a) acted in good faith and in a manner
he reasonably believed to be in or not opposed                                  

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to the best interests of Holdings (or, with respect to a criminal matter, had no
reason to believe his conduct was unlawful) and (b) was not adjudged liable to  
Holdings. Under the Holdings Bylaws, the right to indemnification is subject to 
a finding that the same is proper with respect to a specific proceeding, because
the officer or director involved has met the applicable standard of conduct     
(described in the preceding sentence), by any of (i) a majority vote of a quorum
(consisting of directors not involved in the proceeding) of the Holdings Board, 
(ii) independent legal counsel in a written opinion, or (iii) the stockholders. 
The Merger Agreement also provides for the indemnification of officers and      
directors. See "The Merger Agreement -- Indemnification."                       

 As allowed by the California Corporations Code, Modtech's Articles of
Incorporation provide that the liability of the directors of Modtech for        
monetary damages shall be eliminated to the fullest extent permissible under    
California law. This is intended to eliminate the personal liability of a       
director for monetary damages in an action brought by or in the right of Modtech
for breach of a director's duties to Modtech or its stockholders except for     
liability for acts or omissions that involve intentional misconduct or knowing  
and culpable violation of law, for acts or omissions that a director believes to
be contrary to the best interests of Modtech or its stockholders or that involve
the absence of good faith on the part of the director, for any transaction from 
which a director derived an improper personal benefit, for acts or omissions    
that show a reckless disregard for the director's duty to Modtech or its        
stockholders in circumstances in which the director was aware, or should have   
been aware, in the ordinary course of performing a director's duties, or a risk 
of serious injury to Modtech or its stockholders, for acts or omissions that    
constitute an unexcused pattern of inattention that amounts to an abdication of 
the director's duty to Modtech or its stockholders, with respect to certain     
contracts in which a director has a material financial interest, and for        
approval of certain improper distributions to stockholders or certain loans or  
guarantees. This provision does not limit or eliminate the rights of Modtech or 
any shareholder to seek non-monetary relief such as an injunction or rescission 
in the event of a breach of a director's duty of care.                          

  Modtech's Bylaws require Modtech to indemnify its officers, directors,
employees and other agents to the full extent permitted by law, including those 
circumstances in which indemnification would otherwise be discretionary. In     
addition, Modtech's Articles of Incorporation expressly authorize the use of    
indemnification agreements and, with the approval of its stockholders, Modtech  
has entered into separate indemnification agreements with each of its directors.
Modtech's Board of Directors has authorized similar indemnification agreements  
for Modtech's officers. These agreements may require Modtech, among other       
things, to indemnify directors and officers against certain liabilities that may
arise by reason of their status or service as directors and officers, and to    
advance their expenses incurred as a result of any proceeding against them as to
which they could be indemnified.                                                

   Annual Stockholder Meetings. The Modtech Bylaws provide that the annual
meeting of the stockholders will be held on such dates and at such times as     
shall be designated by the Modtech Board. The Holdings Bylaws provide that the  
annual meeting of stockholders shall be held at such place, on such date, and at
such time as the Board of Directors shall each year fix, which date shall be    
within 13 months subsequent to the later of the organization of the corporation 
or the last annual meeting of stockholders.                                     

   Special Stockholder Meetings. The Modtech Bylaws provide that a special
meeting of the stockholders may be called at any time by the Chairman of the    
Board or president, or by the Board of Directors, or by one or more stockholders
holding at least 10% of the shares entitled to vote at the meeting. The Holdings
Bylaws provide that a special meeting of the stockholders may be called at any  
time by the chairman of the Board, if any, or a majority of                     

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the Board of Directors. The Holdings Bylaws do not permit the stockholders to   
call a special meeting.                                                         

     Actions by Written Consent of Stockholders. Since the Modtech Articles of
Incorporation do not provide otherwise, any action that may be taken at a       
stockholder's meeting of Modtech may be taken without a meeting, without prior  
notice and without a vote, upon the written consent of the holders of           
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a stockholder meeting at which all
shares entitled to vote were present and voted. The California Corporations Code
requires any action taken by written consent to elect Modtech directors to be   
unanimous. Pursuant to Holdings' Certificate of Incorporation, any action       
required or permitted to be taken by the stockholders must be effected at a duly
called annual or special meeting of stockholders and may not be effected by any 
consent in writing in lieu of a meeting of such stockholders.                   

    Dividends and Other Distributions. Under the Delaware Corporations Code,
dividends may be paid out of the surplus of the corporation or, if there is no  
surplus, out of net profits for the year in which the dividend is declared      
and/or the preceding fiscal year. The California Corporations Code allows the   
payment of dividends and other distributions (including redemptions) only if (1)
the amount of retained earnings immediately before the distribution equals or   
exceeds the distribution, or (2) immediately after the distribution:            

-      the sum of the assets of the corporation (including goodwill, capitalized
  research and development expenses, and deferred charges) is at least
 equal to 1-1/4 times its liabilities (not including deferred taxes,
deferred income and other credits); and                           

-      the current assets of the corporation are at least equal to its current  
     liabilities, or the average earnings of the corporation before taxes on
       income and before interest expense for the two preceding fiscal years was
  less than the average of the interest expense of the corporation for
those fiscal years at least 1-1/4 times its current liabilities.  

COMPARISON OF STOCKHOLDERS' RIGHTS WITH RESPECT TO HOLDINGS AND SPI             

     Authorized Capital. The total number of shares of capital stock of SPI is
9,262,000, consisting of 6,000,000 shares of SPI Common Stock, 1,100,000 shares 
of Series A-1 Preferred Stock, 1,000,000 shares of Series A-2 Preferred Stock,  
400,000 shares of Series A-3 Preferred Stock, 155,000 shares of Series A-4      
Preferred Stock, 540,000 shares of Series A-5 Preferred Stock and 67,000 shares 
of Series A-6 Preferred Stock.                                                  

   Standard of Conduct for Directors. Under Colorado law, the standards of
conduct for directors have developed through written opinions of the Colorado   
courts. Generally, directors of Colorado corporations are subject to a duty of  
loyalty, a duty of care and a duty of full disclosure. The duty of loyalty has  
been said to require directors to refrain from self-dealing. According to the   
Colorado Supreme Court, the duty of care requires "directors . . . in managing  
the corporate affairs . . . to use that amount of care which ordinarily careful 
and prudent men would use in similar circumstances." Later case law has         
established "gross negligence" as the standard for the duty of care or liability
in the process of decision-making by directors of Colorado corporations. In     
addition, the duty of full disclosure requires the full disclosure of all       
material facts when seeking stockholder action.                                 

    Number of Directors. Under the SPI Bylaws, the SPI Board is comprised of
no less than one or more than nine directors, the exact number as fixed by      
resolution of the SPI Board. The SPI Board now consists of six directors. The   
Holdings Bylaws provide that the Holdings Board will consist of nine directors. 

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      Removal of Directors. Under the SPI Bylaws and Colorado law, since the SPI
Articles of Incorporation are silent, the SPI stockholders may remove one or    
more directors with or without cause at any meeting of the SPI stockholders     
called for that purpose. Under Holdings' charter documents, the Holdings        
stockholders may remove any director from office at any time, but only for      
cause.                                                                          

Vacancies on the Board of Directors. The SPI Bylaws provide that any
vacancy on the Board of Directors may be filled by the affirmative vote of a    
majority of the stockholders or by the affirmative vote of a majority of the    
directors remaining in office. The Holdings Bylaws provide that vacancies and   
any newly created directorships resulting from any increase in the number of    
directors may be filled by vote of the holders of the particular class or series
of stock entitled to elect such director at a meeting called for the purpose, or
by a majority of the directors then in office, although less than a quorum, or  
by a sole remaining director, in each case elected by the particular class or   
series of stock entitled to elect such directors.                               

Annual Stockholder Meetings. The SPI Bylaws provide that the annual 
meeting of the stockholders shall be held at a date and time fixed by resolution
of the Board of Directors or by the president in the absence of action by the   
Board of Directors. The Holdings Bylaws provide that the annual meeting of      
stockholders shall be held at such place, on such date, and at such time as the 
Board of Directors shall each year fix, which date shall be within 13 months    
subsequent to the later of the organization of the corporation or the last      
annual meeting of stockholders.                                                 

Special Stockholder Meetings. The SPI Bylaws provide that a special 
meeting of the stockholders may be called at any time by the chairman of the    
Board of Directors, by the president, or by resolution of the Board of          
Directors. A special meeting may also be called by the holders of at least 10%  
of all votes entitled to be cast on any issue proposed to be considered at the  
meeting. The Holdings Bylaws provide that a special meeting of the stockholders 
may be called at any time by the chairman of the Board, if any, or a majority of
the Board of Directors. The Holdings Bylaws do not permit the stockholders to   
call a special meeting.                                                         

   Action by Written Consent. Under the SPI Bylaws and Colorado law, since
the SPI Articles of Incorporation are silent, any action required or permitted  
to be taken at a stockholders' meeting may be taken without a meeting if all of 
the stockholders entitled to vote on the action consent to such action in       
writing. Pursuant to Holdings' Certificate of Incorporation, any action required
or permitted to be taken by the stockholders must be effected at a duly called  
annual or special meeting of stockholders and may not be effected by any consent
in writing in lieu of a meeting of such stockholders.                           

    Dividends and Other Distributions. The Colorado Business Corporation Act
allows the payment of dividends and other distributions (including redemptions) 
only if, after giving it effect: (i) the corporation will be able to pay its    
debts as they become due in the usual course of business; or (ii) the           
corporation's total assets will be equal to or more than the sum of its total   
liabilities, plus the amount that would be needed, if the corporation were to be
dissolved at the time of the distribution, to satisfy the preferential rights   
upon dissolution of stockholders whose preferential rights are superior to those
receiving the distribution.                                                     

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 EXPERTS

    The consolidated financial statements of Modtech as of December 31, 1997
and 1996, and for each of the years in the three-year period ended December 31, 
1997, included in this Joint Proxy Statement/Prospectus, have been audited by   
KPMG Peat Marwick LLP, independent certified public accountants, as indicated in
their reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving such reports.                       

  The consolidated balance sheets of SPI as of March 31, 1998, March 27,
1997 and January 31, 1997; the consolidated statements of operations,           
consolidated statements of cash flows and consolidated statements of            
stockholders' equity of SPI for the fiscal year ended March 31, 1998 and the    
fiscal years ended January 31, 1997, January 31, 1996 and for the two months    
ended March 27, 1997; the financial statements of Office Master of Texas, Inc.  
as of and for the year ended December 31, 1997; and the financial statements of 
Rosewood Enterprises, Inc., as of December 31, 1997 and 1996 and for each of the
three years in the period ended December 31, 1997, included in this Joint Proxy 
Statement/Prospectus, have been audited by Arthur Andersen LLP, independent     
public accountants, as indicated in their reports with respect thereto, and are 
included herein in reliance upon the authority of said firm as experts in giving
such reports.                                                                   

 LEGAL MATTERS

     Certain legal matters with respect to the validity of the Holdings Common
Stock and Series A Preferred Stock to be issued pursuant to the Mergers will be 
passed upon by Haddan & Zepfel LLP, and certain federal income tax consequences 
of the Mergers will be passed upon by Gibson, Dunn & Crutcher LLP for Modtech.  
Certain legal matters with respect to the Mergers and certain federal income tax
consequences of the Mergers will be passed upon by Dorsey & Whitney LLP for SPI.
Certain members of Dorsey & Whitney LLP, as of the date of this Joint Proxy     
Statement/Prospectus, own in the aggregate 10,399 shares of SPI Capital Stock.  

 OTHER MATTERS

 As of the date of this Joint Proxy Statement/ Prospectus, the Modtech
Board and the SPI Board know of no matters that will be presented for           
consideration at the Modtech Special Meeting or the SPI Special Meeting other   
than as described in this Joint Proxy Statement/Prospectus. If any other matters
shall properly come before the Modtech Special Meeting or the SPI Special       
Meeting or any adjournments or postponements thereof and be voted upon, the     
enclosed proxies will be deemed to confer discretionary authority on the        
individuals named as proxies therein to vote the shares represented by such     
proxies as to any such matters. The persons named as proxies intend to vote or  
not to vote in accordance with the recommendation of the respective managements 
of Modtech and SPI.                                                             

 WHERE YOU CAN FIND MORE INFORMATION

     Modtech files annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information that Modtech files at the SEC's public reference rooms in     
Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC 
at 1-800-SEC-0330 for further information on the public reference rooms. Modtech
public filings are also available to the public from commercial document        
retrieval services and at the Internet World Wide Web site maintained by the SEC
at "http://www.sec.gov."                                                        

    Holdings has filed a Registration Statement to register with the SEC the
shares of Holdings Common Stock and Holdings Series A Preferred Stock to be     
issued in the Mergers. This Joint Proxy Statement/Prospectus is                 

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a part of the Registration Statement and constitutes a prospectus of Holdings, a
proxy statement of Modtech for the Modtech Special Meeting and a proxy statement
of SPI for the SPI Special Meeting. As allowed by SEC rules, this Joint Proxy   
Statement/ Prospectus does not contain all the information that stockholders can
find in the Registration Statement or the exhibits to the Registration          
Statement.                                                                      

 The SEC allows us to "incorporate by reference" information into this
Joint Proxy Statement/Prospectus, which means that we can disclose important    
information to you by referring you to another document filed separately with   
the SEC. The information incorporated by reference is deemed to be part of this 
Joint Proxy Statement/Prospectus, except for any information superseded by      
information contained directly in the Joint Proxy Statement/Prospectus. This    
Joint Proxy Statement/Prospectus incorporates by reference the documents set    
forth below that Modtech has previously filed with the SEC. These documents     
contain important information about Modtech and its financial condition. Because
SPI is a private company, it has not previously filed any documents with the    
SEC.                                                                            

                                                                [Download Table]

MODTECH SEC FILINGS               PERIOD                                         
-------------------               ------                                         
                                                                                 
Annual Report on Form 10-K....... Year ended December 31, 1997                   
Quarterly Reports on Form 10-Q... Quarters ended March 31, 1998 and June 30, 1998

   We are also incorporating by reference additional documents that we may
file with the SEC between the date of this Joint Proxy Statement/Prospectus and 
the date of the Special Meetings.                                               

Modtech has supplied all information contained or incorporated by   
reference in this Joint Proxy Statement/Prospectus relating to Modtech and      
Holdings, and SPI has supplied all such information relating to SPI.            

    If you are a stockholder of either company, we may have sent you some of
the documents incorporated by reference, but you can obtain any of them through 
us or the SEC. Documents incorporated by reference are available from us without
charge, excluding all exhibits unless specifically incorporated by reference as 
an exhibit to this Joint Proxy Statement/Prospectus. Stockholders may obtain    
documents incorporated by reference in this Joint Proxy Statement/Prospectus by 
requesting them in writing or by telephone from the appropriate company at the  
following addresses and phone numbers:                                          

     Modtech, Inc.
           2830 Barrett Avenue
        Perris, CA 92571
                 Attention: Evan M. Gruber
      (909) 943-4014

          SPI Holdings, Inc.
           9550 Hermosa Avenue
                  Rancho Cucamonga, CA 91730
                     Attn: Patrick Van Den Bossche
      (909) 484-4280

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    If you would like to request documents from either company, please do so
by ___________, 1998 to receive them before the Modtech Special Meeting and by  
__________________, 1998 to receive them before the SPI Special Meeting. If you 
request any incorporated documents from us we will mail them to you by          
first-class mail, or other equally prompt means, within one business day of our 
receipt of your request.                                                        

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS JOINT PROXY STATEMENT/ PROSPECTUS TO VOTE YOUR SHARES AT THE  
MODTECH SPECIAL MEETING OR SPI SPECIAL MEETING. MODTECH AND SPI HAVE NOT        
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS
CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS. THIS JOINT PROXY            
STATEMENT/PROSPECTUS IS DATED ______________, 1998. YOU SHOULD NOT ASSUME THAT  
THE INFORMATION CONTAINED IN THE JOINT PROXY STATEMENT/PROSPECTUS IS ACCURATE AS
OF ANY DATE OTHER THAN THAT DATE, AND NEITHER THE MAILING OF THIS JOINT PROXY   
STATEMENT/PROSPECTUS TO STOCKHOLDERS NOR THE ISSUANCE OF HOLDINGS' SECURITIES IN
THE MERGERS WILL CREATE ANY IMPLICATION TO THE CONTRARY.                        

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INDEX TO FINANCIAL STATEMENTS 
MODTECH, INC. 

                                                        [Enlarge/Download Table]

                                                                                               Page
                                                                                               ----
                                                                                                   
Independent Auditors' Report ................................................................. F-2 
Balance Sheets as of December 31, 1996 and 1997 .............................................. F-3 
Statements of Income for the Years ended December 31, 1995, 1996 and 1997 .................... F-5 
Statements of Shareholders' Equity for the Years ended December 31, 1995, 1996                     
         and 1997 ............................................................................ F-6 
Statements of Cash Flows for the Years ended December 31, 1995,                                    
         1996 and 1997 ....................................................................... F-7 
Notes to Financial Statements ................................................................ F-9 
Schedule II -- Valuation and Qualifying Accounts ............................................. F-23
Condensed Consolidated Balance Sheets as of December 31, 1997 (audited)                            
         and June 30, 1998 (unaudited) ....................................................... F-24
Condensed Consolidated Statements of Income for the three months ended and six                     
         months ended June 30, 1997 and 1998 (unaudited) ..................................... F-25
Condensed Consolidated Statements of Cash Flows for the three months ended and                     
         six months ended June 30, 1997 and 1998 (unaudited) ................................. F-26
Notes to Condensed Financial Statements ...................................................... F-27

                                     SPI HOLDINGS, INC.                                            

Report of Independent Public Accountants ..................................................... F-31
Consolidated Balance Sheets as of January 31, 1997, March 27, 1997 and March 31,1998 ......... F-32
Consolidated Statements of Income for the years ended January 31, 1996                             
         and 1997, the two-month period ended March 31, 1997                                       
         and the year ended March 31, 1998 ................................................... F-34
Consolidated Statements of Stockholders' Equity for the years ended January 31,                    
         1996 and 1997, the two-month period ended March 31, 1997 and the year                     
         ended March 31, 1998 ................................................................ F-35
Consolidated Statements of Cash Flows for the years ended January 31, 1996 and                     
         1997, the two-month period ended March 31, 1997 and the year ended                        
         March 31, 1998 ...................................................................... F-36
Notes to Consolidated Financial Statements ................................................... F-38
Condensed Consolidated Balance Sheet as of June 30, 1998 (unaudited) ......................... F-51
Condensed Consolidated Statements of Income for three months ended June 30, 1997                   
         and 1998 (unaudited) ................................................................ F-53
Condensed Consolidated Cash Flows for the three months ended June 30, 1997 and                     
         1998 (unaudited) .................................................................... F-54
Notes to Condensed Consolidated Financial Statements ......................................... F-55

                               OFFICE MASTER OF TEXAS, INC.                                        

Report of Independent Public Accountants ..................................................... F-58
Balance Sheet as of December 31, 1997 ........................................................ F-59
Statement of Income and Retained Earnings for the year ended December 31, 1997 ............... F-60
Statement of Cash Flows for the year ended December 31, 1997 ................................. F-61
Notes to Financial Statements ................................................................ F-62

        ARIZONA MILLWORK, INC. D/B/A ROSEWOOD ENTERPRISES, INC. MODULAR MANUFACTURING              

Report of Independent Public Accountants ..................................................... F-65
Balance Sheets as of December 31, 1996 and 1997 and March 31, 1998 (unaudited) ............... F-66
Statements of Operations for the years ended December 31, 1995, 1996, 1997                         
         and for the quarters ended March 31, 1997 and 1998 (unaudited) ...................... F-67
Statements of Stockholders' Equity for the years ended December 31, 1995, 1996,                    
         1997 and for the quarters ended March 31, 1997 and 1998 (unaudited) ................. F-68
Statements of Cash Flows for the years ended December 31, 1995, 1996, 1997 and                     
         for the quarters ended March 31, 1997 and 1998 (unaudited) .......................... F-69
Notes to Financial Statements ................................................................ F-71

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INDEPENDENT AUDITORS' REPORT

The Board of Directors                                                          
Modtech, Inc.:                                                                  

We have audited the accompanying balance sheets of Modtech, Inc. as of December 
31, 1996 and 1997 and the related statements of income, shareholders' equity and
cash flows for each of the years in the three-year period ended December 31,    
1997. In connection with our audits of the financial statements, we have also   
audited the financial statement schedule as listed in the accompanying index.   
These financial statements and financial statement schedule are the             
responsibility of the Company's management. Our responsibility is to express an 
opinion on these financial statements and financial statement schedule based on 
our audits.                                                                     

We conducted our audits in accordance with generally accepted auditing          
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.          

In our opinion, the financial statements referred to above present fairly, in   
all material respects, the financial position of Modtech, Inc. as of December   
31, 1996 and 1997 and the results of its operations and its cash flows for each 
of the years in the three-year period ended December 31, 1997, in conformity    
with generally accepted accounting principles. Also in our opinion, the related 
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the     
information set forth therein.                                                  

                               KPMG PEAT MARWICK LLP

Orange County, California                                                       
March 18, 1998                                                                  

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Balance Sheets

December 31, 1996 and 1997

                                                                [Download Table]


                     ASSETS (NOTE 5)                           1996        1997    
                                                           -----------  -----------
                                                                                   
Current assets:                                                                    
  Cash                                                     $   404,981  $11,628,851
  Contracts receivable, less allowance for contract                                
     adjustments of $413,373 in 1996 and $410,119 in 1997   10,309,861   21,510,146
     (note 2)                                                                      
  Costs and estimated earnings in excess of billings on                            
    contracts (notes 3 and 8)                                9,102,733   16,020,986
  Inventories                                                4,166,700    3,931,505
  Due from affiliates (note 8)                                 754,067    1,052,634
  Note receivable from affiliates (note 8)                      45,212       45,212
  Prepaid assets                                               136,960      268,295
  Deferred tax asset (note 7)                                     --      2,094,059
  Other current assets                                          20,305       42,274
                                                           -----------  -----------
      Total current assets                                  24,940,819   56,593,962
                                                           -----------  -----------

Property and equipment, net (notes 4 and 6)                  8,552,720   11,229,163
Other assets                                                   535,235      298,258
Deferred tax asset (note 7)                                       --         98,874
                                                           -----------  -----------
                                                           $34,028,774  $68,220,257
                                                           ===========  ===========

See accompanying notes to financial statements.                                 

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Balance Sheets

December 31, 1996 and 1997

                                                        [Enlarge/Download Table]


           LIABILITIES AND SHAREHOLDERS' EQUITY                 1996          1997    
                                                           ------------   ------------
                                                                                      
Current liabilities:                                                                  
   Accounts payable                                        $  6,409,422   $  2,421,346
   Accrued compensation                                       1,369,441      3,616,498
   Accrued insurance expense                                    551,580      1,470,725
   Other accrued liabilities                                  1,089,439      3,237,255
   Income tax payable                                           204,017      1,017,027
   Billings in excess of costs and estimated earnings on                              
     contracts (notes 3 and 8)                                1,148,050      6,997,350
   Current note payable (note 5)                                   --           42,185
   Current maturities of long-term debt (notes 6 and 8)         100,000      1,374,952
                                                           ------------   ------------
         Total current liabilities                           10,871,949     20,177,338

Note payable (note 5)                                         5,943,853           --  

Long-term debt, less current maturities (notes 6 and 8)       1,899,952           --  
                                                           ------------   ------------
         Total liabilities                                   18,715,754     20,177,338
                                                           ------------   ------------
Shareholders' equity:                                                                 
   Common stock, $.01 par.  Authorized 20,000,000 shares;                             
     issued and outstanding 8,649,436 and 9,819,959 in                                
     1996 and 1997 (notes 10 and 11)                             86,494         98,200
   Additional paid-in capital                                19,620,994     39,330,902
   (Accumulated deficit) retained earnings                   (4,394,468)     8,613,817
                                                           ------------   ------------
         Total shareholders' equity                          15,313,020     48,042,919
                                                           ------------   ------------
Commitments and contingencies (notes 3, 5, 8, and 14)                                 
                                                           ------------   ------------
                                                           $ 34,028,774   $ 68,220,257
                                                           ============   ============

See accompanying notes to financial statements.                                 

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Statements of Income

Years ended December 31, 1995, 1996 and 1997

                                                        [Enlarge/Download Table]


                                               1995            1996           1997      
                                          -------------   -------------   ------------- 
                                                                                        
Net sales (notes 8 and 12)                $  19,386,027   $  49,885,858   $ 134,050,485 

Cost of goods sold (note 8)                  16,400,588      42,628,970     107,367,035 
                                          -------------   -------------   ------------- 
         Gross profit                         2,985,439       7,256,888      26,683,450 

Selling, general, and administrative                                                    
   expenses                                   1,612,792       2,345,182       5,155,987 
                                          -------------   -------------   ------------- 
         Income from operations               1,372,647       4,911,706      21,527,463 
                                          -------------   -------------   ------------- 
Other income (expense):                                                                 
   Interest expense                            (486,323)       (445,631)     (1,004,198)
   Interest income (note 8)                      98,510          23,704          95,551 
   Other - net                                     (937)        (13,116)         92,103 
                                          -------------   -------------   ------------- 
                                               (388,750)       (435,043)       (816,544)
                                          -------------   -------------   ------------- 
         Income before income taxes             983,897       4,476,663      20,710,919 

Income taxes (note 7)                           (19,098)       (207,631)     (7,702,634)
                                          -------------   -------------   ------------- 
         Net income                       $     964,799   $   4,269,032   $  13,008,285 
                                          -------------   -------------   ------------- 
5% Convertible preferred stock dividend                                                 
   (note 11)                                   (166,320)        (47,500)           --   

         Net income available for common                                                
           stock                          $     798,479   $   4,221,532   $  13,008,285 
                                          =============   =============   ============= 
Basic earnings per share                  $        0.25   $        0.77   $        1.47 
                                          =============   =============   ============= 
Weighted-average shares outstanding           3,169,593       5,461,007       8,853,786 
                                          =============   =============   ============= 
Diluted earnings per share                $        0.14   $        0.47   $        1.31 
                                          =============   =============   ============= 
Weighted-average shares outstanding           6,712,155       9,041,084       9,897,935 
                                          =============   =============   ============= 

See accompanying notes to financial statements.                                 

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Statements of Shareholders' Equity

Years ended December 31, 1995, 1996 And 1997

                                                        [Enlarge/Download Table]


                                       5% CONVERTIBLE                                      STOCK                    (ACCUMULATED  
                                      PREFERRED  STOCK            COMMON STOCK           PURCHASE      ADDITIONAL      DEFICIT)   
                                    ----------------------  -------------------------      NOTES         PAID-IN       RETAINED   
                                       SHARES      AMOUNT      SHARES         AMOUNT    RECEIVABLE       CAPITAL       EARNINGS   
                                    ---------- -----------  -------------  ----------  -------------  ------------   ------------ 

                                                                                                                                  
Balance, December 31, 1994           2,850,000   2,685,000     3,209,338   $   32,094  $   (273,594)  $ 14,989,919   $ (9,414,479)

Adjustment of stock purchase notes        --          --        (155,988)      (1,560)      273,594       (346,292)         --    
   receivable                                                                                                                     

Dividend (note 11)                        --          --            --           --            --           --           (166,320)

Net income                                --          --            --           --            --           --                    
                                                                                                                          964,799 
                                    ---------- -----------  ------------  -----------  ------------   ------------   ------------ 
Balance, December 31, 1995           2,850,000   2,685,000     3,053,350       30,534          --       14,643,627     (8,616,000)

Conversion of preferred stock       (2,850,000) (2,685,000)    2,850,000       28,500          --        2,656,500          --    
   (note 11)                                                                                                                      

Exercise of options and warrants          --          --       2,746,086       27,460          --        2,320,867          --    

Dividend (note 11)                        --          --            --           --            --           --            (47,500)

Net income                                --          --            --           --            --           --          4,269,032 
                                    ---------- -----------  ------------  -----------  ------------   ------------   ------------ 
Balance, December 31, 1996                --          --       8,649,436       86,494          --       19,620,994     (4,394,468)

Exercise of options, including                                                                                                    
   tax benefit of                         --          --         170,523        1,706          --        1,119,890          --    
   $753,874 (notes 7, 10 and 11)                                                                                                  

Secondary offering - Net (note 15)        --          --       1,000,000       10,000          --       18,590,018                

Net income                                --          --            --           --            --           --         13,008,285 
                                    ---------- -----------  ------------  -----------  ------------   ------------   ------------ 
Balance, December 31, 1997                --          --       9,819,959   $   98,200  $       --     $ 39,330,902   $  8,613,817 
                                    ========== ===========  ============   ==========  ============   ============   ============ 

See accompanying notes to financial statements.                         

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Statements of Cash Flows

Years ended December 31, 1995, 1996 and 1997

                                                                [Download Table]


                                              1995           1996          1997     
                                         ------------   ------------   ------------ 
                                                                                    
Cash flows from operating activities:                                               
   Net income                            $    964,799   $  4,269,032   $ 13,008,285 
   Adjustments to reconcile net income                                              
     to net cash provided by (used in)                                              
     operating activities:                                                          
       Depreciation and amortization          563,104        540,421      1,344,098 
       Decrease in allowance for                                                    
        contract adjustments                  (17,300)        (5,283)             0 
       Loss (gain) on sale of equipment       (20,084)        17,265         (9,177)
       (Increase) decrease in assets:                                               
        Contracts receivable                  (65,105)    (7,135,702)   (11,200,285)
        Costs and estimated earnings in                                             
          excess of billings                  329,641     (7,648,812)    (6,918,253)
        Inventories                           337,697     (3,520,404)       235,195 
        Amounts due from affiliates          (255,607)       686,774       (298,567)
        Prepaids and other assets              54,088        (12,947)        83,673 
        Deferred tax asset                       --             --       (2,192,933)
       Increase (decrease) in                                                       
         liabilities:                                                               
        Accounts payable                     (436,234)     5,304,183     (3,988,076)
        Accrued compensation                   64,255      1,081,171      2,247,057 
        Accrued insurance expense            (214,004)       526,813        919,145 
        Other accrued liabilities             166,102        465,766      2,147,816 
        Income tax payable                     19,098        184,919        813,010 
        Billings in excess of costs and                                             
          estimated earnings                 (276,306)       388,448      5,849,300 
                                         ------------   ------------   ------------ 
               Net cash provided by                                                 
                 (used in) operating                                                
                 activities                 1,214,144     (4,858,356)     2,040,288 
                                         ------------   ------------   ------------ 
Cash flows from investing activities:                                               
   Proceeds from sale of equipment             46,416          5,550         60,604 
   Purchase of property and                                                         
     equipment                               (481,533)    (1,958,303)    (4,071,968)
                                         ------------   ------------   ------------ 
               Net cash used in                                                     
                 investing activities        (435,117)    (1,952,753)    (4,011,364)
                                         ------------   ------------   ------------ 

 (Continued)

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 Statements of Cash Flows, Continued

                                                                [Download Table]


                                             1995           1996           1997     
                                         ------------   ------------   ------------ 
                                                                                    
Cash flows from financing activities:                                               
   Net principal borrowings (payments)                                              
     under revolving credit lines        $   (309,990)  $  4,353,843   $ (5,901,668)
   Principal payments on long-term debt      (502,735)          --         (625,000)
   (Adjustment of) stock purchase note                                              
     receivable by exchange of common         (74,258)          --             --   
     stock                                                                          
   Net proceeds from issuance of common          --        2,348,327     19,721,614 
     stock                                                                          
   Declared dividends (note 11)              (166,320)       (47,500)          --   
                                         ------------   ------------   ------------ 
               Net cash provided by                                                 
                 (used in) financing                                                
                 activities                (1,053,303)     6,654,670     13,194,946 
                                         ------------   ------------   ------------ 
               Net increase (decrease)                                              
                 in cash                     (274,276)      (156,439)    11,223,870 

Cash at beginning of year                     835,696        561,420        404,981 
                                         ------------   ------------   ------------ 
Cash at end of year                      $    561,420   $    404,981   $ 11,628,851 
                                         ============   ============   ============ 

See accompanying notes to financial statements.                                 

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 Notes to Financial Statements

December 31, 1995, 1996 and 1997

(1)   DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES    

DESCRIPTION OF BUSINESS                                             

   Modtech, Inc. (the Company) designs, manufactures, markets and installs
modular relocatable classrooms.                                     

The Company's classrooms are sold primarily to California school    
   districts. The Company also sells classrooms to the State of California
and to leasing companies, who lease the classrooms principally to   
California school districts.                                        

    Effective October 1, 1996, the Company acquired substantially all of the
      operating assets and assumed certain liabilities of Miller Structure, Inc.
- California. The Company leased the manufacturing facility from    
Miller Structure (note 18).                                         

USE OF ESTIMATES                                                    

The preparation of financial statements in conformity with generally
    accepted accounting principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the 
  financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those  
estimates.                                                          

FAIR VALUE OF FINANCIAL INSTRUMENTS                                 

  The carrying value of cash, contracts receivable and notes receivable,
    costs and estimated earnings in excess of billings on contracts, prepaid
and other assets, accounts payable, accrued liabilities, billings in
    excess of estimated earnings on contracts and notes payable are measured
at cost which approximates their fair value.                        

CONSTRUCTION CONTRACTS                                              

The accompanying financial statements have been prepared using the  
   percentage-of-completion method of accounting and, therefore, take into
      account the costs, estimated earnings and revenue to date on contracts not
      yet completed. Revenue recognized is that percentage of the total contract
   price that cost expended to date bears to anticipated final total cost,
based on current estimates of costs to complete. Most contracts are 
completed within one year.                                          

Contract costs include all direct material and labor costs and those
   indirect costs related to contract performance, such as indirect labor,
   supplies, tools, repairs, and depreciation costs. Selling, general, and
  administrative costs are charged to expense as incurred. At the time a
loss on a contract becomes known, the entire amount of the estimated
ultimate loss is recognized in the financial statements.            

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 MODTECH, INC.

Notes to Financial Statements, Continued

     The current asset, "Costs and Estimated Earnings in Excess of Billings on
   Contracts," represents revenues recognized in excess of amounts billed.
      The current liability, "Billings in Excess of Costs and Estimated Earnings
on Contracts," represents billings in excess of revenues recognized.

The current contra asset, "Allowance for Contract Adjustments," is  
      management's estimated adjustments to contract amounts due to disputes and
or litigation.                                                      

INVENTORIES                                                         

     Inventories are valued at the lower of cost or market. Cost is determined
    by the first-in, first-out (FIFO) method. Inventories, generally include
      only raw materials, as any work-in-process or finished goods are accounted
for in percentage of completion allocations.                        

PROPERTY AND EQUIPMENT                                              

    Property and equipment are stated at cost. Depreciation and amortization
is provided using the straight-line and accelerated methods over the
following estimated useful lives:                                   

                                                                [Download Table]

                                               
Leasehold improvements           15 to 31 years
Machinery and equipment            5 to 7 years
Trucks and automobiles             3 to 5 years
Office equipment                   5 to 7 years

   IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF

   The Company adopted the provisions of Statement of Financial Accounting
Standard No. 121 (SFAS No. 121), "Accounting for the Impairment of  
      Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," on January
1, 1996. This Statement requires that long-lived assets and certain 
  identifiable intangibles be reviewed for impairment whenever events or
      changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is 
     measured by a comparison of the carrying amount of an asset to future net
cash flows expected to be generated by the asset. If such assets are
     considered to be impaired, the impairment to be recognized is measured by
 the amount by which the carrying amount of the assets exceed the fair
      value of the assets. Assets to be disposed of are reported at the lower of
  the carrying amount of fair value less costs to sell. Adoption of this
Statement did not have a material impact on the Company's financial 
position, results of operations, or liquidity.                      

STOCK OPTION PLAN                                                   

     Prior to January 1, 1996, the Company accounted for its stock option plan
  in accordance with the provisions of Accounting Principles Board (APB)
   Opinion No. 25, "Accounting for Stock Issued to Employees," and related
   interpretations. As such, compensation expense would be recorded on the
  date of grant only if the current market price of the underlying stock
exceeded the exercise price. On January 1, 1996, the Company adopted
Statement of Financial Accounting Standard No. 123 (SFAS No. 123),  
"Accounting for Stock-Based Compensation," which permits entities to
recognize as expense over the vesting period the fair value of all  
     stock-based awards on the date of grant. Alternatively, SFAS No. 123 also
     allows entities to continue to apply the provisions of APB Opinion No. 25
and provide pro forma net income and pro forma earnings per share   
      disclosures for employee stock option grants made in 1995 and future years
as if the fair-value-based method defined in SFAS No. 123 had been  
applied. The Company                                                

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 MODTECH, INC.

Notes to Financial Statements, Continued

    has elected to continue to apply the provision of APB Opinion No. 25 and
provide the pro forma disclosure provisions of SFAS No. 123.        

EARNINGS PER SHARE                                                  

   Effective December 31, 1997, the Company adopted Statement of Financial
   Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128). This
statement replaces the previously reported primary and fully diluted
earnings per share with basic and diluted earnings per share. Unlike
      primary earnings per share, basic earnings per share excludes any dilutive
 effects of options. Diluted earnings per share is very similar to the
  previously reported fully diluted earnings per share. All earnings per
share amounts have been restated to conform to the SFAS No. 128     
requirements.                                                       

TAXES ON INCOME                                                     

Income taxes are accounted for under the asset and liability method.
 Deferred tax assets and liabilities are recognized for the future tax
    consequences attributable to differences between the financial statement
    carrying amounts of existing assets and liabilities and their respective
tax bases and tax credit carryforwards. Deferred tax assets and     
 liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
      expected to be recovered or settled. The effect on deferred tax assets and
      liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.                                   

RECLASSIFICATION                                                    

Certain amounts in the 1995 and 1996 financial statements have been 
reclassified to conform to the 1997 presentation.                   

(2)  CONTRACTS RECEIVABLE                                                     

Contracts receivable consisted of customer billings for:            

                                                                [Download Table]

                                     1996              1997      
                                 ------------       ------------ 
                                                                 
Completed contracts              $  7,722,927       $  9,226,114 
Contracts in progress               2,102,766          9,444,794 
Retentions                            897,541          3,249,357 
                                 ------------       ------------ 
                                   10,723,234         21,920,265 
Less allowance for contract                                      
  adjustments                        (413,373)          (410,119)
                                 ------------       ------------ 
                                 $ 10,309,861       $ 21,510,146 
                                 ============       ============ 

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 MODTECH, INC.

Notes to Financial Statements, Continued

(3)   COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON CONTRACTS           

Net costs and estimated earnings in excess of billings on contracts 
consisted of:                                                       

                                                                [Download Table]


                                             1996                 1997     
                                         -------------       ------------- 
                                                                           
Net costs and estimated earnings on                                        
   uncompleted contracts                 $  39,093,050       $ 105,465,154 
Billings to date                           (31,173,406)        (96,144,454)
                                         -------------       ------------- 
                                             7,919,644           9,320,700 

Net under (over) billed receivables                                        
   from completed contracts                     35,039            (297,064)
                                         -------------       ------------- 

                                         $   7,954,683       $   9,023,636 
                                         =============       ============= 

These amounts are shown in the accompanying balance sheets under the
following captions:                                                 

                                                                [Download Table]

                                                   1996             1997       
                                               ------------       ------------ 
                                                                               
Costs and estimated earnings in excess of                                      
   billings on uncompleted contracts           $  8,971,196       $ 15,832,818 
Costs and estimated earnings in excess of                                      
   billings on completed contracts                  131,537            188,168 
                                               ------------       ------------ 
Costs and estimated earnings in excess of                                      
   billings                                       9,102,733         16,020,986 
                                               ------------       ------------ 
Billings in excess of costs and estimated                                      
   earnings on uncompleted contracts             (1,051,552)        (6,512,121)
Billings in excess of costs and estimated                                      
   earnings on completed contracts                  (96,498)          (485,229)
                                               ------------       ------------ 
Billings in excess of costs and estimated                                      
   earnings                                      (1,148,050)        (6,997,350)
                                               ------------       ------------ 
                                               $  7,954,683       $  9,023,636 
                                               ============       ============ 

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Notes to Financial Statements, Continued

(4)   PROPERTY AND EQUIPMENT, NET                                               

Property and equipment, net consists of:                            

                                                                [Download Table]

                                       1996              1997      
                                   ------------       ------------ 
                                                                   
Leasehold improvements             $  7,580,830       $ 10,764,783 
Machinery and equipment               3,535,623          4,347,692 
Trucks and automobiles                  107,024            181,001 
Office equipment                        222,123            364,510 
Construction in progress                567,137            354,826 
                                   ------------       ------------ 
                                     12,012,737         16,012,812 
Less accumulated depreciation                                      
   and amortization                  (3,460,017)        (4,783,649)
                                   ------------       ------------ 

                                   $  8,552,720       $ 11,229,163 
                                   ============       ============ 

(5)   NOTE PAYABLE - REVOLVING CREDIT AGREEMENT                                 

     In 1995 the Company entered into a revolving loan commitment that expires
    in September 1998. The Company is entitled to borrow, from time to time,
    up to $20,000,000 with actual borrowings limited to specific percentages
of eligible contracts receivable, equipment and inventories. Actual 
   outstanding borrowings were $5,943,853 and $42,185 at December 31, 1996
and 1997, respectively. The interest rate is calculated at the prime
     lending rate (8.5% at December 31, 1997) plus three quarters of a percent
(.75%) per annum. The loan is secured by substantially all of the   
Company's assets.                                                   

(6)   LONG-TERM DEBT                                                            

Long-term debt consists of:                                         

                                                                [Download Table]

                                                1996             1997     
                                            -----------       ----------- 
                                                                          
Industrial development bonds                $ 1,999,952       $ 1,374,952 
Less current portion of long-term debt         (100,000)       (1,374,952)
                                            -----------       ----------- 

                                            $ 1,899,952       $      --   
                                            ===========       =========== 

   In June 1990, the Industrial Development Authority of the County of San
      Joaquin, California issued $4,200,000 of Industrial Development Bonds. The
net proceeds of approximately $4,000,000 were used to fund the      
  construction of a manufacturing facility on leased property located in
     Lathrop, California. The Company fully utilized the bonds at December 31,
      1991. The Company has executed financing statements covering the plant and
     equipment financed, as security for repayment of the bonds. The bonds are
     secured by a $1,299,275 letter of credit, and bear interest at an initial
rate of 6.75% and fluctuate weekly. The interest rate was 3.65% at  
December 31, 1997. The bond agreement was amended in 1997 requiring 
repayment of the balance by December 31, 1998.                      

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Notes to Financial Statements, Continued

(7)   INCOME TAXES                                                              

     The components of the 1995, 1996 and 1997 provision for Federal and state
income tax (expense) benefit computed in accordance with Financial  
Accounting Standard No. 109 are summarized below:                   

                                                                [Download Table]


                   1995              1996               1997    
                -----------       -----------       ----------- 
                                                                
Current:                                                        
   Federal      $   (14,210)      $   (90,483)      $(7,874,257)
   State             (4,888)         (117,148)       (2,021,309)
                -----------       -----------       ----------- 
                    (19,098)         (207,631)       (9,895,566)
Deferred:                                                       
   Federal             --                --           1,634,085 
   State               --                --             558,847 
                -----------       -----------       ----------- 

                $   (19,098)      $  (207,631)      $(7,702,634)
                ===========       ===========       =========== 

Income tax (expense) benefit attributable to income from operations 
      differed from the amounts computed by applying the U.S. Federal income tax
rate to pretax income from operations as a result of the following: 

                                                                [Download Table]


                                1995     1996     1997  
                               ------   ------   ------ 
                                                        
Taxes, U.S. statutory rates    (34.0%)  (34.0%)  (35.0%)
State taxes, less Federal                               
   benefit                        --       --     (4.5) 
Utilization of income tax                               
   benefit relating to                                  
   loss carryover               34.0     34.0      3.8  
Other                           (1.9)    (4.6)    (1.5) 
                               -----    -----    -----  
        Total taxes on income   (1.9%)   (4.6%)  (37.2%)
                               =====    =====    =====  

      Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.    
Significant components of the Company's deferred tax assets and     
liabilities as of December 31, 1996 and 1997 are as follows:        

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Notes to Financial Statements, Continued

                                                                [Download Table]

                                                 1996              1997      
                                             -----------         ----------- 
                                                                             
Deferred tax assets:                                                         
    Reserves and accruals not                                                
       recognized for income tax                                             
       purposes                              $ 1,114,987         $ 2,490,821 

    Net operating loss carryforwards             209,100                --   
    State taxes                                   75,065             474,653 
    Other                                         29,117             368,579 
                                             -----------         ----------- 

      Total gross deferred tax assets          1,428,269           3,334,053 

    Less valuation allowance                  (1,158,714)         (1,059,576)
                                             -----------         ----------- 

       Net deferred tax assets               $   269,555         $ 2,274,477 
                                             ===========         =========== 

Deferred tax liabilities:                                                    
    Revenue recognition                      $  (171,360)        $   (73,589)
    Prepaids                                     (98,195)             (7,955)
                                             -----------         ----------- 

       Totals gross deferred tax                                             
         liabilities                            (269,555)            (81,544)
                                             -----------         ----------- 

       Net deferred tax assets               $      --           $ 2,192,933 
                                             ===========         =========== 

These amounts have been presented in the balance sheet as follows:              

                                                                [Download Table]


                                            1996               1997   
                                     ---------------        ----------
                                                                      
Current deferred tax asset           $          --          $2,094,059
Noncurrent deferred tax asset                   --              98,874
                                     ---------------        ----------

   Total deferred tax assets         $          --          $2,192,933
                                     ===============        ==========

The net change in the total valuation allowance for the year ended  
December 31, 1997 was a decrease of $99,138.                        

     The Company's net operating loss carryforward amounted to $615,000 and $0
for the years ended December 31, 1996 and 1997, respectively.       

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 MODTECH, INC.

Notes to Financial Statements, Continued

(8)   TRANSACTIONS WITH RELATED PARTIES                                         

SALES                                                               

The Company sells modular classrooms to certain companies and       
    partnerships, where shareholders and partners are either shareholders or
      an officer of the Company. The buildings are then leased to various school
districts by the related companies and partnerships.                

The table below summarizes the classroom sales to related parties:  

                                                                [Download Table]

                                  1995               1996                1997   
                               ----------         ----------         -----------
                                                                                
Sales                          $  600,228         $1,452,868         $2,942,313 
Cost of goods sold                531,152          1,239,425          2,530,803 
Gross profit percentage             11.51%             14.69%             13.99%
                               ==========         ==========         ========== 

The related party purchases modular relocatable classrooms from the 
Company, upon standard terms and at standard wholesale prices.      

    Due from affiliates includes a portion of unpaid invoices as a result of
  the above transactions. As of December 31, 1996 and 1997 these amounts
   totaled $431,755 and $825,963, respectively. Additional amounts arising
from these transactions are included in the following captions:     

                                                                [Download Table]


                                                   1996                1997    
                                               -----------         ----------- 
                                                                               
Costs and estimated earnings in excess                                         
   of billings on uncompleted contracts        $   417,780         $ 1,406,897 
Billings in excess of costs and                                                
   estimated earnings on uncompleted                                           
   contracts                                       (12,572)            (65,405)
                                               ===========         =========== 

NOTE RECEIVABLE                                                     

     At December 31, 1996 and 1997, the Company had one note receivable from a
  related party partnership in the amount of $45,212. The partnership is
  composed of an officer and shareholders of the Company. The note bears
  interest at 10% and is payable upon demand. Unpaid interest related to
    this note, and two other related party notes with principal repayment in
    1996, totaled $322,312 at December 31, 1996 and $226,671 at December 31,
   1997 and is included in due from affiliates. The Company has negotiated
   payment terms on the accrued interest and is receiving regular interest
payments.                                                           

OPERATING LEASES                                                    

The Company leases various land at its manufacturing facilities. The
     present manufacturing facility leases are with the Company's Chairman and
   partnerships composed of an officer and shareholders. All related party
  leases require monthly payments which aggregate $37,000. In connection
with the lease at the Lathrop facility, the Company made an $83,000 
security deposit during 1990.                                       

      In 1994, due to declines in real estate values, the Company's Chairman and
partnerships reduced the monthly lease rates for the manufacturing  
      facilities to an aggregate of $37,000. The reduced rents will continue for
as long as real estate values remain depressed.                     

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 MODTECH, INC.

Notes to Financial Statements, Continued

      Future minimum lease payments under these leases are discussed in note 14.
Included in cost of sales is $435,000, $447,000 and $444,000 in rent
  expense paid to related parties for the years ended December 31, 1995,
1996, and 1997, respectively.                                       

(9)   401(k) PLAN                                                               

   The Company has a tax deferred savings plan under Section 401(k) of the
 Internal Revenue Code. Eligible employees can contribute up to 12% of
gross annual earnings. Company contributions, made on a 50% matching
     basis, are determined annually. The Company's contributions were $36,937,
$53,031 and $77,016 in 1995, 1996, and 1997, respectively.          

(10)  STOCK OPTIONS                                                             

      In 1989, the Company's shareholders approved a stock option plan (the 1989
Plan). The 1989 Plan provides for the grant of both incentive and   
   non-qualified options to purchase up to 400,000 shares of the Company's
common stock. The incentive stock options can be granted only to    
   employees, including officers of the Company, while non-qualified 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.                                            

The exercise price of the stock options cannot be less than the fair
    market at the date of the grant (110% if granted to an employee who owns
10% or more of the common stock).                                   

    Stock options outstanding under the 1989 Plan are summarized as follows:

                                                                [Download Table]


                                          WEIGHTED    
                                           AVERAGE    
                          SHARES        EXERCISE PRICE
                         --------         ---------   
                                                      
December 31, 1994         400,000         $    1.92   
   Granted                 45,000              2.125  
   Terminated             (45,000)             3.00   
                         --------         ---------   

December 31, 1995         400,000              1.82   
   Exercised             (114,500)             1.87   
                         --------         ---------   

December 31, 1996         285,500              1.82   
   Terminated              (1,000)             1.50   
   Exercised              (78,450)             2.12   
                         --------         ---------   

December 31, 1997         206,050         $    1.70   
                         ========         =========   

  As of December 31, 1997, 142,450 options are vested and exercisable at
   prices ranging from $.625 to $10.00 per share under the 1989 Plan. With
 respect to options issued pursuant to the Del-Tec acquisition, 50,000
      options were exercised during 1997 and 75,000 options remained outstanding
as of December 31, 1997.                                            

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Notes to Financial Statements, Continued

In March of 1994, pursuant to a vote of the Board of Directors, a   
  nonqualified option plan was approved (the March 1994 Plan). The March
     1994 Plan provides for the grant of 200,000 options to purchase shares of
      the Company's common stock. The exercise price of the stock options cannot
be less than the fair market at the date of the grant. All of these 
options were granted during 1994.                                   

     Stock options outstanding at December 31, 1996, under the March 1994 Plan
are summarized as follows:                                          

                                                                [Download Table]

                                          WEIGHTED    
                                           AVERAGE    
                          SHARES        EXERCISE PRICE
                         --------       --------------
                                                      
December 31, 1994         200,000         $   1.22    
   Exercised                 --               --      
                         --------         --------    
December 31, 1995         200,000             1.22    
   Exercised              (15,000)            1.19    
                         --------         --------    
December 31, 1996         185,000             1.22    
   Exercised              (15,900)            1.40    
                         --------         --------    
December 31, 1997         169,100         $   1.21    
                         ========         ========    

  As of December 31, 1997, 126,600 options are vested and exercisable at
   prices ranging from $1.19 to $1.50 per share under the March 1994 Plan.

     In May of 1994, in conjunction with the offering of preferred stock (note
    11) the Board of Directors voted and approved an additional stock option
      plan (the May 1994 Plan). The May 1994 Plan provides for the grant of both
   incentive and non-qualified options to purchase up to 500,000 shares of
  the Company's common stock. The incentive stock options can be granted
     only to employees, including officers of the Company, while non-qualified
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. The exercise price of the stock
      options cannot be less than the fair market at the date of the grant (110%
if granted to an employee who owns 10% or more of the common stock).

Stock options outstanding under the May 1994 Plan, are summarized as
follows:                                                            

                                                                [Download Table]


                                            WEIGHTED  
                                            AVERAGE   
                                            EXERCISE  
                          SHARES            PRICE     
                         --------         ------------
                                                      
December 31, 1994         285,000         $   1.50    
   Granted                 35,000             2.125   
   Terminated             (35,000)            1.50    
                         --------         ------------

December 31, 1995         285,000             1.60    
   Granted                205,000             2.59    
   Terminated             (37,500)            1.50    
   Exercised              (12,500)            1.50    
                         ========         ============

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MODTECH, INC. 

Notes to Financial Statements, Continued

                                                                [Download Table]


                                                      
December 31, 1996         440,000             2.06    
   Granted                  7,500            19.50    
   Exercised               (9,375)            3.86    
                         --------         ------------
December 31, 1997         438,125         $   2.32    
                         ========         ============

  As of December 31, 1997, 216,675 options are vested and exercisable at
 prices ranging from $1.50 to $4.50 per share under the May 1994 Plan.

  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.
The 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).                                                      

 Stock options outstanding under the July 1996 Plan, are summarized as
follows:                                                            

                                                                [Download Table]


                                          WEIGHTED   
                                          AVERAGE    
                          SHARES       EXERCISE PRICE
                         --------      --------------
                                                     
December 31, 1995            --        $     --      
   Granted                110,000           4.50     
                         --------      --------------

December 31, 1996         110,000           4.50     
   Granted                263,333           8.75     
   Terminated              (4,202)         12.62     
   Exercised              (16,798)          4.89     
                         --------      --------------

December 31, 1997         352,333      $    7.56     
                         ========      ==============

 As of December 31, 1997, 81,500 options are vested and exercisable at
   prices ranging from $4.50 to $12.62 per share under the July 1996 Plan.

All stock options have a maximum term of ten years and become fully 
 exercisable in accordance with a predetermined vesting schedule which
varies.                                                             

     The per share weighted-average fair value of stock options granted during
 1996 and 1997 was $1.94 and $9.05, respectively, on the date of grant
using the Black Scholes option-pricing model with the following     
      weighted-average assumptions; 1995 - expected dividend yield 0%, risk-free
     interest rate of 7.80%, volatility factor of 72.66%, and expected life of
     four years; 1996 - expected dividend yield 0%, risk-free interest rate of
   7.80%, volatility factor of 72.66%, and an expected life of four years;
1997 - expected dividend yield 0%, risk-free interest rate of 7.80%,
volatility factor of 73.06%, and an expected life of four years. The
Company applies APB Opinion No. 25 in accounting for its Plans and, 
accordingly, no compensation cost has been recognized for its stock 
options in the financial statements. Had the                        

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 MODTECH, INC.

Notes to Financial Statements, Continued

     Company determined compensation cost based on the fair value at the grant
   date for its stock options under SFAS No. 123, the Company's net income
would have been reduced to the pro forma amounts indicated below:   

                                                                [Download Table]


                           1995          1996            1997     
                       -----------  -------------   --------------
                                                                  
Net Income                                                        
    As Reported        $   964,799  $   4,269,032   $   13,008,285
    Pro Forma              862,133      3,657,659       12,044,970
                       ===========  =============   ==============
Basic earnings per                                                
   share                                                          
    As Reported        $      0.25  $        0.77   $         1.47
    Pro forma                 0.27           0.67             1.36
                       ===========  =============   ==============
Fully diluted                                                     
   earnings per share                                             
    As Reported        $      0.14  $        0.47  $          1.31
    Pro Forma                 0.13           0.40             1.22
                       ===========  =============   ==============

     Pro forma net income reflects only options granted since January 1, 1995.
 Therefore, the full impact of calculating compensation cost for stock
   options under SFAS No. 123 is not reflected in the pro forma net income
   amounts presented above because compensation cost is reflected over the
   options' vesting period of four years and compensation cost for options
granted prior to January 1, 1995 is not considered.                 

(11)  5% CONVERTIBLE PREFERRED STOCK                                            

   In May of 1994, in a private transaction without registration under the
Securities Act, the Company sold 2,850,000 shares of Series A 5%    
Convertible Preferred Stock. The Preferred Stock was sold at        
$1.00 per share resulting in proceeds before costs and expenses of  
$2,850,000. All of the Series A 5% Convertible Preferred Stock was  
    converted into Common Stock during 1996. In connection with this private
placement of the Series A 5% Preferred Stock, the shareholders were 
   granted warrants to purchase an aggregate of 1,385,000 shares of common
stock at $1.50 (subject to adjustment in certain events), as well as
     warrants to purchase an aggregate of 1,375,000 additional shares at $2.00
   per share (subject to adjustments in certain events). All warrants were
either exercised or expired during 1996. Dividends in the amount of 
    $166,320 and $47,500 were declared for the years ended December 31, 1995
and 1996, respectively.                                             

(12)  MAJOR CUSTOMER                                                            

The Company had sales to two major customers which represented the  
following percentage of net sales:                                  

                                                                [Download Table]


                                1995         1996         1997  
                             ---------     ---------    --------
                                                                
Customer A                       9%           13%           4%  
Customer B                       0%            4%          11%  
                             ========      ========     ========

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 MODTECH, INC.

Notes to Financial Statements, Continued

(13)  SUPPLEMENTAL CASH FLOW DISCLOSURES                                        

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                   

                                                                [Download Table]


                                   1995       1996         1997   
                                ----------  ----------  ----------
                                                                  
Cash paid during the year for:                                    
   Interest                     $  248,443  $  470,248  $1,058,256
                                ==========  ==========  ==========
   Income taxes                 $     --    $   24,320  $8,400,000
                                ==========  ==========  ==========

SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES:          

   During 1995, $273,594 of notes receivable from officer shareholders was
 repaid by delivery of 155,988 shares of common stock at market value.

    During 1996, 2,850,000 shares of Series A 5% convertible Preferred Stock
    were converted into 2,850,000 shares of common stock, in accordance with
the private placement (note 11).                                    

(14)  COMMITMENTS AND CONTINGENCIES                                             

LAND LEASES                                                         

      The Company has entered into agreements to lease land at its manufacturing
      facilities in Perris and Lathrop, California. Minimum lease payments under
these noncancelable operating leases for the next five years and    
thereafter are as follows:                                          

                                                                [Download Table]


                                       
Year ending December 31:               
   1998                     $   569,000
   1999                         515,000
   2000                         513,000
   2001                         444,000
   2002                         444,000
   Thereafter                 6,002,000
                            -----------

                            $ 8,487,000
                            ===========

Of the $8,487,000 in future rental payments, substantially all is   
      to related parties (note 8). Rent expense for the years ended December 31,
  1995, 1996 and 1997 was $435,000, $447,000 and $522,000, respectively.

The manufacturing facility in Patterson, California was purchased in
January 1998 (note 18), and is not included above.                  

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 MODTECH, INC.

Notes to Financial Statements, Continued

(15)  SECONDARY STOCK OFFERING                                                  

     In November 1997 the Company sold 1,000,000 shares of common stock at $20
  per share. The net proceeds to the Company were $18,600,000, after the
  deduction of underwriting discounts, commissions and offering expenses
paid by the Company.                                                

   The Company used a portion of the proceeds to repay amounts outstanding
      under the Company's $20,000,000 revolving loan agreement with a bank (note
  5). The remaining net proceeds are expected to be used as additions to
working capital.                                                    

(16)  WARRANTY                                                                  

   The Company provides a one year warranty relating to the workmanship on
their modular units. To date, warranty costs incurred on completed  
contracts have been immaterial.                                     

(17)  PENDING CLAIMS AND LITIGATION                                             

   In the normal course of business, the Company has been named in several
   claims and lawsuits arising out of the failure to pay subcontractors or
      for alleged breach of assigned security. In the opinion of management, the
  outcome of the claims will not have a material effect on the Company's
financial position or results of operations.                        

(18)  SUBSEQUENT EVENTS                                                         

      The manufacturing facility in Patterson, California was leased from Miller
Structures, Inc. from October 1996 through December 1997. The lease 
     payments are included in rent expense. The Company purchased the facility
in January 1998.                                                    

      On March 2, 1998, the Company announced that it had signed an agreement to
   purchase a majority interest in Trac Modular Manufacturing, Inc (Trac).
   Trac is based in Glendale, Arizona. Subsequent to the completion of due
diligence, the transaction closed on March 20, 1998.                

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 Schedule II

 MODTECH, INC.

 Valuation and Qualifying Accounts

 Years ended December 31, 1995, 1996, and 1997

                                                        [Enlarge/Download Table]

                                       BALANCE AT                                                  
                                        BEGINNING        CHARGED                      BALANCE AT   
            DESCRIPTION                  OF YEAR        TO EXPENSE     DEDUCTIONS     END OF YEAR  
------------------------------------  --------------  --------------   ----------   ---------------
Allowance for contract adjustments:                                                                

                                                                                                   
Year ended December 31, 1995             $425,390     $          --      $(17,300)      $408,090   
                                         ========     ===============    ========       ========   
Year ended December 31, 1996             $408,090     $         5,866    $   (583)      $413,373   
                                         ========     ===============    ========       ========   
Year ended December 31, 1997             $413,373     $          --      $ (3,254)      $410,119   
                                         ========     ===============    ========       ========   

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 MODTECH, INC.

 Condensed Consolidated Balance Sheets

 (Unaudited)

                                                        [Enlarge/Download Table]

                                                                 December 31,        June 30,   
                                                                     1997              1998     
------------------------------------------------------------------------------------------------
                                                                    Audited          Unaudited  
------------------------------------------------------------------------------------------------
                                                                                                
                                     Assets                                                     

Current assets                                                                                  
   Cash                                                           $11,629,000        $25,426,000
   Contracts receivable, net, including costs in excess of                                      
     billings of $16,021,000 and $16,818,000 in 1997 and           37,531,000         40,825,000
     1998, respectively                                                                         
   Inventories                                                      3,932,000          1,959,000
   Due from affiliates                                              1,098,000            504,000
   Deferred tax asset                                               2,094,000          2,094,000
   Other current assets                                               310,000            228,000
                                                                  -----------        -----------

         Total current assets                                      56,594,000         71,036,000
                                                                  -----------        -----------

Property and equipment, net                                        11,229,000         12,266,000

Other Assets                                                                                    
   Deferred tax asset                                                  99,000             99,000
   Other assets                                                       298,000            135,000
                                                                  -----------        -----------

                                                                  $68,220,000        $83,536,000
                                                                  ===========        ===========

                      Liabilities and Shareholders' Equity                                      

Current liabilities                                                                             
   Accounts payable and accrued liabilities                       $11,763,000        $17,094,000
   Billings in excess of costs                                      6,997,000          9,469,000
   Current portion of long-term debt                                1,417,000                 --
                                                                  -----------        -----------

         Total current liabilities                                 20,177,000         26,563,000

Stockholders Equity                                                                             
  Common stock, shares authorized, $.01 par.  Authorized                                        
   20,000,000 shares; issued and outstanding 9,820,000                                          
   and 9,856,000 in 1997 and 1998, respectively                        98,000            100,000
   Additional paid-in capital                                      39,331,000         39,531,000
   Retained earnings                                                8,614,000         17,342,000
                                                                  -----------        -----------

         Total shareholders' equity                                48,043,000         56,973,000
                                                                  -----------        -----------

                                                                  $68,220,000        $83,536,000
                                                                  ===========        ===========

The accompanying notes are an integral part of these financial statements.    

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 MODTECH, INC.

 Condensed Consolidated Statements of Income

 (Unaudited)

                                                        [Enlarge/Download Table]

                                       Three Months Ended                   Six Months Ended          
                                           June 30,                              June 30,             
                                    1997               1998               1997              1998      
----------------------------------------------------------------------------------------------------- 

                                                                                                      
Net sales                       $ 33,093,000       $ 42,482,000       $ 58,906,000       $ 75,876,000 
Cost of goods sold                26,251,000         32,333,000         47,688,000         58,675,000 
                                ------------       ------------       ------------       ------------ 

         Gross profit              6,842,000         10,149,000         11,218,000         17,201,000 

Selling, general, and                                                                                 
   administrative expenses         1,144,000          1,634,000          2,182,000          2,741,000 
                                ------------       ------------       ------------       ------------ 

         Income from                                                                                  
           operations              5,698,000          8,515,000          9,036,000         14,460,000 
                                ------------       ------------       ------------       ------------ 

Other income (expense):                                                                               
   Interest income                                                                                    
     (expense), net                 (330,000)           183,000           (549,000)           389,000 
   Other - net                        48,000              8,000             64,000             15,000 
                                ------------       ------------       ------------       ------------ 
                                    (282,000)           191,000           (485,000)           404,000 
                                ------------       ------------       ------------       ------------ 

         Income before                                                                                
           income taxes            5,416,000          8,706,000          8,551,000         14,864,000 

Income taxes                      (2,133,000)        (3,339,000)        (3,356,000)        (5,649,000)
                                ------------       ------------       ------------       ------------ 

         Net income             $  3,283,000          5,367,000          5,195,000       $  9,215,000 
                                ============       ============       ============       ============ 

Basic earnings per share        $       0.38               0.54               0.60       $       0.93 
                                ============       ============       ============       ============ 

Weighted-average shares                                                                               
   outstanding                     8,670,000          9,856,000          8,670,000          9,856,000 
                                ============       ============       ============       ============ 

Diluted earnings per share      $       0.35               0.49               0.55       $       0.83 
                                ============       ============       ============       ============ 

Weighted-average shares                                                                               
   outstanding                     9,370,000         11,000,000          9,370,000         11,100,000 
                                ============       ============       ============       ============ 

The accompanying notes are an integral part of these financial statements 

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MODTECH, INC. AND SUBSIDIARIES

 Condensed Consolidated Statements of Cash Flows

 (Unaudited)

                                                        [Enlarge/Download Table]

                                                                    Six Months Ended         
                                                                        June 30,             
                                                                 1997               1998     
-------------------------------------------------------------------------------------------- 

                                                                                             
Cash flows from operating activities:                                                        
   Net income                                                $  5,195,000       $  9,215,000 
   Adjustments to reconcile net income to net cash                                           
     provided by (used in) operating activities:                                             
       Depreciation and amortization                              472,000            570,000 
       (Increase) decrease in operating assets and                                           
        liabilities:                                                                         
        Contracts receivable                                  (18,192,000)        (3,294,000)
        Inventories                                            (3,685,000)         1,973,000 
        Due from affiliates                                      (132,000)           594,000 
        Other assets                                              (27,000)           245,000 
        Deferred tax asset                                             --                 -- 
        Accounts payable and accrued liabilities                6,093,000          5,331,000 
        Billings in excess of costs                             5,703,000          2,472,000 
                                                             ------------       ------------ 

               Net cash provided by (used in) operating                                      
                 activities                                    (4,573,000)        17,106,000 
                                                             ------------       ------------ 

Cash flows from investing activities:                                                        
   Proceeds from sale of equipment                                 12,000                 -- 
   Purchase of property and equipment                            (508,000)        (1,607,000)
                                                             ------------       ------------ 
               Net cash used in investing activities             (496,000)        (1,607,000)
                                                             ------------       ------------ 

Cash flows from financing activities:                                                        
   Net principal borrowings (payments) under revolving                                       
     credit lines                                               7,288,000                 -- 
   Principal payments on long-term debt                                --         (1,417,000)
   Investment in affiliate                                             --           (307,000)
   Conversion of stock options                                     79,000             22,000 
                                                             ------------       ------------ 
Net cash provided by (used in) financing activities             7,367,000         (1,702,000)
                                                             ------------       ------------ 

Net increase in cash                                            2,298,000         13,797,000 

Cash at beginning of period                                       405,000         11,629,000 
                                                             ------------       ------------ 

Cash at end of period                                        $  2,703,000       $ 25,426,000 
                                                             ============       ============ 

The accompanying notes are an integral part of these financial statements 

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 MODTECH, INC.

 NOTES TO CONDENSED FINANCIAL STATEMENTS

 June 30, 1998

1) Management Opinion                                                           

  In the opinion of management, the condensed financial statements reflect
     all adjustments (which include only normal recurring adjustments) necessary
  to present fairly the financial position and results of operations as of
and for the periods presented.                                        

    The results of operations for the three months ended June 30, 1998 are not
  necessarily indicative of the results to be expected for the full fiscal
year.                                                                 

   Certain statements in this report constitute "forward looking statements"
     within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Such forward - looking    
     statements involve known and unknown risks, uncertainties and other factors
 which may cause the actual results, performance, or achievements of the
     Company to be materially different from any future results, performance, or
  achievements, expressed or implied by such forward - looking statements.

2) Taxes on Income                                                              

Income taxes are accounted for under the asset and liability method.  
Deferred tax assets and liabilities are recognized for the future tax 
  consequences attributable to differences between the financial statement
  carrying amounts of existing assets and liabilities and their respective
     tax bases and tax credit carryforwards. Deferred tax assets and liabilities
     are measured using enacted tax rates expected to apply to taxable income in
     the years in which those temporary differences are expected to be recovered
   or settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the  
enactment date.                                                       

3) Earnings Per Share                                                           

 Effective December 31, 1997, the Company adopted Statement of Financial
 Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128). This
statement replaces the previously reported primary and fully diluted  
earnings per share with basic and diluted earnings per share. Unlike  
    Primary earnings per share, basic earnings per share excludes any dilutive
   effects of options and convertible securities. Diluted earnings per share
is very similar to the previously reported fully diluted earnings per 
     share. All earnings per share amounts for all periods have been restated to
conform to the SFAS No. 128 requirement.                              

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 Item 2. Management's Discussion and Analysis of Financial Condition

 and Results of Operations

Results of Operations                                                           

     The following table sets forth certain items in the Condensed Statements of
Income as a percent of net sales.                                     

                                                        [Enlarge/Download Table]

                                    Percent of Net Sales             Percent of Net Sales     
                                    --------------------             --------------------     
                                     Three Months Ended                Six Months Ended       

                                           June 30,                         June 30,          
                                      1997          1998               1997           1998    
                                --------------------------------------------------------------
                                                                                              
Net sales                            100.0%         100.0%            100.0%          100.0%  

Gross profit                          20.7           23.9              19.0            22.7   

Selling, general and                   3.5            3.9               3.7             3.6   
  administrative                                                                              

Income from operations                17.2           20.0              15.3            19.1   

Interest income (expense), net        (1.0)           0.4              (0.9)            0.5   

Income before taxes on income         16.4           20.5              14.5            19.6   

Net sales for the three and six months ended June 30, 1998, increased by        
$9,389,000 or 28.4% and $16,970,000 or 28.8%. The increase in revenue is        
attributable to the growth in the school population, the Class Size Reduction   
program and a diversification of our product line.                              

Gross profit as a percentage of net sales for the three and six months ended    
June 30, 1998 increased to 23.9% and 22.7% from 20.7% and 19.0% for the same    
period in 1997. The increase was due principally to the utilization of the      
manufacturing facilities and the realization of manufacturing efficiencies.     

Selling, general and administrative expenses increased for the three and six    
months ended June 30, 1998 by $490,000 and $559,000, an increase of 42.8% and   
25.6%. The increase is primarily due to the increase in sales expense as well as
the increase in the number of employees. As a percentage of sales, selling,     
general, and administrative expenses for the three and six months ended June 30,
are 3.9% and 3.6% for 1998. The percentages were 3.5% and 3.7% for the same     
period in 1997.                                                                 

Due to a higher cash balance and reduced line of credit borrowing, the six      
months ended June 30, 1998 reflects net interest income of $389,000 compared to 
net interest expense of $549,000 for the same period in 1997, a favorable       
increase of $938,000 or 170.9%.                                                 

On March 20, 1998, the Company purchased an 80% interest in Trac Modular        
Manufacturing, Inc (Trac). The purchase price approximated the fair value of net
assets on the purchase date. Trac is based in Glendale, Arizona. The financial  
activity for this subsidiary has been included in the Company's financial       
statements for the second quarter of 1998.                                      

INFLATION                                                                       

In the past, the Company has not been adversely affected by inflation, because  
it has been generally able to pass along to its customers increases in the costs
of labor and materials.                                                         

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LIQUIDITY AND CAPITAL RESOURCES                                                 

To date, the Company has generated cash to meet its needs from operations, bank 
borrowings and public offerings. At June 30, 1998, the Company had $25,426,000  
in cash. During the six months ended June 30, 1998, the Company provided cash in
it's operating activities.                                                      

The Company has a revolving loan commitment that will expire September 1998. The
Company is entitled to borrow, from time to time up to $20,000,000 with actual  
borrowings limited to specified percentages of eligible accounts receivables,   
equipment and inventories. On June 30, 1998, no amounts were outstanding under  
this loan.                                                                      

During March, 1998, an officer of the Company exercised 35,000 options for a    
total of $22,000.                                                               

Management believes that the Company's existing product lines and manufacturing 
capacity will enable the Company to generate sufficient cash through operations,
supplemented by periodic use of its existing bank line of credit, to finance the
Company's business at current levels over the next 12 months. Additional cash   
resources may be required if the Company is able to expand its business beyond  
current levels. For example, it will be necessary for the Company to construct  
or acquire additional manufacturing facilities in order for the Company to      
compete effectively in new market areas or states which are beyond a 300 mile   
radius from one of its production facilities. The construction or acquisition of
new facilities would require significant additional capital. For these reasons, 
among others, the Company may need additional debt or equity financing in the   
future. There can be, however, no assurance that the Company will be successful 
in obtaining such additional financing, or that any such financing will be      
available on terms acceptable to the Company.                                   

NEW ACCOUNTING PRONOUNCEMENTS                                                   

In June 1997, the FASB issued Statement of Financial Accounting Standards No.   
130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes        
standards for the reporting and display of comprehensive income and its         
components (revenues, expenses, gains and losses) in a full set of              
general-purpose financial statements. SFAS 130 requires all items that are      
required to be recognized under accounting standards as components of           
comprehensive income to be reported in a financial statement that is displayed  
with the same prominence as other financial statements. SFAS 130 does not       
require a specific format for that financial statement but requires that an     
enterprise display an amount representing total comprehensive income for the    
period covered by that financial statement. SFAS 130 requires an enterprise to  
(a) classify items of other comprehensive income by their nature in a financial 
statement and (b) display the accumulated balance of other comprehensive income 
separately from retained earnings and additional paid-in capital in the equity  
section of a statement of financial position. SFAS 130 is effective for fiscal  
years beginning after December 15, 1997. Management has determined the adoption 
of SFAS 130 will not have a material impact on the Company's combined financial 
statement or results of operations.                                             

In June 1997, the FASB issued Statement of Financial Accounting Standards No.   
131, "Disclosures about Segments of an Enterprise and Related Information"      
("SFAS 131"). SFAS 131 establishes standards for public business enterprises to 
report information about operating segments in annual financial statements and  
requires that those enterprises report selected information about operating     
segments in interim financial reports issued to shareholders. It also           
establishes standards for related disclosures about products and services,      
geographic areas and major customers. This statement supersedes FASB Statement  
No. 14, "Financial Reporting for Segments of a Business Enterprise", but retains
the requirement to report information about major customers. It amends FASB     
Statement No. 94, "Consolidation of All Majority-Owned Subsidiaries", to remove 
the special disclosure requirements for previously unconsolidated subsidiaries. 
SFAS 131 requires, among other items, that a public business enterprise report a
measure of segment profit or loss, certain specific revenue and expense items,  
and segment assets, information about the revenues derived from the enterprise's
products or services, and major customers. SFAS 131 also requires that the      
enterprise report descriptive information about the way that the operating      
segments were determined and the products and services provided by the operating
segments. SFAS 131 is effective for financial statements for periods beginning  
after December 15, 1997. In the initial year of application, comparative        
information for earlier years is to be restated. SFAS 131 need not be applied to
interim financial statements in the initial year of its application, but        
comparative information for interim periods in the initial year of application  
is to be reported in financial statements for interim periods in the second year
of application. Management has not determined whether the adoption of SFAS 131  
will have a material impact on the Company's segment reporting.                 

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In February 1998, the FASB issued Statement of Financial Accounting Standards   
No. 132, "Employers' Disclosures about Pensions and Other Postretirement        
Benefits" ("SFAS 132"). SFAS 132 revises employers' disclosures about pension   
and other postretirement benefit plans. It does not change the measurement or   
recognition of those plans. SFAS 132 is effective for fiscal years beginning    
after December 15, 1997. SFAS 132, requiring only additional information        
disclosures, is effective for the Company's fiscal year ending December 31,     
1998.                                                                           

In June 1998, the FASB issued Statement of Financial Accounting Standards No.   
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS      
133"). SFAS 133 establishes accounting and reporting standards for derivative   
instruments, including certain derivative instruments embedded in other         
contracts, and hedging activities. SFAS 133 is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. Application of SFAS 133 is not   
expected to have a material impact on the Company's financial position, results 
of operations or liquidity.                                                     

YEAR 2000                                                                       

Many computer programs use only the last two digits of a year to store or       
process dates. This is the case with the accounting program used by the Company.
As a result, the programs may treat dates after 1999 as earlier than dates      
before 2000. This could adversely affect routines such as calculating           
depreciation or aging accounts receivable. The Company is in the process of     
correcting this defect in the Company's program, and the Company expects the    
defect with be corrected without material cost before the year 2000. The        
Company's customers, suppliers and service providers may use computer programs  
with similar defects which, to the extent not corrected, could adversely affect 
the Company's operations, such as the receipt of supplies, services, purchase   
orders and payments of accounts receivable.                                     

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of                                                          
SPI Holdings, Inc.:                                                         

We have audited the accompanying consolidated balance sheets of SPI HOLDINGS,   
INC. (a Colorado corporation) as of January 31, 1997, March 27, 1997 and March  
31, 1998, and the related consolidated statements of income, shareholders'      
equity and cash flows for the years ended January 31, 1996 and 1997, the period 
from February 1, 1997 to March 27, 1997, and the year ended March 31, 1998.     
These consolidated financial statements are the responsibility of the Company's 
management. Our responsibility is to express an opinion on these consolidated   
financial statements based on our audits.                                       

We conducted our audits in accordance with generally accepted auditing          
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the consolidated financial statements are    
free of material misstatement. An audit includes examining, on a test basis,    
evidence supporting the amounts and disclosures in the financial statements. An 
audit also includes assessing the accounting principles used and significant    
estimates made by management, as well as evaluating the overall financial       
statement presentation. We believe that our audits provide a reasonable basis   
for our opinion.                                                                

In our opinion, the consolidated financial statements referred to above present 
fairly, in all material respects, the financial position of SPI Holdings, Inc.  
as of January 31, 1997, March 27, 1997 and March 31, 1998 and the results of its
operations and its cash flows for the years ended January 31, 1996 and 1997, the
period from February 1, 1997 to March 27, 1997 and the year ended March 31, 1998
in conformity with generally accepted accounting principles.                    

                                           ARTHUR ANDERSEN LLP

Orange County, California                                                       
May 22, 1998                                                                    

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SPI HOLDINGS, INC.

 CONSOLIDATED BALANCE SHEETS
($ In Thousands)

ASSETS

                                                        [Enlarge/Download Table]

                                                      Predecessor(1)          Company  
                                             -----------------------------   ----------
                                             January 31,         March 27,   March 31, 
                                                1997               1997        1998    
                                             ----------         ----------   ----------
                                                                                       
CURRENT ASSETS:                                                                        
  Cash                                         $  1,243           $  1,991    $  1,119 
  Accounts receivable, net of allowance                                                
    for doubtful accounts of $26 at                                                    
    January 31, 1997 and March 31, 1997                                                
    and $122 at March 31, 1998,                                                        
    respectively                                  2,819              3,320       4,034 
  Accounts receivable from former officers        1,380              1,433          -- 
  Inventories                                       918              1,215       2,761 
  Notes receivable from related parties             470                540          -- 
  Interest receivable                                48                 --          -- 
  Income tax receivable                              --                 --         166 
  Deferred tax asset                                 25                 25         152 
  Prepaid expenses                                    2                 14         380 
                                             ----------         ----------   ----------
          Total current assets                    6,905              8,538       8,612 
                                             ----------         ----------   ----------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS,                                                  
  at cost:                                                                             
    Furniture, fixtures and equipment               338                338       1,194 
    Vehicles                                        239                215          49 
    Leasehold improvements                          375                380         390 
    Lease assignment and interest                    --                 --         566 
                                             ----------         ----------   ----------
                                                    952                933       2,199 
  Less--Accumulated depreciation                   (219)              (231)       (330)
                                             ----------         ----------   ----------
                                                    733                702       1,869 
                                             ----------         ----------   ----------
OTHER ASSETS:                                                                          
  Deposits                                           10                 10          40 
  Deferred tax asset                                 --                 --          50 
  Goodwill, net of accumulated amortization                                            
    of $239 at March 31, 1998                        --                 --      11,934 
  Deferred loan fees, net of accumulated                                               
    amortization of $123 at March 31, 1998           --                 --         638 
  Covenants not to compete, net of                                                     
    accumulated amortization of $575 at                                                
    March 31, 1998                                   --                 --       2,625 
                                             ----------         ----------   ----------
          Total assets                       $    7,648         $    9,250   $   25,768
                                             ==========         ==========   ==========

(1)    Effective March 28, 1997, SPI Holdings, Inc. acquired Standard Pacific   
Industries, Inc. ("the Predecessor"). Because the acquisition was 
accounted for as a purchase, the post-acquisition period is not   
comparable to the pre-acquisition periods.                        

The accompanying notes are an integral part of these consolidated balance       
sheets.                                                                         

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SPI HOLDINGS, INC.

 CONSOLIDATED BALANCE SHEETS
($ In Thousands)

LIABILITIES AND SHAREHOLDERS' EQUITY

                                                        [Enlarge/Download Table]


                                                    Predecessor(1)          Company    Pro forma   
                                             ----------------------------  ---------  shareholders'
                                                                                        equity at  
                                             January 31,        March 27,  March 31,     at March  
                                                1997              1997        1998       31, 1998  
                                             -----------        ---------  ---------     --------  
                                                                                                   
CURRENT LIABILITIES:                                                                   (unaudited) 

  Accounts payable                            $  1,869          $  2,021    $  2,973               
  Accrued liabilities                              264               533       1,537               
  Revolving line of credit                          --                --         600               
  Current portion of long-term debt                 10                --       2,332               
  Income taxes payable                           1,091             1,437          --               
                                              --------          --------    --------               
          Total current liabilities              3,234             3,991       7,442               
                                              --------          --------    --------               
LONG-TERM LIABILITIES:                                                                             
  Deferred tax liability                            21                21          --               
  Long-term debt, net of current portion            13                --      11,624               
                                              --------          --------    --------               
          Total long-term liabilities               34                21      11,624               
                                              --------          --------    --------               
          Total liabilities                      3,268             4,012      19,066               
                                              --------          --------    --------               
COMMITMENTS AND CONTINGENCIES (Note 11)                                                            

SHAREHOLDERS' EQUITY:                                                                              
Convertible preferred stock-                                                                       
  Class A-1, stated value $2.715 per share:                                                        
    1,500,000 shares authorized, 994,335                                                           
    shares issued and outstanding at                                                               
    March 31, 1998                                  --                --       2,628     $     --  
  Class A-2, stated value $2.863 per share:                                                        
    1,000,000 shares authorized, 272,051                                                           
    shares issued and outstanding at                                                               
    March 31, 1998                                  --                --         725           --  
  Class A-3 warrants, no par value: 400,000                                                        
    shares authorized, no shares issued at                                                         
    March 31, 1998                                  --                --         647           --  
  Class A-4, stated value $4.500 per share:                                                        
    155,000 shares authorized, 133,331                                                             
    shares issued and outstanding at                                                               
    March 31, 1998                                  --                --         600           --  
Common stock of Predecessor, stated value                                                          
    $1 per share: 3,600 shares authorized,                                                         
    issued and outstanding at                                                                      
    January 31, 1997 and March 27, 1997              4                 4          --           --  
Common stock of Company, par value $0.017                                                          
    per share: 5,000,000 shares authorized,                                                        
    333,614 shares issued and outstanding                                                          
    at March 31, 1998, 1,733,331 pro forma                                                         
    shares at March 31, 1998                        --                --           6        4,606  
Retained earnings                                4,376             5,234       2,096        1,396  
                                              --------          --------    --------     --------  
          Total shareholders' equity             4,380             5,238       6,702     $  6,002  
                                              --------          --------    --------     --------  
                                              $  7,648          $  9,250    $ 25,768               
                                              ========          ========    ========               

(1)    Effective March 28, 1997, SPI Holdings, Inc. acquired Standard Pacific   
Industries, Inc. ("the Predecessor"). Because the acquisition was 
accounted for as a purchase, the post-acquisition period is not   
comparable to the pre-acquisition periods.                        

The accompanying notes are an integral part of these consolidated balance       
sheets.                                                                         

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SPI HOLDINGS, INC.

 CONSOLIDATED STATEMENTS OF INCOME
 ($ In Thousands, except per share data)

                                                        [Enlarge/Download Table]

                                               Predecessor(1)                        Company 
                              ----------------------------------------------        -------- 
                                     Year ended                    Period from               
                                     January 31,                 February 1, 1997  Year ended
                              ---------------------------          to March 27,     March 31,
                                1996               1997               1997            1998   
                              --------           --------           --------        -------- 
                                                                                             
NET SALES                     $ 13,429           $ 24,113           $  6,033        $ 42,180 

COST OF SALES                   10,541             19,035              4,106          32,458 
                              --------           --------           --------        -------- 
         Gross profit            2,888              5,078              1,927           9,722 
                              --------           --------           --------        -------- 
OPERATING EXPENSES:                                                                          
  Selling and administrative     2,609              1,644                507           2,667 
  Management and monitoring                                                                  
    fees                            --                 --                 --             225 
  Depreciation                      49                 78                 13             263 
  Amortization                      --                 --                 --           1,488 
                              --------           --------           --------        -------- 
                                 2,658              1,722                520           4,643 
                              --------           --------           --------        -------- 
         Income from                                                                         
           operations              230              3,356              1,407           5,079 
                              --------           --------           --------        -------- 
OTHER INCOME/(EXPENSE):                                                                      
  Interest expense                  (5)                (1)                --          (1,477)
  Interest income                   85                 79                 21              38 
  Miscellaneous income              34                111                 90              36 
  Penalties and interest                                                                     
    on income taxes                 --               (117)                --              -- 
                              --------           --------           --------        -------- 
                                   114                 72                111          (1,403)
                              --------           --------           --------        -------- 
         Income before                                                                       
           provision for                                                                     
           income taxes            344              3,428              1,518           3,676 

PROVISION FOR INCOME TAXES         141              1,409                660           1,580 
                              --------           --------           --------        -------- 
         Net income           $    203           $  2,019           $    858        $  2,096 
                              ========           ========           ========        ======== 

EARNINGS PER SHARE:                                                                          

  Basic                                                                             $   1.30 
                                                                                    ======== 
  Diluted                                                                           $   1.12 
                                                                                    ======== 

(1)    Effective March 28, 1997, SPI Holdings, Inc. acquired the Predecessor    
  entity. Because the acquisition was accounted for as a purchase, the
       post-acquisition period is not comparable to the pre-acquisition periods.

The accompanying notes are an integral part of these consolidated statements.   

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SPI HOLDINGS, INC.

 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in Thousands)

                                                        [Enlarge/Download Table]

                                                                                           Total  
                                        Common Stock        Preferred Stock                Share- 
                                  ---------------------  ---------------------  Retained  holders'
                                  Shares         Amount  Shares         Amount  Earnings   Equity 
                                  ------         ------  ------         ------   ------    ------ 
                                                                                                  
PREDECESSOR(1):                                                                                   

  BALANCE, January 31, 1995            4         $    4      --         $   --   $2,154    $2,158 

    Net Income                        --             --      --             --      203       203 
                                  ------         ------  ------         ------   ------    ------ 
  BALANCE, January 31, 1996            4              4      --             --    2,357     2,361 

    Net Income                        --             --      --             --    2,019     2,019 
                                  ------         ------  ------         ------   ------    ------ 
  BALANCE, January 31, 1997            4              4      --             --    4,376     4,380 

    Net Income                        --             --      --             --      858       858 
                                  ------         ------  ------         ------   ------    ------ 
  BALANCE, March 27, 1997              4         $    4      --         $   --   $5,234    $5,238 
                                  ======         ======  ======         ======   ======    ====== 

COMPANY:                                                                                          

  BALANCE, March 27, 1997             --         $   --      --         $   --   $   --    $   -- 

    Common stock issuance            334              6      --             --       --         6 
    Series A-1 issuance               --             --     994          2,628       --     2,628 
    Series A-2 issuance               --             --     272            725       --       725 
    Series A-3 warrants issuance      --             --      --            647       --       647 
    Series A-4 issuance               --             --     133            600       --       600 

    Net Income                        --             --      --             --    2,096     2,096 
                                  ------         ------  ------         ------   ------    ------ 
BALANCE, March 31, 1998              334         $    6   1,399         $4,600   $2,096    $6,702 
                                  ======         ======  ======         ======   ======    ====== 

(1)    Effective March 28, 1997, SPI Holdings, Inc. acquired the Predecessor    
  entity. Because the acquisition was accounted for as a purchase, the
       post-acquisition period is not comparable to the pre-acquisition periods.

The accompanying notes are an integral part of these consolidated statements.   

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SPI HOLDINGS, INC.

 CONSOLIDATED STATEMENTS OF CASH FLOWS
($ In Thousands)

                                                        [Enlarge/Download Table]

                                                      Predecessor (1)                Company 
                                  -----------------------------------------------  ----------
                                         Year ended              Period from                 
                                         January 31,             February 1, 1997  Year ended
                                  ------------------------        to March 27,      March 31,
                                    1996             1997             1997            1998   
                                  -------          -------       ----------------  ----------
                                                                                             
CASH FLOWS FROM OPERATING                                                                    
  ACTIVITIES:                                                                                
    Net income                      $ 203          $ 2,019            $ 858         $ 2,096  
    Adjustments to reconcile                                                                 
      net income to net cash                                                                 
      provided by operating                                                                  
      activities:                                                                            
        Depreciation and                                                                     
          amortization                 49               78               13           1,203  
        Net gain on                                                                          
          disposition                                                                        
          of equipment                 --              (12)              --              --  
        Provision for deferred                                                               
          income taxes                 --              (25)              --            (134) 
     Changes in assets and                                                                   
      liabilities, net of assets                                                             
      acquired and liabilities                                                               
      assumed:                                                                               
        Accounts receivable           271           (1,907)            (501)           (142) 
        Inventories                    (5)            (391)            (297)           (623) 
        Notes receivable from                                                                
          related parties            (395)             (74)             (71)             --  
        Interest receivable            (7)             (41)              48              --  
        Prepaid expenses              (20)              18              (12)           (367) 
        Other assets                  (23)              23               --             (30) 
        Accounts payable              (74)           1,271              153             403  
        Accrued liabilities           727             (671)             269             666  
        Deferred tax liability         --               21               --             (25) 
        Income taxes payable          218              504              346          (1,603) 
                                  -------          -------          -------         -------  
        Net cash provided by                                                                 
         operating activities         944              813              806           1,444  
                                  -------          -------          -------         -------  
CASH FLOWS FROM INVESTING                                                                    
  ACTIVITIES:                                                                                
    Purchases of equipment and                                                               
      leasehold improvements         (411)            (193)              (7)         (1,260) 
    Insurance proceeds from                                                                  
      theft of equipment               --               21               --              --  
    (Increase) decrease in                                                                   
      accounts receivable                                                                    
      from officers                    --           (1,380)             (53)          1,600  
    Investment in Office Master,                                                             
      net of cash received             --               --               --          (3,893) 
    Payments under non-compete                                                               
      agreements                       --               --               --            (600) 
                                  -------          -------          -------         -------  
        Net cash used in                                                                     
         investing activities        (411)          (1,552)             (60)         (4,153) 
                                  -------          -------          -------         -------  

 (continued)

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                                                        [Enlarge/Download Table]

                                    Year ended          Period from                   
                                    January 31,         February 1, 1997   Year ended 
                              ------------------------    to March 27,       March 31,
                               1996             1997         1997             1998    
                             -------          -------   ----------------   ---------- 
                                                                                      

CASH FLOWS FROM FINANCING                                                             
  ACTIVITIES:                                                                         
    Principal payments on                                                             
      notes payable               --             (33)           2          (6,442)    
    Proceeds from notes                                                               
      payable                     --              25           --              --     
    Additions to notes                                                                
      payable                     --              --           --           8,604     
    Issuance of common                                                                
      stock                       --              --           --             600     
    Issuance of warrants          --              --           --              75     
                             -------         -------      -------         -------     
          Net cash provided                                                           
            by (used in)                                                              
            financing                                                                 
            activities            --              (8)           2           2,837     
                             -------         -------      -------         -------     

NET INCREASE                                                                          
(DECREASE) IN CASH               533            (747)         748             128     

CASH, beginning of period      1,457           1,990        1,243             991     
                             -------         -------      -------         -------     
CASH, end of period          $ 1,990         $ 1,243      $ 1,991         $ 1,119     
                             =======         =======      =======         =======     

SUPPLEMENTAL DISCLOSURES                                                              
  OF CASH FLOW INFORMATION:                                                           
  Cash paid during the                                                                
    period for interest      $     5         $     1      $    --         $ 1,303     
                             =======         =======      =======         =======     
  Cash paid during the                                                                
    period for income taxes  $   201         $   520      $   314         $ 2,851     
                             =======         =======      =======         =======     

(1)    Effective March 28, 1997, SPI Holdings, Inc. acquired the Predecessor    
  entity. Because the acquisition was accounted for as a purchase, the
       post-acquisition period is not comparable to the pre-acquisition periods.

The accompanying notes are an integral part of these consolidated statements.   

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SPI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 1998

1.      Company Background and Business                                         

 SPI Holdings, Inc. dba SPI Manufacturing, Inc. (the Company), was
    incorporated in the state of Colorado in 1996. On March 27, 1997 the
      Company completed a transaction to acquire all of the then outstanding
      shares of Ronfran Inc., doing business as Standard Pacific Industries,
       Inc. (the Predecessor) The acquisition by the Company was accounted for
    as a purchase. Accordingly, the assets and liabilities were revalued
based on relative fair market values as follows: (in thousands) 

                                                                [Download Table]
                                                        
Assets acquired:                                        

Cash                                             $   991
Accounts receivable, net                           3,320
Inventory                                          1,215
Property, plant and equipment, net                   662
Covenant not to compete                            2,500
Goodwill                                           9,190
Other                                                 49
                                                 -------
                                                  17,927
                                                 -------
Liabilities assumed:                                    

Accounts payable and                                    
  accrued liabilities                              4,034
Long-term liabilities                                 21
                                                 -------
                                                   4,055
                                                 -------
Net purchase price                               $13,872
                                                 =======

       The purchase price above includes related transaction costs of $228,000
        and the subsequent payment by the sellers of $1,600,000 for post-closing
     adjustments to the purchase price pursuant to the purchase agreement.

The Company has consummated the following acquisitions:         

  -       Leasehold interest in a manufacturing facility and certain
               assets of a former mobile home manufacturer located in Ontario,
California (August, 1997)                       
      -       Office Master of Texas, Inc. ("Office Master"), a manufacturer
      of modular buildings located in the Dallas, Texas area
(February, 1998)                                
        -       Rosewood Enterprises, Inc. Modular Manufacturing ("Rosewood"), a
              Phoenix-based manufacturer of modular buildings (April, 1998 -
see Note 16)                                    

      The acquisitions of Office Master and Rosewood, which consisted of the
      acquisition of all outstanding shares of common stock, have or will be
accounted for under the purchase method.                        

 The Company manufactures modular buildings at its four production
        facilities in Southern California, Texas and Arizona, and distributes to
        customers throughout the western United States, primarily in California.
      The Company's customers include dealers and leasing companies who then
 sell or lease the buildings to third-party end users operating in
various industries.                                             

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2.      Summary of Significant Accounting Policies                              

a.      Basis of Presentation                                   

   These consolidated financial statements include the accounts of the
   Company and its wholly owned subsidiary, Office Master. The Company
 acquired Office Master on February 24, 1998, and the accompanying
     consolidated financial statements include the period from acquisition
through March 31, 1998 for Office Master operations.            

   The effects of operations for the four-day period March 28, 1997 to
       March 31, 1997 have been included in the year ended March 31, 1998. The
Company had sales of approximately $400,000, costs of sales of  
     approximately $251,000 and incurred payroll expenses of approximately
  $47,000 during the period. There were no other material activities
during this four-day period.                                    

  Because of the effects of purchase accounting, the accounts of the
Predecessor are not comparable to those of the Company.         

b.      Office Master Purchase Price Allocation                 

      The assets and liabilities were revalued based on relative fair market
values as follows: (in thousands)                               

                                                                [Download Table]
                                                        
Assets acquired:                                        

Cash                                              $   89
Accounts receivable, net                             571
Inventory                                            923
Property, plant and equipment, net                   213
Goodwill                                           2,984
Non-compete covenant                                 100
                                                  ------
                                                   4,880
                                                  ------

Liabilities assumed:                                    

Accounts payable and                                    
  accrued liabilities                                898
                                                  ------
                                                     898
                                                  ------
Net purchase price                                $3,982
                                                  ======

     Included in the purchase price above are related transaction costs of
$148,000, including fees to KRG Capital of $50,000.             

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c.      Inventories                                             

       Inventories are stated at the lower of cost or market. The following is
     a summary of inventory by component as of January 31, 1997, March 27,
1997 and March 31, 1998 (in thousands):                         

                                                                [Download Table]

                         January 31,      March 27,       March 31,
                            1997            1997            1998   
                          -------         -------         -------  
                                                                   
Raw materials             $   828         $ 1,138         $ 2,184  
Work-in-process                90              77             167  
Finished goods                 --              --             550  
                          -------         -------         -------  
                              918           1,215           2,901  
Inventory reserve              --              --            (140) 
                          -------         -------         -------  
                          $   918         $ 1,215         $ 2,761  
                          =======         =======         =======  

       Work-in-process consists of raw materials and labor. Overhead costs are
        not capitalized due to the short construction period, and in the opinion
of management, are not material.                                

Finished goods typically consist of structures manufactured for 
  customers based upon a verbal or preliminary order but for which a
    signed purchase order was not received as of the balance sheet date.

d.      Equipment and Leasehold Improvements                    

        Equipment and leasehold improvements are stated at cost. Depreciation is
       computed using straight-line and accelerated methods over the following
estimated useful lives:                                         

Furniture and fixtures               Seven years        
Vehicles and equipment               One to seven years 
       Leasehold improvements               Useful life or life of the
                                             lease, whichever is shorter

       Upon retirement or disposal of depreciable assets, the cost and related
        accumulated depreciation are removed from the accounts and the resulting
      gain or loss is reflected in operations. Major renewals or betterments
       are capitalized while maintenance costs and repairs are expensed in the
period incurred.                                                

e.      Revenue Recognition                                     

      The Company recognizes revenue under the completed-contract method. In
       accounting for such contracts, income is recognized when performance is
substantially completed and accepted.                           

f.      Goodwill                                                

     The purchase price in excess of the fair market value of net assets
     acquired for each acquisition is recorded as goodwill and amortized
       using the straight-line method over a period of 40 years. Accumulated
  amortization related to goodwill was $239,000 at March 31, 1998.

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g.      Covenants not to Compete                                

        Covenants not to compete entered into as part of purchase agreements are
 amortized over the term of the covenant on a straight-line basis.
    Accumulated amortization related to the covenants not to compete was
$575,000 at March 31, 1998.                                     

h.      Accounting for Equity-based Compensation                

       Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
  for Stock-Based Compensation" establishes financial accounting and
   reporting standards for stock-based employee compensation plans and
        transactions in which an entity issues its equity instruments to acquire
    goods or services from non-employees. The adoption of the accounting
    methodology of SFAS No. 123 related to employees is optional, and as
        permitted under SFAS No. 123, the Company intends to continue to account
   for employee stock options using the intrinsic value methodology in
        accordance with the Accounting Principles Board Opinion No. 25; however,
pro forma disclosures as if the Company adopted the accounting  
       methodology of SFAS No. 123 are required to be presented. (see Note 13)

i.      Use of Estimates                                        

    The preparation of financial statements in conformity with generally
        accepted accounting principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities
      and disclosure of contingent assets and liabilities at the date of the
  financial statements and reported amounts of revenues and expenses
   during the reporting period. Actual results could differ from those
estimates.                                                      

j.      Reclassifications                                       

    Certain reclassifications have been made to the prior year financial
    statements in order to conform with the current year's presentation.

k.      New Accounting Pronouncements                           

    In June 1997, the Financial Accounting Standards Board (FASB) issued
       SFAS Nos. 130 and 131 "Reporting Comprehensive Income" and "Disclosures
      about Segments of an Enterprise and Related Information." FASB No. 130
       and No. 131 are effective for fiscal years beginning after December 15,
        1997, with earlier adoption permitted. The Company does not believe that
        adoption of these standards will have a material effect on the Company's
   financial statements. The Company has to date reflected no items of
comprehensive income in its statement of shareholders' equity.  

l.      Earnings Per Share                                      

       The Company accounts for earnings per share in accordance with SFAS No.
      128, "Earnings per Share." This Statement requires the presentation of
   both basic and diluted net income per share for financial statement
   purposes. Basic net income per share is computed by dividing income
  available to common shareholders by the weighted average number of
    common shares outstanding. Diluted net income per share includes the
    effect of the potential shares outstanding, including dilutive stock
options using the treasury stock method.                        

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        Concurrent with the proposed merger, all outstanding shares of preferred
stock will convert into common stock of the acquiring Company or
    redeemed for cash. (See Note 16 c.) Earnings per share is calculated
   using the weighted average number of common shares outstanding that
 would have resulted from the preferred stock conversion to common
shares.                                                         

        The following table reconciles the components of the pro forma basic net
       income per share calculation to pro forma diluted net income per share.

                                                                [Download Table]

                                   Income                 Per share
                               (in Thousands)    Shares    Amount  
                               --------------  ---------  -------- 
                                                                   
Basic Net Income per Share         $ 2,096     1,612,785    $ 1.30 

Effect of Dilutive Securities           --       265,143     (0.18)
                                 ---------     ---------  -------- 
Diluted Net Loss per share         $ 2,096     1,877,928    $ 1.12 
                                 =========     =========  ======== 

500,000 shares of convertible Series A-5 Preferred stock, 10,000
      convertible Series A-6 Preferred stock options, and 63,346 convertible
       Series A-3 Preferred stock warrants were issued subsequent to year end.
     Additionally, 62,333 shares of convertible Series A-6 Preferred stock
    and 28,416 convertible Series A-5 preferred stock options, which are
subject to further adjustment based on the final purchase price 
   calculation for Rosewood, were issued subsequent to year end. These
        subsequent equity issuances are not included in the fiscal 1998 earnings
per common share calculation above.                             

3.      Receivables From Related Parties and Former Officers                    

  Notes receivable from related parties and accounts receivable from
    former officers represent advances to the former shareholders of the
      Predecessor during the years ended January 31, 1996 and 1997. Interest
  accrued monthly on the receivables at 6.5 percent. Pursuant to the
     acquisition of the Predecessor described in Note 1, these receivables
were paid following the close of the transaction.               

4.      Employee Benefit Plan                                                   

       The Company sponsors a defined contribution plan (the Plan) under which
    all employees who have completed one year of service are eligible to
      participate. Company contributions, if any, are determined annually by
       the board of directors from net profits or accumulated earnings and may
  not exceed 15 percent of each employee's eligible compensation, as
   defined. Vesting under the Plan is at a rate of 20 percent per year
       beginning after the second year of participation. During the year ended
     January 31, 1997, the Company made contributions to the Plan totaling
      $64,000. The Company did not make contributions to the plan during the
        year ended January 31, 1996 or the period from February 1, 1997 to March
     27, 1997. The Company accrued a contribution of $131,000 at March 31,
       1998, which was paid after year end. One of the former shareholders was
    the trustee of the Plan through March 27, 1997. The President of the
Company and a member of the Board of Directors are currently the
trustees.                                                       

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5.      Revolving Line of Credit                                                

      The Company maintains a working capital note with a bank which matures
       on the earlier of May 1, 2004 or whenever the Long-Term Debt is paid in
 full. As of March 31, 1998, borrowings against the line of credit
       totaled $600,000. The unused amount available under this line of credit
       was $2,751,000 as of March 31, 1998. Interest accrues at the Commercial
      Paper Rate, plus 4 percent. The weighted average interest rate for the
       year ended March 31, 1998 was 9.62 percent. The weighted average amount
  of borrowings outstanding during the year ended March 31, 1998 was
     $988,000. This line of credit is secured by a security interest which
   covers substantially all assets of the Company. This line of credit
  contains certain restrictive covenants, which, among other things,
       require the maintenance of certain financial ratios and place limits on
       other indebtedness. As of March 31, 1998, the Company was in compliance
with all of the financial covenants in the credit agreement.    

6.      Long-Term Debt                                                          

Long-term debt consists of (in thousands):                      

                                                        [Enlarge/Download Table]

                                                                          January 31,  March 27,  March 31,
                                                                             1997       1997        1998   
                                                                            -------    -------     ------- 
                                                                                                           
     Secured note payable to NationsCredit, interest accrues at the                                        
     Commercial Paper Rate, plus 4.25 percent (9.77 percent at March 31,                                   
     1998,) payable in quarterly installments                                $    -     $   --     $10,396 

     Secured note payable to NationsCredit, interest accrues at the                                        
     Commercial Paper Rate, plus 6.25 percent (11.77 percent at March                                      
     31, 1998, payable in quarterly installments                                 --         --       4,150 

Debt discount                                                                                         (590)

Secured note payable to Bank                                                     23         --          -- 
                                                                            -------    -------     ------- 
                                                                                 23         --      13,956 
Less--Current portion                                                            10         --       2,332 
                                                                            -------    -------     ------- 
Long-term portion                                                            $   13     $   --     $11,624 
                                                                            =======    =======     ======= 

       The debt discount represents the value of warrants which were issued in
      conjunction with the notes payable. The debt is being accreted to face
     value using the effective interest method. The credit agreements also
contain anti-dilution provisions, which require the issuance of 
   additional warrants upon triggering events, such as the issuance of
        certain equity securities at issuance or exercise prices below specified
    amounts. Upon the occurrence of those triggering events, the Company
     records additional debt costs, which are amortized over the remaining
life of the debt.                                               

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    Principal amounts due on notes payable as of March 31, 1998 are as
follows(in thousands):                                                          

                                                                [Download Table]

Year ending March 31,                 
                                      
        1999                   $ 2,332
        2000                     2,414
        2001                     2,441
        2002                     2,551
        2003                     2,215
  Thereafter                     2,593
                               -------
                               $14,546
                               =======

        All of the notes are collateralized by a security interest, which covers
        substantially all assets of the Company. These credit agreements contain
     certain restrictive covenants, which, among other things, require the
 maintenance of certain financial ratios and place limits on other
      indebtedness. As of March 31, 1998, the Company was in compliance with
    all of the financial ratio covenants listed in the credit agreement.

7.      Employment, Consulting, and Non-compete Agreements                      

      The Company has entered into a five-year employment agreement with its
  Chief Executive Officer. The agreement provides for an annual base
     salary of $150,000, all normal employee benefits, and an annual bonus
        based on earnings before interest, taxes, depreciation and amortization.
        The Board may, in its sole discretion, grant an additional bonus in cash
    or stock options in any fiscal year. The agreement also entitles the
 officer to purchase shares of the Company's Class A-2 convertible
        preferred stock. Additionally, the agreement granted options to purchase
        additional shares of such stock pursuant to the Company's 1997 Long Term
        Incentive Stock Option Plan, and granted warrants to purchase additional
shares of such stock.                                           

       The Company has also entered into a five-year employment agreement with
      its Senior Vice President Manufacturing. The agreement provides for an
       annual base salary of $150,000; all normal employee benefits and annual
       bonuses based on net sales and gross margin. The Board may, in its sole
     discretion, grant an additional bonus in cash or stock options in any
  fiscal year. The agreement also entitles the executive to purchase
 shares of the Company's common stock. Additionally, the agreement
granted options to purchase shares of the Company's Class A-2   
    convertible preferred stock pursuant to the Company's 1997 Long Term
Incentive Stock Option Plan.                                    

       At March 27, 1997, the Company entered into a consulting agreement with
      a former shareholder for a period of one year. The agreement calls for
     the payment of $100,000 to the former shareholder over a twelve-month
     period. Additionally, the Company entered into non-compete agreements
    with the former shareholders for a period of five years. The Company
        allocated $2,500,000 of the purchase price to the covenant as determined
        in the agreement. The asset is recorded in the accompanying consolidated
       balance sheet in other assets. The covenant is being amortized over the
       term of the agreement and as of March 31, 1998 accumulated amortization
was $500,000.                                                   

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As of August 1997, the Company entered into one-year consulting 
   agreements with certain individuals from whom the Company purchased
        certain assets and a leasehold interest in a manufacturing facility. The
      Company paid $600,000 in accordance with these agreements. As of March
      31, 1998, accumulated amortization was $400,000. The asset is recorded
     in the prepaid assets in the accompanying consolidated balance sheet.
        Additionally, the Company entered into non-compete agreements with these
     individuals for a period of five years. The Company paid $600,000 for
these agreements. The asset is recorded in other assets in the  
        accompanying consolidated balance sheet. The covenant is being amortized
   over the term of the agreement and as of March 31, 1998 accumulated
amortization was $75,000.                                       

       In February 1998, the Company entered into a non-compete agreement with
      the former owners of Office Master for a five year period. The Company
       paid $100,000 for this agreement. The asset is recorded in other assets
       in the accompanying consolidated balance sheet. This agreement is being
   amortized over the term of the agreement. As of March 31, 1998, the
accumulated amortization was nominal.                           

8.      Related Party Transactions                                              

The Predecessor previously sold inventory at normal margins, and
 provided accounting and management services at no cost to another
       company, which was also owned by the former shareholders. Sales to this
      company during the years ended January 31, 1996 and 1997 were $185,000
     and $231,000. There were no sales to this company for the period from
        February 1, 1997 to March 27, 1997 or for the year ended March 31, 1998.
       Receivables due to this company were $85,000 and 151,000 at January 31,
  1996 and 1997, respectively. Accrued interest related to the above
 receivables were $2,000 and $12,000 at January 31, 1996 and 1997,
      respectively. Those amounts were subsequently repaid prior to the date
of acquisition.                                                 

      As of the date of acquisition, the Company paid $300,000 to one of its
 shareholders for obtaining debt financing and locating the equity
    investors for the transaction. The portion related to obtaining debt
       financing is included in deferred loan fees and the portion relating to
     locating equity investors is recorded as a reduction to equity on the
consolidated balance sheets.                                    

      Pursuant to certain management agreements, the Company pays monitoring
    fees to certain of its shareholders. During the year ended March 31,
1998, the Company paid $200,000 and $25,000 to two groups of    
      shareholders in accordance with the management agreement; such amounts
    are included in operating expenses on the consolidated statements of
    income. Additionally, the Company maintains a line of credit and all
        outstanding notes payable with a shareholder of the Company. This lender
     also received a management fee of $25,000 during the year ended March
   31, 1998, which is included in interest expense on the consolidated
statements of income.                                           

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9.      Income Taxes                                                            

    The components of the provision for income taxes for the years ended
        January 31, 1996 and 1997, the period from February 1, 1997 to March 27,
   1997 and the year ended March 31, 1998 consist of the following (in
thousands):                                                     

                                                                [Download Table]

                January 31,    January 31,      March 27,        March 31,
                  1996            1997            1997             1998   
                 -------         -------         -------         -------  
                                                                          
Current:                                                                  
  Federal          $ 117          $1,166           $ 505          $1,377  
  State               24             248             155             401  
                   -----          ------           -----          ------  
                     141           1,414             660           1,778  
                   -----          ------           -----          ------  

Deferred:                                                                 
  Federal             --               1              --            (162) 
  State               --              (6)             --             (36) 
                   -----          ------           -----          ------  
                      --              (5)             --            (198) 
                   -----          ------           -----          ------  
                   $ 141          $1,409           $ 660          $1,580  
                   =====          ======           =====          ======  

       Deferred income taxes arise as a result of temporary differences in the
      methods used to determine income for financial reporting versus income
   tax reporting purposes. Significant components of the Company's net
        deferred tax asset and liability at January 31, 1997, March 27, 1997 and
March 31, 1998 are as follows: (in thousands)                   

                                                                [Download Table]

                                    January 31,  March 27,    March 31,
                                      1997         1997         1998   
                                      ----         ----         ----   
                                                                       
Depreciation and Amortization         $(21)        $(21)        $ 50   
                                      ----         ----         ----   
  Long-term deferred tax asset                                         
    (liability)                        (21)         (21)          50   
                                      ====         ====         ====   

Inventory costs capitalized             --           --           12   
Provision for bad debt                  12           12           52   
Warranty accrual                        13           13           88   
                                      ----         ----         ----   
  Current deferred tax asset            25           25          152   
                                      ====         ====         ====   

Net deferred tax asset                $  4         $  4         $202   
                                      ====         ====         ====   

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    The effective tax rate differs from the Federal statutory rate of 34
percent due to the following:                                   

                                                        [Enlarge/Download Table]

                                                              Period from            
                                     Years ended               February 1,   Year    
                            --------------------------------     1997 to     ended   
                            January 31,          January 31,    March 27,   March 31,
                               1996                1997           1997       1998    
                            -----------          -----------    ---------   ---------
                                                                                     
Provision for income                                                                 
taxes at statutory rate        34.0%               34.0%          34.0%      34.0%   

Increases in tax                                                                     
  resulting from:                                                                    
   State income taxes, net      7.0                 7.1            6.7        7.2    
   Other                         --                  --            2.8        1.8    
                               ----                ----           ----       ----    
Provision for income                                                                 
 taxes                         41.0%               41.1%          43.5%      43.0%   
                               ====                ====           ====       ====    

10.     Commitments and Contingencies                                           

a.      Leases                                                  

   The Company leases facilities under noncancelable operating leases.
      Future minimum lease payments on operating leases as of March 31, 1998
are as follows (in thousands):                                  

                                                                [Download Table]

    Year ending March 31:                   
                                            
          1999                        $  830
          2000                           807
          2001                           805
          2002                           771
          2003                           356
Thereafter                             1,718
                                      ------
Total future minimum                        
lease payments                        $5,287
                                      ======

      Rent expense for the years ended January 31, 1996 and 1997, the period
     from February 1, 1997 to March 27, 1997, and the year ended March 31,
  1998, were $136,000, $209,000, $40,000 and $391,000, respectively.

b.      Litigation                                              

       The Company is, from time to time, a party to litigation arising in the
 normal course of its business. The Company is not involved in any
       pending or threatened legal proceeding which the Company believes could
 reasonably be expected to have a material effect on the Company's
financial condition or results of operations.                   

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11.     Accrued Liabilities                                                     

    The components of accrued liabilities at January 31, 1997, March 27,
1997 and March 31, 1998 consist of the following (in thousands):

                                                                [Download Table]

                          January 31,  March 27,  March 31,
                            1997         1997       1998   
                           ------       ------     ------  
                                                           
Warranty reserve           $   30       $   30     $  206  
Income tax penalties           62          113         --  
Interest on income taxes       55           59         --  
Payroll and related            96          212        777  
Professional fees              --           49        136  
Interest payable               --           --        149  
Other                          21           70        269  
                           ------       ------     ------  
                           $  264       $  533     $1,537  
                           ======       ======     ======  

12.     Shareholders' Equity                                                    

 As of March 31, 1998, the Company had four classes of convertible
        preferred stock, Class A-1, A-2, A-3, and A-4. The holders of Class A-1,
    A-2 and A-4 convertible preferred stock are entitled to one vote for
    each share of common stock issuable upon conversion of the preferred
  stock at the time the vote is taken. Class A-3 stock has no voting
        privileges, except where mandated by law. All classes of preferred stock
share ratably with the common stockholders in dividends and upon
     liquidation. Shares of convertible preferred stock are convertible to
       common stock on a one-to-one basis. Preferred stock may be converted to
common stock at any time, and the Board of Directors may require
    conversion of all outstanding preferred shares upon the closing of a
 Qualified Public Offering. All classes of preferred stock contain
        anti-dilution privileges whereby the conversion price will be reduced if
     any shares of common stock are sold for a lower price than the stated
conversion price.                                               

     Prior to March 28, 1997, the Company had 3,600 shares of common stock
  authorized, issued and outstanding which were owned equally by the
        former shareholders. As of March 28, 1997 these common stock shares were
       cancelled and new common stock shares were issued. The new common stock
shares have a par value of $0.017 per share.                    

13.     Stock Option Plan                                                       

        The Company has elected to follow APB 25 "Accounting for Stock Issued to
     Employees" and related interpretations in accounting for its employee
     stock options because, as discussed below, the alternative fair value
  accounting provided for under SFAS 123 "Accounting for Stock-Based
   Compensation" requires use of option valuation models that were not
developed for use in valuing employee stock options.            

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      The 1997 Long Term Incentive Stock Plan, as amended (the Plan), allows
grants of options to purchase up to 200,000 shares of Series A-2
    Preferred Stock and 16,667 shares of Series A-4 Preferred Stock. The
   preferred stock is convertible into common stock at any time. Stock
   options granted under the Plan are exercisable over a period of ten
    years and vest over a period of three to five years. As of March 31,
      1998, 178,749 stock options have been granted to various employees and
    approximately 37,918 remained available for grant under the Plan. In
       addition, an officer of the Company received options to purchase 34,933
   shares of Series A-2 Preferred Stock and 2,538 shares of Series A-4
      Preferred Stock. These options are in addition to those reserved under
   the Plan and contain anti-dilution privileges. No options have been
   exercised. There were no stock options granted, issued or exercised
    during the years ended January 31, 1996 and 1997, or the period from
February 1, 1997 to March 27, 1997.                             

   The fair value for these options was estimated at the date of grant
      using a Black-Scholes option pricing model with the following weighted
average assumptions: (i) no dividend yield, (ii) volatility of  
    effectively zero, (iii) risk-free interest rate of seven percent and
(iv) expected life of ten years.                                

      The following table summarizes the information regarding stock options
as of March 31, 1998:                                           

Options Outstanding                                             

                                                                [Download Table]
                                                                    
Average exercise price of options outstanding               $   3.11
Total options granted and outstanding                        216,220
Average remaining outstanding life                           8 years
Aggregate fair value of options granted                     $307,046
Range of exercise prices                              $2.8626-$4.725

Options Exercisable                                                 

Number exercisable                                            40,000
Exercise price                                              $ 3.0057

        Had compensation expense for the Company's 1998 stock-based compensation
      been recorded under fair market value principles applicable under SFAS
       123, the Company would have recorded $62,000 of additional compensation
     expense, and net income would have been reduced to $2,034,000 for the
     year ended March 31, 1998. Basic earnings per share and fully diluted
      earnings would have been reduced to $0.54 and $0.51, respectively, for
     the year ended March 31, 1998 had the Company recorded the additional
compensation expense.                                           

14.     Concentration of Credit Risk                                            

        The Company had several customers which individually account for greater
      than ten percent of net sales during the periods presented as follows:

                                                                [Download Table]

                                                                Period from
                                Years ended        February 1,      Year   
                                 January 31,         1997 to       ended   
                           ----------------------    March 27,    March 31,
                           1996              1997      1997         1999   
                           ----              ----      ----         ----   
                                                                           
GE Capital Modular Space    20%               49%       65%         41%    
Mobile Modular Management   11                 *        12          15     
Williams Scotsman           36                15        12          14     

*-less than 10%                                                 

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15.     Disclosure About the Fair Value of Financial Instruments                

    The following methods and assumptions were used to estimate the fair
       value of each class of financial instrument for which it is practicable
to estimate:                                                    

      Cash-The carrying amount is a reasonable estimate of fair value. Thus,
the fair value is disclosed on the consolidated balance sheets. 

      Note Receivable-The notes receivable bear interest at a variable rate;
        therefore fair value is assumed to approximate carrying value. Thus, the
fair value is disclosed on the consolidated balance sheets.     

  Long-Term Debt-The notes payable bear interest at a variable rate;
        therefore fair value is assumed to approximate carrying value. Thus, the
fair value is disclosed on the consolidated balance sheets.     

16.     Subsequent Events                                                       

a.      Rosewood Acquisition                                    

             In April 1998, the Company consummated the acquisition of all
            outstanding Rosewood shares. The purchase price consisted of
             cash payments totaling $21,773,000, a 9% subordinated note in
              the amount of $1.5 million, and a variable number of shares of
              the Company's Series A-6 preferred stock with a fixed value of
          $1.0 million. The purchase price also includes $195,000 of
              transactional costs. The number of shares issued is subject to
           adjustment based on additional analysis of the value of the
          Company. The agreement also provides that, in the event an
              initial public offering, as defined, is not consummated within
            five years of the purchase, the seller may elect to have the
              shares repurchased by the Company at a price equal to the then
                fair market value. Alternately, the Company may elect to acquire
the seller's shares at the fair market value.   

b.      Proposed acquisition (unaudited)                        

                In June 1998, the Company signed a letter of intent to acquire a
                modular building manufacturer located in the southeastern United
               States. The proposed purchase price consists of a base price of
          $2.0 million plus additional consideration based on future
earnings.                                       

c.      Proposed merger (unaudited)                             

                The Company has entered into a Plan of Reorganization and Merger
              dated September 28, 1998 with Modtech, Inc. Under terms of the
               agreement, all equity instruments will be converted into equity
           instruments of Modtech Holdings, Inc. or redeemed for cash.

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SPI HOLDINGS, INC.

 CONDENSED CONSOLIDATED BALANCE SHEETS
($ In Thousands)
 (Unaudited)

ASSETS

                                                                [Download Table]

                                                                June 30,
                                                                  1998  
                                                                ------- 
                                                                        
CURRENT ASSETS:                                                         
  Cash                                                          $ 1,524 
  Accounts receivable, net of allowance                                 
    for doubtful accounts of $117                                 7,028 
  Inventories                                                     3,792 
  Prepaid and other assets                                          609 
                                                                ------- 
          Total current assets                                   12,953 
                                                                ------- 
PROPERTY, PLANT AND EQUIPMENT, net of accumulated                       
  depreciation and amortization                                   2,142 

OTHER ASSETS:                                                           
  Goodwill, net                                                  33,996 
  Deferred loan fees, net                                           853 
  Covenants not to compete, net                                   2,946 
  Other assets                                                      381 
                                                                ------- 
          Total assets                                          $53,271 
                                                                ======= 

The accompanying notes are an integral part of these consolidated balance 
sheets. 

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SPI HOLDINGS, INC.

 CONDENSED CONSOLIDATED BALANCE SHEETS
($ In Thousands)
 (Unaudited)

LIABILITIES AND SHAREHOLDERS' EQUITY

                                                        [Enlarge/Download Table]

                                                                                   June 30,
                                                                                     1998  
                                                                                    -------
                                                                                           
CURRENT LIABILITIES:                                                                       
  Accounts payable                                                                  $ 4,437
  Accrued liabilities                                                                 2,417
  Revolving line of credit                                                            2,324
  Current portion of long-term debt                                                   4,913
                                                                                    -------
          Total current liabilities                                                  14,091
                                                                                    -------
LONG-TERM LIABILITIES:                                                                     
  Long-term debt, net of current portion                                             26,023
                                                                                    -------
          Total liabilities                                                          40,114
                                                                                    -------

SHAREHOLDERS' EQUITY:                                                                      
Convertible preferred stock:                                                               
  Class A-1, stated value $2.715 per share; 1,500,000 shares authorized, 994,335           
    shares issued and outstanding                                                     2,628
  Class A-2, stated value $2.863 per share; 1,000,000                                      
    shares authorized, 272,051 shares issued and outstanding                            725

  Class A-3 warrants, no par value; 400,000 shares authorized, no shares issued       1,153

  Class A-4, stated value $4.500 per share; 155,000 shares authorized, 133,331             
    shares issued and outstanding                                                       600
  Class A-5, stated value $  per share;                                                    
    shares authorized, 500,000 shares issued and outstanding                          3,930
  Class A-6, stated value $  per share; shares authorized, 62,333 shares issued            
    and outstanding                                                                   1,000

Common stock of Company, par value $0.017 per share; 5,000,000 shares authorized,          
    333,614 shares issued and outstanding                                                 6
Retained earnings                                                                     3,115
                                                                                    -------
          Total shareholders' equity                                                 13,157
                                                                                    -------
                                                                                    $53,271
                                                                                    =======

The accompanying notes are an integral part of these consolidated balance 
sheets. 

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SPI HOLDINGS, INC.

 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 ($ In Thousands, except per share data)
 (Unaudited)

                                                        [Enlarge/Download Table]

                                                           For the Three Months ended     
                                                   -------------------------------------- 
                                                     June 30,                  June 30,   
                                                      1997                       1998     
                                                   -----------                ----------- 
                                                                                          
NET SALES                                          $     9,837                $    20,925 

COST OF SALES                                            7,576                     16,588 
                                                   -----------                ----------- 
         Gross profit                                    2,261                      4,337 
                                                   -----------                ----------- 
OPERATING EXPENSES:                                                                       
  Selling and administrative                               499                      1,183 
  Management and monitoring fees                            56                         84 
  Depreciation and amortization                            306                        667 
                                                   -----------                ----------- 
                                                           862                      1,934 
                                                   -----------                ----------- 
         Income from operations                          1,400                      2,403 
                                                   -----------                ----------- 
OTHER INCOME/(EXPENSE):                                                                   
  Interest expense, net                                   (382)                      (835)
  Miscellaneous income                                       2                          1 
                                                   -----------                ----------- 
                                                          (380)                      (834)
                                                   -----------                ----------- 
         Income before provision for income taxes        1,020                      1,569 

PROVISION FOR INCOME TAXES                                 439                        550 
                                                   -----------                ----------- 
         Net income                                $       581                $     1,019 
                                                   ===========                =========== 

NET INCOME PER SHARE:                                                                     
  Basic                                            $      0.36                $      0.47 
  Diluted                                          $      0.31                $      0.40 

WEIGHTED AVERAGE NUMBER OF SHARES:                                                        
  Basic                                              1,600,000                  2,190,616 
  Diluted                                            1,856,931                  2,527,088 

The accompanying notes are an integral part of these consolidated statements.   

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SPI HOLDINGS, INC.

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ In Thousands)
 (unaudited)

                                                        [Enlarge/Download Table]

                                                                               For the Three Months ended  
                                                                               --------------------------- 
                                                                               June 30,           June 30, 
                                                                                 1997               1998   
                                                                               --------           -------- 
                                                                                                           
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                      
    Net income                                                                 $    581           $  1,019 

    Adjustments to reconcile net income to net cash provided by operating                                  
      activities:                                                                                          
        Depreciation and amortization                                               306                667 
        Loss on sale of assets                                                      (50)                   
    Changes in assets and liabilities, net of assets acquired and liabilities                              
         assumed:                                                                                          
        Accounts receivable                                                        (943)              (688)
        Inventories                                                                 (10)               342 
        Prepaid expenses                                                            (57)                32 
        Other assets                                                               (976)              (340)
        Accounts payable                                                           (391)               189 
        Accrued liabilities                                                        (168)               149 
                                                                               --------           -------- 
        Net cash provided by (used in) operating                                                           
         activities                                                              (1,708)             1,370 
                                                                               --------           -------- 
CASH FLOWS FROM INVESTING ACTIVITIES:                                                                      
    Purchases of equipment and leasehold                                                                   
      improvements                                                                  (61)              (220)
    Proceeds from notes receivable from related                                                            
       Party                                                                      1,600                    
    Investment in Rosewood, net of cash                                                                    
      received                                                                       --            (24,452)
                                                                               --------           -------- 
         Net cash provided by (used in) investing                                                          
         Activities                                                               1,539            (24,672)
                                                                               --------           -------- 
CASH FLOWS FROM FINANCING                                                                                  
  ACTIVITIES:                                                                                              
       Principal payments on notes payable                                       (1,400)            (1,321)
       Additions to notes payable                                                 1,231             20,097 
       Proceeds from issuance of common stock                                        --              4,931 
                                                                               --------           -------- 
          Net cash provided by (used in) financing                                                         
            activities                                                             (169)            23,707 
                                                                               --------           -------- 

NET INCREASE (DECREASE) IN CASH                                                    (339)               405 

CASH, beginning of period                                                           991              1,119 
                                                                               --------           -------- 
CASH, end of period                                                            $    652           $  1,524 
                                                                               ========           ======== 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW                                                                      
 INFORMATION:                                                                                              
  Cash paid during the period for interest                                     $     --           $     -- 
                                                                               ========           ======== 
  Cash paid during the period for income                                                                   
    taxes                                                                      $     --           $     -- 
                                                                               ========           ======== 

The accompanying notes are an integral part of these consolidated statements.   

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SPI HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 June 30, 1998
(In Thousands)
 (unaudited)

1.      Financial Statements                                                    

       The accompanying consolidated financial statements included herein have
        been prepared by the Company, without audit, and include all adjustments
which are, in the opinion of Management, necessary for a fair   
       presentation of the financial position as of June 30, 1998, the results
      of operations and cash flows for the three-month period ended June 30,
   1997 and June 30, 1998 pursuant to the rules and regulations of the
       Securities and Exchange Commission (SEC). All such adjustments are of a
     normal recurring nature. Certain information and footnote disclosures
  normally included in consolidated financial statements prepared in
  accordance with generally accepted accounting principles have been
     condensed or omitted pursuant to such rules and regulations. Although
      the Company believes that the disclosures in such financial statements
    are adequate to make the information presented not misleading, these
        consolidated statements should be read in conjunction with the Company's
       fiscal 1998 audited consolidated financial statements and notes thereto
        included in this Form S-4. The results of operations for the three-month
      periods are not necessarily indicative of the results for a full year.
The financial statements include the accounts, from the date of 
      acquisition, of Office Master (acquired in February 1998) and Rosewood
(acquired in April 1998--see Note 6.)                           

2.      Inventories                                                             

Inventories consisted of the following:                         

                                                                [Download Table]

                           June 30,
                             1998  
                           ------- 
                                   
Raw materials              $ 3,237 
Work-in-process                625 
Finished goods                  42 
                           ------- 
                             3,904 
Inventory reserve             (112)
                           ------- 
                             3,792 
                           ======= 

3.      Comprehensive Income                                                    

    In June 1997, the Financial Accounting Standards Board (FASB) issued
      Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
       Comprehensive Income". This Statement requires that all items that meet
 the definition of comprehensive income be reported in a financial
        statement for the period in which they are recognized. This Statement is
    effective for fiscal years beginning after December 15, 1997 and was
adopted by the Company in the quarter ended June 30, 1998.      

        The Company had no comprehensive income adjustments for the period ended
June 30, 1998.                                                  

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4.      Earnings per Share                                                      

       The Company accounts for earnings per share in accordance with SFAS No.
      128, "Earnings per Share." This Statement requires the presentation of
   both basic and diluted net income per share for financial statement
   purposes. Basic net income per share is computed by dividing income
  available to common shareholders by the weighted average number of
    common shares outstanding. Diluted net income per share includes the
    effect of the potential shares outstanding, including dilutive stock
options using the treasury stock method.                        

        Concurrent with the proposed merger, all outstanding shares of preferred
     stock will convert into common stock. Pro forma earnings per share is
       calculated using the pro forma weighted average number of common shares
        outstanding that would have resulted from the preferred stock conversion
to common shares.                                               

        The following table reconciles the components of the pro forma basic net
       income per share calculation to pro forma diluted net income per share.

                                                                [Download Table]

                                       Income          Shares         Per share
                                                                        Amount 
                                       ------           -----          --------
                                                                               
Basic Net Income per Share             $1,019           2,190          $   0.47

Effect of Dilutive Securities                             341                  
                                       ------           -----          --------
Diluted Net Loss per share             $1,019           2,531          $   0.40
                                       ======           =====          ========

5.      Income Taxes                                                            

The effective tax rate differs from that computed at the Federal
       statutory rate of 34 percent principally because of the effect of state
income taxes.                                                   

6.      Rosewood Purchase Price Allocation                                      

In April 1998, the Company consummated the acquisition of all   
     outstanding Rosewood shares. The assets and liabilities were recorded
based on relative fair market values as follows:                

                                                                [Download Table]
                                                   
Assets acquired:                                   

Cash                                        $   321
Accounts receivable, net                      1,666
Prepaid and other assets                         60
Notes receivable                                475
Inventory                                     1,373
Property, plant and equipment, net              156
Goodwill                                     22,228
Non-compete covenant                            500
                                            -------
                                            $26,779
                                            -------
Liabilities assumed:                               

Accounts payable and                               
  accrued liabilities                         2,006
                                            -------

Net purchase price                          $24,773
                                            =======

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     Included in the purchase price above are related transaction costs of
$262,000, including fees to KRG Capital of $75,000.             

7.      Stockholders' Equity                                                    

Stockholders' equity activity consists of the following:        

                                                        [Enlarge/Download Table]

                                                                                Total  
                       Common Stock             Preferred Stock                 Share- 
                  -----------------------  -----------------------  Retained   holders'
                   Shares          Amount   Shares          Amount   Earnings   Equity 
                  -------         -------  -------         -------   -------    -------
                                                                                       
BALANCE,                                                                               
  March 31, 1998      334         $     6    1,399         $ 4,600   $ 2,096    $ 6,702

  Series A-5                                                                           
    issuance                                   500           3,930                3,930
  Series A-6                                                                           
    issuance                                    62           1,000                1,000
  Series A-3                                                                           
     warrants                                                                          
     issued                                     --             506                  506
  Net income                                                           1,019      1,019

BALANCE,                                                                               
  June 30, 1998       334         $     6    1,961         $10,036   $ 3,115    $13,157
                  =======         =======  =======         =======   =======    =======

8.      Proposed acquisition                                                    

In June 1998, the Company signed a letter of intent to acquire a
        Florida-based modular building manufacturer. The proposed purchase price
      consists of a base price of $2.0 million plus additional consideration
based on future earnings. No assurance can be provided that the 
transaction will be consummated.                                

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholder of                                                           
Office Master of Texas, Inc.:                                                   

We have audited the accompanying balance sheet of Office Master of Texas, Inc.  
(a Texas corporation) as of December 31, 1997, and the related statements of    
income and retained earnings and cash flows for the year then ended. These      
financial statements are the responsibility of the Company's management. Our    
responsibility is to express an opinion on these financial statements based on  
our audit.                                                                      

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable 
assurance about whether the financial statements are free of material           
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audit provides a reasonable basis for our opinion.          

In our opinion, the financial statements referred to above present fairly, in   
all material respects, the financial position of Office Master of Texas, Inc. as
of December 31, 1997, and the results of its operations and its cash flows for  
the year then ended in conformity with generally accepted accounting principles.

As discussed more fully in Note 9 to the financial statements, the Company's    
shareholder has entered into a letter of intent to sell all shares of common    
stock currently outstanding.                                                    

Dallas, Texas,                                                                  
January 16, 1998                                                        

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OFFICE MASTER OF TEXAS, INC.

BALANCE SHEET--DECEMBER 31, 1997

ASSETS

                                                                [Download Table]
                                                                          
CURRENT ASSETS:                                                           
    Cash                                                      $   277,996 
    Accounts receivable                                           480,453 
    Inventories                                                   839,524 
    Note receivable from shareholder                               82,000 
                                                              ----------- 

                  Total current assets                          1,679,973 

EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost:                            
    Buildings                                                      10,365 
    Vehicles and equipment                                        127,409 
    Leasehold improvements                                         79,238 
                                                              ----------- 

    Less- Accumulated depreciation                                (62,271)
                                                              ----------- 

                  Total assets                                $ 1,834,714 
                                                              =========== 

                      LIABILITIES AND SHAREHOLDER'S EQUITY                
CURRENT LIABILITIES:                                                      
    Accounts payable                                          $   295,796 
    Accrued liabilities                                           169,478 
    Notes payable 310,162                                                 
    Note payable to shareholder                                    46,000 
    Income taxes payable                                           73,670 
                                                              ----------- 

                  Total current liabilities                       895,106 

LONG-TERM LIABILITIES:                                                    
    Deferred tax liability                                          8,573 
    Notes payable, net of current portion                         131,070 
                                                              ----------- 

                  Total long-term liabilities                     139,643 

                  Total liabilities                             1,034,749 

COMMITMENTS AND CONTINGENCIES                                             

SHAREHOLDER'S EQUITY:                                                     
    Common stock, par value $1 per share:  1,000 shares                   
       authorized, issued and outstanding                           1,000 
    Retained earnings                                             798,965 
                                                              ----------- 

                  Total liabilities and shareholder's equity  $ 1,834,714 
                                                              =========== 

The accompanying notes are an integral part of this balance sheet.

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OFFICE MASTER OF TEXAS, INC.

 STATEMENT OF INCOME AND RETAINED EARNINGS

FOR THE YEAR ENDED DECEMBER 31, 1997

                                                                [Download Table]
                                                                            
NET SALES                                                       $ 8,328,105 

COST OF SALES                                                     7,468,292 
                                                                ----------- 

                  Gross profit                                      859,813 

OPERATING EXPENSES:                                                         
    Selling and administrative expenses                             867,154 
    Depreciation and amortization expense                            16,866 
                                                                ----------- 

                  Loss from operations                              (24,207)

OTHER INCOME (EXPENSE):                                                     
    Interest income                                                   7,884 
    Miscellaneous income                                              4,061 
                                                                ----------- 

                  Loss before benefit from income taxes             (12,262)

BENEFIT FROM INCOME TAXES                                            (3,924)
                                                                ----------- 

                  Net loss                                           (8,338)

RETAINED EARNINGS, beginning of year                                807,303 
                                                                ----------- 

RETAINED EARNINGS, end of year                                  $   798,965 
                                                                =========== 

The accompanying notes are an integral part of this financial statement.

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OFFICE MASTER OF TEXAS, INC.

 STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 1997

                                                                [Download Table]
                                                                              
CASH FLOWS FROM OPERATING ACTIVITIES:                                         
    Net loss                                                        $  (8,338)
    Adjustments to reconcile net loss to net cash                             
       provided by operating activities-                                      
          Depreciation and amortization                                16,866 
          Decrease in accounts receivable                             522,324 
          Increase in inventories                                    (192,165)
          Decrease in note receivable from related party               11,491 
          Decrease in other assets                                     10,020 
          Increase in accounts payable                                  1,831 
          Increase in accrued liabilities                             125,326 
          Increase in deferred tax liability                            1,543 
          Decrease in income taxes payable                           (195,958)
                                                                    --------- 

                  Net cash provided by operating activities           292,940 

CASH FLOWS FROM INVESTING ACTIVITIES:                                         
    Sale of equipment and leasehold improvements                        8,843 
                                                                    --------- 

                  Net cash provided by investing activities             8,843 

CASH FLOWS FROM FINANCING ACTIVITIES:                                         
    Principal payments on notes payable                              (199,585)
                                                                    --------- 

                  Net cash used in financing activities              (199,585)

NET INCREASE IN CASH                                                  102,198 
                                                                    --------- 

CASH, beginning of year                                               175,798 

CASH, end of year                                                    $277,996 
                                                                    ========= 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                            
    Cash paid during the year for interest                          $  37,365 
                                                                    ========= 

    Cash paid during the year for income taxes                      $ 192,034 
                                                                    ========= 

The accompanying notes are an integral part of this financial statement.

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OFFICE MASTER OF TEXAS, INC.

 NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996

1.      COMPANY OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:                 

Organization and Business                                                       

Office Master of Texas, Inc. (the "Company"), manufactures modular buildings at 
its production facility in Glen Rose, Texas, and distributes to customers       
throughout the United States, primarily in the South. The Company's customers   
include dealers and leasing companies who then sell or lease the buildings to   
third parties operating in various industries. The Company is 100% owned by     
Bertrand Taylor (the "shareholder").                                            

Inventories                                                                     

Inventories consist of raw materials, work-in-process, and finished goods and   
are stated at the lower of cost or market. The following is a summary of        
inventory by component:                                                         

                                                                [Download Table]
                               
Raw materials           458,228
Work-in-process          95,669
Finished goods          285,627

Work-in-process consists of raw materials and overhead.                         

Equipment and Leasehold Improvements                                            

Equipment and leasehold improvements are stated at cost. Depreciation is        
computed using the straight-line method over the following useful lives:        

Buildings                            31.5 years                   
Vehicles and equipment               Five to ten years            
Leasehold improvements               Useful life or life of       
                               the lease, whichever is
               shorter

Major renewals or betterments are capitalized while maintenance costs and       
repairs are expensed in the period incurred.                                    

Revenue Recognition                                                             

The Company recognizes revenue upon completion of the buildings and transfer of 
title. Buildings are maintained on the Company's property until the customer    
arranges for delivery.                                                          

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Use of Estimates                                                                

The preparation of financial statements in conformity with generally accepted   
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of         
contingent assets and liabilities at the date of the financial statements and   
reported amounts of revenues and expenses during the reporting period. Actual   
results could differ from those estimates.                                      

2.      NOTE RECEIVABLE FROM SHAREHOLDER:                                       

Note receivable from the shareholder represents advances to the shareholder.    
Interest accrues monthly on the receivable at 6.5%. Pursuant to the agreement   
entered into as described in Note 9, this receivable will be paid prior to the  
close of the transaction described therein.                                     

3.      NOTES PAYABLE:                                                          

Notes payable consists of five secured notes payable to two banks. These notes  
accrue interest at rates ranging from 9.5% to 10.5%. Amounts due on the note    
payable in future years are as follows:                                         

                                                                [Download Table]

Year Ending                                      
December 31,                                     
                                                 
   1998                                  $310,162
   1999                                    53,831
   2000                                    55,012
   2001                                    22,227
                                         --------

4.      NOTE PAYABLE TO SHAREHOLDER:                                            

Note payable to the shareholder represents advances from the shareholder.       
Interest accrues monthly on the payable at 10.95%. Pursuant to the agreement    
entered into as described in Note 9, this payable will be paid prior to the     
close of the transaction described therein.                                     

5.      INCOME TAXES:                                                           

Deferred income taxes arise as a result of temporary difference in the methods  
used to determine income for financial reporting versus income tax reporting    
purposes. The components of the Company's net deferred tax liability are as     
follows:                                                                        

                                                                [Download Table]
                                                           
Current                                            $(2,381)
Deferred                                            (1,543)
                                                   ------- 

Benefit from income taxes                          $(3,924)
                                                   ======= 

The provision for income taxes for the year ended December 31, 1997, is         
comprised of the following:                                                     

                                                                [Download Table]
                                                                  
Deferred tax asset-                                               
    Warranty provision                                   $  5,520 

Deferred tax liability-                                           
    Depreciation and amortization                         (14,093)

Net deferred tax liability                               $ (8,573)
                                                         ======== 

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6.   LEASE COMMITMENTS:                                                         

The Company conducts its major operations from a building owned by the          
shareholder and currently pays a monthly rental fee of $3,300 pursuant to an    
informal agreement. The Company also incurred rental expense during a portion of
the year related to a parcel of land adjacent to the Company's facility. Such   
land was sold to the Company during the year in exchange for an agreement to    
employ additional county residents. The current year rent expense was $60,906.  

7.   ACCRUED LIABILITIES:                                                       

The components of accrued liabilities at December 31, 1997, consist of the      
following:                                                                      

                                                                [Download Table]
                                                                  
Sales taxes                                                $83,108
Warranty reserve                                            17,250
Interest                                                    11,654
Payroll                                                     42,230
Payroll taxes and withheld income taxes                      2,785
Property taxes                                              12,451

8.      CONCENTRATION OF CREDIT RISK:                                           

The Company had six customers which accounted for approximately 88% of net sales
during the year, and approximately 93% of accounts receivable at December 31,   
1997.                                                                           

9.      SUBSEQUENT EVENT:                                                       

On December 10, 1997, the shareholder entered into an agreement to sell all of  
the outstanding shares of the Company for an amount substantially in excess of  
the net book value of the Company. Pursuant to this agreement, the shareholders 
agree to, among other things, (1) repay all related party notes and advances,   
plus accrued interest, (2) enter into one-year consulting agreements, and (3)   
enter into five-year noncompete agreements. The transaction is expected to close
in February 1998.                                                               

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Arizona Millwork, Inc.:                                                      

We have audited the accompanying balance sheets of ARIZONA MILLWORK, INC. (an   
Arizona corporation) dba ROSEWOOD ENTERPRISES MODULAR MFG. as of December 31,   
1997 and 1996, and the related statements of operations, shareholders' equity   
(deficit) and cash flows for each of the three years in the period ended        
December 31, 1997. These financial statements are the responsibility of the     
Company's management. Our responsibility is to express an opinion on these      
financial statements based on our audits.                                       

We conducted our audits in accordance with generally accepted auditing          
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.          

In our opinion, the financial statements referred to above present fairly, in   
all material respects, the financial position of Arizona Millwork, Inc. dba     
Rosewood Enterprises Modular Mfg. as of December 31, 1997 and 1996, and the     
results of its operations and its cash flows for each of the three years in the 
period ended December 31, 1997, in conformity with generally accepted accounting
principles.                                                                     

Phoenix, Arizona,                                                               
March 17, 1998.                                                           

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ARIZONA MILLWORK, INC.
 DBA ROSEWOOD ENTERPRISES MODULAR MFG.

BALANCE SHEETS

                                                        [Enlarge/Download Table]

                                                                  Years Ended                 Three Months Ended   
                                                                  December 31,                   March 31,         
                                                         ----------------------------  ----------------------------
                                                            1997              1996        1998              1997   
                                                         -----------      -----------  -----------      -----------
ASSETS                                                                                 (Unaudited)      (Unaudited)
                                                                                                                   
CURRENT ASSETS:                                                                                                    
   Cash and cash equivalents                             $   108,866      $   429,692  $   179,247      $   864,131
   Accounts receivable, net of allowance for doubtful                                                              
      accounts of $20,000                                  1,383,876        1,283,365    2,264,851        1,720,999
   Inventories                                             1,454,520        1,330,076    1,951,692        1,391,726
   Prepaid expenses                                           45,998          249,397       52,301           43,216
                                                         -----------      -----------  -----------      -----------

   Total current assets                                    2,993,260        3,292,530    4,448,091        4,020,072

   EQUIPMENT AND LEASEHOLD IMPROVEMENTS,                                                                           
      net                                                    163,722          210,731      139,588          249,340

   DEFERRED TAX ASSET                                        138,774           20,000      157,974           20,000
                                                         -----------      -----------  -----------      -----------

   Total assets                                          $ 3,295,756      $ 3,523,261  $ 4,745,653      $ 4,289,412
                                                         ===========      ===========  ===========      ===========

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)                                                                     
CURRENT LIABILITIES:                                                                                               
   Accounts payable                                      $   468,813      $   590,588  $ 1,605,090      $   813,464
   Income taxes payable                                       63,111           20,000      297,094          107,166
   Accrued payroll and related liabilities                   473,366          281,997      246,731          273,168
   Accrued liabilities                                       106,511           31,000      329,285           70,389
   Current portion of notes payable                          200,000               --      200,000               --
                                                         -----------      -----------  -----------      -----------

   Total current liabilities                               1,311,801          923,585    2,678,200        1,264,187

   OTHER LIABILITIES (Note 7)                                762,771               --      566,937               --

   NOTES PAYABLE, net of current portion                   1,875,437               --    1,811,260               --
                                                         -----------      -----------  -----------      -----------

   Total liabilities                                       3,950,009          923,585    5,056,397        1,264,187
                                                         -----------      -----------  -----------      -----------

COMMITMENTS AND CONTINGENCIES                                                                                      

SHAREHOLDERS' EQUITY (DEFICIT):                                                                                    
   Nonvoting common stock, $.001 par value,                                                                        
      10,000 shares authorized, 1,011 and 4,049                                                                    
      shares issued and outstanding at                                                                             
      December 31, 1997                                                                                            
      and 1996, respectively                                       1                4            1                4
   Voting common stock, $.001 par value, 1,000 shares                                                              
     authorized, 101 and 405 shares issued and                                                                     
     outstanding at December 31, 1997 and 1996,                                                                    
     respectively                                                 --               --           --               --
   Additional paid-in capital                                338,423          338,423      338,423          338,423
   Treasury stock                                         (4,884,599)              --   (4,884,599)              --
   Retained earnings                                       3,891,922        2,261,249    4,235,431        2,686,798
                                                         -----------      -----------  -----------      -----------

   Total shareholders' equity (deficit)                     (654,253)       2,599,676     (310,744)       3,025,225
                                                         -----------      -----------  -----------      -----------

   Total liabilities and shareholders' equity (deficit)  $ 3,295,756      $ 3,523,261  $ 4,745,653      $ 4,289,412
                                                         ===========      ===========  ===========      ===========

The accompanying notes are an integral part of these balance sheets.

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ARIZONA MILLWORK, INC.
 DBA ROSEWOOD ENTERPRISES MODULAR MFG.

STATEMENTS OF OPERATIONS

                                                        [Enlarge/Download Table]

                                                                                              For the Three Months     
                                              For the Years Ended December 31,                  Ended March 31,        
                                       -----------------------------------------------   ------------------------------
                                           1997              1996             1995          1998               1997    
                                       ------------      ------------     ------------   ------------      ------------
                                                                                          (Unaudited)       (Unaudited)
                                                                                                                       
NET SALES                              $ 31,875,003      $ 18,361,747     $ 19,859,641   $  6,724,383      $  6,368,789

COST OF SALES                            26,482,353        15,965,611       16,573,200      5,632,444         5,258,207
                                       ------------      ------------     ------------   ------------      ------------

         Gross profit                     5,392,650         2,396,136        3,286,441      1,091,939         1,110,582

OPERATING EXPENSES:                                                                                                    
  General and administrative expenses     2,551,986         1,767,241        1,890,964        478,392           412,364
  Professional fees                         250,000           300,000          375,000             --                --
                                       ------------      ------------     ------------   ------------      ------------

         Income from operations           2,590,664           328,895        1,020,477        613,547           698,218
                                       ------------      ------------     ------------   ------------      ------------

OTHER INCOME (EXPENSE):                                                                                                
  Interest expense                          (81,482)               --              (53)       (42,655)               --
  Interest income                            46,980            50,667           47,528          3,503             8,675
  Other income                              180,650               213           29,404          3,046                --
  Loss on sale of assets, net               (28,802)               --               --             --                --
                                       ------------      ------------     ------------   ------------      ------------

                                            117,346            50,880           76,879        (36,106)            8,675
                                       ------------      ------------     ------------   ------------      ------------
         Income before provision for                                                                                   
             income taxes                 2,708,010           379,775        1,097,356        577,441           706,893

PROVISION FOR INCOME TAXES                1,077,337           143,422          453,647        233,932           281,344
                                       ------------      ------------     ------------   ------------      ------------

         Net income                    $  1,630,673      $    236,353     $    643,709   $    343,509      $    425,549
                                       ============      ============     ============   ============      ============

The accompanying notes are an integral part of these financial statements.

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ARIZONA MILLWORK, INC.
 DBA ROSEWOOD ENTERPRISES MODULAR MFG.

STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

                                                        [Enlarge/Download Table]

                      Voting              Nonvoting                  Additional                                          
                   Common Stock          Common Stock                  Paid-in      Treasury      Retained               
                      Shares     Amount    Shares         Amount       Capital       Stock        Earnings      Total    
                   -----------   -----   -----------   -----------   -----------  -----------   -----------  ----------- 
                                                                                                                         
BALANCE,                                                                                                                 
December 31, 1994          405   $  --         4,049   $         4   $   338,423  $        --   $ 1,381,187  $ 1,719,614 
Net income                  --      --            --            --            --           --       643,709      643,709 
                   -----------   -----   -----------   -----------   -----------  -----------   -----------  ----------- 

BALANCE,                                                                                                                 
December 31, 1995          405      --         4,049             4       338,423           --     2,024,896    2,363,323 
Net income                  --      --            --            --            --           --       236,353      236,353 
                   -----------   -----   -----------   -----------   -----------  -----------   -----------  ----------- 

BALANCE,                                                                                                                 
December 31, 1996          405      --         4,049             4       338,423           --     2,261,249    2,599,676 
   Purchase of                                                                                                           
common stock              (304)     --        (3,038)           (3)           --   (4,884,599)           --   (4,884,602)
Net income                  --      --            --            --            --           --     1,630,673    1,630,673 
                   -----------   -----   -----------   -----------   -----------  -----------   -----------  ----------- 

BALANCE,                                                                                                                 
December 31, 1997          101      --         1,011             1       338,423   (4,884,599)    3,891,922     (654,253)
Net income                                                                                                               
(unaudited)                 --      --            --            --            --           --       343,509      343,509 
                   -----------   -----   -----------   -----------   -----------  -----------   -----------  ----------- 

BALANCE,                                                                                                                 
March 31, 1998             101   $  --         1,011   $         1   $   338,423  $(4,884,599)  $ 4,235,431  $  (310,744)
                   ===========   =====   ===========   ===========   ===========  ===========   ===========  =========== 

The accompanying notes are an integral part of these financial statements.      

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ARIZONA MILLWORK, INC.
 DBA ROSEWOOD ENTERPRISES MODULAR MFG.

STATEMENTS OF CASH FLOWS

                                                        [Enlarge/Download Table]

                                                                                                   For the Three Months     
                                                         For the Years Ended December 31,             Ended March 31,       
                                                     -----------------------------------------   -------------------------- 
                                                         1997           1996           1995          1998           1997    
                                                     -----------    -----------    -----------   -----------    ----------- 
                                                                                                                            
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                       
   Net income                                        $ 1,630,673    $   236,353    $   643,709   $   343,509    $   425,549 
   Adjustments to reconcile net income to net cash                                                                          
     provided by (used in) operating activities-                                                                            
      Depreciation                                       109,317         92,097         71,284        24,134         24,144 
      Deferred income taxes                             (118,774)            --        (20,000)      (19,200)            -- 
      Loss on sale of assets                              28,802             --             --            --             -- 
       Changes in assets and liabilities:                                                                                   
         Increase in accounts receivable                (100,511)      (384,175)      (298,420)     (880,975)      (437,634)
         Decrease (increase) in inventories             (124,444)      (489,682)       422,957      (497,172)       (61,650)
         Decrease (increase) in prepaid expenses         203,399       (150,868)       (50,940)       (6,303)       206,181 
         Increase (decrease) in income tax payables       43,111       (432,634)       404,871       233,983         87,166 
         Increase (decrease) in accounts payable        (121,775)       329,942       (599,092)    1,136,277        222,876 
         Increase in accrued payroll and related                                                                            
                 liabilities                             191,369         75,980        120,781      (226,635)        (8,829)
         Increase (decrease) in accrued liabilities       75,511        (11,887)      (126,776)      222,774         39,389 
         Increase in other liabilities                   183,771             --             --      (195,834)            -- 
                                                     -----------    -----------    -----------   -----------    ----------- 

                  Net cash provided by (used in)                                                                            
                      operating activities             2,000,449       (734,874)       568,374       134,558        497,192 
                                                     -----------    -----------    -----------   -----------    ----------- 

CASH FLOWS FOR INVESTING ACTIVITIES:                                                                                        
   Purchases of equipment and                                                                                               
     leasehold improvements                             (103,110)       (82,965)      (111,601)           --        (62,753)
   Proceeds from sale of equipment                        12,000             --             --            --             -- 
                                                     -----------    -----------    -----------   -----------    ----------- 

                  Net cash used in investing                                                                                
                      activities                         (91,110)       (82,965)      (111,601)           --        (62,753)
                                                     -----------    -----------    -----------   -----------    ----------- 

CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                       
   Purchase of common stock                           (3,305,602)            --             --            --             -- 
   Proceeds from notes payable                         1,600,000             --             --            --             -- 
   Principal payments on notes payable                  (524,563)            --             --       (64,177)            -- 
                                                     -----------    -----------    -----------   -----------    ----------- 

                  Net cash used in financing                                                                                
                      activities                      (2,230,165)            --             --       (64,177)            -- 
                                                     -----------    -----------    -----------   -----------    ----------- 

NET INCREASE (DECREASE) IN CASH AND                                                                                         
   CASH EQUIVALENTS                                     (320,826)      (817,839)       456,773        70,381        434,439 

CASH AND CASH EQUIVALENTS,                                                                                                  
    beginning of year                                    429,692      1,247,531        790,758       108,866        429,692 
                                                     -----------    -----------    -----------   -----------    ----------- 

   CASH AND CASH EQUIVALENTS,                                                                                               
       end of year                                   $   108,866    $   429,692    $ 1,247,531   $   179,247    $   864,131 
                                                     ===========    ===========    ===========   ===========    =========== 

 (continued)

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                                                        [Enlarge/Download Table]

                                                                                           For the Three Months  
                                                   For the Years Ended December 31,           Ended March 31,    
                                               ----------------------------------------- ------------------------
                                                   1997         1996           1995         1998           1997  
                                               ----------   -----------    -----------   -----------   ----------
                                                                                                                 
SUPPLEMENTAL DISCLOSURES OF CASH                                                                                 
    FLOW INFORMATION:                                                                                            
   Cash paid during the year for interest      $   94,982   $        --    $        --   $    42,655   $       --
                                               ==========   ===========    ===========   ===========   ==========

   Cash paid during the year for income taxes  $1,153,000   $   336,000    $    21,300   $        --   $       --
                                               ==========   ===========    ===========   ===========   ==========

SUPPLEMENTAL DISCLOSURES OF                                                                                      
    NONCASH TRANSACTIONS:                                                                                        
     Common stock purchased through issuance                                                                     
   of a note payable                           $1,000,000   $        --    $        --   $        --   $       --
                                               ==========   ===========    ===========   ===========   ==========
     Common stock purchased through other                                                                        
   long-term liabilities                       $  579,000   $        --    $        --   $        --   $       --
                                               ==========   ===========    ===========   ===========   ==========

The accompanying notes are an integral part of these financial statements.

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ARIZONA MILLWORK, INC.
 DBA ROSEWOOD ENTERPRISES MODULAR MFG.

 NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996

(1)     COMPANY OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:                 

ORGANIZATION AND BUSINESS                                     

Arizona Millwork, Inc. dba Rosewood Enterprises Modular Mfg. (the Company)      
manufactures modular buildings at its production facility in Phoenix, Arizona,  
and distributes to customers throughout the western United States. The Company's
customers include dealers and leasing companies who sell or lease the buildings 
to third parties operating in various industries.                               

CASH AND CASH EQUIVALENTS                                     

The Company considers all cash and highly liquid investments with original      
maturities of three months or less when purchased to be cash equivalents. Cash  
equivalents consist of investments in a money market account. Cash equivalents  
are recorded at cost of $17,048 and $363,314 at December 31, 1997 and 1996,     
respectively, which approximates market value.                                  

INVENTORIES                                                   

Inventories consist of raw materials and work-in-process and are stated at the  
lower of cost (first-in first-out) or market. Work-in-process consists of raw   
materials and overhead. Inventories at December 31 consist of the following:    

                                                                [Download Table]

                                    1997         1996   
                                 ----------   ----------
                                                        
Raw materials                    $1,193,530   $  971,772
Work-in-process                     260,990      358,304
                                 ----------   ----------

         Total inventories       $1,454,520   $1,330,076
                                 ==========   ==========

EQUIPMENT AND LEASEHOLD IMPROVEMENTS                          

Equipment and leasehold improvements are stated at cost. Depreciation is        
computed using the straight-line method over the assets' useful lives or life of
the lease, whichever is shorter.                                                

Equipment and leasehold improvements at December 31 is comprised of the         
following:                                                                      

                                                                [Download Table]

                                Useful                          
                                 Life       1997        1996    
                                 ----    ---------    --------- 
                                                                
Automotive equipment              3-5    $ 199,855    $ 164,162 
Furniture and fixtures            5-10     208,691      208,691 
Leasehold improvements            5-10      33,545       33,545 
Warehouse equipment               5-7      202,911      187,205 
                                         ---------    --------- 
                                           645,002      593,603 
Less - accumulated depreciation           (481,280)    (382,872)
                                         ---------    --------- 

                                         $ 163,722    $ 210,731 
                                         =========    ========= 

Major renewals or betterments are capitalized while maintenance costs and       
repairs are expensed in the period incurred. Upon retirement or disposal of     
depreciable assets, the cost and related accumulated depreciation are removed   
from the accounts and the resulting gain or loss is reflected in operations.    
Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the  
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of,        
requires that long-lived assets to be held and used be                          

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reviewed for impairment whenever events or changes in circumstances indicate    
that the carrying amount of an asset may not be recoverable based on the        
estimated future cash flows. In management's opinion, no such events or changes 
in circumstances have occurred.                                                 

PRODUCT WARRANTY                                              

The Company provides a one-year parts and labor warranty on units sold. The     
Company provides, by a current charge to income, an amount it estimates will be 
needed to cover future warranty obligations for products sold during the year.  
The accrued liability for warranty costs of $71,600 and $31,000 at December 31, 
1997 and 1996, respectively, is included in accrued liabilities in the          
accompanying balance sheets.                                                    

REVENUE RECOGNITION                                           

The Company recognizes revenue upon completion of the buildings and transfer of 
title to the customer. Customer-owned buildings are often maintained on the     
Company's premises until the customer arranges for pickup and delivery.         

USE OF ESTIMATES                                              

The preparation of financial statements in conformity with generally accepted   
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of         
contingent assets and liabilities at the date of the financial statements and   
reported amounts of revenues and expenses during the reporting period.          
Actual results could differ from those estimates.                               

OTHER INCOME                                                  

Other income for the year ended December 31, 1997 included approximately        
$130,000 of bad debt recovery and a dividend of approximately $50,000 received  
from the Company's workers' compensation carrier.                               

(2)     NOTES PAYABLE:                                                          

Notes payable consist of the following:                                         

                                                        [Enlarge/Download Table]

                                                                               December 31,   
                                                                         ---------------------
                                                                            1997         1996 
                                                                         -----------    ------
                                                                                              
Note payable to bank, payments of principal and interest due monthly,                         
interest at base rate (9.5% at December 31, 1997) plus 1% per annum,                          
guaranteed by the Company's president, due August 27, 2002, secured by                        
receivables, inventories, and equipment                                  $   475,437    $   --

Note payable to a former shareholder, monthly payments of interest only                       
for the first 24 months, monthly payments of principal and interest                           
thereafter, interest at 11% per annum, guaranteed by the Company's                            
president, due August 28, 2004, secured by all of the Company's assets     1,000,000        --

Note payable to the Company's president, payments of interest due                             
quarterly, interest at 9% per annum, principal due August 29, 2006,                           
secured by all of the Company's assets                                       600,000        --
                                                                         -----------    ------
                                                                           2,075,437        --
Less - current portion                                                      (200,000)       --
                                                                         -----------    ------

                                                                         $ 1,875,437    $   --
                                                                         ===========    ======

Amounts due on the note payable in future years are as follows:                 

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                                                                [Download Table]

  Year Ending                               
  December 31,                              
  ------------                              
                                            
      1998                        $  200,000
      1999                           251,000
      2000                           240,080
      2001                           183,700
      2002                           204,963
Thereafter                           995,694
                                  ----------

                                  $2,075,437
                                  ==========

(3)     LINE OF CREDIT:                                                         

In August 1997, the Company obtained a bank revolving line of credit for        
borrowings in an amount that is the lower of $500,000 or 80% of eligible        
accounts receivable and 20% of raw materials inventory as defined in the line of
credit agreement. Interest accrues at the bank's base rate (9.5% at December 31,
1997) plus 1% on the outstanding balance and is payable monthly. The line of    
credit is guaranteed by the president and is secured by all of the Company's    
assets. The line of credit expires May 1998 and contains certain financial      
covenants. The Company had no borrowings under the line of credit during the    
year ended December 31, 1997.                                                   

(4)     INCOME TAXES:                                                           

The Company accounts for income taxes in accordance with SFAS No. 109,          
Accounting for Income Taxes. Deferred tax assets and liabilities are recorded   
based on the differences between the financial statement and tax bases of assets
and liabilities at the tax rates in effect when these differences are expected  
to reverse. The deferred provision for income taxes results from timing         
differences in the recognition of certain revenue and expense items for         
financial reporting and income tax reporting purposes.                          

The provision for income taxes for the years ended December 31 is comprised of  
the following:                                                                  

                                                                [Download Table]

                                          1997           1996          1995   
                                      -----------    -----------   -----------
                                                                              
Current                               $ 1,196,069    $   143,422   $   453,647
Deferred                                 (118,732)            --            --
                                      -----------    -----------   -----------

         Provision for income taxes   $ 1,077,337    $   143,422   $   453,647
                                      ===========    ===========   ===========

The components of the Company's net deferred tax asset are as follows:          

                                                                [Download Table]

                                       1997          1996  
                                     --------      --------
                                                           
Reserves                             $ 36,774      $ 20,000
Deferred compensation                  97,000            --
Depreciation and amortization           5,000            --
                                     --------      --------

         Net deferred tax asset      $138,774      $ 20,000
                                     ========      ========

A reconciliation of the federal statutory rate to the Company's effective tax   
rate for the years ended December 31 is as follows:                             

                                                                [Download Table]

                                        1997      1996       1995 
                                        ----      ----       ---- 
                                                                  
Statutory federal rate                    34%       34%        34%
State taxes, net of federal benefit        6         6          6 
Other                                     --        (2)         1 
                                         ---       ---        --- 

                                          40%       38%        41%
                                         ===       ===        === 

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(5)     LEASE COMMITMENTS:                                                      

OPERATING LEASE                                               

The Company conducts its major operations from a facility owned by a former     
shareholder and currently pays a monthly rental fee of $16,300 plus taxes,      
maintenance fees and insurance. The Company also incurred month-to-month rental 
expense for storage during a portion of 1997, 1996 and 1995 related to a parcel 
of land adjacent to the Company's facility. Rent expense was approximately      
$245,000, $233,000, and $234,000 for the years ended December 31, 1997, 1996,   
and 1995, respectively.                                                         

As of December 31, 1997, future minimum lease payments required under           
noncancellable operating leases are as follows:                                 

                                                                [Download Table]

                             Year Ending
                            December 31,
                            ------------
                                        
1998                          $206,148  
1999                           204,390  
2000                           195,600  
2001                           195,600  
2002                           130,400  
                              --------  

                              $932,138  
                              ========  

(6)     CONCENTRATION OF CREDIT RISK:                                           

The Company is a wholesale manufacturer that sells its products to dealers, who 
in turn, sell or lease the products to end-users. Financial instruments which   
potentially expose the Company to concentrations of credit risk, as defined by  
SFAS No. 105, Disclosure of Information About Financial Instruments with        
Off-Balance Sheet Risk and Financial Instruments with Concentration of Credit   
Risk consist primarily of trade accounts receivable. The Company's trade        
accounts receivable are not secured. The Company generally does not require     
collateral upon delivery of its products.                                       

The percentage of total sales to customers that in aggregate exceed 10% of total
sales are as follows:                                                           

                                                                [Download Table]

                      For the Years Ended December 31,  
                     ---------------------------------- 
                     1997           1996           1995 
                     ----           ----           ---- 
                                                        
Customer #1            50%            44%            61%
Customer #2            29             11             18 
Customer #3            --             12             -- 

(7)     COMMITMENTS AND CONTINGENCIES:                                          

LITIGATION                                                    

In the normal course of its business, the Company is subject to certain         
contractual guarantees and litigation. In management's opinion, upon            
consultation with legal counsel, there is no current, pending, or threatened    
litigation that will materially affect the Company's financial position or      
results of operations.                                                          

DEFERRED COMPENSATION AND CONSULTING AGREEMENTS               

On August 29, 1997, the Company entered into a deferred compensation agreement  
with a former shareholder. For services provided from January 1997 to August    
1997, the shareholder earned $200,000, payable quarterly over the next twelve   
years. The Company recorded $200,000 of professional fees for the year ended    
December 31, 1997 related to the deferred compensation agreement in the         
accompanying statements of operations.                                          

On August 29, 1997, the Company entered into a consulting agreement with the    
same shareholder to provide consulting services to the Company for three years. 
Under the consulting agreement, the former shareholder earns $150,000 in year   
one, $100,000 in year two, and $75,000 in year three for these services. The    
fees are paid quarterly over twelve years. The Company recognizes the expense   
straight-line in each of the three years earned and recorded professional fees  
of $50,000 for the year ended December 31, 1997, in the accompanying statements 
of operations.                                                                  

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Professional fees for 1996 and 1995 of $300,000 and $375,000, respectively, were
paid to this same former shareholder for management and consulting services.    

PROFIT SHARING PLAN AND 401(k) SALARY SAVINGS PLAN            

In 1987, the Company adopted a profit sharing plan and a 401(k) salary savings  
plan (the Plan). All of the Company's employees are eligible to participate     
after completing three months of service with the Company. The Company matches  
25% of the employee's contribution up to an annual maximum of 6% of the         
employee's annual compensation. In addition, the Company, at its discretion, may
make a profit sharing contribution. To be eligible for a profit sharing         
contribution, the employee must work at least 1,000 hours during the Plan year  
and be employed by the Company on the last day of the Plan year. The Company's  
matching contributions and profit sharing contributions vest over a seven year  
period. The Company contributed approximately $141,000, $48,000, and $94,000 to 
the Plan for the years ended December 31, 1997, 1996, and 1995, respectively.   

(8)   STOCK PURCHASE:                                                           

On August 29, 1997, the Company entered into an agreement to purchase 303 shares
of voting common stock and 3,034 shares of nonvoting common stock (approximately
75% of the Company's outstanding voting and nonvoting common stock) for $1,462  
per share from the then, majority shareholder, for $4,879,000. The transaction  
was financed with cash from operations of $1,700,000, a loan from a bank for    
$1,000,000, a note from the seller in the amount of $1,000,000 and a note from  
the Company's president in the amount of $600,000. In connection with this      
agreement, the Company entered into a non-compete agreement with this           
shareholder. Under the agreement, the shareholder agreed not to compete with the
Company for twelve years in exchange for a total of $579,000, paid quarterly    
over twelve years. The Company recorded the value of this agreement in the      
accompanying balance sheets as additional consideration paid to acquire his     
outstanding common stock. The corresponding liability is recorded in other      
long-term liabilities in the accompanying balance sheets.                       

In addition, the Company purchased fractional shares from various minority      
shareholders for approximately $6,000.                                          

(9)     DESCRIPTION OF SECURITIES:                                              

REVERSE STOCK SPLIT                                           

Information in the accompanying financial statements and notes to financial     
statements gives retroactive effect to a reverse stock split effected October   
31, 1997. Each holder of record of the Company's common stock received one share
of newly created nonvoting common stock and one-tenth of a share of the newly   
created voting common stock for each 10,000 shares of common stock.             

COMMON STOCK                                                  

The Company's capital stock consists of 10,000 shares of $.001 par value        
nonvoting common stock and 1,000 shares of $.001 par value of voting common     
stock. No holders of any shares of common stock have preemptive or preferential 
right to acquire any additional shares. Holders of common stock will be entitled
to receive such dividends, if any, as may be declared by the board of directors 
from time to time out of legally available funds. Holders of the voting common  
stock are entitled to one vote for each share on all matters submitted to a vote
of shareholders. Holders of the nonvoting common stock have no voting rights.   
Upon any liquidation, dissolution or winding up of the Company, and after paying
or adequately providing for the payment of all its obligations, the remainder of
the assets of the Company shall be distributed, either in cash or in kind, pro  
rata to the holders of common stock.                                            

(10)    SUBSEQUENT EVENT:                                                       

In February 1998, the shareholders entered into an agreement to sell all of the 
outstanding shares of the Company for an amount in excess of the net book value 
of the Company. Pursuant to this agreement, the shareholders agree to, among    
other things, enter into noncompete, consulting and employment agreements. The  
transaction is expected to close in April 1998.                                 

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 ANNEX I
================================================================================
 AGREEMENT AND PLAN OF REORGANIZATION AND MERGER

by and between

 MODTECH, INC.

 and

SPI HOLDINGS, INC.

 -------------------------------

Dated as of September 28, 1998

 -------------------------------

================================================================================

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 TABLE OF CONTENTS

                                                                [Download Table]

                                                                                
ARTICLE I                                                                       
THE MERGERS .............................................................      2
   1.1   Organization of Holdings .......................................      2
   1.2   Directors and Officers of Holdings .............................      2
   1.3   Modtech Sub Merger .............................................      3
   1.4   SPI Sub Merger .................................................      3
   1.5   The Closing ....................................................      3
   1.6   Effective Time .................................................      4
   1.7   Effects of the Mergers .........................................      4
   1.8   Directors and Officers of the Surviving Entities ...............      4

ARTICLE II                                                                      
CONVERSION OF SECURITIES ................................................      5
   2.1   Conversion of Securities .......................................      5
   2.2   Conversion of Modtech Shares ...................................      5
   2.3   Modtech Election, Allocation and Conversion Procedures .........      6
   2.4   Additional Exchange Procedures .................................      8
   2.5   Dissenting Modtech Shares ......................................      9
   2.6   Modtech Options ................................................     10
   2.7   Conversion of SPI Shares .......................................     11
   2.8   SPI Election, Allocation and Conversion Procedures .............     12
   2.9   Additional Exchange Procedures .................................     14
   2.10  Dissenting SPI Shares ..........................................     16
   2.11  SPI Options ....................................................     17
   2.12  SPI Warrants ...................................................     18
   2.13  Cancellation of Shares .........................................     18
   2.14  No Transfer after the Effective Time ...........................     18

ARTICLE III                                                                     
REPRESENTATIONS AND WARRANTIES OF MODTECH ...............................     18
   3.1   Existence; Good Standing; Corporate Authority ..................     18
   3.2   Authorization; Validity and Effect of Agreement ................     19
   3.3   Capitalization .................................................     19
   3.4   Subsidiaries ...................................................     20
   3.5   Other Interests ................................................     20
   3.6   No Conflict; Required Filings and Consents .....................     20
   3.7   Compliance .....................................................     21
   3.8   SEC Documents ..................................................     21
   3.9   Litigation .....................................................     22

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   3.10  Absence of Certain Changes .....................................     22
   3.11  Environmental Matters ..........................................     22
   3.12  Real Properties ................................................     23
   3.13  Tangible Personal Property .....................................     24
   3.14  Intellectual Property ..........................................     24
   3.15  Absence of Changes in Modtech Benefit Plans ....................     24
   3.16  ERISA Compliance ...............................................     25
   3.17  Taxes ..........................................................     27
   3.18  Contracts; Debt Instruments ....................................     28
   3.19  Insurance ......................................................     30
   3.20  Interests of Officers and Directors ............................     30
   3.21  No Brokers .....................................................     30
   3.22  Customers ......................................................     30
   3.23  Suppliers ......................................................     30
   3.24  Employees ......................................................     30
   3.25  Product Liability ..............................................     31
   3.26  Information in Joint Proxy Statement/Prospectus and Form S-4....     31
   3.27  Disclosure .....................................................     31
   3.28  Fairness Opinion ...............................................     31
   3.29  Year 2000 Matters ..............................................     31

ARTICLE IV                                                                      
REPRESENTATIONS AND WARRANTIES OF SPI ...................................     32
   4.1   Existence; Good Standing; Authority ............................     32
   4.2   Authorization; Validity and Effect of Agreement ................     32
   4.3   Capitalization .................................................     33
   4.4   Subsidiaries ...................................................     33
   4.5   Other Interests ................................................     33
   4.6   No Conflict; Required Filings and Consents .....................     34
   4.7   Compliance .....................................................     34
   4.8   Financial Statements ...........................................     35
   4.9   Litigation .....................................................     35
   4.10  Absence of Certain Changes .....................................     35
   4.11  Environmental Matters ..........................................     36
   4.12  Real Properties ................................................     36
   4.13  Tangible Personal Property .....................................     37
   4.14  Intellectual Property ..........................................     37
   4.15  Absence of Changes in SPI Benefit Plans ........................     37
   4.16  ERISA Compliance ...............................................     38
   4.17  Taxes ..........................................................     40
   4.18  Contracts; Debt Instruments ....................................     41
   4.19  Insurance ......................................................     43
   4.20  Interests of Officers and Directors ............................     43

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   4.21  No Brokers .....................................................     43
   4.22  Customers ......................................................     43
   4.23  Suppliers ......................................................     44
   4.24  Employees ......................................................     44
   4.25  Product Liability ..............................................     44
   4.26  Information in Joint Proxy Statement/Prospectus and Form S-4 ...     44
   4.27  Disclosure .....................................................     44
   4.28  Year 2000 Matters ..............................................     44

ARTICLE V                                                                       
COVENANTS ...............................................................     45
   5.1   Conduct of Business by Modtech or SPI ..........................     45
   5.2   Meetings of Stockholders .......................................     46
   5.3   Further Assurance and Cooperation ..............................     47
   5.4   Certain Filings and Consents ...................................     47
   5.5   Publicity ......................................................     48
   5.6   Joint Proxy Statement/Prospectus and Form S-4 ..................     48
   5.7   Listing Application ............................................     48
   5.8   Further Action .................................................     48
   5.9   Lockup Agreements ..............................................     49
   5.10  Expenses........................................................     49
   5.11  Notice of Change in Representations and Warranties .............     49
   5.12  Consents .......................................................     49
   5.13  Letter of Modtech's Accountants ................................     49
   5.14  Letter of SPI's Accountants ....................................     50
   5.15  Registration Statement on Form S-8 .............................     50
   5.16  Tax Matters Certificates .......................................     50
   5.17  Assumption of Obligations by Holdings, Modtech Sub and SPI Sub..     50
   5.19  Development of Holdings Business Plan ..........................     51
   5.20  Payment of Transaction Fees; Transaction Advisory Agreement ....     51
   5.21  Retention of Holdings' Financial Advisor .......................     51
   5.22  Deregistration of Modtech Shares ...............................     51

ARTICLE VI                                                                      
CONDITIONS ..............................................................     51
   6.1   Conditions to Each of Modtech's and SPI's                              
         Obligation to Effect the Mergers ...............................     51
   6.2   Conditions to Obligation of Modtech to Effect the Mergers.......     53
   6.3   Conditions to Obligation of SPI to Effect the Mergers ..........     54

ARTICLE VII                                                                     
TERMINATION, WAIVER AND AMENDMENT .......................................     55
   7.1   Termination or Abandonment .....................................     55
   7.2   Effect of Termination ..........................................     56

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   7.3   Amendment or Supplement ........................................     57
   7.4   Extension of Time; Waiver, Etc .................................     57

ARTICLE VIII                                                                    
INDEMNIFICATION .........................................................     58
   8.1   Indemnification ................................................     58

ARTICLE IX                                                                      
GENERAL PROVISIONS ......................................................     59
   9.1   Non-survival of Representations and Warranties .................     59
   9.2   Notices ........................................................     59
   9.3   Assignment; Binding Effect .....................................     60
   9.4   Entire Agreement ...............................................     60
   9.5   Governing Law ..................................................     61
   9.6   Counterparts ...................................................     61
   9.7   Headings 61 ....................................................       
   9.8   Interpretation .................................................     61
   9.9   Incorporation of Schedules .....................................     61
   9.10  Severability ...................................................     61
   9.11  Enforcement of Agreement .......................................     61

ARTICLE X                                                                       
DEFINITIONS .............................................................     62
   10.1   Defined Terms .................................................     62

SCHEDULES                                                                       

Schedule I  Schedule of Modtech Shareholders to be Allocated Holdings Preferred 
Stock                                                   

DISCLOSURE SCHEDULES                                                            

Modtech Disclosure Schedule                                                     
SPI Disclosure Schedule                                                         

LIST OF EXHIBITS                                                                

Exhibit A Form of Certificate of Incorporation of Holdings                      

Exhibit B Form of Bylaws of Holdings                                            

Exhibit C Form of Certificate of Designation for Holdings Preferred Stock       

Exhibit D Form of Voting Agreement                                              

Exhibit E Form of Certificate of Merger to be filed in California               

Exhibit F Form of Articles of Merger to be filed in Colorado                    

Exhibit G Form of Transaction Advisory Agreement                                

Exhibit H Form of Registration Rights Agreement                                 

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AGREEMENT AND PLAN OF REORGANIZATION AND MERGER                                 

     Agreement and Plan of Reorganization and Merger (this "Agreement"),
dated as of September 28, 1998, by and between Modtech, Inc., a California      
corporation ("Modtech") and SPI Holdings, Inc., a Colorado corporation ("SPI"). 

RECITALS

         A. The Board of Directors of Modtech deems it advisable and in the best
interest of Modtech and its stockholders to consummate, and has approved,       
including for purposes of Section 1101 of the General Corporation Law of the    
State of California (the "CGCL"), the business combination transactions provided
for herein; and the Board of Directors of SPI deems it advisable and in the best
interest of SPI and its stockholders to consummate, and has approved, including 
for purposes of Section 7-111-101 of the Colorado Business Corporation Act (the 
"CBCA"), the business combination transactions provided for herein, in which:   

                 (1) Modtech and SPI will form a Delaware corporation, Modtech
Holdings, Inc. ("Holdings"); and                              

              (2) Because of a number of operational differences between
         Modtech and SPI, the Board of Directors of each of Modtech and SPI have
       deemed it advisable to maintain the separate existence of Modtech and
         SPI following the consummation of the transactions provided for herein;
accordingly, Holdings will form two subsidiaries, a Delaware  
 corporation which will merge with and into Modtech with Modtech
       continuing as the surviving corporation (the "Modtech Merger"), and a
  Colorado corporation which will merge with and into SPI with SPI
         continuing as the surviving corporation (the "SPI Merger" and, together
 with the Modtech Merger, the "Mergers"), and (i) all issued and
    outstanding Modtech Shares (as hereinafter defined) and all vested
     Modtech Options (as hereinafter defined) will be converted into the
       right to receive, in the aggregate, 9,481,118 shares of common stock,
  par value $.01 per share, of Holdings ("Holdings Common Stock"),
       388,939 shares of Series A Preferred Stock, par value $.01 per share,
       of Holdings ("Holdings Preferred Stock") and $39,923,472 in cash, and
      (ii) all issued and outstanding SPI Shares (as hereinafter defined),
         all vested SPI Options (as hereinafter defined) and all exercisable SPI
       Warrants (as hereinafter defined) will be converted into the right to
      receive, in the aggregate, 4,974,462 shares of Holdings Common Stock
and $8,076,133 in cash, all as more fully set forth below;    

        B. For federal income tax purposes, it is intended that the SPI Merger
shall qualify as a "reorganization" within the meaning of Section 368 of the    
Internal Revenue Code of 1986, as amended (the "Code"), and the Modtech Merger  
(together with the SPI Merger) shall qualify as an "exchange" under Section 351 
of the Code; and                                                                

       C. Modtech and SPI desire to make certain representations, warranties
and agreements in connection with the Mergers and also to prescribe various     
conditions to the Mergers.                                                      

    Capitalized terms used in this Agreement and not otherwise defined
herein shall have the meanings set forth in Section 10.1 hereof.                

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 ARTICLE I

THE MERGERS 

        1.1 Organization of Holdings. As promptly as practicable following the
execution of this Agreement, Modtech and SPI shall cause Holdings to be         
organized under the laws of the State of Delaware. The initial certificate of   
incorporation and bylaws of Holdings shall be substantially in the forms        
attached hereto as Exhibit A and Exhibit B, respectively. The certificate of    
designation for the Holdings Preferred Stock shall be substantially in the form 
attached hereto as Exhibit C. The authorized capital stock of Holdings shall    
consist of 25,000,000 shares of Holdings Common Stock and 5,000,000 shares of   
Holdings Preferred Stock, of which 680 shares of Holdings Common Stock will be  
issued to Modtech and 320 shares of Holdings Common Stock will be issued to SPI.
Prior to the Effective Time (as hereinafter defined), Modtech and SPI shall     
cause Holdings to provide for the issuance of Holdings Common Stock pursuant to 
the Mergers.                                                                    

1.2      Directors and Officers of Holdings.                  

         (a) Upon formation of Holdings, the Board of Directors of Holdings will
consist of seven directors. Modtech and SPI shall cause to be elected as initial
directors of Holdings Evan M. Gruber, Patrick Van Den Bossche, Charles C.       
McGettigan, Myron A. Wick III, Daniel Donahoe, Charles A. Hamilton and Charles  
R. Gwirtsman. Each director shall remain in office until his successor is duly  
elected or appointed and qualified or until such director's earlier death,      
resignation or removal in accordance with the certificate of incorporation and  
bylaws of Holdings.                                                             

       (b) As of the Effective Time, the Board of Directors of Holdings will
consist of nine directors, including the individuals set forth in Section       
1.2(a), one additional Independent Director to be selected by SPI and one       
additional Independent Director to be selected by the Board of Directors of     
Holdings. Each director shall remain in office until his successor is duly      
elected or appointed and qualified or until such director's earlier death,      
resignation or removal in accordance with the certificate of incorporation and  
bylaws of Holdings. In addition, Proactive Partners, LP ("Proactive Partners")  
and KRG Capital Partners, LLC ("KRG Capital") shall each be permitted to        
designate one non-voting observer, who may be changed from time to time, and who
shall be permitted to attend all meetings of the Board of Directors of Holdings.

      (c) Upon formation of Holdings and as of the Effective Time, Evan M.
Gruber shall be the Chairman and Chief Executive Officer of Holdings, Patrick   
Van Den Bossche shall be the President of Holdings and Michael G. Rhodes shall  
be the Chief Operating Officer and Chief Financial Officer of Holdings.         

   (d) At each of the first three stockholder's meetings of Holdings
following the Effective Time the Board of Directors of Holdings will, subject   
to the exercise of its fiduciary duties, use its best efforts to nominate the   
following persons for election to the Board of Directors for one-year terms:    
(1) Evan Gruber; (2) Patrick Van den Bossche; (3) two designees of Proactive    
Partners; (4) two designees of KRG Capital; and (5) three joint designees of    
Proactive Partners and KRG Capital, all three of whom will be Independent       
Directors. As used in this Section, the term "Independent Director" shall mean  
a person other than an officer, employee or affiliate of Holdings or its        
subsidiaries or any other individual having a relationship which, in the        
opinion of the Board of Directors of Holdings, would interfere with the         
exercise of independent judgement in carrying out the responsibilities of a     
director.                                                                       

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1.3      Modtech Sub Merger .                                 

         (a) As promptly as practicable after the formation of Holdings, Modtech
and SPI shall cause Holdings to form a wholly-owned corporation called Modtech  
Merger Sub, Inc. ("Modtech Sub") under the laws of the State of Delaware.       
Modtech and SPI shall cause Holdings to cause Modtech Sub to execute and deliver
this Agreement and to merge with and into Modtech. Modtech shall be the         
surviving corporation in the Modtech Merger and as a result thereof shall become
a wholly-owned subsidiary of Holdings.                                          

         (b) The certificate of incorporation and bylaws of Modtech Sub shall be
in such form as shall be determined by Holdings. Upon formation of Modtech Sub, 
Holdings shall elect Evan M. Gruber, Michael G. Rhodes and Patrick Van Den      
Bossche as directors of Modtech Sub and such Board of Directors, by unanimous   
written consent, shall appoint the officers of Modtech Sub.                     

       (c) Modtech shall use its best efforts to cause the Modtech Merger to
be consummated in accordance with the terms of this Agreement. Modtech and SPI  
shall cause Holdings to execute a written consent under Section 228 of the      
Delaware General Corporation Law (the "DGCL"), as the sole stockholder of       
Modtech Sub, to the execution, delivery and performance of this Agreement by    
Modtech Sub.                                                                    

1.4      SPI Sub Merger .                                     

         (a) As promptly as practicable after the formation of Holdings, Modtech
and SPI shall cause Holdings to form a wholly-owned corporation called SPI      
Merger Sub, Inc. ("SPI Sub") under the laws of the State of Colorado. Modtech   
and SPI shall cause Holdings to cause SPI Sub to execute and deliver this       
Agreement and to merge with and into SPI. SPI shall be the surviving corporation
in the SPI Merger and as a result thereof shall become a wholly-owned subsidiary
of Holdings.                                                                    

     (b) The articles of incorporation and bylaws of SPI Sub shall be in
such form as shall be determined by Holdings. Upon formation of SPI Sub,        
Holdings shall elect Evan M. Gruber, Patrick Van Den Bossche and Ronald R.      
Procunier as directors of SPI Sub and such Board of Directors, by unanimous     
written consent, shall appoint the officers of SPI Sub.                         

  (c) SPI shall use its best efforts to cause the SPI Merger to be
consummated in accordance with the terms of this Agreement. Modtech and SPI     
shall cause Holdings to execute a written consent under Section 7-107-104 of the
CBCA, as the sole stockholder of SPI Sub, to the execution, delivery and        
performance of this Agreement by SPI Sub.                                       

   1.5 The Closing . The closing (the "Closing") of the transactions
contemplated by this Agreement will take place at the offices of Gibson, Dunn & 
Crutcher LLP, 4 Park Plaza, Irvine, California, at 10:00 a.m., local time, as   
soon as practicable following the date on which the last of the conditions set  
forth in Article 6 is satisfied or waived in accordance herewith or at such     
other                                                                           

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place, time or date as Modtech and SPI may agree. The date on which the Closing 
occurs is hereinafter referred to as the "Closing Date".                        

    1.6 Effective Time . On the Closing Date, (i) Modtech will cause a
certificate of merger in the form attached hereto as Exhibit D to be filed with 
the Secretary of State of the State of California as provided in Section 1103 of
the CGCL in order to effect the Modtech Merger; and (ii) SPI will cause articles
of merger in the form attached hereto as Exhibit E to be filed with the         
Secretary of State of the State of Colorado as provided in Section 7-111-105 of 
the CBCA in order to effect the SPI Merger. Upon completion of such filings, the
respective Mergers will become effective in accordance with the CGCL and CBCA.  
The time and date on which the Mergers become effective is herein referred to as
the "Effective Time".                                                           

1.7      Effects of the Mergers .  At the Effective Time,     

       (a) The separate existence of Modtech Sub shall cease and Modtech Sub
shall be merged with and into Modtech, with Modtech continuing as the surviving 
corporation (as such, "New Modtech");                                           

        (b) The separate existence of SPI Sub shall cease and SPI Sub shall be
merged with and into SPI with SPI continuing as the surviving corporation (as   
such, "New SPI" and, together with New Modtech, the "Surviving Entities"); and  

(c) The Mergers shall have all the effects of applicable law, 
including, without limitation, the applicable provisions of the CGCL and the    
CBCA.                                                                           

1.8      Directors and Officers of the Surviving Entities .   

      (a) The members of the Board of Directors of New Modtech will be the
members of the Board of Directors of Modtech Sub immediately prior to the       
Effective Time and the members of the Board of Directors of New SPI will be the 
members of the Board of Directors of SPI Sub immediately prior to the Effective 
Time. All of the members of the Board of Directors of New Modtech and New SPI   
will serve until their respective successors are duly elected or appointed and  
qualified or until their earlier death, resignation or removal in accordance    
with the articles of incorporation and bylaws of New Modtech or New SPI, as the 
case may be.                                                                    

     (b) The officers of New Modtech will be the officers of Modtech Sub
immediately prior to the Effective Time and the officers of New SPI will be the 
officers of SPI Sub immediately prior to the Effective Time. Such persons will  
continue as officers of New Modtech and New SPI until their respective          
successors have been duly elected or appointed and qualified or until their     
earlier death, resignation or removal in accordance with the articles of        
incorporation and bylaws of New Modtech or New SPI, as the case may be.         

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ARTICLE II

CONVERSION OF SECURITIES

      2.1 Conversion of Securities of Merger Entities. As of the Effective
Time, by virtue of the Mergers and without any action on the part of the holder 
of any securities of the entities involved: (i) each outstanding share of common
stock of Modtech Sub, par value $0.01 per share, which is issued and outstanding
immediately prior to the Effective Time, shall be converted into and become one 
(1) share of common stock of New Modtech and (ii) each outstanding share of     
common stock of SPI Sub, par value $0.01 per share, which is issued and         
outstanding immediately prior to the Effective Time, shall be converted into and
become one (1) share of common stock of New SPI.                                

2.2.     Conversion of Modtech Shares .                       

   (a) As of the Effective Time, by virtue of the Modtech Merger and
without any action on the part of the holder of any securities of the entities  
involved, each share of Common Stock, par value $0.01 per share, of Modtech     
("Modtech Common Stock" or "Modtech Shares") issued and outstanding immediately 
prior to the Effective Time (other than (x) Modtech Shares owned by Modtech or  
any of its Subsidiaries or any other Modtech Shares designated as treasury      
shares (collectively, the "Modtech Treasury Shares") and (y) any Dissenting     
Modtech Shares (as defined in Section 2.5(b))) will, by virtue of the Modtech   
Merger, be converted into:                                                      

                        (A) cash in an amount equal to $3.7293, subject to
              adjustment as hereinafter provided (the "Modtech Per Share
Cash Stock Consideration"), and             

                       (B) 0.8508 fully paid and nonassessable shares of
              Holdings Common Stock (the "Modtech Exchange Ratio"), (the
    "Modtech Per Share Common Stock Consideration");

  provided, however, that, subject to the election, allocation and
conversion procedures set forth in Section 2.3:               

                    (C) the holders of Modtech Shares may elect to
           receive fully paid and nonassessable shares of Holdings
           Preferred Stock (the "Modtech Per Share Preferred Stock
                  Consideration") in lieu of receiving an equal number of shares
                  of Holdings Common Stock, provided, that, no holder of Modtech
                 Shares may elect to receive Holdings Preferred Stock for more
                than 3.94% (rounded down to the nearest whole share) of such
           Record Holders ownership of Holdings Common Stock, and,
           provided further, that in the aggregate no greater than
            388,939 shares of Holdings Preferred Stock may be issued
                pursuant to such elections (such aggregate number of shares,
the "Modtech Preferred Stock Number").      

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                  (D) The maximum number of shares of Holdings
           Preferred Stock set forth in paragraph (C) above may be
            adjusted upward or downward by the Exchange Agent on the
               Closing Date upon receipt by the Exchange Agent of a notice
         from Modtech specifying the amount of such adjustment
                 necessary to ensure that the Modtech Merger meets the minimum
                 requirements for qualification as a transaction under Section
351 the Code.                               

         (b) At the Effective Time, each Modtech Treasury Share shall, by virtue
of the Modtech Merger and without any action on the part of the holders of any  
securities of the entities involved, be canceled and extinguished and shall     
cease to exist, and no exchange or payment shall be made therefor.              

   2.3      Modtech Election, Allocation and Conversion Procedures .

      (a) Subject to the allocation and conversion procedures set forth in
Section 2.3(b), each Record Holder of Modtech Shares will be entitled to elect  
to receive one share of Holdings Preferred Stock in lieu of each share of       
Holdings Common Stock such Record Holder would otherwise receive, provided, such
Holdings Preferred Stock may not exceed 3.94% of the Holdings Common Stock such 
Record Holder would receive but for such election. All other Modtech Shares held
by such Record Holders ("Modtech No-Election Shares") shall be converted into   
the Modtech Per Share Common Stock Consideration as set forth above. Any Record 
Holder who delivers to the Exchange Agent an Election Form electing to receive  
Holdings Preferred Stock for greater than 3.94% of the Holdings Common Stock    
such Record Holder would receive but for such election shall be deemed to have  
elected to receive Holdings Preferred Stock for only 3.94% of the Holdings      
Common Stock such Record Holder would receive but for such election. The        
percentage of Holdings Common Stock that each Record Holder may convert to      
Holdings Preferred Stock may be adjusted upward or downward by the Exchange     
Agent on the Closing Date in accordance with the adjustments, if any, made in   
the Modtech Preferred Stock Number pursuant to Section 2.2(a)(D) above. If such 
adjustment is made, each electing Record Holder's election will be adjusted pro 
rata based on the original percentage elected.                                  

   (b) Not later than two business days after the Election Deadline,
Holdings shall cause the Exchange Agent to effect the allocations and           
conversions among the Record Holders of Modtech Shares of rights to receive the 
Modtech Per Share Common Stock Consideration or the Modtech Per Share Preferred 
Stock Consideration in the Modtech Merger as follows:                           

                (i) If the number of Modtech Preferred Stock Election Shares
       (on the basis of Election Forms received by the Election Deadline) is
less than the Modtech Preferred Stock Number, then            

                           (A) all Modtech Preferred Stock Election Shares shall
                be deemed, as of the Effective Time, to have become and been
             converted into the right to receive the Modtech Per Share
Preferred Stock Consideration,              

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                    (B) the Exchange Agent shall convert (pro rata
               according to the total number of Modtech No-Election Shares
                  held by each such Record Holder set forth on Schedule I on the
             Record Date) into Modtech Preferred Stock Election Shares
                ("Converted Modtech No-Election Shares") a sufficient number
                of Modtech No-Election Shares such that the remainder of (x)
            the Modtech Preferred Stock Election Shares plus (y) the
                  Converted Modtech No-Election Shares shall equal as closely as
           practicable the Modtech Preferred Stock Number, and all
               Converted Modtech No-Election Shares shall be deemed, as of
                  the Effective Time, to have become and been converted into the
          right to receive the Modtech Per Share Preferred Stock
Consideration, and                          

                     (C) the Modtech No-Election Shares that are not
               Converted Modtech No-Election Shares shall be deemed, as of
                  the Effective Time, to have become and been converted into the
       right to receive the Modtech Per Share Common Stock
Consideration.                              

     (c) On the Mailing Date, Holdings shall mail an Election Form and a
letter of transmittal (the "Letter of Transmittal") to each Record Holder of    
Modtech Shares. To be effective, an Election Form must be properly completed,   
signed and actually received by the Exchange Agent not later than the Election  
Deadline and must be accompanied by the certificates representing all the       
Modtech Shares ("Modtech Certificates") as to which the Election is being made  
(or an appropriate guarantee of delivery by an eligible organization). Holdings 
shall have reasonable discretion, which it may delegate in whole or in part to  
the Exchange Agent, to determine whether Election Forms have been properly      
completed, signed and timely submitted or to disregard defects in Election      
Forms; such decisions of Holdings (or of the Exchange Agent) shall be conclusive
and binding. Neither Holdings nor the Exchange Agent shall be under any         
obligation to notify any person of any defect in an Election Form submitted to  
the Exchange Agent, except that if Holdings determines not to disregard a       
defect, Holdings shall notify Modtech of such defect and provide a reasonable   
opportunity for the defect to be cured by the subject Record Holder. The        
Exchange Agent shall also make, and Holdings shall verify, all computations     
contemplated by this Section 2.3, and all such computations shall be conclusive 
and binding on the Record Holders of Modtech Shares, absent manifest error. The 
Exchange Agent shall promptly provide Modtech with a copy of the completed      
computation. Modtech Shares covered by an Election Form which is not effective  
shall be deemed to be Modtech No-Election Shares. Once an Election is made, it  
may not be revoked unless such revocation has been communicated in writing to   
the Exchange Agent prior to the Election Deadline.                              

   (d) No fractional interests in shares of Holdings Common Stock or
Holdings Preferred Stock, and no certificates representing such fractional      
interests, shall be issued upon the surrender for exchange of Modtech           
Certificates or upon the exercise of Modtech Options. In lieu of any fractional 
share, Holdings shall pay to each Record Holder of Modtech Shares, or to the    
holder of a Modtech Option upon the exercise thereof, who otherwise would be    
entitled to receive a fractional interest in a share of Holdings Common Stock or
Holdings Preferred Stock, an amount of cash (without interest) determined by    
multiplying (i) closing price of Modtech Common Stock on the last               

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trading day on Nasdaq prior to the Closing Date by (ii) the fractional interest 
to which such Record Holder would otherwise be entitled.                        

2.4      Additional Exchange Procedures .                     

   (a) The Letter of Transmittal which accompanies the Election Form
(which shall specify that delivery shall be effected and the risk of loss and   
title to the Modtech Certificates (and the Modtech Shares and consideration     
therefor represented by such Modtech Certificates) shall pass after the         
Effective Time only upon proper delivery of such Modtech Certificates to the    
Exchange Agent) will advise the Record Holders of Modtech Certificates of the   
procedure for surrendering to the Exchange Agent, Modtech Certificates in       
exchange for either the certificates representing the Modtech Per Share Cash    
Consideration, the Modtech Per Share Common Stock Consideration or the Modtech  
Per Share Preferred Stock Consideration (the "Modtech Merger Consideration").   

        (b) Each Record Holder of Modtech Shares that have been converted into
a right to receive the Modtech Merger Consideration shall, upon surrender to the
Exchange Agent of a Modtech Certificate or Certificates together with a properly
completed Letter of Transmittal, be entitled to receive the Modtech Merger      
Consideration as provided herein.                                               

      (c) Until so surrendered, each Modtech Certificate, and each Modtech
Share represented thereby, shall, at and after the Effective Time, represent for
all purposes only the right to receive the Modtech Merger Consideration as      
provided herein, and nothing else, subject to applicable law in the case of     
Modtech Dissenting Shares.                                                      

     (d) If any of the Modtech Merger Consideration is to be issued to a
person other than the Record Holder of the Modtech Shares formerly represented  
by the Modtech Certificate or Certificates surrendered with respect thereto, it 
shall be a condition to such issuance that the Modtech Certificate or           
Certificates so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the person requesting such issuance shall pay to the 
Exchange Agent any transfer or other taxes required as a result of such issuance
to a person other than the Record Holder of such Modtech Shares or shall        
establish to the satisfaction of the Exchange Agent that such tax has been paid 
or is not payable.                                                              

(e) At and after the Record Date, there shall be no further   
registration or transfers of Modtech Shares (other than transfers by operation  
of law), and the stock ledgers of Modtech shall be closed. After the Effective  
Time, Modtech Certificates presented to the Exchange Agent for transfer shall be
canceled and exchanged for the Modtech Merger Consideration provided for,       
without interest, and in accordance with the procedures set forth, in this      
Article 2.                                                                      

 (f) One hundred eighty (180) days after the Effective Time, any
Holdings Common Stock or cash made available to the Exchange Agent that remains 
unclaimed by the Record Holders of Modtech Shares shall be returned to Holdings,
upon its demand therefor. Any such Record Holder who has not delivered Modtech  
Certificates to the Exchange Agent in accordance with this Section              

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2.4 prior to that time shall thereafter look only to the Holdings (and only as  
general creditors thereof) for the Modtech Merger Consideration in respect of   
any Modtech Shares formerly requested thereby. Notwithstanding the foregoing,   
neither Holdings nor the Exchange Agent shall be liable to any Record Holder of 
Modtech Shares for any securities delivered or any cash paid to a public        
official pursuant to applicable escheat or abandoned property laws or for any   
securities or cash retained by Holdings as permitted by any such law.           

       (g) No dividends, interest or other distributions with respect to the
Modtech Merger Consideration shall be paid to the holder of any unsurrendered   
Modtech Certificates until such Modtech Certificates are surrendered as provided
in this Section 2.4. Upon such surrender, there shall be paid, without interest,
to the person in whose name any Modtech Per Share Common Stock Consideration is 
registered, all dividends and other distributions payable in respect of such    
securities on a date subsequent to, and in respect of a record date after, the  
Effective Time.                                                                 

      (h) In the event that any Modtech Certificates shall have been lost,
stolen or destroyed, the Exchange Agent shall pay in respect of such lost,      
stolen or destroyed certificate, upon the making of an affidavit of that fact by
the holder thereof, the Modtech Merger Consideration as may be provided pursuant
to this Agreement; provided, however, that Holdings may, in its sole discretion 
and as a condition precedent to the payment thereof, require the owner of such  
lost, stolen or destroyed certificate to deliver an indemnity agreement or a    
bond in such sum as it may reasonably direct as indemnity against any claim that
may be made against Holdings, New Modtech or the Exchange Agent or any other    
party with respect to the certificate alleged to have been lost, stolen or      
destroyed.                                                                      

         (i) If the Record Holder of any Modtech Shares shall become entitled to
receive payment for such shares pursuant to Section 1101 of the CGCL and Section
2.5, such payment shall be made by Holdings in accordance with Section 2.5.     

       (j) (i) Payments of Modtech Per Share Cash Consideration and payments
in lieu of fractional shares shall be made by check mailed by the Exchange Agent
at the Effective Time, and (ii) certificates representing Modtech Per Share     
Common Stock Consideration and Modtech Per Share Preferred Stock Consideration  
shall be delivered by hand or mailed by certified mail, return receipt          
requested, at the Effective Time; provided the Modtech Certificates have been   
provided by the surrendering shareholder to the Exchange Agent in compliance    
with Section 2.4. At the time of such payment or mailing, a statement setting   
forth in reasonable detail the calculation of the Modtech Merger Consideration  
being paid to each Record Holder shall also be mailed to each Record Holder.    
Risk of loss shall remain on Holdings until such certificate for Holdings Common
Stock is actually received by the surrendering shareholder.                     

2.5      Dissenting Modtech Shares .                          

      (a) Notwithstanding any provision of this Agreement to the contrary,
any Modtech Shares held by a holder who has demanded and perfected his demand   
for the fair value of his shares in                                             

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accordance with Chapter 13 of the CGCL and as of the Effective Time has neither 
effectively withdrawn nor lost his right to demand such fair value (a           
"Dissenting Modtech Shareholder") shall not represent a right to receive any    
part of the Modtech Merger Consideration, but in lieu thereof the holder thereof
shall be entitled to only such rights as are granted by the CGCL.               

         (b) Notwithstanding any provision of this Agreement to the contrary, if
any Dissenting Modtech Shareholder demanding the fair value of such Dissenting  
Modtech Shareholder's Modtech Shares ("Dissenting Modtech Shares") under the    
CGCL shall effectively withdraw or lose (through failure to perfect or          
otherwise) his right to a determination of the fair value of his shares, then as
of the Effective Time or the occurrence of such event, whichever later occurs,  
such Dissenting Modtech Shares shall automatically be converted into and        
represent only the right to receive the fair market value of such Modtech Shares
upon surrender of the certificate or certificates representing such Dissenting  
Modtech Shares.                                                                 

         (c) Modtech shall give SPI prompt notice of any demands by a Dissenting
Modtech Shareholder for payment, or notices of intent to demand payment received
by Modtech under the CGCL, and SPI shall have the right to participate in all   
negotiations and proceedings with respect to such demands. Modtech shall not,   
except with the prior written consent of SPI (which will not be unreasonably    
withheld or delayed) or as otherwise required by law, make any payment with     
respect to, or settle, or offer to settle, any such demands.                    

2.6      Modtech Options .                                    

  (a) At the Effective Time, adjustments shall be made to the then
outstanding options to purchase Modtech Shares (each, a "Modtech Option"), to   
accelerate the vesting of Modtech Options held by those holders whose Modtech   
Options are not at least 75% vested. Such Modtech Options shall be accelerated, 
pro rata on the basis of the number of unvested Modtech Options held by such    
holders of Modtech Options, with the effect that, in the aggregate, all then    
outstanding Modtech Options (which theretofore have been granted under Modtech's
1989, 1994 and 1996 Stock Option Plans (the "Modtech Stock Option Plans")) shall
be vested to the extent of 75% of the Modtech Shares covered thereby.           

  (b) At the Effective Time, after giving effect to the adjustment
contemplated by Section 2.6(a), on an aggregate basis per holder of Modtech     
Options:                                                                        

                 (i) 14.6709% of all Modtech Options held by such holder which
         are vested and exercisable shall be converted into the right to receive
        $25.00 per share in cash (less the applicable per share exercise price
         of each such Modtech Option and less applicable withholding taxes); and

           (ii) each remaining Modtech Option held by such holder,
  whether vested or unvested, shall be converted into an option to
 acquire, on substantially the same terms and conditions as were
         applicable under such Modtech Option immediately prior to the Effective

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   Time, except as otherwise set forth in this Section 2.6, for each
         Modtech Share subject to such Modtech Option, one (1) share of Holdings
        Common Stock at a price per share equal to the original exercise price
of such Modtech Options.                                      

       (c) Except as set forth in this Section 2.6, any and all rights under
any provisions of the Modtech Stock Option Plans or in any other plan, program  
or arrangement providing for the issuance or grant of any other interest in     
respect of the capital stock of Modtech or any Subsidiary thereof shall be      
canceled as of the Effective Time. As soon as practicable following the date of 
this Agreement, and, in any event, prior to the Effective Time, the Board of    
Directors of Modtech (or, if appropriate, the Compensation and Stock Option     
Committee thereof) and Modtech shall take all action necessary to give effect to
the provisions of this Section 2.6 and to ensure that no Person shall have any  
right under any Modtech Stock Option Plan (or any Modtech Option granted        
thereunder) following the Effective Time except for the right to exercise       
Modtech Options for shares of Holdings Common Stock as provided in this Section 
2.6. As soon as practicable following the date of this Agreement, and, in any   
event, prior to the Effective Time, the Board of Directors of Modtech (or, if   
appropriate, any committee thereof) and Modtech shall take all action necessary 
to either terminate any other plan, program or arrangement with respect to,     
including any right to acquire, equity securities of Modtech, or to amend or    
modify such other plans, programs or arrangements to provide for the issuance of
shares of Holdings Common Stock in lieu of equity securities of Modtech or New  
Modtech.                                                                        

         2.7 Conversion of SPI Shares . To effectuate the SPI Merger and subject
to the terms and conditions of this Agreement:                                  

        (a) At the Effective Time, by virtue of the SPI Merger and without any
action on the part of the holder of any securities of the entities involved:    

                  (i) Each share of Common Stock, no par value per share, of SPI
("SPI Common Stock"), and each share of Series A-1 Convertible
  Preferred Stock, no par value per share, of SPI ("SPI Series A-1
         Preferred Stock"), Series A-2 Convertible Preferred Stock, no par value
  per share, of SPI ("SPI Series A-2 Preferred Stock"), Series A-3
   Convertible Preferred Stock, no par value per share, of SPI ("SPI
       Series A-3 Preferred Stock"), Series A-4 Convertible Preferred Stock,
    no par value per share, of SPI ("SPI Series A-4 Preferred Stock"),
        Series A-5 Convertible Preferred Stock, no par value per share, of SPI
         ("SPI Series A-5 Preferred Stock") and Series A-6 Convertible Preferred
  Stock, no par value per share, of SPI ("SPI Series A-6 Preferred
      Stock") (shares of SPI Common Stock, SPI Series A-1 Preferred Stock,
     SPI Series A-2 Preferred Stock, SPI Series A-3 Preferred Stock, SPI
    Series A-4 Preferred Stock, SPI Series A-5 Preferred Stock and SPI
        Series A-6 Preferred Stock are collectively referred to herein as "SPI
         Shares") issued and outstanding immediately prior to the Effective Time
       (other than (x) SPI Shares owned by SPI or any of its Subsidiaries or
       any other SPI Shares designated as treasury shares (collectively, the
         "SPI Treasury Shares") and (y) any SPI Dissenting Shares (as defined in
Section 2.10)) shall be canceled and                          

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      extinguished and be converted into and become a right to receive, at
the election of each holder thereof, but subject to the other 
provisions of this Section 2.7,                               

                         (A) cash in an amount equal to $49.4097, subject to
               adjustment as hereinafter provided (the "SPI Per Share Cash
Consideration"), or                         

                       (B) 1.8785 fully paid and nonassessable shares of
                Holdings Common Stock (the "SPI Exchange Ratio"), subject to
                adjustment as hereinafter provided (the "SPI Per Share Stock
Consideration");                            

  provided, however, that, subject to the election, allocation and
conversion procedures set forth in Section 2.8:               

                     (C) no Record Holder of SPI Shares may elect to
              receive the SPI Per Share Cash Consideration for more than
              5.9176% of the aggregate number of SPI Shares held by such
         Record Holder rounded down to the nearest whole share
           (provided that Record Holders of SPI Shares electing to
                 receive the SPI Per Share Cash Consideration may receive more
                than 5.9176% pursuant to the allocation procedures set forth
in Section 2.8);                            

                     (D) only 5.9176% of the aggregate number of SPI
                 Shares outstanding on the Record Date shall be converted into
             the right to receive the SPI Per Share Cash Consideration
       (such number of shares, the "SPI Cash Number"); and

                        (E) 94.0728% of the aggregate number of SPI Shares
              outstanding on the Record Date shall be converted into the
                right to receive the SPI Per Share Stock Consideration (such
number of shares, the "SPI Stock Number").  

        (b) At the Effective Time, each SPI Treasury Share shall, by virtue of
the SPI Merger and without any action on the part of the holders of any         
securities of the entities involved, be canceled and extinguished and shall     
cease to exist, and no exchange or payment shall be made therefor.              

2.8      SPI Election, Allocation and Conversion Procedures . 

      (a) Subject to the allocation and conversion procedures set forth in
Section 2.8(b), each Record Holder of SPI Shares will be entitled (i) to elect  
to receive Holdings Common Stock for some or all of the SPI Shares ("SPI Stock  
Election Shares") held by such Record Holder, (ii) to elect to receive cash for 
up to, but not more than, 5.9176% of the SPI Shares ("SPI Cash Election Shares")
held by such Record Holder or (iii) to indicate that such Record Holder makes no
such election for some or all of the SPI Shares ("SPI No-Election Shares") held 
by such Record Holder. All Elections pursuant to this Section 2.8(a) shall be   
made on an Election Form. Any Record Holder who delivers to the Exchange Agent  
an Election Form electing to receive SPI Cash Election Shares for greater than  
5.9176% of the SPI Shares held by such Record Holder shall be deemed to have    
elected SPI                                                                     

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Cash Election Shares for only 5.9176% of the SPI Shares held by such Record     
Holder. Any SPI Shares with respect to which the Record Holder thereof shall    
not, as of the Election Deadline, have properly submitted to the Exchange Agent 
a properly completed Election Form shall be deemed to be SPI No-Election Shares.
A Record Holder acting in different capacities or acting on behalf of other     
Record Holders in any way shall be entitled to submit an Election Form for each 
capacity in which such Record Holder so acts with respect to each Record Holder 
for which it so acts.                                                           

   (b) Not later than two business days after the Election Deadline,
Holdings shall cause the Exchange Agent to effect the allocations and           
conversions among the Record Holders of SPI Shares of rights to receive the SPI 
Per Share Stock Consideration or the SPI Per Share Cash Consideration in the SPI
Merger as follows:                                                              

                (i) If the number of SPI Stock Election Shares (on the basis
      of Election Forms received by the Election Deadline) is greater than
the SPI Stock Number, then                                    

                          (A) all SPI Cash Election Shares shall be deemed, as
                 of the Effective Time, to have become and been converted into
              the right to receive the SPI Per Share Cash Consideration,

                    (B) the Exchange Agent shall convert (pro rata
              according to the total number of SPI Stock Election Shares
                 held by each Record Holder who has elected to receive the SPI
               Per Share Cash Consideration) into SPI Cash Election Shares
                  ("Converted SPI Stock Election Shares") a sufficient number of
              SPI Stock Election Shares held by those Record Holders who
                have elected to receive the SPI Per Share Cash Consideration
                such that the remainder of (x) the SPI Stock Election Shares
                less (y) the Converted SPI Stock Election Shares shall equal
           as closely as practicable the SPI Stock Number, and all
                  Converted SPI Stock Election Shares shall be deemed, as of the
              Effective Time, to have become and been converted into the
          right to receive the SPI Per Share Cash Consideration,

                           (C) if the remainder of the SPI Stock Election Shares
                less the Converted SPI Stock Election Shares is greater than
               the SPI Stock Number, the Exchange Agent shall convert (pro
              rata according to each Record Holder's total number of SPI
                 No-Election Shares) into Cash Election Shares ("Converted SPI
               No-Election Shares") a sufficient number of SPI No-Election
                Shares such that the remainder of (x) the SPI Stock Election
               Shares less (y) the Converted SPI Stock Election Shares and
            less the Converted SPI No-Election Shares shall equal as
                  closely as practicable the SPI Stock Number, and all Converted
               SPI No-Election Shares shall be deemed, as of the Effective
             Time, to have become and been converted into the right to
     receive the SPI Per Share Cash Consideration, and

                      (D) the SPI No-Election Shares and the SPI Stock
             Election Shares that are not Converted SPI Stock Election
    Shares or Converted SPI No-Election Shares shall

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                be deemed, as of the Effective Time, to have become and been
               converted into the right to receive the SPI Per Share Stock
Consideration.                              

     (c) On the Mailing Date, Holdings shall mail an Election Form and a
Letter of Transmittal to each Record Holder of SPI Shares. To be effective, an  
Election Form must be properly completed, signed and actually received by the   
Exchange Agent not later than the Election Deadline and must be accompanied by  
the certificates representing all the SPI Shares ("SPI Certificates") as to     
which the Election is being made (or an appropriate guarantee of delivery by an 
eligible organization). Holdings shall have reasonable discretion, which it may 
delegate in whole or in part to the Exchange Agent, to determine whether        
Election Forms have been properly completed, signed and timely submitted or to  
disregard defects in Election Forms; such decisions of Holdings (or of the      
Exchange Agent) shall be conclusive and binding. Neither Holdings nor the       
Exchange Agent shall be under any obligation to notify any person of any defect 
in an Election Form submitted to the Exchange Agent, except that if Holdings    
determines not to disregard a defect, Holdings shall notify SPI of such defect  
and provide a reasonable opportunity for the defect to be cured by the subject  
Record Holder. The Exchange Agent shall also make, and Holdings shall verify,   
all computations contemplated by this Section 2.8, and all such computations    
shall be conclusive and binding on the Record Holders of SPI Shares, absent     
manifest error. The Exchange Agent shall promptly provide SPI with a copy of the
completed computation. SPI Shares covered by an Election Form which is not      
effective shall be deemed to be SPI No-Election Shares. Once an Election is     
made, it may not be revoked unless such revocation has been communicated in     
writing to the Exchange Agent prior to the Election Deadline.                   

        (d) No fractional interests in shares of Holdings Common Stock, and no
certificates representing such fractional interests, shall be issued upon the   
surrender for exchange of SPI Certificates or upon the exercise of SPI Options. 
In lieu of any fractional share, Holdings shall pay to each Record Holder of SPI
Shares, or to the holder of an SPI Option upon the exercise thereof, who        
otherwise would be entitled to receive a fractional interest in a share of      
Holdings Common Stock an amount of cash (without interest) determined by        
multiplying (i) the closing price of Modtech Common Stock on the last trading   
day on Nasdaq prior to the Closing Date by (ii) the fractional interest to which
such Record Holder would otherwise be entitled.                                 

2.9      Additional Exchange Procedures.                      

   (a) The Letter of Transmittal which accompanies the Election Form
(which shall specify that delivery shall be effected and the risk of loss and   
title to the SPI Certificates (and the SPI Shares and consideration therefor    
represented by such SPI Certificates) shall pass after the Effective Time only  
upon proper delivery of such SPI Certificates to the Exchange Agent) will advise
the Record Holders of SPI Certificates of the procedure for surrendering to the 
Exchange Agent, SPI Certificates in exchange for either the certificates        
representing the SPI Per Share Stock Consideration or the SPI Per Share Cash    
Consideration (either, "SPI Merger Consideration").                             

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      (b) Each Record Holder of SPI Shares that have been converted into a
right to receive the SPI Merger Consideration shall, upon surrender to the      
Exchange Agent of a SPI Certificate or Certificates together with a properly    
completed Letter of Transmittal, be entitled to receive the SPI Merger          
Consideration as provided herein.                                               

    (c) Until so surrendered, each SPI Certificate, and each SPI Share
represented thereby, shall, at and after the Effective Time, represent for all  
purposes only the right to receive the SPI Merger Consideration as provided     
herein, and nothing else, subject to applicable law in the case of SPI          
Dissenting Shares.                                                              

        (d) If any of the SPI Merger Consideration is to be issued to a person
other than the Record Holder of the SPI Shares formerly represented by the SPI  
Certificate or Certificates surrendered with respect thereto, it shall be a     
condition to such issuance that the SPI Certificate or Certificates so          
surrendered shall be properly endorsed or otherwise be in proper form for       
transfer and that the person requesting such issuance shall pay to the Exchange 
Agent any transfer or other taxes required as a result of such issuance to a    
person other than the Record Holder of such SPI Shares or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not        
payable.                                                                        

(e) At and after the Record Date, there shall be no further   
registration or transfers of SPI Shares (other than transfers by operation of   
law), and the stock ledgers of SPI shall be closed. After the Effective Time,   
SPI Certificates presented to the Exchange Agent for transfer shall be canceled 
and exchanged for the SPI Merger Consideration provided for, without interest,  
and in accordance with the procedures set forth, in this Article 2.             

 (f) One hundred eighty (180) days after the Effective Time, any
Holdings Common Stock or cash made available to the Exchange Agent that remains 
unclaimed by the Record Holders of SPI Shares shall be returned to Holdings,    
upon its demand therefor. Any such Record Holder who has not delivered SPI      
Certificates to the Exchange Agent in accordance with this Section 2.9 prior to 
that time shall thereafter look only to the Holdings (and only as general       
creditors thereof) for the SPI Merger Consideration in respect of any SPI Shares
formerly requested thereby. Notwithstanding the foregoing, neither Holdings nor 
the Exchange Agent shall be liable to any Record Holder of SPI Shares for any   
securities delivered or any cash paid to a public official pursuant to          
applicable escheat or abandoned property laws or for any securities or cash     
retained by Holdings as permitted by any such law.                              

       (g) No dividends, interest or other distributions with respect to the
SPI Merger Consideration shall be paid to the holder of any unsurrendered SPI   
Certificates until such SPI Certificates are surrendered as provided in this    
Section 2.9. Upon such surrender, there shall be paid, without interest, to the 
person in whose name any SPI Per Share Stock Consideration is registered, all   
dividends and other distributions payable in respect of such securities on a    
date subsequent to, and in respect of a record date after, the Effective Time.  

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         (h) In the event that any SPI Certificates shall have been lost, stolen
or destroyed, the Exchange Agent shall pay in respect of such lost, stolen or   
destroyed certificate, upon the making of an affidavit of that fact by the      
holder thereof, the SPI Merger Consideration as may be provided pursuant to this
Agreement; provided, however, that Holdings may, in its sole discretion and as a
condition precedent to the payment thereof, require the owner of such lost,     
stolen or destroyed certificate to deliver an indemnity agreement or a bond in  
such sum as it may reasonably direct as indemnity against any claim that may be 
made against Holdings, New SPI or the Exchange Agent or any other party with    
respect to the certificate alleged to have been lost, stolen or destroyed.      

     (i) If the Record Holder of any SPI Shares shall become entitled to
receive payment for such shares pursuant to Sections 7-113-101 through 7-113-302
of the CBCA and Section 2.10, such payment shall be made by Holdings in         
accordance with Section 2.10.                                                   

      (j) (i) Payments of SPI Per Share Cash Consideration and payments in
lieu of fractional shares shall be made by check mailed by the Exchange Agent at
the Effective Time, and (ii) certificates representing SPI Per Share Stock      
Consideration shall be delivered by hand or mailed by certified mail, return    
receipt requested, at the Effective Time; provided the SPI Certificates have    
been provided by the surrendering shareholder to the Exchange Agent in          
compliance with Section 2.9. At the time of such payment or mailing, a statement
setting forth in reasonable detail the calculation of the SPI Merger            
Consideration being paid to each Record Holder shall also be mailed to each     
Record Holder. Risk of loss shall remain on Holdings until such certificate for 
Holdings Common Stock is actually received by the surrendering shareholder.     

2.10     Dissenting SPI Shares.                               

      (a) Notwithstanding any provision of this Agreement to the contrary,
any SPI Shares held by a holder who has demanded and perfected his demand for   
the fair value of his shares in accordance with Sections 7-113-101 through      
7-113-302 of the CBCA and as of the Effective Time has neither effectively      
withdrawn nor lost his right to demand such fair value (a "Dissenting SPI       
Shareholder") shall not represent a right to receive any part of the SPI Merger 
Consideration, but in lieu thereof the holder thereof shall be entitled to only 
such rights as are granted by the CBCA.                                         

         (b) Notwithstanding any provision of this Agreement to the contrary, if
any Dissenting SPI Shareholder demanding the fair value of such Dissenting SPI  
Shareholder's SPI Shares ("Dissenting SPI Shares") under the CBCA shall         
effectively withdraw or lose (through failure to perfect or otherwise) his right
to a determination of the fair market value of his shares, then as of the       
Effective Time or the occurrence of such event, whichever later occurs, such    
Dissenting SPI Shares shall automatically be converted into and represent only  
the right to receive the fair market value of such Dissenting SPI Shares upon   
surrender of the certificate or certificates representing such Dissenting SPI   
Shares.                                                                         

         (c) SPI shall give Modtech prompt notice of any demands by a Dissenting
SPI Shareholder for payment, or notices of intent to demand payment received by 
SPI under the CBCA,                                                             

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and Modtech shall have the right to participate in all negotiations and         
proceedings with respect to such demands. SPI shall not, except with the prior  
written consent of Modtech (which will not be unreasonably withheld or delayed) 
or as otherwise required by law, make any payment with respect to, or settle, or
offer to settle, any such demands.                                              

2.11     SPI Options.                                         

  (a) At the Effective Time, adjustments shall be made to the then
outstanding options to purchase SPI Shares (each, an "SPI Option"), such that   
seventy-five percent (75%) of the then outstanding SPI Options (which           
theretofore have been granted under SPI's Second Amended and Restated 1997 Stock
Option Plan (the "SPI Stock Option Plan")) shall become vested.                 

  (b) At the Effective Time, after giving effect to the adjustment
contemplated by Section 2.10(a), on an aggregate basis per holder of SPI        
Options:                                                                        

                (i) 5.9176% of all SPI Options held by such holder which are
     vested and exercisable shall be converted into the right to receive
    $49.4097 per share in cash (less the applicable per share exercise
       price of each such SPI Option and less applicable withholding taxes);
and                                                           

               (ii) each remaining SPI Option held by such holder, whether
      vested or unvested, shall be converted into an option to acquire, on
      substantially the same terms and conditions as were applicable under
    such SPI Option immediately prior to the Effective Time, except as
         otherwise set forth in this Section 2.10, for each SPI Share subject to
        such SPI Option, 1.8785 shares of Holdings Common Stock at a price per
   share (rounded upward to the nearest whole cent) equal to (i) the
      aggregate exercise price for SPI Shares purchasable pursuant to such
       SPI Option (without regard to vesting provisions) divided by (ii) the
   number of full shares of Holdings Common Stock deemed purchasable
pursuant to such SPI Option.                                  

        (c) Except as set forth in this Section 2.11, any and all rights under
any provisions of the SPI Stock Option Plans or in any other plan, program or   
arrangement providing for the issuance or grant of any other interest in respect
of the capital stock of SPI or any Subsidiary thereof shall be canceled as of   
the Effective Time. As soon as practicable following the date of this Agreement,
and, in any event, prior to the Effective Time, the Board of Directors of SPI   
(or, if appropriate, the Compensation and Stock Option Committee thereof) and   
SPI shall take all action necessary to give effect to the provisions of this    
Section 2.11 and to ensure that no Person shall have any right under any SPI    
Stock Option Plan (or any SPI Option granted thereunder) following the Effective
Time except for the right to exercise SPI Options for shares of Holdings Common 
Stock as provided in this Section 2.11. As soon as practicable following the    
date of this Agreement, and, in any event, prior to the Effective Time, the     
Board of Directors of SPI (or, if appropriate, any committee thereof) and SPI   
shall take all action necessary to either terminate any other plan, program or  
arrangement with respect to, including any right to acquire, equity securities  
of SPI, or to amend or modify such                                              

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other plans, programs or arrangements to provide for the issuance of shares of  
Holdings Common Stock in lieu of equity securities of SPI or New SPI.           

2.12     SPI Warrants.                                        

    (a) All outstanding warrants to purchase SPI Shares (each, an "SPI
Warrant"), shall be deemed exercised immediately prior to the Effective Time.   

(b) At the Effective Time:                                    

              (i) 5.9176% of all SPI Warrants held by each holder of SPI
    Warrants shall be converted into the right to receive $49.4097 per
     share in cash (less the applicable per share exercise price of each
such SPI Warrant); and                                        

                 (ii) each remaining SPI Warrant held by such holder, upon the
         payment by the holder of the exercise price thereof, shall be converted
   into the right to receive 1.8785 shares of Holdings Common Stock.

  2.13 Cancellation of Shares. All shares of Holdings Common Stock
outstanding immediately prior to the Effective Time will be canceled.           

    2.14 No Transfer after the Effective Time. No transfers of Modtech
Shares will be made on the stock transfer books of Modtech, and no transfers of 
SPI Shares will be made on the books of SPI, after the close of business on the 
day prior to the date of the Effective Time.                                    

 ARTICLE III

 REPRESENTATIONS AND WARRANTIES OF MODTECH

Modtech hereby represents and warrants to SPI as follows:     

        3.1 Existence; Good Standing; Corporate Authority. Modtech and each of
its Subsidiaries is duly organized, validly existing and in good standing under 
the laws of the jurisdiction of its organization, with the power and authority  
to own and operate its businesses as presently conducted. Section 3.1 of the    
Disclosure Schedule sets forth the state of incorporation of Modtech and each of
its Subsidiaries, and lists each jurisdiction in which Modtech and each of its  
Subsidiaries is qualified as a foreign corporation. Modtech and each of its     
Subsidiaries is duly qualified as a foreign corporation or other entity to do   
business and is in good standing in each jurisdiction where the character of its
Properties or the nature of its activities makes such qualification necessary,  
except for such failures of Modtech and any of its Subsidiaries to be so        
qualified as would not have a Material Adverse Effect. Modtech has previously   
provided SPI with true and correct copies of its articles of incorporation and  
bylaws and the charter documents and bylaws or other organizational documents of
each of its Subsidiaries, as currently in effect.                               

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      3.2 Authorization; Validity and Effect of Agreement. Modtech has the
requisite corporate power and authority to execute, deliver and perform its     
obligations under this Agreement, every other document or agreement to be       
executed by Modtech under this Agreement (each a "Modtech Transaction Document")
and to consummate the transactions contemplated hereby and thereby. The         
execution and delivery of this Agreement by Modtech and the performance by      
Modtech of its obligations hereunder, the execution and delivery of each of the 
Modtech Transaction Documents by Modtech and the performance of its obligations 
thereunder and the consummation of the transactions contemplated hereby and     
thereby have been duly authorized by the Board of Directors of Modtech and all  
other necessary corporate action on the part of Modtech, other than the adoption
and approval of this Agreement by the stockholders of Modtech, and no other     
corporate proceedings on the part of Modtech are necessary to authorize this    
Agreement, the Modtech Transaction Documents and the transactions contemplated  
hereby and thereby (assuming due authorization, execution and delivery by the   
other party or parties thereto). The Board of Directors of Modtech has approved 
for the purposes of Section 1101 of the CGCL the agreement of merger contained  
in this Agreement and the Modtech Merger. This Agreement has been duly and      
validly executed and delivered by Modtech and constitutes a legal, valid and    
binding obligation of Modtech, enforceable against it in accordance with its    
terms, except to the extent that such enforceability may be limited by          
applicable bankruptcy, insolvency, reorganization, moratorium or other laws     
affecting the enforcement of creditors' rights generally or by general          
principles of equity. Each Modtech Transaction Document has been, or, as of the 
Effective Time, will have been, duly and validly authorized, executed and       
delivered by Modtech, and constitutes or will constitute as of such time a      
legally valid and binding obligation of Modtech, enforceable against it in      
accordance with its terms, except to the extent that such enforceability may be 
limited by applicable bankruptcy, insolvency, reorganization, moratorium or     
other laws affecting the enforcement of creditors' rights generally or by       
general principles of equity.                                                   

      3.3 Capitalization. The authorized capital stock of Modtech consists
of 20,000,000 shares of Modtech Common Stock and 5,000,000 shares of preferred  
stock having a par value of $0.01 per share ("Modtech Preferred Stock"), none of
which shares have been designated. As of the date hereof, 9,871,409 shares of   
Modtech Common Stock and no shares of Modtech Preferred Stock are issued and    
outstanding. As of the date hereof, Modtech Options to acquire 1,625,658 Modtech
Shares are outstanding, 1,219,244 of which will be vested as of the Effective   
Time in accordance with Section 2.06. All of the issued and outstanding Modtech 
Shares are validly issued, fully paid and non-assessable and no class of Modtech
stock is entitled to preemptive rights. As of the date hereof, except for       
Modtech Stock Option Plans, there are no existing options, warrants, calls,     
subscriptions, convertible securities or other securities, agreements,          
commitments, or obligations which would require Modtech to issue or sell shares 
of Modtech Common Stock or any other equity securities, or securities           
convertible into or exchangeable or exercisable for shares of Modtech Common    
Stock or any other equity securities of Modtech or any of its Subsidiaries.     
Modtech has no commitments or obligations to purchase or redeem any shares of   
Modtech Common Stock. Set forth in Section 3.3 of the Disclosure Schedule is a  
complete list of the Modtech Options held by the executive officers of Modtech  
which are outstanding as of the date hereof, which list sets forth, for         

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each such holder of a Modtech Option, the number of Modtech Shares subject      
thereto, the number of vested options, the exercise price and the expiration    
date thereof.                                                                   

       3.4 Subsidiaries. Set forth in Section 3.4 of the Disclosure Schedule
is a complete list of Modtech's Subsidiaries. All of the outstanding shares of  
capital stock of each of Modtech's Subsidiaries are validly issued, fully paid, 
non-assessable and free of preemptive rights or rights of first refusal. Except 
as set forth in Section 3.4 of the Disclosure Schedule, Modtech owns, directly  
or indirectly, all of the issued and outstanding capital stock and other        
ownership interests of each of its Subsidiaries, free and clear of all          
Encumbrances, and there are no existing options, warrants, calls, subscriptions,
convertible securities or other securities, agreements, commitments or          
obligations of any character relating to the outstanding capital stock or other 
securities of any Subsidiary of Modtech or which would require any Subsidiary of
Modtech to issue or sell any shares of its capital stock, ownership interests or
securities convertible into or exchangeable for shares of its capital stock or  
ownership interests.                                                            

3.5 Other Interests. Except as set forth in Section 3.4 of the
Disclosure Schedule, neither Modtech nor any of Modtech's Subsidiaries owns,    
directly or indirectly, any interest or investment (whether equity or debt) in  
any corporation, partnership, limited liability company, joint venture,         
business, trust or other Person (other than Modtech Subsidiaries).              

3.6      No Conflict; Required Filings and Consents.          

         (a) Except as set forth in Section 3.6(a) of the Disclosure Schedule,
neither the execution and delivery of this Agreement and the Modtech Transaction
Documents, nor the performance by Modtech of its obligations hereunder and      
thereunder, nor the consummation of the transactions contemplated hereby or     
thereby, will: (i) assuming receipt of the Modtech Stockholder Approvals (as    
defined below), conflict with Modtech's articles of incorporation or bylaws;    
(ii) assuming satisfaction of the requirements set forth in Section 3.6(b)      
below, violate any statute, law, ordinance, rule or regulation applicable to    
Modtech or any of its Subsidiaries or any of their Properties or assets; or     
(iii) violate, breach, be in conflict with or constitute a default (or an event 
which, with notice or lapse of time or both, would constitute a default) under, 
or permit the termination of any provision of, or result in the termination of, 
the acceleration of the maturity of, or the acceleration of the performance of  
any obligation of Modtech or any of its Subsidiaries, or result in the creation 
or imposition of any Encumbrance upon any Properties, assets or business of     
Modtech or any of its Subsidiaries under, any note, bond, indenture, mortgage,  
deed of trust, lease, franchise, permit, authorization, license, contract,      
instrument or other agreement or commitment or any order, judgment or decree to 
which Modtech or any of its Subsidiaries is a party or by which Modtech or any  
of its Subsidiaries or any of their respective assets or Properties is bound or 
encumbered, or give any Person the right to require Modtech or any of its       
Subsidiaries to purchase or repurchase any notes, bonds or instruments of any   
kind except, in each case, for such violations, conflicts, defaults or other    
occurrences which would not have, and would not reasonably be expected to have, 
a Material Adverse Effect.                                                      

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       (b) Except (i) for applicable requirements, if any, of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder (the 
"Exchange Act"), the Securities Act of 1933, as amended, and the rules and      
regulations thereunder (the "Securities Act"), and state securities or "blue    
sky" laws ("Blue Sky Laws"), (ii) for the pre-merger notification requirements  
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations thereunder (the "HSR Act"), (iii) for the filing of       
certificates of merger pursuant to the CGCL, (iv) for the Modtech Stockholder   
Approvals (as defined below) or (v) with respect to matters set forth in        
Sections 3.6(a) or 3.6(b) of the Disclosure Schedule, no consent, approval or   
authorization of, permit from, or declaration, filing or registration with, any 
governmental or regulatory authority, or any other Person is required to be made
or obtained by Modtech or its Subsidiaries in connection with the execution,    
delivery and performance of this Agreement, the Modtech Transaction Documents   
and the consummation of the transactions contemplated hereby and thereby except 
where the failure to obtain such consent, approval, authorization, permit or    
declaration or to make such filing or registration would not have a Material    
Adverse Effect.                                                                 

       3.7 Compliance. Modtech and each of its Subsidiaries is in compliance
with all foreign, federal, state and local laws and regulations applicable to   
its operations or with respect to which compliance is a condition of engaging in
the business thereof, except to the extent that failure to comply would not have
a Material Adverse Effect. Neither Modtech nor any of its Subsidiaries has      
received any notice asserting a failure, or possible failure, to comply with any
such law or regulation, the subject of which notice has not been resolved as    
required thereby or otherwise to the satisfaction of the party sending the      
notice, except for such failure as would not have a Material Adverse Effect. Set
forth in Section 3.7 of the Disclosure Schedule is a complete list of all       
material permits, licenses and franchises from governmental agencies held by    
Modtech and its Subsidiaries. Modtech and its Subsidiaries have all material    
permits, licenses and franchises from governmental agencies required to conduct 
their respective businesses as they are now being conducted and all such        
permits, licenses and franchises will remain in effect after the Effective Time,
except for such failures to remain effective that would not have a Material     
Adverse Effect.                                                                 

3.8      SEC Documents.                                       

       (a) Set forth in Section 3.8 of the Disclosure Schedule is a complete
list of all registration statements, proxy or information statements, forms,    
reports and other documents required to be filed by Modtech with the Securities 
and Exchange Commission (the "SEC") since January 1, 1996 (collectively, the    
"Modtech SEC Reports"). Modtech has delivered or made available to SPI true and 
complete copies of each SEC Reports. As of their respective dates, the Modtech  
SEC Reports and any registration statements, reports, forms, proxy or           
information statements and other documents filed by Modtech with the SEC after  
the date of this Agreement (i) complied or, with respect to those not yet filed,
will comply, in all material respects with the applicable requirements of the   
Securities Act and the Exchange Act and (ii) did not or, with respect to those  
not yet filed, will not, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the 
statements made therein, in light of the circumstances under which they were    
made, not misleading.                                                           

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        (b) Neither Modtech nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)  
that would be required to be reflected on, or reserved against in, a balance    
sheet of Modtech or in the notes thereto, prepared in accordance with GAAP      
consistently applied, except for (i) liabilities or obligations that were so    
reserved on, or reflected in (including the notes to), the consolidated balance 
sheet of Modtech as of June 30, 1998 and (ii) liabilities or obligations arising
in the ordinary course of business (including trade indebtedness) since June 30,
1998 which would not have a Material Adverse Effect.                            

      3.9 Litigation. Except as set forth in Section 3.9 of the Disclosure
Schedule, there is no Action instituted, pending or, to the best knowledge of   
Modtech, threatened, which, if adversely decided, would, directly or indirectly,
have a Material Adverse Effect, nor is there any outstanding judgment, decree,  
or injunction or any statute, rule or order of any domestic or foreign court,   
governmental department, commission or agency which has or would have a Material
Adverse Effect.                                                                 

3.10     Absence of Certain Changes.                          

      (a) Except for the transactions expressly contemplated hereby, since
August 14, 1998, Modtech and its Subsidiaries have conducted their respective   
businesses only in the ordinary and usual course consistent with past practices 
and there has not been any change in Modtech's business, operations, condition  
(financial or otherwise), results of operations, business prospects, assets,    
liabilities, working capital or reserves, except for changes contemplated hereby
or changes which have not had a Material Adverse Effect. From August 14, 1998   
through the date of this Agreement, neither Modtech nor any of its Subsidiaries 
has taken any of the actions prohibited by Section 5.1 hereof.                  

      (b) Since December 31, 1997, to the best knowledge of Modtech, there
has been no change in (i) the demand in the California public school system for 
the products manufactured and sold by Modtech and its Subsidiaries, (ii) the    
competitive environment in which Modtech and its Subsidiaries conduct business, 
(iii) the regulatory standards or guidelines applicable to the business         
conducted by Modtech and its Subsidiaries, (iv) the legislation applicable to   
the business conducted by Modtech and its Subsidiaries, (v) the relationship    
between Modtech or its Subsidiaries on the one hand, and any customers or       
suppliers of Modtech or its Subsidiaries or the owners of any Properties        
utilized by Modtech or its Subsidiaries on the other hand, any of which would   
have a Material Adverse Effect.                                                 

3.11     Environmental Matters.                               

        (a) There are no existing uncured notices of noncompliance, notices of
violation, administrative actions, or lawsuits against Modtech or any of its    
Subsidiaries arising under Environmental Laws or relating to the use, handling, 
storage, treatment, recycling, generation, or release of Hazardous Materials at 
any of the Properties, nor has Modtech received any uncured notification of any 
allegation of any responsibility for any disposal, release, or threatened       
release at                                                                      

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any location of any Hazardous Materials, except in any such case which would not
be reasonably expected to have a Material Adverse Effect.                       

    (b) To the best knowledge of Modtech, there have been no spills or
releases of Hazardous Materials at any of the Properties in excess of quantities
reportable under Environmental Laws, except in any such case which would not be 
reasonably expected to have a Material Adverse Effect.                          

       (c) There are no consent decrees, consent orders, judgments, judicial
or administrative orders, or Encumbrances by any governmental authority relating
to any Environmental Law which have not already been fully satisfied and which  
regulate, obligate, or bind Modtech or any of its Subsidiaries, except in any   
such case which would not be reasonably expected to have a Material Adverse     
Effect.                                                                         

        (d) Except as set forth in Section 3.11(d) of the Disclosure Schedule,
no Properties or Facilities are listed on the federal National Priorities List, 
the federal Comprehensive Environmental Response Compensation Liability         
Information System list, or any similar state listing of sites known to be      
contaminated with Hazardous Materials.                                          

     3.12 Real Properties. Section 3.12 of the Disclosure Schedule lists
all Properties owned by Modtech and its Subsidiaries and all Leased Real Estate 
leased by Modtech or any of its Subsidiaries. Except as set forth in Section    
3.12 of the Disclosure Schedule, neither Modtech nor any of its Subsidiaries    
currently owns, and neither Modtech nor any of its Subsidiaries or any of their 
respective predecessors have ever owned, fee title to any Properties. Modtech   
has delivered or caused to be delivered to SPI complete and accurate copies of  
the Leases which relate to the Leased Real Estate, together with all amendments 
or supplements thereto. Modtech has not received written notice of condemnation 
or eminent domain proceedings pending or threatened against any Leased Real     
Estate. Except as disclosed in Section 3.12 of the Disclosure Schedule, Modtech 
has not received any notice from any city, village or other Person of any       
zoning, ordinance, building, fire or health code or other legal violation in    
respect of any Leased Real Estate. The Leases are in full force and effect and  
are valid, binding and enforceable in accordance with their respective terms;   
(i) no amount payable under any Lease is past due; (ii) Modtech is in compliance
in all material respects with all commitments and obligations on its part to be 
performed or observed under each Lease and is not aware of the failure by any   
other party to any Lease to comply in all material respects with all of its     
commitments and obligations; (iii) Modtech has not received any written notice  
(A) of a default, offset or counterclaim under any Lease, or, any other         
communication calling upon it to comply with any provision of any Lease or      
asserting noncompliance, or asserting Modtech has waived or altered its rights  
thereunder, and no event or condition has happened or presently exists which    
constitutes a default or, after notice or lapse of time or both, would          
constitute a default under any Lease on the part of Modtech or, to the best     
knowledge of Modtech, any other party, or (B) of any Action against any party   
under any Lease which if adversely determined would result in such Lease being  
terminated or cut off; and (iv) Modtech has not assigned, mortgaged, pledged or 
otherwise encumbered its interest, if any, under any Lease.                     

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      3.13 Tangible Personal Property. Except as disclosed in Section 3.13
of the Disclosure Schedule, Modtech and its Subsidiaries (i) have good and valid
title to all the tangible personal property material to its business and        
reflected in the latest audited financial statements included in Modtech SEC    
Reports as being owned by Modtech and its Subsidiaries or acquired after the    
date thereof (except properties sold or otherwise disposed of in the ordinary   
course of business since the date thereof), free and clear of all Encumbrances  
except Permitted Encumbrances, and (ii) are collectively the lessee of all      
tangible personal property material to Modtech's business and reflected as      
leased in the latest audited financial statements included in Modtech SEC       
Reports (or on the books and records of Modtech as of the date thereof) or      
acquired after the date thereof (except for leases that have expired by their   
terms or that have been transferred in the ordinary course of business) and are 
in possession of the properties purported to be leased thereunder, and each such
lease is valid and in full force and effect without default thereunder by the   
lessee or, to Modtech's knowledge, the lessor. Each of Modtech and each of its  
Subsidiaries enjoys peaceful and undisturbed possession under all such leases.  
Such owned and leased tangible personal property is in good working order,      
reasonable wear and tear excepted.                                              

     3.14 Intellectual Property. Section 3.14 of the Disclosure Schedule
sets forth a listing of all intellectual property rights utilized by Modtech or 
its Subsidiaries other than intellectual property rights relating to the plans  
and designs for structures manufactured by Modtech and its Subsidiaries. The    
ownership, operation and conduct by Modtech and its Subsidiaries of its         
business, as presently owned, operated, and conducted, does not infringe upon or
conflict in any respect with any patent, copyright, trademark, trade name,      
service mark, brand name, any related regulations or other intellectual property
rights of any other Person, and to the knowledge of Modtech no other Person is  
infringing upon any such rights of Modtech and its Subsidiaries, in each case,  
other than as set forth in Section 3.14 of the Disclosure Schedule.             

       3.15 Absence of Changes in Modtech Benefit Plans. Section 3.15 of the
Disclosure Schedule sets forth a listing of all Modtech Benefit Plans (as       
defined below). Except as required under this Agreement, since December 31,     
1997, there has not been (i) any acceleration, amendment or change of the period
of exercisability or vesting of any Modtech Options under the Modtech Option    
Plans (including any discretionary acceleration of the exercise periods or      
vesting by Modtech's Board of Directors or any committee thereof or any other   
persons administering the Modtech Option Plans) or authorization of cash        
payments in exchange for any Modtech Options under the Modtech Option Plan, (ii)
any adoption or material amendment by Modtech or any of its Subsidiaries of any 
collective bargaining agreement or any bonus, pension, profit sharing, deferred 
compensation, incentive compensation, stock ownership, stock purchase, stock    
option, phantom stock, stock appreciation right, retirement, vacation,          
severance, disability, death benefit, hospitalization, medical, worker's        
compensation, disability, supplementary unemployment benefits, or other plan,   
arrangement or understanding (whether or not legally binding) or any employment 
agreement providing compensation or benefits to any current or former employee, 
officer, director or independent contractor of Modtech or any of its            
Subsidiaries or any beneficiary thereof or entered into, maintained or          
contributed to, as the case may be, by Modtech or any of its Subsidiaries       
(collectively, "Modtech Benefit Plans"), or (iii) any adoption of, or amendment 
to, or change in                                                                

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employee participation or coverage under, any Modtech Benefit Plans which would 
increase materially the expense of maintaining such Modtech Benefit Plans above 
the level of the expense incurred in respect thereof for the year ended December
31, 1997.                                                                       

3.16     ERISA Compliance.                                    

       (a) Section 3.16(a) of the Disclosure Schedule contains a list of all
"employee pension benefit plans" (defined in Section 3(2) of the Employee       
Retirement Income Security Act of 1974, as amended ("ERISA")), "employee welfare
benefit plans" (defined in Section 3(l) of ERISA) and all other Modtech Benefit 
Plans. With respect to each Modtech Benefit Plan, Modtech has delivered or made 
available to SPI a true, correct and complete copy of: (A) each writing         
constituting a part of such Modtech Benefit Plan, including without limitation  
all plan documents, benefit schedules, trust agreements, and insurance contracts
and other funding vehicles; (B) the most recent Annual Report (Form 5500 Series)
and accompanying schedule, if any; (C) the current summary plan description, if 
any; (D) the most recent annual financial report, if any; and (E) the most      
recent determination letter from the United States Internal Revenue Service, if 
any.                                                                            

        (b) Section 3.16(b) of the Disclosure Schedule identifies each Modtech
Benefit Plan that is intended to be a "qualified plan" within the meaning of    
Section 401(a) of the Code ("Qualified Plans"). The Internal Revenue Service has
issued a favorable determination letter with respect to each Qualified Plan that
has not been revoked, and there are no existing circumstances nor any events    
that have occurred that could adversely affect the qualified status of any      
Qualified Plan or the related trust.                                            

(c) Modtech and its Subsidiaries have complied, and are now in
compliance, in all material respects with all provisions of ERISA, the Code, and
all laws and regulations applicable to the Modtech Benefit Plans of which the   
failure to comply with would have a Material Adverse Effect. No prohibited      
transaction has occurred with respect to any Modtech Benefit Plan. All          
contributions required to be made to any Modtech Benefit Plan by applicable law 
or regulation or by any plan document or other contractual undertaking, and all 
premiums due or payable with respect to insurance policies funding any Modtech  
Benefit Plan, for any period through the date hereof have been timely made or   
paid in full or, to the extent not required to be made or paid on or before the 
date hereof, have been fully reflected in Modtech SEC Reports.                  

      (d) No Modtech Benefit Plan is subject to Title IV or Section 302 of
ERISA or Section 412 or 4971 of the Code. None of Modtech, its Subsidiaries and 
their respective ERISA Affiliates (as defined below) has at any time since      
September 2, 1974, contributed to or been obligated to contribute to any        
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA or any   
plan with two or more contributing sponsors at least two of whom are not under  
common control, within the meaning of Section 4063 of ERISA. There does not now 
exist, nor do any circumstances exist that could result in, any Controlled Group
Liability (as defined below) that would be a liability of Modtech or any of its 
Subsidiaries following the Closing. "ERISA Affiliate" for purposes of this      
Section means, with respect to any entity, trade or business, any other entity, 
trade or business that                                                          

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is a member of a group described in Section 414(b), (c), (m) or (o) of the Code 
or Section 4001(b)(1) of ERISA that includes the first entity, trade or         
business, or that is a member of the same "controlled group" as the first       
entity, trade or business pursuant to Section 4001(a)(14) of ERISA. "Controlled 
Group Liability" for purposes of this Section means any and all liabilities     
under (i) Title IV of ERISA, (ii) Section 302 of ERISA, (iii) Sections 412 and  
4971 of the Code, (iv) the continuation coverage requirements of Section 601 et 
seq. of ERISA and Section 4980B of the Code, and (v) corresponding or similar   
provisions of foreign laws or regulations, other than such liabilities that     
arise solely out of, or relate solely to, the Modtech Benefit Plans.            

         (e) Except as set forth in Modtech SEC Reports or in Section 3.16(e) of
the Disclosure Schedule, neither Modtech nor any of its Subsidiaries has any    
liability for life, health, medical or other welfare benefits to former         
employees or beneficiaries or dependents thereof, except for health continuation
coverage as required by Section 4980B of the Code or Part 6 of Title I of ERISA 
and at no expense to Modtech and its Subsidiaries.                              

  (f) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in   
conjunction with any other event) result in, cause the accelerated vesting or   
delivery of, or increase the amount or value of, any payment or benefit to any  
employee of Modtech or any of its Subsidiaries. Without limiting the generality 
of the foregoing, no amount paid or payable by Modtech or any of its            
Subsidiaries in connection with the transactions contemplated hereby (either    
solely as a result thereof or as a result of such transactions in conjunction   
with any other event) will be an "excess parachute payment" within the meaning  
of Section 280G of the Code.                                                    

      (g) No labor organization or group of employees of Modtech or any of
its Subsidiaries has made a pending demand for recognition or certification, and
there are no representation or certification proceedings or petitions seeking a 
representation proceeding presently pending or threatened to be brought or      
filed, with the National Labor Relations Board or any other labor relations     
tribunal or authority. There are no organizing activities, strikes, work        
stoppages, slowdowns, lockouts, material arbitrations or material grievances, or
other material labor disputes pending or, to the knowledge of Modtech,          
threatened against or involving Modtech or any of its Subsidiaries.             

         (h) There are no pending or, to Modtech's knowledge, threatened claims,
and the fiduciaries of the Modtech Benefit Plans have not advised Modtech that  
with respect to their duties to the Modtech Benefit Plans or the assets or any  
of the trusts under any of the Modtech Benefit Plans, there are any pending or  
threatened claims (other than claims for benefits in the ordinary course),      
lawsuits or arbitrations which have been asserted or instituted against the     
Modtech Benefit Plans, which could reasonably be expected to result in any      
material liability of Modtech or any of its Subsidiaries to the Pension Benefit 
Guaranty Corporation, the Department of Treasury, the Department of Labor or any
multiemployer benefit plan.                                                     

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3.17     Taxes.                                               

        (a) Modtech and its Subsidiaries have duly prepared and filed federal,
state, local and foreign Returns which were required to be filed by or in       
respect of Modtech and its Subsidiaries, or any of their Properties, income     
and/or operations. As of the time they were filed, such Returns accurately      
reflected the material facts regarding the income, business, Assets, operations,
activities, status of the entity on whose behalf the Return was filed, and any  
other information required to be shown thereon. No extension of time within     
which Modtech or any of its Subsidiaries may file any Return is currently in    
force.                                                                          

        (b) With respect to all amounts in respect of Taxes imposed on Modtech
or any of its Subsidiaries or for which Modtech or any of its Subsidiaries is or
could be liable, whether to taxing authorities or to other Persons, all material
amounts required to be paid by or on behalf of Modtech or any of its            
Subsidiaries to taxing authorities or others have been paid.                    

        (c) Except as set forth in Section 3.17(c) of the Disclosure Schedule,
Modtech has not been advised that there is any review or audit in process by any
taxing authority of any Tax liability of Modtech or any of its Subsidiaries     
currently in progress. Modtech and its Subsidiaries have not received any       
written notice of any pending or threatened audit by the Internal Revenue       
Service or any state, local or foreign agency of any Returns or Tax liability of
Modtech or any of its Subsidiaries for any period. Modtech and its Subsidiaries 
currently have no unpaid deficiencies assessed by the Internal Revenue Service  
or any state, local or foreign taxing authority arising out of any examination  
of any of the Returns of Modtech or any of its Subsidiaries nor, to the         
knowledge of Modtech, is there reason to believe that any material deficiency   
will be assessed.                                                               

        (d) No agreements are in force or are currently being negotiated by or
on behalf of Modtech or any of its Subsidiaries for any waiver or for the       
extension of any statute of limitations governing the time of assessments or    
collection of any Tax. No closing agreements or compromises concerning Taxes of 
Modtech or any Subsidiaries are currently pending.                              

       (e) Modtech and its Subsidiaries have withheld from each payment made
to any of their respective officers, directors and employees, the amount of all 
applicable Taxes, including, but not limited to, income tax, social security    
contributions, unemployment contributions, backup withholding and other         
deductions required to be withheld therefrom by any Tax law and have paid the   
same to the proper Taxing authorities within the time required under any        
applicable Tax law.                                                             

 (f) There are no Encumbrances for Taxes, whether imposed by any
federal, state, local or foreign taxing authority, outstanding against any      
Assets owned by Modtech or its Subsidiaries, except for Encumbrances for Taxes  
that are not yet due and payable. None of the Assets owned by Modtech or its    
Subsidiaries is property that is required to be treated as being owned by any   
other Person pursuant to the safe harbor lease provisions of former Section     
168(f)(8) of the Code. None of the assets owned by Modtech or its Subsidiaries  
directly or indirectly secures any debt, the interest on which is tax-exempt    
under Section 103(a) of the Code. None of the Assets owned by Modtech           

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or its Subsidiaries is "tax-exempt use property" within the meaning of Section  
168(h) of the Code. None of Modtech or any of its Subsidiaries is a person other
than a United States person within the meaning of the Code.                     

   (g) Neither Modtech nor any of its Subsidiaries is a party to any
agreement, contract, or arrangement for compensating any employee that,         
individually or collectively, could give rise to the payment of any amount      
(whether in cash or property, including Modtech Shares or other Equity          
Interests) that would not be deductible pursuant to the terms of Sections       
162(a)(1), 162(m), 162(n) or 280G of the Code.                                  

(h) Neither Modtech nor any of its Subsidiaries anticipate the
assessment of any additional Taxes against Modtech or any of its Subsidiaries   
nor is Modtech or any of its Subsidiaries aware of any unresolved questions,    
claims or disputes concerning the liability for Taxes of Modtech or any of its  
Subsidiaries which would exceed by more than $1,000,000 the reserves established
on the consolidated balance sheet of Modtech as of June 30, 1998.               

3.18     Contracts; Debt Instruments.                         

     (a) Except as otherwise disclosed in Section 3.18 of the Disclosure
Schedule, neither Modtech nor any of its Subsidiaries is a party to or subject  
to:                                                                             

                (i) any collective bargaining or other agreements with labor
         unions, trade unions, employee representatives, work committees, guilds
         or associations representing employees of Modtech and its Subsidiaries;

               (ii) any employment, consulting, severance, termination, or
        indemnification agreement, contract or arrangement, including any oral
       agreement, contract or arrangement which requires the payment of over
      $75,000, with any current or former officer, consultant, director or
employee;                                                     

              (iii) any lease for real or personal property in which the
         amount of payments which Modtech is required to make, or is expected to
receive, on an annual basis exceeds $50,000;                  

            (iv) any agreement, contract, instrument, arrangement or
  commitment to repurchase assets previously sold or leased, or to
     indemnify or otherwise compensate the purchaser in respect thereof;

           (v) any agreement, contract, policy, license, document,
  instrument, arrangement or commitment that materially limits the
         freedom of Modtech or any of its Subsidiaries to compete in any line of
business;                                                     

              (vi) any agreement or contract relating to any outstanding
         commitment for material capital expenditures, or any partially or fully
executory agreement or contract                               

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      relating to the acquisition or disposition of rights or assets other
     than those entered into in the ordinary course consistent with past
practices;                                                    

                  (vii) any sale-leaseback, conditional sale, exclusive dealing,
brokerage, finder's fee contract or agreement; or             

          (viii) any other agreement, contract, policy, license,
 document, instrument, arrangement or commitment not made in the
  ordinary course of business which is material to Modtech and its
       Subsidiaries taken as a whole and which is not otherwise disclosed in
the Disclosure Schedules.                                     

         (b) None of Modtech, its Subsidiaries and, to the knowledge of Modtech,
none of the other parties to any of the contracts and agreements identified in  
Sections 3.18(a) and (c) of the Disclosure Schedule or otherwise disclosed in   
Modtech SEC Reports is in default under or has terminated any such contract or  
agreement, or in any way expressed to Modtech an intent to materially reduce or 
terminate the amount of its business with Modtech or any of its Subsidiaries in 
the future.                                                                     

      (c) Set forth in Section 3.18(c) of the Disclosure Schedule is (A) a
list of all loan or credit agreements, notes, bonds, mortgages, indentures and  
other agreements and instruments pursuant to which any indebtedness of Modtech  
or any of its Subsidiaries is outstanding or may be incurred, (B) the respective
principal amounts currently outstanding thereunder, and (C) any interest rate   
swaps, caps, floors or option agreements or similar interest rate risk          
management agreements. Except as set forth in Section 3.18(c) of the Disclosure 
Schedule, all such indebtedness is prepayable at any time without penalty,      
subject to the notice provisions of the agreements governing such indebtedness  
(which, except as set forth in Section 3.18(c)of the Disclosure Schedule, do not
require a notice period of more than thirty days). For purposes of this Section 
3.18(c), "indebtedness" shall mean, with respect to any Person, without         
duplication, (A) all obligations of such Person for borrowed money, or with     
respect to deposits or advances of any kind to such Person, (B) all obligations 
of such Person evidenced by bonds, debentures, notes or similar instruments, (C)
all obligations of such Person upon which interest charges are customarily paid,
(D) all obligations of such person under conditional sale or other title        
retention agreements relating to property purchased by such Person, (E) all     
obligations of such Person issued or assumed as the deferred purchase price of  
property or services (excluding obligations of such Person to creditors for raw 
materials, inventory, services and supplies incurred in the ordinary course of  
such Person's business), (F) all capitalized lease obligations of such Person,  
(G) all indebtedness of others secured by any Lien on property or assets owned  
or acquired by such Person, whether or not the obligations secured thereby have 
been assumed, (H) all obligations of such Person under interest rate or currency
swap transactions (valued at the termination value thereof), (I) all letters of 
credit issued for the account of such Person, (J) all obligations of such Person
to purchase securities (or other property) which arises out of or in connection 
with the sale of the same or substantially similar securities or property, and  
(K) all guarantees and arrangements having the economic effect of a guarantee of
such Person of any indebtedness of any other person.                            

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       3.19 Insurance. Modtech and its Subsidiaries are covered by valid and
currently effective insurance policies issued in favor of Modtech that are      
customary for companies of similar size and financial condition which conduct   
similar businesses. All such policies are in full force and effect, all premiums
due thereon have been paid and Modtech has complied with the provisions of such 
policies with respect to which the failure to comply with would result in a     
cancellation of such policies. Neither Modtech nor any of its Subsidiaries has  
received any written notice from or on behalf of any insurance carrier issuing  
policies or binders relating to or covering Modtech and its Subsidiaries that   
there will be a cancellation or non-renewal of existing policies or binders, or 
material modification of any of the methods of doing business, will be required.

  3.20 Interests of Officers and Directors. Except as disclosed in
Modtech SEC Reports, neither any of Modtech's or any of its Subsidiaries'       
officers, directors or material shareholders, nor any member of their respective
immediate families or any entity with respect to which any such person is an    
Affiliate, has any material interest in any property, real or personal, tangible
or intangible, used in or pertaining to the business of Modtech or its          
Subsidiaries, or any other business relationship with Modtech or any of its     
Subsidiaries.                                                                   

        3.21 No Brokers. Except as set forth in Section 3.21 of the Disclosure
Schedule, no broker, finder, investment banker, or other Person or firm is      
entitled to any brokerage, finder's or other similar fee or commission in       
connection with this Agreement or the transactions contemplated hereby based    
upon arrangements made by or on behalf of Modtech, any of its Subsidiaries or   
any of their respective directors, officers or employees.                       

      3.22 Customers. Section 3.22 of the Disclosure Schedule sets forth a
list of the names of the twenty (20) most significant jobs (by revenue) of      
Modtech and its Subsidiaries for goods or products ordered from Modtech or any  
of its Subsidiaries and the amount of revenue accrued for each such job         
completed or in progress during the nine-month period ended September 1, 1998.  
Neither Modtech nor any of its Subsidiaries has received any notice that any    
significant customer of Modtech or any of its Subsidiaries has ceased, will     
cease, or has significantly reduced, or will significantly reduce its ordering  
of goods or products from Modtech or any of its Subsidiaries, nor are Modtech or
any of its Subsidiaries aware of any circumstances that could reasonably be     
anticipated to cause any such reduction or cessation of orders.                 

      3.23 Suppliers. Section 3.23 of the Disclosure Schedule sets forth a
list of the names of the fifteen (15) most significant suppliers of raw         
materials and other goods to Modtech and its Subsidiaries for the nine-month    
period ended September 1, 1998. Neither Modtech nor any of its Subsidiaries has 
received any notice that any such supplier will cease selling raw materials or  
other goods to them at any time after the Closing or materially alter the terms 
of such sales (other than normal price increases), nor is Modtech or any of its 
Subsidiaries aware of any circumstances that could reasonably be anticipated to 
cause such suppliers to make such changes.                                      

     3.24 Employees. To the best knowledge of Modtech, no executive, key
employee or group of employees has any plans to terminate employment with       
Modtech or any of its Subsidiaries.                                             

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Neither Modtech nor any of its Subsidiaries is a party to or bound by a         
collective bargaining agreement, nor does Modtech have any knowledge of any     
organizational effort presently being made or threatened by or on behalf of any 
labor union with respect to the employees of Modtech or its Subsidiaries.       

        3.25 Product Liability. Each product manufactured by Modtech or any of
its Subsidiaries has been manufactured, sold, delivered and installed in all    
material respects in accordance with applicable plans, specifications, laws     
(including building codes and regulations) and applicable industry standards.   

    3.26 Information in Joint Proxy Statement/Prospectus and Form S-4.
Information supplied by Modtech or any of its Subsidiaries for inclusion or     
incorporation by reference in (i) the Joint Proxy Statement/Prospectus (as      
hereinafter defined) (or any amendment thereof or supplement thereto), at the   
date mailed to Modtech stockholders and SPI stockholders and at the time of the 
respective meetings of the Modtech stockholders and of the SPI stockholders     
contemplated hereby, and (ii) the Form S-4 (as hereinafter defined) at any time 
the Form S-4 is filed with the SEC, at any time it is amended or supplemented   
and at any time it becomes effective under the Securities Act, will not contain 
any untrue statement of a material fact or omit to state any material fact      
required to be stated therein or necessary in order to make the statements      
therein, in light of the circumstances under which they are made, not           
misleading.                                                                     

3.27 Disclosure. The representative and warranties of Modtech 
contained in this Agreement are true and correct in all material respects and do
not omit any material fact necessary to make the statements contained therein,  
in light of the circumstances under which they were made, not misleading. There 
is no fact known to Modtech which has not been disclosed to SPI in the          
Disclosure Schedule and Modtech SEC Reports, taken as a whole, which has had, or
would reasonably be expected to have, a Material Adverse Effect.                

3.28 Fairness Opinion. Modtech has engaged Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ") who has rendered an opinion to the      
effect that, from a financial point of view, the Modtech Merger Consideration to
be received by the holders of Modtech Shares pursuant to this Agreement is fair 
to such holders of Modtech Shares (the "Fairness Opinion").                     

3.29 Year 2000 Matters. To the best knowledge of Modtech, the 
information systems utilized by Modtech and each of its Subsidiaries are capable
of properly recognizing date sensitive information when the year changes to     
2000, and as such, the year change to 2000, as it relates to the information    
systems of Modtech and its Subsidiaries, will not result in a material          
disruption of the business of Modtech or any of its Subsidiaries.               

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ARTICLE IV

 REPRESENTATIONS AND WARRANTIES OF SPI

SPI hereby represents and warrants to Modtech as follows:     

4.1 Existence; Good Standing; Authority. SPI and each of its  
Subsidiaries is duly organized, validly existing and in good standing under the 
laws of the jurisdiction of its organization, with the power and authority to   
own and operate its businesses as presently conducted. Section 4.1 of the       
Disclosure Schedule sets forth the state of incorporation of SPI and each of its
Subsidiaries, and lists each jurisdiction in which SPI and each of its          
Subsidiaries is qualified as a foreign corporation. SPI and each of its         
Subsidiaries is duly qualified as a foreign corporation or other entity to do   
business and is in good standing in each jurisdiction where the character of its
Properties or the nature of its activities makes such qualification necessary,  
except for such failures of SPI and any of its Subsidiaries to be so qualified  
as would not have a Material Adverse Effect. SPI has previously provided Modtech
with true and correct copies of its articles of incorporation and bylaws and the
charter documents and bylaws or other organizational documents of each of its   
Subsidiaries, as currently in effect.                                           

  4.2 Authorization; Validity and Effect of Agreement. SPI has the
requisite corporate power and authority to execute, deliver and perform its     
obligations under this Agreement, every other document or agreement to be       
executed by SPI under this Agreement (each an "SPI Transaction Document") and to
consummate the transactions contemplated hereby and thereby. The execution and  
delivery of this Agreement by SPI and the performance by SPI of its obligations 
hereunder, the execution and delivery of each of the SPI Transaction Documents  
by SPI and the performance of its obligations thereunder and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by   
the Board of Directors of SPI and all other necessary corporate action on the   
part of SPI, other than the adoption and approval of this Agreement by the      
stockholders of SPI, and no other corporate proceedings on the part of SPI are  
necessary to authorize this Agreement, the SPI Transaction Documents and the    
transactions contemplated hereby and thereby (assuming due authorization,       
execution and delivery by the other party or parties thereto). The Board of     
Directors of SPI has approved for the purposes of Section 7-111-101 of the CBCA 
the agreement of merger contained in this Agreement and the SPI Merger. This    
Agreement has been duly and validly executed and delivered by SPI and           
constitutes a legal, valid and binding obligation of SPI, enforceable against it
in accordance with its terms, except to the extent that such enforceability may 
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or  
other laws affecting the enforcement of creditors' rights generally or by       
general principles of equity. Each SPI Transaction Document has been, or, as of 
the Effective Time, will have been, duly and validly authorized, executed and   
delivered by SPI, and constitutes or will constitute as of such time a legally  
valid and binding obligation of SPI, enforceable against it in accordance with  
its terms, except to the extent that such enforceability may be limited by      
applicable bankruptcy, insolvency, reorganization, moratorium or other laws     
affecting the enforcement of creditors' rights generally or by general          
principles of equity.                                                           

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     4.3 Capitalization. The authorized capital stock of SPI consists of
6,000,000 shares of SPI Common Stock, 1,100,000 shares of Series A-1 Preferred  
Stock, 1,000,000 shares of Series A-2 Preferred Stock, 400,000 shares of Series 
A-3 Preferred Stock, 155,000 shares of Series A-4 Preferred Stock, 540,000      
shares of Series A-5 Preferred Stock and 67,000 shares of Series A-6 Preferred  
Stock. As of the date hereof, 333,614 shares of SPI Common Stock, 994,335 shares
of Series A-1 Preferred Stock, 272,051 shares of Series A-2 Preferred Stock, no 
shares of Series A-3 Preferred Stock, 133,334 shares of Series A-4 Preferred    
Stock, 500,000 shares of Series A-5 Preferred Stock and 62,333 (subject to      
adjustment as set forth in Section 4.3 of the Disclosure Schedule) shares of    
Series A-6 Preferred Stock are issued and outstanding. As of the date hereof,   
SPI Options to acquire 217,085 (subject to adjustment as set forth in Section   
4.3 of the Disclosure Schedule) SPI Shares are outstanding, 162,814 of which    
will be vested as of the Effective Time in accordance with Section 2.11, and    
warrants to acquire 320,829 SPI Shares are outstanding, all of which are        
currently exercisable. All of the issued and outstanding SPI Shares are validly 
issued, fully paid and non-assessable and no class of SPI stock is entitled to  
preemptive rights. As of the date hereof, except for the SPI Stock Option Plan, 
and except as set forth in Section 4.3 of the Disclosure Schedule, there are no 
existing options, warrants, calls, subscriptions, convertible securities or     
other securities, agreements, commitments, or obligations which would require   
SPI to issue or sell shares of SPI Common Stock, SPI Preferred Stock or any     
other equity securities, or securities convertible into or exchangeable or      
exercisable for SPI Shares or any other equity securities of SPI or any of its  
Subsidiaries. Except as set forth in Section 4.3 of the Disclosure Schedule, SPI
has no commitments or obligations to purchase or redeem any SPI Shares. Set     
forth in Section 4.3 of the Disclosure Schedule is a complete list of the SPI   
Options held by the executive officers of SPI which are outstanding as of the   
date hereof, which list sets forth, for each such holder of an SPI Option, the  
number of SPI Shares subject thereto, the number of vested options, the exercise
price and the expiration date thereof.                                          

       4.4 Subsidiaries. Set forth in Section 4.4 of the Disclosure Schedule
is a complete list of SPI's Subsidiaries. All of the outstanding shares of      
capital stock of each of SPI's Subsidiaries are validly issued, fully paid,     
non-assessable and free of preemptive rights or rights of first refusal. SPI    
owns, directly or indirectly, all of the issued and outstanding capital stock   
and other ownership interests of each of its Subsidiaries, free and clear of all
Encumbrances, and there are no existing options, warrants, calls, subscriptions,
convertible securities or other securities, agreements, commitments or          
obligations of any character relating to the outstanding capital stock or other 
securities of any Subsidiary of SPI or which would require any Subsidiary of SPI
to issue or sell any shares of its capital stock, ownership interests or        
securities convertible into or exchangeable for shares of its capital stock or  
ownership interests.                                                            

4.5 Other Interests. Except as set forth in Section 4.4 of the
Disclosure Schedule, neither SPI nor any of SPI's Subsidiaries owns, directly or
indirectly, any interest or investment (whether equity or debt) in any          
corporation, partnership, limited liability company, joint venture, business,   
trust or other Person.                                                          

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4.6      No Conflict; Required Filings and Consents.          

         (a) Except as set forth in Section 4.6(a) of the Disclosure Schedule,
neither the execution and delivery of this Agreement and the SPI Transaction    
Documents, nor the performance by SPI of its obligations hereunder and          
thereunder, nor the consummation of the transactions contemplated hereby or     
thereby, will: (i) assuming receipt of the SPI Stockholder Approvals (as defined
below), conflict with SPI's articles of incorporation or bylaws; (ii) assuming  
satisfaction of the requirements set forth in Section 4.6(b) below, violate any 
statute, law, ordinance, rule or regulation applicable to SPI or any of its     
Subsidiaries or any of their Properties or assets; or (iii) violate, breach, be 
in conflict with or constitute a default (or an event which, with notice or     
lapse of time or both, would constitute a default) under, or permit the         
termination of any provision of, or result in the termination of, the           
acceleration of the maturity of, or the acceleration of the performance of any  
obligation of SPI or any of its Subsidiaries, or result in the creation or      
imposition of any Encumbrance upon any Properties, assets or business of SPI or 
any of its Subsidiaries under, any note, bond, indenture, mortgage, deed of     
trust, lease, franchise, permit, authorization, license, contract, instrument or
other agreement or commitment or any order, judgment or decree to which SPI or  
any of its Subsidiaries is a party or by which SPI or any of its Subsidiaries or
any of their respective assets or Properties is bound or encumbered, or give any
Person the right to require SPI or any of its Subsidiaries to purchase or       
repurchase any notes, bonds or instruments of any kind except, in each case, for
such violations, conflicts, defaults or other occurrences which would not have, 
and would not reasonably be expected to have, a Material Adverse Effect.        

     (b) Except (i) for applicable requirements, if any, of the Exchange
Act, the Securities Act and the Blue Sky Laws, (ii) for the pre-merger          
notification requirements of the HSR Act, (iii) for the filing of certificates  
of merger pursuant to the CBCA, (iv) for the SPI Stockholder Approvals (as      
defined below) or (v) with respect to matters set forth in Sections 4.6(a) or   
4.6(b) of the Disclosure Schedule, no consent, approval or authorization of,    
permit from, or declaration, filing or registration with, any governmental or   
regulatory authority, or any other Person is required to be made or obtained by 
SPI or its Subsidiaries in connection with the execution, delivery and          
performance of this Agreement, the SPI Transaction Documents and the            
consummation of the transactions contemplated hereby and thereby except where   
the failure to obtain such consent, approval, authorization, permit or          
declaration or to make such filing or registration would not have a Material    
Adverse Effect.                                                                 

        4.7 Compliance. SPI and each of its Subsidiaries is in compliance with
all foreign, federal, state and local laws and regulations applicable to its    
operations or with respect to which compliance is a condition of engaging in the
business thereof, except to the extent that failure to comply would not have a  
Material Adverse Effect. Neither SPI nor any of its Subsidiaries has received   
any notice asserting a failure, or possible failure, to comply with any such law
or regulation, the subject of which notice has not been resolved as required    
thereby or otherwise to the satisfaction of the party sending the notice, except
for such failure as would not have a Material Adverse Effect. Set forth in      
Section 4.7 of the Disclosure Schedule is a complete list of all material       
permits, licenses and franchises from governmental agencies held by SPI and its 
Subsidiaries. SPI and its Subsidiaries                                          

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have all material permits, licenses and franchises from governmental agencies   
required to conduct their respective businesses as they are now being conducted 
and all such permits, licenses and franchises will remain in effect after the   
Effective Time, except for such failures to remain effective that would not have
a Material Adverse Effect.                                                      

4.8      Financial Statements.                                

      (a) SPI has delivered or made available to Modtech true and complete
copies of the financial statements set forth in Section 4.8 of the Disclosure   
Schedule (collectively, the "SPI Financial Statements"). Each of the            
consolidated and consolidating balance sheets included in the SPI Financial     
Statements (including the related notes and schedules) presents fairly, in all  
material respects, the consolidated financial position of SPI and its           
Subsidiaries as of its date, and each of the consolidated and consolidating     
statements of income and cash flows included in the SPI Financial Statements    
(including any related notes and schedules) presents fairly, in all material    
respects, the results of operations or cash flows, as the case may be, of SPI   
and its Subsidiaries for the periods set forth therein (subject, in the case of 
unaudited statements, to normal year-end audit adjustments), in each case in    
accordance with GAAP consistently applied during the periods involved, except as
may be noted therein.                                                           

    (b) Neither SPI nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)  
that would be required to be reflected on, or reserved against in, a            
consolidated balance sheet of SPI or in the notes thereto, prepared in          
accordance with GAAP consistently applied, except for (i) liabilities or        
obligations that were so reserved on, or reflected in (including the notes to), 
the consolidated balance sheet of SPI as of June 30, 1998 and (ii) liabilities  
or obligations arising in the ordinary course of business (including trade      
indebtedness) since June 30, 1998 which would not have a Material Adverse       
Effect.                                                                         

      4.9 Litigation. Except as set forth in Section 4.9 of the Disclosure
Schedule, there is no Action instituted, pending or, to the best knowledge of   
SPI, threatened, which, if adversely decided, would, directly or indirectly,    
have a Material Adverse Effect, nor is there any outstanding judgment, decree,  
or injunction or any statute, rule or order of any domestic or foreign court,   
governmental department, commission or agency which has or would have any       
Material Adverse Effect.                                                        

4.10     Absence of Certain Changes.                          

      (a) Except for the transactions expressly contemplated hereby, since
March 31, 1998, SPI and its Subsidiaries have conducted their respective        
businesses only in the ordinary and usual course consistent with past practices 
and there has not been any change in SPI's business, operations, condition      
(financial or otherwise), results of operations, business prospects, assets,    
liabilities, working capital or reserves, except for changes contemplated hereby
or changes which have not had a Material Adverse Effect. From March 31, 1998    
through the date of this Agreement, neither SPI nor any of its Subsidiaries has 
taken any of the actions prohibited by Section 5.1 hereof.                      

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      (b) Since December 31, 1997, to the best knowledge of SPI, there has
been no change in (i) the demand for the products manufactured and sold by SPI  
and its Subsidiaries, (ii) the competitive environment in which SPI and its     
Subsidiaries conduct business, (iii) the regulatory standards or guidelines     
applicable to the business conducted by SPI and its Subsidiaries, (iv) the      
legislation applicable to the business conducted by SPI and its Subsidiaries,   
(v) the relationship between SPI or its Subsidiaries on the one hand, and any   
customers or suppliers of SPI or its Subsidiaries or the owners of any          
Properties utilized by SPI or its Subsidiaries on the other hand, any of which  
would have a Material Adverse Effect.                                           

4.11     Environmental Matters.                               

        (a) There are no existing uncured notices of noncompliance, notices of
violation, administrative actions, or lawsuits against SPI or any of its        
Subsidiaries arising under Environmental Laws or relating to the use, handling, 
storage, treatment, recycling, generation, or release of Hazardous Materials at 
any of the Properties, nor has SPI received any uncured notification of any     
allegation of any responsibility for any disposal, release, or threatened       
release at any location of any Hazardous Materials, except in any such case     
which would not be reasonably expected to have a Material Adverse Effect.       

         (b) To the best knowledge of SPI, there have been no spills or releases
of Hazardous Materials at any of the Properties in excess of quantities         
reportable under Environmental Laws, except in any such case which would not be 
reasonably expected to have a Material Adverse Effect.                          

       (c) There are no consent decrees, consent orders, judgments, judicial
or administrative orders, or Encumbrances by any governmental authority relating
to any Environmental Law which have not already been fully satisfied and which  
regulate, obligate, or bind SPI or any of its Subsidiaries, except in any such  
case which would not be reasonably expected to have a Material Adverse Effect.  

        (d) Except as set forth in Section 4.11(d) of the Disclosure Schedule,
no Properties or Facilities are listed on the federal National Priorities List, 
the federal Comprehensive Environmental Response Compensation Liability         
Information System list, or any similar state listing of sites known to be      
contaminated with Hazardous Materials.                                          

4.12 Real Properties. Neither SPI nor any of its Subsidiaries 
currently owns, and neither SPI nor any of its Subsidiaries or any of their     
respective predecessors have ever owned, fee title to any Properties. Section   
4.12 of the Disclosure Schedule lists all Leased Real Estate leased by SPI or   
any of its Subsidiaries. SPI has delivered or caused to be delivered to Modtech 
complete and accurate copies of the Leases which relate to the Leased Real      
Estate, together with all amendments or supplements thereto. SPI has not        
received written notice of condemnation or eminent domain proceedings pending or
threatened against any Leased Real Estate. Except as disclosed in Section 4.12  
of the Disclosure Schedule, SPI has not received any notice from any city,      
village or other Person of any zoning, ordinance, building, fire or health code 
or other legal violation in respect of                                          

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any Leased Real Estate. The Leases are in full force and effect and are valid,  
binding and enforceable in accordance with their respective terms; (i) no amount
payable under any Lease is past due; (ii) SPI is in compliance in all material  
respects with all commitments and obligations on its part to be performed or    
observed under each Lease and is not aware of the failure by any other party to 
any Lease to comply in all material respects with all of its commitments and    
obligations; (iii) SPI has not received any written notice (A) of a default,    
offset or counterclaim under any Lease, or, any other communication calling upon
it to comply with any provision of any Lease or asserting noncompliance, or     
asserting SPI has waived or altered its rights thereunder, and no event or      
condition has happened or presently exists which constitutes a default or, after
notice or lapse of time or both, would constitute a default under any Lease on  
the part of SPI or, to the best knowledge of SPI, any other party, or (B) of any
Action against any party under any Lease which if adversely determined would    
result in such Lease being terminated or cut off; and (iv) SPI has not assigned,
mortgaged, pledged or otherwise encumbered its interest, if any, under any      
Lease.                                                                          

      4.13 Tangible Personal Property. Except as disclosed in Section 4.13
of the Disclosure Schedule, SPI and its Subsidiaries (i) have good and valid    
title to all the tangible personal property material to its business and        
reflected in the latest audited consolidated financial statements of SPI as     
being owned by SPI and its Subsidiaries or acquired after the date thereof      
(except properties sold or otherwise disposed of in the ordinary course of      
business since the date thereof), free and clear of all Encumbrances except     
Permitted Encumbrances, and (ii) are collectively the lessee of all tangible    
personal property material to SPI's business and reflected as leased in the     
latest audited consolidated financial statements of SPI (or on the books and    
records of SPI as of the date thereof) or acquired after the date thereof       
(except for leases that have expired by their terms or that have been           
transferred in the ordinary course of business) and are in possession of the    
properties purported to be leased thereunder, and each such lease is valid and  
in full force and effect without default thereunder by the lessee or, to SPI's  
knowledge, the lessor. Each of SPI and each of its Subsidiaries enjoys peaceful 
and undisturbed possession under all such leases. Such owned and leased tangible
personal property is in good working order, reasonable wear and tear excepted.  

     4.14 Intellectual Property. Section 4.14 of the Disclosure Schedule
sets forth a listing of all intellectual property rights utilized by SPI or its 
Subsidiaries other than intellectual property rights relating to the plans and  
designs for structures manufactured by SPI and its Subsidiaries. The ownership, 
operation and conduct by SPI and its Subsidiaries of its business, as presently 
owned, operated, and conducted, does not infringe upon or conflict in any       
respect with any patent, copyright, trademark, trade name, service mark, brand  
name, any related regulations or other intellectual property rights of any other
Person, and to the knowledge of SPI no other Person is infringing upon any such 
rights of SPI and its Subsidiaries, in each case.                               

   4.15 Absence of Changes in SPI Benefit Plans. Section 4.15 of the
Disclosure Schedule sets forth a listing of all SPI Benefit Plans (as defined   
below). Except as set forth in Section 4.15 of the Disclosure Schedule, and     
except as required under this Agreement, since March 31, 1998, there has not    
been (i) any acceleration, amendment or change of the period of exercisability  
or vesting of any SPI Options under the SPI Option Plans (including any         
discretionary acceleration of                                                   

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the exercise periods or vesting by SPI's Board of Directors or any committee    
thereof or any other persons administering the SPI Option Plans) or             
authorization of cash payments in exchange for any SPI Options under the SPI    
Option Plan, (ii) any adoption or material amendment by SPI or any of its       
Subsidiaries of any collective bargaining agreement or any bonus, pension,      
profit sharing, deferred compensation, incentive compensation, stock ownership, 
stock purchase, stock option, phantom stock, stock appreciation right,          
retirement, vacation, severance, disability, death benefit, hospitalization,    
medical, worker's compensation, disability, supplementary unemployment benefits,
or other plan, arrangement or understanding (whether or not legally binding) or 
any employment agreement providing compensation or benefits to any current or   
former employee, officer, director or independent contractor of SPI or any of   
its Subsidiaries or any beneficiary thereof or entered into, maintained or      
contributed to, as the case may be, by SPI or any of its Subsidiaries           
(collectively, "SPI Benefit Plans"), or (iii) any adoption of, or amendment to, 
or change in employee participation or coverage under, any SPI Benefit Plans    
which would increase materially the expense of maintaining such SPI Benefit     
Plans above the level of the expense incurred in respect thereof for the fiscal 
year ended March 31, 1998.                                                      

4.16     ERISA Compliance.                                    

       (a) Section 4.16(a) of the Disclosure Schedule contains a list of all
"employee pension benefit plans" (defined in Section 3(2) of ERISA), "employee  
welfare benefit plans" (defined in Section 3(l) of ERISA) and all other SPI     
Benefit Plans. With respect to each SPI Benefit Plan, SPI has delivered or made 
available to Modtech a true, correct and complete copy of: (A) each writing     
constituting a part of such SPI Benefit Plan, including without limitation all  
plan documents, benefit schedules, trust agreements, and insurance contracts and
other funding vehicles; (B) the most recent Annual Report (Form 5500 Series) and
accompanying schedule, if any; (C) the current summary plan description, if any;
(D) the most recent annual financial report, if any; and (E) the most recent    
determination letter from the United States Internal Revenue Service, if any.   

    (b) Section 4.16(b) of the Disclosure Schedule identifies each SPI
Benefit Plan that is intended to be a "qualified plan" within the meaning of    
Section 401(a) of the Code ("Qualified Plans"). The Internal Revenue Service has
issued a favorable determination letter with respect to each Qualified Plan that
has not been revoked, and, except as set forth in Section 4.16(b) of the        
Disclosure Schedule, there are no existing circumstances nor any events that    
have occurred that could adversely affect the qualified status of any Qualified 
Plan or the related trust.                                                      

        (c) Except as set forth in Section 4.16(c) of the Disclosure Schedule,
SPI and its Subsidiaries have complied, and are now in compliance, in all       
material respects with all provisions of ERISA, the Code, and all laws and      
regulations applicable to the SPI Benefit Plans of which the failure to comply  
with would have a Material Adverse Effect. No prohibited transaction has        
occurred with respect to any SPI Benefit Plan. All contributions required to be 
made to any SPI Benefit Plan by applicable law or regulation or by any plan     
document or other contractual undertaking, and all premiums due or payable with 
respect to insurance policies funding any SPI Benefit Plan, for any period      
through the date hereof have been timely made or paid in full or, to the        

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extent not required to be made or paid on or before the date hereof, have been  
fully reflected in the latest audited consolidated financial statements of SPI. 

        (d) No SPI Benefit Plan is subject to Title IV or Section 302 of ERISA
or Section 412 or 4971 of the Code. None of SPI, its Subsidiaries and their     
respective ERISA Affiliates (as defined below) has at any time since September  
2, 1974, contributed to or been obligated to contribute to any "multiemployer   
plan" within the meaning of Section 4001(a)(3) of ERISA or any plan with two or 
more contributing sponsors at least two of whom are not under common control,   
within the meaning of Section 4063 of ERISA. There does not now exist, nor do   
any circumstances exist that could result in, any Controlled Group Liability (as
defined below) that would be a liability of SPI or any of its Subsidiaries      
following the Closing. "ERISA Affiliate" for purposes of this Section means,    
with respect to any entity, trade or business, any other entity, trade or       
business that is a member of a group described in Section 414(b), (c), (m) or   
(o) of the Code or Section 4001(b)(1) of ERISA that includes the first entity,  
trade or business, or that is a member of the same "controlled group" as the    
first entity, trade or business pursuant to Section 4001(a)(14) of ERISA.       
"Controlled Group Liability" for purposes of this Section means any and all     
liabilities under (i) Title IV of ERISA, (ii) Section 302 of ERISA, (iii)       
Sections 412 and 4971 of the Code, (iv) the continuation coverage requirements  
of Section 601 et seq. of ERISA and Section 4980B of the Code, and (v)          
corresponding or similar provisions of foreign laws or regulations, other than  
such liabilities that arise solely out of, or relate solely to, the SPI Benefit 
Plans.                                                                          

   (e) Except as set forth the latest audited consolidated financial
statements of SPI or in Section 4.16(e) of the Disclosure Schedule, neither SPI 
nor any of its Subsidiaries has any liability for life, health, medical or other
welfare benefits to former employees or beneficiaries or dependents thereof,    
except for health continuation coverage as required by Section 4980B of the Code
or Part 6 of Title I of ERISA and at no expense to SPI and its Subsidiaries.    

      (f) Except as set forth in the latest audited consolidated financial
statements of SPI or in Section 4.16(f) of the Disclosure Schedule, neither the 
execution and delivery of this Agreement nor the consummation of the            
transactions contemplated hereby will (either alone or in conjunction with any  
other event) result in, cause the accelerated vesting or delivery of, or        
increase the amount or value of, any payment or benefit to any employee of SPI  
or any of its Subsidiaries. Without limiting the generality of the foregoing, no
amount paid or payable by SPI or any of its Subsidiaries in connection with the 
transactions contemplated hereby (either solely as a result thereof or as a     
result of such transactions in conjunction with any other event) will be an     
"excess parachute payment" within the meaning of Section 280G of the Code.      

        (g) Except as set forth in Section 4.16(g) of the Disclosure Schedule,
no labor organization or group of employees of SPI or any of its Subsidiaries   
has made a pending demand for recognition or certification, and there are no    
representation or certification proceedings or petitions seeking a              
representation proceeding presently pending or threatened to be brought or      
filed, with the National Labor Relations Board or any other labor relations     
tribunal or authority. There are no organizing activities, strikes, work        
stoppages, slowdowns, lockouts, material arbitrations or material               

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grievances, or other material labor disputes pending or, to the knowledge of    
SPI, threatened against or involving SPI or any of its Subsidiaries.            

         (h) There are no pending or, to SPI's knowledge, threatened claims, and
the fiduciaries of the SPI Benefit Plans have not advised SPI that with respect 
to their duties to the SPI Benefit Plans or the assets or any of the trusts     
under any of the SPI Benefit Plans, there are any pending or threatened claims  
(other than claims for benefits in the ordinary course), lawsuits or            
arbitrations which have been asserted or instituted against the SPI Benefit     
Plans, which could reasonably be expected to result in any material liability of
SPI or any of its Subsidiaries to the Pension Benefit Guaranty Corporation, the 
Department of Treasury, the Department of Labor or any multiemployer benefit    
plan.                                                                           

4.17     Taxes.                                               

    (a) SPI and its Subsidiaries have duly prepared and filed federal,
state, local and foreign Returns which were required to be filed by or in       
respect of SPI and its Subsidiaries, or any of their Properties, income and/or  
operations. As of the time they were filed, such Returns accurately reflected   
the material facts regarding the income, business, Assets, operations,          
activities, status of the entity on whose behalf the Return was filed, and any  
other information required to be shown thereon. No extension of time within     
which SPI or any of its Subsidiaries may file any Return is currently in force. 

       (b) With respect to all amounts in respect of Taxes imposed on SPI or
any of its Subsidiaries or for which SPI or any of its Subsidiaries is or could 
be liable, whether to taxing authorities or to other Persons, all material      
amounts required to be paid by or on behalf of SPI or any of its Subsidiaries to
taxing authorities or others have been paid.                                    

   (c) SPI has not been advised that there is any review or audit in
process by any taxing authority of any Tax liability of SPI or any of its       
Subsidiaries currently in progress. SPI and its Subsidiaries have not received  
any written notice of any pending or threatened audit by the Internal Revenue   
Service or any state, local or foreign agency of any Returns or Tax liability of
SPI or any of its Subsidiaries for any period. SPI and its Subsidiaries         
currently have no unpaid deficiencies assessed by the Internal Revenue Service  
or any state, local or foreign taxing authority arising out of any examination  
of any of the Returns of SPI or any of its Subsidiaries nor, to the knowledge of
SPI, is there reason to believe that any material deficiency will be assessed.  

        (d) No agreements are in force or are currently being negotiated by or
on behalf of SPI or any of its Subsidiaries for any waiver or for the extension 
of any statute of limitations governing the time of assessments or collection of
any Tax. No closing agreements or compromises concerning Taxes of SPI or any    
Subsidiaries are currently pending.                                             

      (e) SPI and its Subsidiaries have withheld from each payment made to
any of their respective officers, directors and employees, the amount of all    
applicable Taxes, including, but not                                            

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limited to, income tax, social security contributions, unemployment             
contributions, backup withholding and other deductions required to be withheld  
therefrom by any Tax law and have paid the same to the proper Taxing authorities
within the time required under any applicable Tax law.                          

 (f) There are no Encumbrances for Taxes, whether imposed by any
federal, state, local or foreign taxing authority, outstanding against any      
Assets owned by SPI or its Subsidiaries, except for Encumbrances for Taxes that 
are not yet due and payable. None of the Assets owned by SPI or its Subsidiaries
is property that is required to be treated as being owned by any other Person   
pursuant to the safe harbor lease provisions of former Section 168(f)(8) of the 
Code. None of the assets owned by SPI or its Subsidiaries directly or indirectly
secures any debt, the interest on which is tax-exempt under Section 103(a) of   
the Code. None of the Assets owned by SPI or its Subsidiaries is "tax-exempt use
property" within the meaning of Section 168(h) of the Code. None of SPI or any  
of its Subsidiaries is a person other than a United States person within the    
meaning of the Code.                                                            

(g) Neither SPI nor any of its Subsidiaries is a party to any 
agreement, contract, or arrangement for compensating any employee that,         
individually or collectively, could give rise to the payment of any amount      
(whether in cash or property, including SPI Shares or other Equity Interests)   
that would not be deductible pursuant to the terms of Sections 162(a)(1),       
162(m), 162(n) or 280G of the Code.                                             

       (h) Neither SPI nor any of its Subsidiaries anticipate the assessment
of any additional Taxes against SPI or any of its Subsidiaries nor is SPI or any
of its Subsidiaries aware of any unresolved questions, claims or disputes       
concerning the liability for Taxes of SPI or any of its Subsidiaries which would
exceed by more than $500,000 the reserves established on the consolidated       
balance sheet of SPI as of June 30, 1998.                                       

4.18     Contracts; Debt Instruments.                         

        (a) Except as otherwise disclosed in Section 4.18(a) of the Disclosure
Schedule, neither SPI nor any of its Subsidiaries is a party to or subject to:  

                (i) any collective bargaining or other agreements with labor
         unions, trade unions, employee representatives, work committees, guilds
     or associations representing employees of SPI and its Subsidiaries;

               (ii) any employment, consulting, severance, termination, or
        indemnification agreement, contract or arrangement, including any oral
       agreement, contract or arrangement which requires the payment of over
      $75,000, with any current or former officer, consultant, director or
employee;                                                     

              (iii) any lease for real or personal property in which the
     amount of payments which SPI is required to make, or is expected to
receive, on an annual basis exceeds $50,000;                  

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            (iv) any agreement, contract, instrument, arrangement or
  commitment to repurchase assets previously sold or leased, or to
     indemnify or otherwise compensate the purchaser in respect thereof;

           (v) any agreement, contract, policy, license, document,
  instrument, arrangement or commitment that materially limits the
     freedom of SPI or any of its Subsidiaries to compete in any line of
business or with any person;                                  

              (vi) any agreement or contract relating to any outstanding
         commitment for material capital expenditures, or any partially or fully
executory agreement or contract relating to the acquisition or
      disposition of rights or assets other than those entered into in the
ordinary course consistent with past practices;               

                  (vii) any sale-leaseback, conditional sale, exclusive dealing,
brokerage, finder's fee contract or agreement; or             

          (viii) any other agreement, contract, policy, license,
 document, instrument, arrangement or commitment not made in the
ordinary course of business which is material to SPI and its  
       Subsidiaries taken as a whole and which is not otherwise disclosed in
the Disclosure Schedules.                                     

         (b) None of SPI, its Subsidiaries and, to the knowledge of SPI, none of
the other parties to any of the contracts and agreements identified in Sections 
4.18(a) and (c) of the Disclosure Schedule is in default under or has terminated
any such contract or agreement, or in any way expressed to SPI an intent to     
materially reduce or terminate the amount of its business with SPI or any of its
Subsidiaries in the future.                                                     

      (c) Set forth in Section 4.18(c) of the Disclosure Schedule is (A) a
list of all loan or credit agreements, notes, bonds, mortgages, indentures and  
other agreements and instruments pursuant to which any indebtedness of SPI or   
any of its Subsidiaries is outstanding or may be incurred, (B) the respective   
principal amounts currently outstanding thereunder, and (C) any interest rate   
swaps, caps, floors or option agreements or similar interest rate risk          
management agreements. Except as set forth in Section 4.18(c) of the Disclosure 
Schedule, all such indebtedness is prepayable at any time without penalty,      
subject to the notice provisions of the agreements governing such indebtedness  
(which, except as set forth in Section 4.18(c) of the Disclosure Schedule, do   
not require a notice period of more than thirty days). For purposes of this     
Section 4.18(c), "indebtedness" shall mean, with respect to any Person, without 
duplication, (A) all obligations of such Person for borrowed money, or with     
respect to deposits or advances of any kind to such Person, (B) all obligations 
of such Person evidenced by bonds, debentures, notes or similar instruments, (C)
all obligations of such Person upon which interest charges are customarily paid,
(D) all obligations of such person under conditional sale or other title        
retention agreements relating to property purchased by such Person, (E) all     
obligations of such Person issued or assumed as the deferred purchase price of  
property or services (excluding obligations of such Person to creditors for raw 
materials, inventory, services and                                              

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supplies incurred in the ordinary course of such Person's business), (F) all    
capitalized lease obligations of such Person, (G) all indebtedness of others    
secured by any Lien on property or assets owned or acquired by such Person,     
whether or not the obligations secured thereby have been assumed, (H) all       
obligations of such Person under interest rate or currency swap transactions    
(valued at the termination value thereof), (I) all letters of credit issued for 
the account of such Person, (J) all obligations of such Person to purchase      
securities (or other property) which arises out of or in connection with the    
sale of the same or substantially similar securities or property, and (K) all   
guarantees and arrangements having the economic effect of a guarantee of such   
Person of any indebtedness of any other person.                                 

   4.19 Insurance. SPI and its Subsidiaries are covered by valid and
currently effective insurance policies issued in favor of SPI that are customary
for companies of similar size and financial condition which conduct similar     
businesses; provided, that SPI currently does not have in force any directors   
and officers liability insurance coverage. All such policies are in full force  
and effect, all premiums due thereon have been paid and SPI has complied with   
the provisions of such policies with respect to which the failure to comply with
would result in a cancellation of such policies. Neither SPI nor any of its     
Subsidiaries has received any written notice from or on behalf of any insurance 
carrier issuing policies or binders relating to or covering SPI and its         
Subsidiaries that there will be a cancellation or non-renewal of existing       
policies or binders, or material modification of any of the methods of doing    
business, will be required.                                                     

  4.20 Interests of Officers and Directors. Except as set forth in
Section 4.20 of the Disclosure Schedule, neither any of SPI's or any of its     
Subsidiaries' officers, directors or material shareholders nor any member of    
their respective immediate families or any entity with respect to which any such
person is an Affiliate, has any material interest in any property, real or      
personal, tangible or intangible, used in or pertaining to the business of SPI  
or its Subsidiaries, or any other business relationship with SPI or any of its  
Subsidiaries.                                                                   

        4.21 No Brokers. Except as set forth in Section 4.21 of the Disclosure
Schedule, no broker, finder, investment banker, or other Person or firm is      
entitled to any brokerage, finder's or other similar fee or commission in       
connection with this Agreement or the transactions contemplated hereby based    
upon arrangements made by or on behalf of SPI, any of its Subsidiaries or any of
their respective directors, officers or employees.                              

      4.22 Customers. Section 4.22 of the Disclosure Schedule sets forth a
list of the names of the twenty (20) most significant customers (by revenue) of 
SPI and its Subsidiaries that ordered goods or products from SPI or any of its  
Subsidiaries and the amount for which each such customer was invoiced during the
12-month period ended March 31, 1998. Neither SPI nor any of its Subsidiaries   
has received any notice that any significant customer of SPI or any of its      
Subsidiaries has ceased, will cease, or has significantly reduced, or will      
significantly reduce its ordering of goods or products from SPI or any of its   
Subsidiaries, nor are SPI or any of its Subsidiaries aware of any circumstances 
that could reasonably be anticipated to cause any such reduction or cessation of
orders.                                                                         

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      4.23 Suppliers. Section 4.23 of the Disclosure Schedule sets forth a
list of the names of the twenty (20) most significant suppliers of raw materials
and other goods to SPI and its Subsidiaries for the 12-month period ended March 
31, 1998. Neither SPI nor any of its Subsidiaries has received any notice that  
any such supplier will cease selling raw materials or other goods to them at any
time after the Closing or materially alter the terms of such sales (other than  
normal price increases), nor is SPI or any of its Subsidiaries aware of any     
circumstances that could reasonably be anticipated to cause such suppliers to   
make such changes.                                                              

 4.24 Employees. To the best knowledge of SPI, no executive, key
employee or group of employees has any plans to terminate employment with SPI or
any of its Subsidiaries. Except as set forth in Section 4.24 of the Disclosure  
Schedule, neither SPI nor any of its Subsidiaries is a party to or bound by a   
collective bargaining agreement, nor does SPI have any knowledge of any         
organizational effort presently being made or threatened by or on behalf of any 
labor union with respect to the employees of SPI or its Subsidiaries.           

  4.25 Product Liability. Each product manufactured by SPI and its
Subsidiaries has been manufactured, sold, delivered and installed in all        
material respects in accordance with applicable plans, specifications, laws     
(including building codes and regulations) and applicable industry standards.   

    4.26 Information in Joint Proxy Statement/Prospectus and Form S-4.
Information supplied by SPI or any of its Subsidiaries for inclusion or         
incorporation by reference in (i) the Joint Proxy Statement/Prospectus (as      
hereinafter defined) (or any amendment thereof or supplement thereto), at the   
date mailed to SPI stockholders and Modtech stockholders and at the time of the 
respective meetings of the SPI stockholders and of the Modtech stockholders     
contemplated hereby, and (ii) the Form S-4 (as hereinafter defined) at any time 
the Form S-4 is filed with the SEC, at any time it is amended or supplemented   
and at any time it becomes effective under the Securities Act, will not contain 
any untrue statement of a material fact or omit to state any material fact      
required to be stated therein or necessary in order to make the statements      
therein, in light of the circumstances under which they are made, not           
misleading.                                                                     

      4.27 Disclosure. The representations and warranties of SPI contained
in this Agreement are true and correct in all material respects and do not omit 
any material fact necessary to make the statements contained therein, in light  
of the circumstances under which they were made, not misleading. There is no    
fact known to SPI which has not been disclosed to Modtech in the Disclosure     
Schedule and the latest audited consolidated financial statements of SPI, taken 
as a whole, which has had, or would reasonably be expected to have, a Material  
Adverse Effect.                                                                 

       4.28 Year 2000 Matters. To the best knowledge of SPI, the information
systems utilized by SPI and each of its Subsidiaries are capable of properly    
recognizing date sensitive information when the year changes to 2000, and as    
such, the year change to 2000, as it relates to the information systems of SPI  
and its Subsidiaries, will not result in a material disruption of the business  
of SPI or any of its Subsidiaries.                                              

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 ARTICLE V

 COVENANTS

      5.1 Conduct of Business by Modtech or SPI. Commencing the date after
the date hereof and at all times prior to the Effective Time or the date, if    
any, on which this Agreement is earlier terminated pursuant to Article 7 hereof 
(the "Termination Date"), and except as may be required pursuant to this        
Agreement, or as disclosed or contemplated in the Disclosure Schedule (including
the agreements and contemplated agreements referred to therein, and the         
consummation of the transactions contemplated by such agreements) or as may be  
consented to in writing by the other, Modtech and SPI:                          

      (a) shall, and shall cause each of their respective Subsidiaries to,
conduct their respective operations according to their ordinary and usual course
of business; provided, however, that this provision shall not prohibit the      
acquisition by SPI of a nonresidential modular building manufacturer located in 
the Southeastern United States or the other transactions contemplated to be     
consummated in connection therewith on terms substantially similar to those     
discussed with the chief executive officer of Modtech (the "Proposed            
Acquisition"); and provided, further, that SPI shall be permitted to update its 
Disclosure Schedules to reflect the completion of the Proposed Acquisition, and 
that any such updating shall not constitute a breach of any of the              
representations or warranties of SPI made herein, or any other provision of this
Agreement;                                                                      

      (b) shall, and shall cause each of their respective Subsidiaries to,
use their best efforts to preserve intact their respective business             
organizations and good will in all material respects, keep available the        
services of their respective partners, officers and employees as a group and    
maintain satisfactory relations with lessees, suppliers, distributors,          
customers, banks and others having business relationships with them;            

   (c) shall confer on a regular and frequent basis with one or more
representatives of the other to report operational matters of a material nature 
and the general status of ongoing operations, subject to compliance with        
applicable law;                                                                 

    (d) shall notify the other of any emergency or other change in the
normal course of their or their respective Subsidiaries' respective businesses  
or in the operation of their or their respective Subsidiaries' Properties and of
any governmental complaints, investigations or hearings (or communications      
indicating that the same may be contemplated) if such emergency, change,        
complaint, investigation or hearing or the effect thereof would be material to  
the business, operations or financial condition of either Modtech or SPI and    
their respective Subsidiaries, as the case may be, taken as a whole;            

        (e) shall not declare or pay any dividends on their outstanding shares
of capital stock;                                                               

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      (f) shall not, except as otherwise provided in this Agreement, enter
into or amend in any material respect any employment, severance or similar      
agreement or any agreement or agreement in principle with respect to, any       
merger, consolidation or business combination (other than the Mergers), any     
acquisition of a material amount of assets or securities, any disposition of a  
material amount of assets or securities or any release or relinquishment of any 
material contract rights not in the ordinary course of business; provided,      
however, that this provision shall not prohibit the Proposed Acquisition by SPI;

   (g) shall not propose or adopt any amendments of their respective
organizational documents;                                                       

    (h) shall not issue any shares of their capital stock (except upon
exercise of warrants and options issued and outstanding on the date hereof),    
effect any stock split, issue any debt securities or borrow any money (other    
than bank borrowings in the ordinary course of business consistent with past    
practice, borrowings by SPI necessary to consummate the Proposed Acquisition),  
or otherwise change its capitalization as it existed on the date hereof;        

    (i) shall not grant, confer or award any options, warrants, calls,
subscriptions, convertible securities or other securities, or enter into any    
agreements, commitments or obligations which would require Modtech or SPI to    
acquire any shares of its capital stock except pursuant to employee benefit     
plans, programs or arrangements in existence on the date hereof, in the ordinary
course of business and consistent with past practice;                           

         (j) shall not purchase or redeem any shares of their own capital stock,
Modtech Shares or SPI Shares; and                                               

  (k) shall not agree in writing, or otherwise, to take any of the
foregoing actions or any action which would make any of their respective        
representations or warranties in Articles III or IV hereof untrue or incorrect. 

     5.2 Meetings of Stockholders. Each of Modtech and SPI will take all
action necessary in accordance with applicable law and its organizational       
documents to convene a meeting of its stockholders as promptly as practicable to
consider and vote upon the adoption of this Agreement and the transactions      
contemplated hereby, as required by applicable law. The Boards of Directors of  
Modtech and SPI will recommend that their respective stockholders vote in favor 
of such adoption, and Modtech and SPI will each take all lawful action to       
solicit such approval, including, without limitation, timely mailing the Joint  
Proxy Statement/Prospectus; provided, however, that nothing contained in this   
Section 5.2 shall prohibit either Modtech or SPI from taking and disclosing to  
its stockholders a position contemplated by Rule 14e-2(a) promulgated under the 
Exchange Act or from making any disclosure to, or having any communication with,
their respective stockholders if, in the good faith judgment of the Board of    
Directors of Modtech or SPI, as applicable, after consultation with outside     
counsel, failure so to disclose or communicate would be inconsistent with its   
fiduciary duties under applicable law. The respective meetings of the           
stockholders of Modtech                                                         

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and SPI shall be held as soon as practicable and in any event (to the extent    
permissible under applicable law) within twenty (20) days after the date upon   
which the Joint Proxy Statement/Prospectus shall have been approved for release 
to the stockholders of Modtech and SPI by the SEC; provided, however, that      
notwithstanding anything to the contrary contained in this Agreement, Modtech   
and SPI may adjourn or postpone their respective meetings of stockholders to the
extent necessary, in the opinion of their respective counsel, to supplement or  
amend the Joint Proxy Statement/Prospectus in advance of a vote on this         
Agreement and the Mergers. Modtech and SPI shall coordinate and cooperate with  
respect to the timing of such meetings and shall endeavor to hold such meetings 
on the same day.                                                                

 5.3 Further Assurance and Cooperation. Subject to the terms and
conditions herein provided, Modtech and SPI agree to use all reasonable efforts 
to take, or cause to be taken, all actions and to do, or cause to be done, all  
things necessary, proper or advisable to consummate and make effective as       
promptly as practicable the transactions contemplated by this Agreement and to  
cooperate with each other in connection therewith, (a) to obtain all necessary  
waivers, consents and approvals from other parties to material loan agreements, 
leases and other contracts (provided that neither Modtech nor SPI shall agree to
any substantial modification to any such agreement, lease or contract or to any 
payment of funds in order to obtain such waiver, consent or approval without the
prior written consent of the other), (b) to defend any lawsuits or other legal  
proceedings challenging this Agreement or the consummation of the transactions  
contemplated hereby, (c) to lift or rescind any injunction or restraining order 
or other order adversely affecting the ability of the parties to consummate the 
transactions contemplated thereby, (d) to effect all necessary registrations and
filings (including any registrations and filings which may be required to be    
made by Holdings pursuant to any federal or state securities laws), and (e) to  
fulfill all conditions to this Agreement.                                       

     5.4 Certain Filings and Consents. Each of Modtech and SPI shall (a)
promptly make the required filings and submissions under the HSR Act, (b)       
cooperate with the other in determining whether any other filings are required  
to be made or consents, approvals, permits or authorizations are required to be 
obtained under any federal, state, local or foreign law or regulation or whether
any consents, approvals or waivers are required to be obtained from other       
parties to loan agreements, leases or other contracts in connection with the    
consummation of the Mergers and the other transactions contemplated by this     
Agreement, and (c) actively assist each other in obtaining any consents,        
permits, authorizations, approvals or waivers which are required. Each of       
Modtech and SPI shall promptly inform the other of any material communication   
between such party and any government or governmental authority regarding the   
Mergers or the other transactions contemplated by this Agreement. If Modtech or 
SPI receives a request for additional information or documentary material from  
any such government or governmental authority, then such party shall endeavor in
good faith to make, or cause to be made, as soon as reasonably practicable and  
after consultation with the other party, an appropriate response to such        
request. Modtech and SPI shall cooperate in connection with reaching any        
understandings, undertaking or agreements (oral or written) involving any       
government or any governmental authority in connection with the transactions    
contemplated hereby.                                                            

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     5.5 Publicity. The initial press release relating to this Agreement
and all press releases or public statements thereafter with respect to the      
transactions contemplated hereby shall be joint press releases or statements.   
Subject to their respective legal obligations (including requirements of stock  
exchanges and other similar regulatory bodies), Modtech and SPI shall consult   
with each other in making any filings with any governmental or regulatory       
authorities or with any national securities exchange.                           

5.6      Joint Proxy Statement/Prospectus and Form S-4.       

       (a) Modtech and SPI will cooperate and promptly prepare and file with
the SEC as soon as practicable a joint proxy statement/prospectus and necessary 
forms of proxy in connection with the vote of Modtech's and SPI's stockholders  
with respect to the Mergers and the offer to such stockholders of the securities
to be issued pursuant to the Mergers (the "Joint Proxy Statement/Prospectus")   
and will cause Holdings to prepare and file with the SEC the registration       
statement on Form S-4 (the "Form S-4") under the Securities Act, in which the   
Joint Proxy Statement/Prospectus shall be included as a prospectus. Modtech and 
SPI will cause the Form S-4 to comply in all material respects with the         
applicable provisions of the Securities Act and the Exchange Act. Each of       
Modtech and SPI will use its best efforts to have the Form S-4 declared         
effective by the SEC as promptly as practicable and to keep the Form S-4        
effective as long as is necessary to consummate the Mergers. Modtech and SPI    
will cause Holdings to take any action required to be taken to obtain, prior to 
the effective date of the Form S-4, all necessary state securities law or "Blue 
Sky" permits or approvals required to carry out the transactions contemplated by
this Agreement and all expenses incident thereto will be paid 68% by Modtech and
32% by SPI. No amendment or supplement to the Form S-4 or the Joint Proxy       
Statement/Prospectus will be made by Modtech or SPI without the approval of the 
other party, such approval not to be unreasonably withheld or delayed. Each of  
SPI and Modtech shall use reasonable efforts to cause the Joint Proxy           
Statement/Prospectus to be mailed to its respective stockholders as soon as     
practicable after the date hereof.                                              

      5.7 Listing Application. Each of Modtech and SPI will cause Holdings
to promptly prepare and submit to Nasdaq a listing application covering the     
shares of Holdings Common Stock issuable in the Mergers, and will use its best  
efforts to obtain, prior to the Effective Time, approval for the listing of such
Holdings Common Stock, subject to official notice of issuance.                  

        5.8 Further Action. Each of Modtech and SPI will, subject to the other
terms and conditions set forth herein and to the fulfillment at or before the   
Effective Time of each of the conditions of performance set forth herein or the 
waiver thereof, perform such further acts and execute such documents as may be  
reasonably required to effect the Mergers. Each of Modtech and SPI will permit  
the other and its authorized representatives full access to all of its and its  
Subsidiaries premises, properties, personnel, books, records, contracts and     
documents, and each party will use commercially reasonable efforts to cause its 
representatives to furnish to the other party and its authorized representatives
such additional financial and operating data and other information              

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concerning its businesses and properties (and those of its Subsidiaries) as the 
other or its duly authorized representatives may from time to time reasonably   
request.                                                                        

        5.9 Lockup Agreements. Each of Modtech and SPI will use all reasonable
efforts to deliver or cause to be delivered to the other, prior to the Closing  
Date, from each of their respective "affiliates" within the meaning of Rule 145 
of the rules and regulations promulgated under the Securities Act, a lockup     
agreement pursuant to which each such affiliate will agree not to sell any      
shares of Holdings for a period of 90 days following the Effective Time (the    
"Lockup Agreement"). Holdings will be entitled, to the extent it is so required 
by applicable law (as advised by outside counsel experienced in such matters) to
place legends as specified in such Lockup Agreements on the certificates        
evidencing any Holdings Common Stock or Holdings Preferred Stock to be received 
by such affiliates pursuant to the terms of this Agreement, and to issue        
appropriate stop-transfer instructions to the transfer agent for Holdings Common
Stock, consistent with the terms of such Lockup Agreements.                     

      5.10 Expenses. Whether or not the Mergers are consummated, all costs
and expenses incurred in connection with this Agreement and the transactions    
contemplated hereby will be paid by the party incurring such expenses except as 
expressly provided herein, and except that (i) the filing fee in connection with
the HSR Act filings of SPI and Modtech and the affiliates of SPI and Modtech,   
(ii) the filing fee in connection with the filing of the Form S-4 or Joint Proxy
Statement/Prospectus with the SEC, and (iii) the expenses incurred in connection
with the preparation, printing and mailing of the Form S-4 and the Joint Proxy  
Statement/Prospectus, will be paid 68% by Modtech and 32% by SPI. In addition,  
SPI will reimburse Modtech for 32% of the cost of obtaining the Fairness        
Opinion. Following consummation of the Mergers, Holdings will reimburse Modtech 
and SPI for their reasonable expenses payable to third parties and incurred in  
connection with this Agreement and the transactions contemplated hereby,        
including amounts paid by SPI to Modtech to reimburse Modtech for 32% of the    
cost of the Fairness Opinion. The provisions of this Section 5.10 will survive  
the consummation of the Mergers.                                                

      5.11 Notice of Change in Representations and Warranties. Modtech and
SPI will each give prompt notice to the other of (i) any change in its condition
or any event causing a breach of any of its representations and warranties, (ii)
the occurrence or non-occurrence of any event which would, or which would be    
reasonably likely to, cause any conditions to their obligations to effect the   
Mergers and other transactions contemplated hereby not to be satisfied in any   
material respect, and (iii) their failure to satisfy in any material respect any
covenant or condition to be complied with by them pursuant to this Agreement.   

   5.12 Consents. Modtech and SPI will use all reasonable efforts to
obtain each of the consents identified in Section 3.6 and 4.6, respectively, of 
the Disclosure Schedule.                                                        

    5.13 Letter of Modtech's Accountants. Modtech shall use reasonable
efforts to cause to be delivered to SPI and Holdings a letter of KPMG Peat      
Marwick LLP, Modtech's independent auditors, dated a date within two business   
days before the date on which the Form S-4 shall become                         

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effective and addressed to Holdings, in form reasonably satisfactory to SPI and 
customary in scope and substance for letters delivered by independent public    
accountants in connection with registration statements similar to the Form S-4. 

       5.14 Letter of SPI's Accountants. SPI shall use reasonable efforts to
cause to be delivered to Modtech and Holdings a letter of Arthur Andersen LLP,  
SPI's independent auditors, dated a date within two business days before the    
date on which the Form S-4 shall become effective and addressed to Holdings, in 
form reasonably satisfactory to Modtech and customary in scope and substance for
letters delivered by independent public accountants in connection with          
registration statements similar to the Form S-4.                                

        5.15 Registration Statement on Form S-8. On or promptly after the 90th
day following the Effective Time, Modtech and SPI shall cause Holdings to       
prepare and file with the SEC a registration statement on Form S-8 (or another  
appropriate form) registering a number of shares of Holdings Common Stock at    
least equal to the number of shares of Holdings Common Stock subject to options 
to be received by the holders of Modtech and SPI options pursuant to Section    
2.1(c). Such registration statement shall be kept effective (and the current    
status of the prospectus or prospectuses required thereby shall be maintained)  
at least for so long as any options with respect to Holdings Common Stock       
received by the holders of Modtech or SPI options pursuant to Section 2.1(c)    
remain outstanding.                                                             

      5.16 Tax Matters Certificates. In connection with the opinions to be
rendered by counsel to Modtech and SPI pursuant to Sections 6.2(e) and 6.3(e),  
respectively, tax certificates shall be delivered to such counsel which         
certificates shall be from such parties and in such form and substance as may   
reasonably be required by such counsel. Such counsel shall, in rendering such   
opinions, be entitled to rely on the representations contained in such tax      
certificates.                                                                   

      5.17 Assumption of Obligations by Holdings, Modtech Sub and SPI Sub.
As soon as practicable after the formation of Holdings, Modtech and SPI (i)     
shall cause Holdings to sign and become a party to this Agreement and to assume 
the obligations applicable to it hereunder, and (ii) shall cause Modtech Sub and
SPI Sub to sign and become parties to this Agreement and to assume their        
respective obligations hereunder and under the agreements of merger contained   
herein. Upon their execution of this Agreement, Holdings, Modtech Sub and SPI   
Sub will be bound by the provisions hereof and Modtech and SPI hereby agree that
upon such execution such entities shall be parties hereto.                      

        5.18 Representations and Warranties of Holdings. Modtech and SPI shall
cause Holdings to deliver, on the Closing Date, a certificate of an executive   
officer containing representations and warranties substantially to the effect of
those representations and warranties set forth in Articles III and IV of this   
Agreement.                                                                      

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    5.19 Development of Holdings Business Plan. Promptly following the
execution of this Agreement, representatives of Modtech and SPI shall jointly   
develop a business plan for the operation of Holdings following the Closing.    

   5.20 Payment of Transaction Fees; Transaction Advisory Agreement.
Modtech and SPI shall cause Holdings to pay the fees set forth in Section 3.21  
and Section 4.21, respectively, of the Disclosure Schedule. In addition to the  
payment of the fees described in the preceding sentence, Modtech and SPI shall, 
in connection with the Closing, cause Holdings, following approval thereof by   
the Independent Directors, to enter into the Transaction Advisory Agreement with
KRG Capital, in substantially the form set forth in Exhibit F (the "Transaction 
Advisory Agreement").                                                           

      5.21 Retention of Holdings' Financial Advisor. Modtech and SPI shall
cause Holdings to retain DLJ as financial advisor to Holdings in connection with
the Mergers.                                                                    

    5.22 Deregistration of Modtech Shares. Promptly after the Closing,
Holdings shall take all necessary steps to deregister the Modtech Shares with   
the Securities and Exchange Commission and Nasdaq.                              

ARTICLE VI

CONDITIONS

        6.1 Conditions to Each of Modtech's and SPI's Obligation to Effect the
Mergers. The respective obligations of Modtech and SPI to effect the Mergers    
will be subject to the fulfillment or waiver by both parties at or prior to the 
Closing Date of the following conditions:                                       

   (a) The Modtech Merger and this Agreement shall have been validly
approved and adopted by the affirmative vote of the holders of at least that    
number of outstanding shares of Modtech Shares required to approve the Modtech  
Merger under the CGCL and Modtech's articles of incorporation at the            
stockholders' meeting referred to in Section 5.2 (the "Modtech Stockholder      
Approvals");                                                                    

        (b) The SPI Merger and this Agreement shall have been validly approved
and adopted by the affirmative vote of the holders of at least that number of   
outstanding shares of SPI Shares required to approve the SPI Merger under the   
CBCA and SPI's articles of incorporation at the stockholders' meeting referred  
to in Section 5.2 (the "SPI Stockholder Approvals");                            

    (c) Neither Modtech nor SPI shall be subject to any order, decree,
ruling or injunction of a court of competent jurisdiction or by a governmental, 
regulatory or administrative agency or commission, and no law, statute, rule or 
regulation shall have been promulgated or enacted by a governmental or          
regulatory authority, which prohibits the consummation of the transactions      
contemplated by this Agreement or would otherwise impair the ability of Holdings
to operate the business of Modtech and SPI on a consolidated basis following the
Closing and there shall be no                                                   

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pending action, proceeding or investigation by or before any governmental entity
challenging or seeking material damages in connection with the Mergers or       
otherwise limiting the right of Modtech and SPI to continue their respective    
operations (and those of their Subsidiaries) following the Closing;             

      (d) The waiting period applicable to the consummation of the Mergers
under the HSR Act shall have expired or been terminated;                        

        (e) The Form S-4 shall have become effective and shall be effective at
the Effective Time, and no stop order suspending effectiveness of the Form S-4  
shall have been issued which shall be in effect at the Effective Time, no       
action, suit, proceeding or investigation by the SEC to suspend the             
effectiveness thereof shall have been initiated and be continuing or, to the    
knowledge of Modtech or SPI, be threatened in writing, and all necessary        
approvals under state securities laws relating to the issuance or trading of    
Holdings Common Stock to be issued to Modtech and SPI stockholders in connection
with the Mergers shall have been received;                                      

       (f) Holdings shall have successfully negotiated and put into effect a
credit facility on terms acceptable to Holdings, which facility shall provide   
approximately $100 million in available credit, (approximately $45 million of   
which shall be a term loan, $30 million of which shall be a revolving loan, and 
$25 million of which shall be an acquisition line of credit);                   

 (g) All consents, licenses, permits, authorizations, orders and
approvals of (or filings or registrations with) any governmental or regulatory  
authorities, and all consents, authorizations and approvals of any other entity 
(including, without limitation, any bank or financial institution) required in  
connection with the execution, delivery and performance of this Agreement shall 
have been obtained or made, except for filings in connection with the Mergers   
and any other documents required to be filed after the Effective Time and except
where the failure to have obtained or made any such consent, license, permit,   
authorization, order, approval, filing or registration would not have a Material
Adverse Effect on Holdings and its Subsidiaries, taken as a whole, following the
Effective Time;                                                                 

        (h) Holdings Common Stock to be issued to Modtech and SPI stockholders
in connection with the Mergers shall have been approved for listing on Nasdaq,  
subject only to official notice of issuance;                                    

         (i) After the Effective Time and except as set forth in this Agreement,
no Person will have any right under any stock option plan (or any option granted
thereunder) or other plan, program or arrangement to acquire any securities of  
Modtech, SPI or any of their respective Subsidiaries;                           

   (j) Holders of Modtech Shares representing no more than 5% of the
issued and outstanding Modtech Shares shall have exercised, and not withdrawn,  
their rights to dissent from the Modtech Merger;                                

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      (k) Holders of SPI Shares representing no more than 5% of the issued
and outstanding SPI Shares shall have exercised, and not withdrawn, their rights
to dissent from the SPI Merger;                                                 

      (l) All of the parties set forth on the signature page thereof shall
have entered into the Registration Rights Agreement substantially in the form of
Exhibit G;                                                                      

(m) Holdings and KRG Capital shall each have entered into the 
Transaction Advisory Agreement substantially in the form of Exhibit F;          

      (n) Such key employees as shall be identified by mutual agreement of
Modtech and SPI shall have entered into employment agreements with Holdings on  
terms acceptable to Holdings;                                                   

        (o) Holdings shall have delivered the certificate described in Section
5.16 of this Agreement; and                                                     

   (p) The affiliates of Modtech and SPI shall have entered into the
Lockup Agreements.                                                              

    6.2 Conditions to Obligation of Modtech to Effect the Mergers. The
obligation of Modtech to effect the Mergers will be subject to the fulfillment  
or waiver by Modtech at or prior to the Closing Date of the following additional
conditions:                                                                     

         (a) SPI shall have performed and complied in all material respects with
all material obligations and agreements required to be performed and complied   
with by it under this Agreement at or prior to the Closing Date;                

 (b) The representations and warranties of SPI contained in this
Agreement that are qualified as to materiality shall be true and correct, and   
such representations and warranties of SPI that are not so qualified shall be   
true and correct in all material respects, in each case both as of the date of  
this Agreement and on the Closing Date as though made on and as of the Closing  
Date, except to the extent such representations and warranties are expressly    
made as of an earlier date, in which case, such representations and warranties  
shall be true and correct as of such date;                                      

       (c) Modtech shall have received a certificate from the President or a
Vice President of SPI, dated as of the Closing Date, to the effect that the     
conditions set forth in paragraphs (a) and (b) above have been satisfied;       

   (d) From the date of this Agreement through the Effective Time, a
Material Adverse Effect with respect to SPI and its Subsidiaries, taken as a    
whole, shall not have occurred;                                                 

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  (e) Modtech shall have received a tax opinion from Gibson Dunn &
Crutcher LLP, in form and substance reasonably satisfactory to Modtech,         
substantially to the effect that, on the basis of the facts, representations and
assumptions set forth in such opinion, the Modtech Merger (together with the SPI
Merger) will be treated as an "exchange" under Section 351 of the Code;         

      (f) Modtech shall have received the opinion of Dorsey & Whitney LLP,
counsel to SPI, dated the Effective Time, in form and substance reasonably      
satisfactory to Modtech and its counsel; and                                    

     (g) The Fairness Opinion received by Modtech in accordance with the
provisions of Section 3.28 hereof and shall not have been amended, withdrawn or 
modified in any adverse manner.                                                 

6.3 Conditions to Obligation of SPI to Effect the Mergers. The
obligation of SPI to effect the Mergers will be subject to the fulfillment or   
waiver by SPI at or prior to the Closing Date of the following additional       
conditions:                                                                     

        (a) Modtech shall have performed and complied in all material respects
with all material obligations and agreements required to be performed and       
complied with by it under this Agreement at or prior to the Closing Date;       

     (b) The representations and warranties of Modtech contained in this
Agreement that are qualified as to materiality shall be true and correct, and   
such representations and warranties of Modtech that are not so qualified shall  
be true and correct in all material respects, in each case both as of the date  
of this Agreement and on the Closing Date as though made on and as of the       
Closing Date, except to the extent such representations and warranties are      
expressly made as of an earlier date, in which case, such representations and   
warranties shall be true and correct as of such date;                           

 (c) SPI shall have received from Modtech a certificate from the
President or a Vice President of Modtech, dated as of the Closing Date, to the  
effect that the conditions set forth in paragraphs (a) and (b) above have been  
satisfied;                                                                      

   (d) From the date of this Agreement through the Effective Time, a
Material Adverse Effect on Modtech and its Subsidiaries, taken as a whole, shall
not have occurred;                                                              

         (e) SPI shall have received a tax opinion from Dorsey & Whitney LLP, in
form and substance reasonably satisfactory to SPI, substantially to the effect  
that, on the basis of the facts, representations and assumptions set forth in   
such opinion, the SPI Merger will be treated as a "reorganization" within the   
meaning of Section 368 of the Code; and                                         

        (f) SPI shall have received the opinion of Gibson, Dunn & Crutcher LLP
and Haddan & Zepfel LLP, counsel to Modtech, in form and substance reasonably   
satisfactory to SPI and its counsel.                                            

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 ARTICLE VII

 TERMINATION, WAIVER AND AMENDMENT

       7.1 Termination or Abandonment. Notwithstanding anything contained in
this Agreement to the contrary, this Agreement may be terminated and abandoned  
at any time prior to the Effective Time, whether before or after the Modtech    
Stockholder Approvals and the SPI Stockholder Approvals:                        

(a) by the mutual written consent of Modtech and SPI;         

         (b) by Modtech or SPI, if the Effective Time shall not have occurred on
or before six (6) months from the date of this Agreement; provided, however,    
that the right to terminate this Agreement under this Section 7.1(b) shall not  
be available to any party whose breach of this Agreement has been the cause of, 
or resulted in, the failure of the Effective Time to occur on or before such    
date;                                                                           

     (c) by Modtech or SPI if any court of competent jurisdiction in the
United States or other United States governmental body shall have issued an     
order, decree or ruling or taken any other action restraining, enjoining or     
otherwise prohibiting the Modtech Merger or the SPI Merger;                     

(d) by Modtech, (i) if SPI shall materially breach any of its 
representations, warranties or covenants hereunder and such breach shall not    
have been cured within ten (10) business days after receipt by SPI of written   
notice of such breach, (ii) if any required approval of the shareholders of SPI 
has not been obtained, or (iii) if the Board of Directors of SPI shall have     
withdrawn or modified its recommendation of the approval of this Agreement or   
the SPI Merger in a manner adverse to Modtech or shall have resolved to do any  
of the foregoing;                                                               

(e) by SPI, (i) if Modtech shall materially breach any of its 
representations, warranties or covenants hereunder and such breach shall not    
have been cured within ten (10) business days after receipt by Modtech of       
written notice of such breach, (ii) if any required approval of the shareholders
of Modtech has not been obtained, or (iii) if the Board of Directors of Modtech 
shall have withdrawn or modified its recommendation of the approval of this     
Agreement or the Modtech Merger in a manner adverse to SPI or shall have        
resolved to do any of the foregoing;                                            

       (f) by Modtech, at any time prior to the Effective Time, by action of
the Board of Directors of Modtech, if Modtech receives an Acquisition Proposal  
on terms Modtech's Board of Directors (after consultation with its independent  
financial advisors) determines in good faith to be more favorable to the        
Modtech's stockholders than the terms of the Modtech Merger, and Modtech's Board
of Directors determines, upon the advice of its legal counsel, that, to continue
to recommend that holders of Modtech Shares vote in favor of the Modtech Merger,
notwithstanding the receipt of such offer with respect to an Acquisition        
Proposal, or to fail to recommend or accept the Acquisition Proposal, would not 
be consistent with the fiduciary duties of Modtech's Board of Directors;        

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provided, however, that Modtech shall not be permitted to terminate this        
Agreement pursuant to this Section 7.1(f) unless it has provided SPI with three 
(3) business days' prior written notice of its intent to so terminate this      
Agreement, together with a detailed summary of the terms and conditions         
(including proposed financing, if any) of such Acquisition Proposal; or         

       (g) by SPI, at any time prior to the Effective Time, by action of the
Board of Directors of SPI, if SPI receives an Acquisition Proposal on terms     
SPI's Board of Directors (after consultation with its independent financial     
advisors) determines in good faith to be more favorable to the SPI's            
stockholders than the terms of the SPI Merger, and SPI's Board of Directors     
determines, upon the advice of its legal counsel, that, to continue to recommend
that holders of SPI Shares vote in favor of the SPI Merger, notwithstanding the 
receipt of such offer with respect to an Acquisition Proposal, or to fail to    
recommend or accept the Acquisition Proposal, would not be consistent with the  
fiduciary duties of SPI's Board of Directors; provided, however, that SPI shall 
not be permitted to terminate this Agreement pursuant to this Section 7.1(g)    
unless it has provided Modtech with three (3) business days' prior written      
notice of its intent to so terminate this Agreement, together with a detailed   
summary of the terms and conditions (including proposed financing, if any) of   
such Acquisition Proposal.                                                      

7.2      Effect of Termination.                               

 (a) Modtech shall pay to SPI, concurrently with any termination
pursuant to Sections 7.1(e) or 7.1(f) by wire transfer in same day funds, all   
documented fees and expenses of SPI related to this Agreement and the           
transactions contemplated hereby, if SPI shall have satisfied all conditions to 
the Closing that are or were at the time reasonably within its control and if   
SPI shall not have taken any action reasonably calculated to prevent or         
unreasonably delay the Closing, plus an additional fee of $2,000,000.           

 (b) SPI shall pay to Modtech, concurrently with any termination
pursuant to Sections 7.1(d) or 7.1(g) by wire transfer in same day funds, all   
documented fees and expenses of Modtech related to this Agreement and the       
transactions contemplated hereby, if Modtech shall have satisfied all conditions
to the Closing that are or were at the time reasonably within its control and if
Modtech shall not have taken any action reasonably calculated to prevent or     
unreasonably delay the Closing, plus an additional fee of $2,000,000.           

         (c) The parties agree that the payments contemplated by Sections 7.2(a)
and 7.2 (b) are intended as liquidated damages to reimburse the other party for 
all damages it may suffer as a result of termination of this Agreement. The     
parties acknowledge and agree that such amounts are not a penalty, and that such
amounts are reasonable considering all the circumstances existing on the date of
this Agreement, including the relationship of the remedy to the range of harm   
that could reasonably be anticipated and the anticipation that proof of actual  
damages would be costly or inconvenient. The foregoing payments are each        
parties' sole and exclusive remedy in the event of a termination of this        
Agreement pursuant to Section 7.1 and neither party shall have any other remedy 
at law or in equity as a result of such termination.                            

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   (d) The parties acknowledge that the agreements contained in this
Section 7.2 are an integral part of the transactions contemplated in this       
Agreement, and that, without these agreements, neither party would enter into   
this Agreement. Accordingly, if either party fails to pay promptly the amounts  
due pursuant to this Section 7.2, and, in order to obtain such payments, the    
other party commences a suit for the fees set forth in this paragraph, the      
prevailing party shall be reimbursed by the other party its costs and expenses  
(including attorneys' fees and expenses) in connection with such suit, together 
with interest on the amount thereof at the prime rate of as quoted in The Wall  
Street Journal on the date such payment was required to be made.                

       (e) In the event of termination of this Agreement pursuant to Section
7.2, this Agreement shall terminate, and there shall be no other liability on   
the part of Modtech or SPI to the other, except that the liability on the       
agreements contained in Section 7.2 shall survive the termination hereof, and   
except liability arising out of a breach of this Agreement.                     

      7.3 Amendment or Supplement. At any time before or after the Modtech
Stockholder Approvals and the SPI Stockholder Approvals and prior to the        
Effective Time, this Agreement may be amended or supplemented in writing by     
Modtech and SPI with respect to any of the terms contained in this Agreement,   
except that following the Modtech Stockholder Approvals and the SPI Stockholder 
Approvals there shall be no amendment or change to the provisions hereof with   
respect to the Modtech Exchange Ratio or SPI Exchange Ratio as provided herein, 
without further approval by the respective stockholders of Modtech and SPI.     

        7.4 Extension of Time; Waiver, Etc. At any time prior to the Effective
Time, Modtech and SPI may:                                                      

      (a) extend the time for the performance of any of the obligations or
acts of the other party;                                                        

         (b) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered pursuant hereto; and  

      (c) waive compliance with any of the agreements or conditions of the
other party contained herein;                                                   

provided, however, that no failure or delay by Modtech or SPI in exercising any 
right hereunder shall operate as a waiver thereof nor shall any single or       
partial exercise thereof preclude any other or further exercise thereof or the  
exercise of any other right hereunder. Any agreement on the part of a party     
hereto to any such extension or waiver shall be valid only if set forth in an   
instrument in writing signed on behalf of such party.                           

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ARTICLE VIII

 INDEMNIFICATION

8.1 Indemnification.                                          

         (a) From and after the Effective Time, Holdings shall indemnify, defend
and hold harmless the present and former directors, officers and employees of   
Modtech and SPI and their respective Subsidiaries (each, an "Indemnified Party")
against all costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities (collectively, "Costs") incurred  
in connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of actions or     
omissions as directors or officers of Modtech or SPI and their respective       
Subsidiaries occurring at or prior to the Effective Time, including, without    
limitation, the transactions contemplated by this Agreement, to the fullest     
extent that such persons are indemnified under the laws of the States of        
California or Colorado and the organizational documents, as in effect on the    
date hereof, of Modtech and SPI and their respective Subsidiaries or any        
existing indemnification agreement with any of Modtech or SPI (and during such  
period Holdings shall also advance expenses (including expenses constituting    
Costs described in Section 8.1(e)) as incurred to the fullest extent permitted  
under applicable law, provided that the Person to whom expenses are advanced    
provides a written affirmation of his or her good faith that the standard of    
conduct necessary for indemnification has been met and an undertaking to repay  
such advances if it is ultimately determined that such Person is not entitled to
indemnification with no bond or security to be required); provided that any     
determination required to be made with respect to whether an officer's or       
director's conduct complies with the standards set forth under applicable law   
and any such organizational documents shall be made by independent counsel      
(which shall not be counsel that provides material services to Holdings or its  
Subsidiaries) selected by Holdings and reasonably acceptable to such officer or 
director; and provided, further, that in the absence of applicable judicial     
precedent to the contrary, such counsel, in making such determination, shall    
presume such officer's or director's conduct complied with such standard and    
Holdings shall have the burden to demonstrate that such officer's or director's 
conduct failed to comply with such standard.                                    

     (b) For a period of not less than six (6) years after the Effective
Time, Holdings will maintain officers' and directors' liability insurance       
covering the Indemnified Parties who are currently covered, in their capacities 
as current or former officers and directors of Modtech and covering similarly   
situated Indemnified Parties of SPI, by existing officers' and directors'       
liability insurance policy on terms substantially no less advantageous to the   
Indemnified Parties than such existing insurance.                               

  (c) Any Indemnified Party wishing to claim indemnification under
Section 8.1(a), upon learning of any claim, action, suit, proceeding or         
investigation described above, shall promptly notify Holdings thereof; provided 
that the failure so to notify shall not affect the obligations of Holdings      

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under Section 8.1(a) unless and to the extent such failure materially increases 
Holdings' liability under such subsection (a).                                  

       (d) If Holdings or any of its successors or assigns shall consolidate
with or merge with any other entity and shall not be the continuing or surviving
entity of such consolidation or merger or shall transfer all or substantially   
all of its assets to any Person, then and in each case, proper provision shall  
be made so that the successors and assigns of Holdings or any of its            
Subsidiaries shall assume the obligations set forth in this Section 8.1.        

         (e) Holdings shall pay all reasonable Costs, including attorneys' fees,
that may be incurred by any Indemnified Party in enforcing the indemnity and    
other obligations provided for in this Section 8.1. The rights of each          
Indemnified Party hereunder shall be in addition to any other rights such       
Indemnified Party may have under applicable law.                                

         (f) Modtech and SPI will cause Holdings to keep in effect provisions in
Holdings', New Modtech's and New SPI's organizational documents providing for   
exculpation of director and officer liability and its indemnification of the    
Indemnified Parties to the fullest extent permitted under the Delaware General  
Corporation Law (the "DGCL"), the CGCL or the CBCA, as applicable, which        
provisions will not be amended except as required by applicable law or except to
make changes permitted by law that would enlarge the Indemnified Parties' right 
of indemnification.                                                             

         (g) The provisions of this Section 8.1 will survive the consummation of
the Mergers and expressly are intended to benefit each Indemnified Party.       

ARTICLE IX

GENERAL PROVISIONS

9.1 Non-survival of Representations and Warranties. All       
representations and warranties in this Agreement or in any instrument delivered 
pursuant to this Agreement will be deemed to the extent expressly provided      
herein to be conditions to the Mergers and will not survive the Mergers. This   
Section 9.1 shall not limit any covenant or agreement of the parties which by   
its terms contemplates performance after the Effective Time.                    

9.2 Notices. Any notice required to be given hereunder will be
sufficient if in writing, and sent by facsimile transmission and by courier     
service (with proof of service), hand delivery or certified or registered mail  
(return receipt requested and first-class postage prepaid), addressed as        
follows:                                                                        

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If to Modtech:                              If to SPI:                          

Modtech, Inc.                               SPI Manufacturing, Inc.             
2830 Barrett Avenue                         9550 Hermosa Avenue                 
P.O. Box 1240                               Rancho Cucamonga, California  91730 
Perris, California  92572                   Attention:  Patrick Van Den Bossche 
Attention:  Evan M. Gruber                  Fax No.:  (909) 484-4296            
Fax No.:  (949) 476-0740                                                        

With copies to:                             With copies to:                     

Proactive Partners, L.P.                    KRG Capital Partners, LLC           
50 Osgood Place                             370 17th Street, Suite 2300         
San Francisco, California  94133            Denver, CO  80202                   
Attention:  Charles C. McGettigan           Attention:  Charles R. Gwirtsman    
Fax No.:  (415) 986-3617                    Fax No.:  (303) 572-5015            

With copies to counsel for Modtech:         With copies to counsel for SPI:     

Haddan & Zepfel LLP                         Dorsey & Whitney LLP                
4675 McCarthy Court                         370 17th Street, Suite 4400         
Suite 710                                   Denver, Colorado  80202-5644        
Newport Beach, California  98660            Attention:  Kevin A. Cudney         
Attention:  Jon R. Haddan, Esq.             Fax No.:  (303) 629-3450            
Fax No.:  (949) 752-6100                                                        

or to such other address as any party shall specify by written notice so given, 
and such notice shall be deemed to have been delivered as of the date so        
telecommunicated, personally delivered or mailed.                               

       9.3 Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations hereunder will be assigned by any of the       
parties hereto (whether by operation of law or otherwise) without the prior     
written consent of the other parties. Subject to the preceding sentence, this   
Agreement will be binding upon and will inure to the benefit of the parties     
hereto and their respective successors and assigns. Notwithstanding anything    
contained in this Agreement to the contrary, except for the provisions of       
Section 8.1, nothing in this Agreement, expressed or implied, is intended to    
confer on any Person other than the parties hereto or their respective heirs,   
successors, executors, administrators and assigns any rights, remedies,         
obligations or liabilities under or by reason of this Agreement.                

    9.4 Entire Agreement. This Agreement, the Exhibits, the Disclosure
Schedule and any documents delivered by the parties in connection herewith which
will survive the execution and delivery of this Agreement, constitute the entire
agreement among the parties with respect to the                                 

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subject matter hereof and supersede all prior agreements and understandings     
among the parties with respect thereto. No addition to or modification of any   
provision of this Agreement will be binding upon any party hereto unless made in
writing and signed by all parties hereto.                                       

        9.5 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Delaware without regard to its rules of
conflict of laws; provided, however, that all matters covered by the CGCL will  
be governed by and construed in accordance with the laws of the State of        
California without regard to its rules of conflict of laws and all matters      
covered by the CBCA will be governed by and construed in accordance with the    
laws of the State of Colorado without regard to its rules of conflict of laws.  

        9.6 Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered will be  
an original, but all such counterparts will together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each      
signed by less than all, but together signed by all of the parties hereto.      

       9.7 Headings. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and will be given no substantive or
interpretive effect whatsoever.                                                 

     9.8 Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number will include the plural and vice 
versa, and words denoting any gender will include all genders and words denoting
natural Persons will include corporations and partnerships and vice versa.      

  9.9 Incorporation of Schedules. The Disclosure Schedule attached
hereto and referred to herein is hereby incorporated herein and made a part     
hereof for all purposes as if fully set forth herein.                           

     9.10 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction will, as to that jurisdiction, be  
ineffective to the extent of such invalidity or unenforceability without        
rendering invalid or unenforceable the remaining terms and provisions of this   
Agreement or affecting the validity or enforceability of any of the terms or    
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision will be interpreted 
to be only so broad as is enforceable.                                          

9.11 Enforcement of Agreement. The parties hereto agree that  
irreparable damage would occur in the event that any of the provisions of this  
Agreement was not performed in accordance with its specific terms or was        
otherwise breached. It is accordingly agreed that the parties will be entitled  
to an injunction or injunctions to prevent breaches of this Agreement and to    
enforce specifically the terms and provisions hereof in any Delaware court, this
being in addition to any other remedy to which they are entitled at law or in   
equity.                                                                         

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 ARTICLE X

 DEFINITIONS

    10.1 Defined Terms. As used herein, the terms below shall have the
following meanings:                                                             

     "Acquisition Proposal" shall mean any proposal or offer (including,
without limitation, any proposal or offer to stockholders) with respect to a    
merger, consolidation or similar transaction involving, or any purchase of all  
or any significant portion of the assets or any equity securities of, Modtech or
SPI or any of the Subsidiaries of Modtech or SPI.                               

      "Action" shall mean any action, order, writ, injunction, judgment or
decree outstanding or claim, suit, litigation, proceeding, arbitration or       
investigation by or before any court, governmental or other regulatory or       
administrative agency or commission or any other Person.                        

      "Affiliate" shall mean, with respect to any Person, any other Person
that directly, or through one or more intermediaries, controls or is controlled 
by or is under common control with such Person.                                 

       "Assets" shall mean, with respect to any Person, all land, buildings,
improvements, leasehold improvements, Fixtures and Equipment and other assets,  
real or personal, tangible or intangible, owned, leased or licensed by such     
Person or any of its Subsidiaries.                                              

       "Disclosure Schedule" means the schedules dated as of the date hereof
and delivered by or on behalf of each party hereto to the other party hereto in 
connection with this Agreement and which set forth exceptions to the            
representations and warranties contained herein and certain other information   
called for by other provisions of this Agreement.                               

       "Election" shall mean the election contemplated by Section 2.3 hereof
with respect to the Record Holders of Modtech Shares, and the election          
contemplated by Section 2.8 hereof with respect to the Record Holders of SPI    
Shares.                                                                         

         "Election Deadline" shall mean a time not later than the time specified
in the Letter of Transmittal, at which time the shareholders of Modtech and SPI 
must submit their Election Forms to the Exchange Agent.                         

 "Election Form" shall mean a form for the purpose of making the
Elections, which form shall be delivered to Record Holders in connection with   
the delivery of the definitive proxy statement for the transaction contemplated 
by this Agreement.                                                              

    "Encumbrances" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, right-of-way, covenant,   
condition, restriction, encumbrance or other rights of third parties.           

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  "Environmental Laws" shall mean any federal, state or local law,
statute, ordinance, order, decree, rule or regulation relating to releases,     
discharges, emissions or disposals to air, water, land or groundwater of        
Hazardous Materials; to the withdrawal or use of groundwater; to the use,       
handling or disposal of polychlorinated biphenyls, asbestos or urea formaldehyde
or any other Hazardous Material; to the treatment, storage, disposal or         
management of Hazardous Materials; to exposure to toxic, hazardous or other     
controlled, prohibited or regulated substances; and to the transportation,      
release or any other use of Hazardous Materials, including the Comprehensive    
Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601, et seq. 
("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C. 6901, et seq. 
("RCRA"), the Toxic Substances Control Act, 15 U.S.C. 2601, et seq. ("TSCA"),   
the Occupational, Safety and Health Act, 29 U.S.C. 651, et seq., the Clean Air  
Act, 42 U.S.C. 7401, et seq., the Federal Water Pollution Control Act, 33 U.S.C.
1251, et seq., the Safe Drinking Water Act, 42 U.S.C. 300f, et seq., the        
Hazardous Materials Transportation Act, 49 U.S.C. 1802 et seq. ("HMTA") and the 
Emergency Planning and Community Right to Know Act, 42 U.S.C. 11001 et seq.     
("EPCRA"), and other comparable state laws and all rules, regulations and       
guidance documents promulgated pursuant thereto or published thereunder.        

  "Equity Interests" means capital stock, partnership interests or
warrants, options or other rights to acquire capital stock or partnership       
interests (including any debt security which is convertible into, or            
exchangeable for, capital stock or partnership interests).                      

       "Exchange Agent" shall mean the Person selected by Modtech and SPI to
perform the duties of the exchange agent under this Agreement and shall be a    
commercial bank having trust powers or a trust company, either of which shall   
have a reported capital and surplus of not less than $100,000,000.              

 "Facilities" shall mean, with respect to any Person, all of the
offices, plants, factories, storage facilities and similar structures owned or  
leased by such Person.                                                          

         "Fixtures and Equipment" shall mean, with respect to any Person, all of
the furniture, fixtures, furnishings, machinery and equipment owned, leased or  
licensed by such Person and located in, at or upon the Facilities of such       
Person.                                                                         

   "GAAP" shall mean generally accepted accounting principles in the
United States of America, as in effect from time to time, consistently applied. 

    "Hazardous Materials" shall mean each and every element, compound,
chemical mixture, contaminant, pollutant, material, waste or other substance    
which is defined, determined or identified as hazardous or toxic under          
Environmental Laws or the release of which is regulated under Environmental     
Laws. Without limiting the generality of the foregoing, the term includes:      
"hazardous substances" as defined in CERCLA; "extremely hazardous substances" as
defined in EPCRA; "hazardous waste" as defined in RCRA; "hazardous materials" as
defined in HMTA; "chemical substance or mixture" as defined in TSCA; crude oil, 
petroleum products or any fraction thereof;                                     

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radioactive materials including source, byproduct or special nuclear materials; 
asbestos or asbestos-containing materials; and radon.                           

   "Independent Director" shall mean a person other than an officer,
employee or affiliate of Holdings or its subsidiaries or any other individual   
having a relationship which, in the opinion of the board of directors of        
Holdings, would interfere with the exercise of independent judgment in carrying 
out the responsibilities of a director.                                         

"Leased Real Estate" shall mean all Properties (including all 
Facilities) which are leased by any Person as lessee or sublessee.              

        "Leases" shall mean, with respect to any Person, all leases (including
subleases, licenses, any occupancy agreement and any other agreement) of real or
personal property, in each case to which such Person or any of its Subsidiaries 
is a party, whether as lessor, lessee, guarantor or otherwise, or by which any  
of them or their respective Properties or assets are bound, or which otherwise  
relate to the operation of their respective businesses.                         

       "Mailing Date" shall mean the date agreed to by Holdings, Modtech and
SPI as the date on which a Letter of Transmittal and Election Form shall be     
mailed to each Record Holder of Modtech Shares and SPI Shares.                  

       "Material Adverse Effect" shall mean, with respect to any of Holdings
(following the Mergers), Modtech or SPI, as the context requires, a material    
adverse change in or effect on the business, results of operations, assets,     
liabilities or conditions (financial or otherwise) or prospects of such Person  
and its Subsidiaries taken as a whole or any change which impairs or materially 
delays the ability of such Person to consummate the transactions contemplated by
this Agreement.                                                                 

         "Permitted Encumbrances" shall mean any Encumbrances resulting from (i)
all statutory or other liens for Taxes or assessments which are not yet due or  
delinquent or the validity of which are being contested in good faith by        
appropriate proceedings for which adequate reserves are being maintained in     
accordance with GAAP; (ii) all workers' and repairers' liens, and other similar 
liens imposed by law, incurred in the ordinary course of business; (iii) all    
laws and governmental rules, regulations, ordinances and restrictions; (iv) all 
leases, subleases or licenses to which any Person or any of its Subsidiaries is 
a party; (v) Encumbrances identified on title policies or preliminary title     
reports delivered or made available for inspection to any Person prior to the   
date hereof; and (vi) all other liens and mortgages (but solely to the extent   
such liens or mortgages secure indebtedness described in the Disclosure         
Schedule), covenants, imperfections in title, charges, easements, restrictions  
and other Encumbrances which, in the case of any such Encumbrances pursuant to  
clause (i) through (vi), do not materially detract from or materially interfere 
with the value or present use of the asset subject thereto or affected thereby. 

       "Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, governmental agency or instrumentality, or any
other entity.                                                                   

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 "Properties" shall mean, with respect to any Person, all of the
improved and unimproved real property owned or leased by such Person.           

         "Record Date" shall mean the record date established in accordance with
applicable charter documents and applicable state law, by Modtech or SPI, as the
case may be, for the respective stockholders' meeting to approve the Mergers.   

         "Record Holder" shall mean a holder of record as of the Record Date, of
Modtech Shares or SPI Shares, as the case may be.                               

      "Returns" shall mean all returns, declarations, reports, statements,
and other documents required to be filed with respect to federal, state, local  
and foreign Taxes or for information purposes.                                  

         "Subsidiary" shall mean, with respect to any Person, any corporation or
other organization, whether incorporated or unincorporated, of which at least a 
majority of the Equity Interests having ordinary voting power for the election  
of directors or other governing body of such organization is owned or controlled
by such Person directly or indirectly.                                          

    "Tax" or "Taxes" shall mean all federal, state, local, foreign and
other taxes, levies, imposts, assessments, impositions or other similar         
government charges, including, without limitation, income, estimated income,    
business, occupation, franchise, real property, payroll, personal property,     
sales, transfer, stamp, use, employment, commercial rent or withholding,        
occupancy, premium, gross receipts, profits, windfall profits, deemed profits,  
license, lease, severance, capital, production, corporation, ad valorem, excise,
duty or other taxes, including interest, penalties and additions (to the extent 
applicable) thereto.                                                            

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         IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year first written 
above.                                                                          

     MODTECH, INC.

              By: /s/ EVAN M. GRUBER
                                     -------------------------------------
             Name:  Evan M. Gruber
                       Title:  Chief Executive Officer

          SPI HOLDINGS, INC.

By:     
                                     -------------------------------------
                      Name:  Patrick Van Den Bossche
                                    Title: President and Chief Executive Officer

-66-

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     MODTECH, INC.

By:     
                                     -------------------------------------
             Name:  Evan M. Gruber
                       Title:  Chief Executive Officer

          SPI HOLDINGS, INC.

                       By: /s/ PATRICK VAN DEN BOSSCHE
                                     -------------------------------------
                      Name:  Patrick Van Den Bossche
                                    Title: President and Chief Executive Officer

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              MODTECH HOLDINGS, INC.

                              By: __________________________________
                              Name: ________________________________
                              Title: _______________________________

                MODTECH MERGER SUB, INC.

                              By: __________________________________
                              Name: ________________________________
                              Title: _______________________________

            SPI MERGER SUB, INC.

                              By: __________________________________
                              Name: ________________________________
                              Title: _______________________________

-68-

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Annex II

DONALDSON, LUFKIN & JENRETTE
 Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue, New York, New York 10172 (212) 892-3000

                                            September 28, 1998

The Board of Directors                                                          
Modtech, Inc.                                                                   
2830 Barrett Avenue                                                             
Perris, CA 92570                                                                

Dear Board Members:                                                             

    You have requested our opinion as to the fairness from a financial
point of view to the stockholders of Modtech, Inc. (the "Company") of the       
consideration to be received by such stockholders pursuant to the terms of the  
Agreement and Plan of Reorganization and Merger (the "Agreement"), dated as of  
September 28, 1998 (the "Agreement"), by and between Modtech, Inc., and SPI     
Holdings, Inc. ("SPI"), pursuant to which the Company and SPI will form a new   
corporation ("Holdings") which will in turn form two wholly owned acquisition   
subsidiaries, one of which will merge with and into the Company (the "Modtech   
Merger") and the other of which will merge with and into SPI (the "SPI Merger"  
and, together with the Modtech Merger, the "Mergers").                          

     Pursuant to the Agreement, (i) all issued and outstanding shares of
common stock of Modtech (together with certain options to purchase such shares  
of common stock which have or will become exercisable, as set forth in the      
Agreement) will be converted, subject to certain exceptions, into the right to  
receive, in the aggregate, $39,923,472 in cash, 9,027,566 shares of common      
stock, $.01 par value per share of Holdings ("Holdings Common Stock") and       
260,734 shares of non-voting convertible series A preferred stock, par value    
$.01 per share of Holdings ("Holdings Preferred Stock"); and (ii) all issued and
outstanding shares of common stock and preferred stock of SPI (together with    
certain options to purchase such shares of common stock which have or will      
become exercisable, as set forth in the Agreement) and exercisable warrants to  
purchase common stock or preferred stock of SPI will be converted, subject to   
certain exceptions, into the right to receive, in the aggregate, 4,873,306      
shares of Holdings Common Stock and $8,076,133 in cash.                         

  In arriving at our opinion, we have reviewed the Agreement dated
September 28, 1998 and the draft dated September 27, 1998 of the Certificate of 
Determination of Rights, Preferences, Privileges and Restrictions of Series A   
Non-Voting Convertible Preferred Stock of Modtech Holdings, Inc. We also have   
reviewed financial and other information that was publicly available or         
furnished to us by the Company and SPI including information provided during    
discussions with your and their respective managements. Included in the         
information provided during discussions with the respective managements were    
certain financial projections of SPI for the period beginning January 1998 and  
ending December 2003 prepared by the management of SPI and certain financial    
projections of the Company for the period beginning January 1998 and ending     
December 2003 prepared by the management of the Company. In addition, we have   
compared certain financial and securities data of the Company and SPI with      
various other companies whose securities are traded in public markets, reviewed 
the historical stock prices and trading volumes of the common stock of the      

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The Board of Directors                                                          
Modtech, Inc.                                                                   
Page 2                                                                          

Company, reviewed prices and premiums paid in certain other business            
combinations and conducted such other financial studies, analyses and           
investigations as we deemed appropriate for purposes of this opinion.           

      In rendering our opinion and with your approval, we have relied upon
and assumed the accuracy and completeness of all of the financial and other     
information that was available to us from public sources, that was provided to  
us by the Company and SPI or their respective representatives, or that was      
otherwise reviewed by us. With respect to the financial projections relied on by
us, we have assumed that they have been reasonably prepared on the basis        
reflecting the best currently available estimates and judgments of the          
management of the Company and SPI as to the future operating and financial      
performance of the Company and SPI respectively. We have assumed that the cash  
portion of the consideration to be received by holders of Company common stock  
would not otherwise be received by such holders in the ordinary course of       
business. We have not assumed any responsibility for making any independent     
evaluation of any assets or liabilities or for making any independent           
verification of any of the information reviewed by us. We have relied as to     
certain legal matters on advice of counsel to the Company.                      

     Our opinion is necessarily based on economic, market, financial and
other conditions as they exist on, and on the information made available to us  
as of, the date of this letter. It should be understood that, although          
subsequent developments may affect this opinion, we do not have any obligation  
to update, revise or reaffirm this opinion. We are expressing no opinion herein 
as to the prices at which Holdings Common Stock or Holdings Preferred Stock will
actually trade at any time. Our opinion does not address the relative merits of 
the Mergers and the other business strategies being considered by the Company's 
Board of Directors, nor does it address the Board's decision to proceed with the
Mergers. Our opinion does not constitute a recommendation to any stockholder as 
to how such stockholder should vote on the proposed transaction.                

         Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of
its investment banking services, is regularly engaged in the valuation of       
businesses and securities in connection with mergers, acquisitions,             
underwritings, sales and distributions of listed and unlisted securities,       
private placements and valuations for corporate and other purposes, and has     
previously advised SPI and certain of its stockholders with respect to the      
Transaction and possible financing alternatives.                                

         Based upon the foregoing and such other factors as we deem relevant, we
are of the opinion that the consideration to be received by holders of Company  
common stock pursuant to the Agreement is fair to such holders from a financial 
point of view.                                                                  

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The Board of Directors                                                          
Modtech, Inc.                                                                   
Page 3                                                                          

                         Very truly yours,

                                    DONALDSON, LUFKIN & JENRETTE
                                          SECURITIES CORPORATION

                                  By:      s/Marc G. Cummins
                                               ---------------------------------
                                             Marc G. Cummins
                                               Managing Director

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ANNEX III 

CALIFORNIA CORPORATIONS CODE                                                    
SECTIONS 1300-1312                                                              

1300. (a) If the approval of the outstanding shares (Section 152) of a          
corporation is required for a reorganization under subdivisions (a) and (b) or  
subdivision (e) or (f) of Section 1201, each shareholder of the corporation     
entitled to vote on the transaction and each shareholder of a subsidiary        
corporation in a short-form merger may, by complying with this chapter, require 
the corporation in which the shareholder holds shares to purchase for cash at   
their fair market value the shares owned by the shareholder which are dissenting
shares as defined in subdivision (b). The fair market value shall be determined 
as of the day before the first announcement of the terms of the proposed        
reorganization or short-form merger, excluding any appreciation or depreciation 
in consequence of the proposed action, but adjusted for any stock split, reverse
stock split, or share dividend which becomes effective thereafter.              

(b) As used in this chapter, "dissenting shares" means shares which come  
within all of the following descriptions:                                       

(1) Which were not immediately prior to the reorganization or short-form  
merger either (A) listed on any national securities exchange certified by the   
Commissioner of Corporations under subdivision (o) of Section 25100 or (B)      
listed on the list of OTC margin stocks issued by the Board of Governors of the 
Federal Reserve System, and the notice of meeting of shareholders to act upon   
the reorganization summarizes this section and Sections 1301, 1302, 1303 and    
1304; provided, however, that this provision does not apply to any shares with  
respect to which there exists any restriction on transfer imposed by the        
corporation or by any law or regulation; and provided, further, that this       
provision does not apply to any class of shares described in subparagraph (A) or
(B) if demands for payment are filed with respect to 5 percent or more of the   
outstanding shares of that class.                                               

  (2) Which were outstanding on the date for the determination of shareholders
entitled to vote on the reorganization and (A) were not voted in favor of the   
reorganization or, (B) if described in subparagraph (A) or (B) of paragraph (1) 
(without regard to the provisos in that paragraph), were voted against the      
reorganization, or which were held of record on the effective date of a         
short-form merger; provided, however, that subparagraph (A) rather than         
subparagraph (B) of this paragraph applies in any case where the approval       
required by Section 1201 is sought by written consent rather than at a meeting. 

(3) Which the dissenting shareholder has demanded that the corporation    
purchase at their fair market value, in accordance with                         

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Section 1301.                                                                   

(4) Which the dissenting shareholder has submitted for endorsement, in    
accordance with Section 1302.                                                   

  (c) As used in this chapter, "dissenting shareholder" means the recordholder
of dissenting shares and includes a transferee of record.                       

1301. (a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and  
(4) of subdivision (b) thereof, to require the corporation to purchase their    
shares for cash, such corporation shall mail to each such shareholder a notice  
of the approval of the reorganization by its outstanding shares (Section 152)   
within 10 days after the date of such approval, accompanied by a copy of        
Sections 1300, 1302, 1303, 1304 and this section, a statement of the price      
determined by the corporation to represent the fair market value of the         
dissenting shares, and a brief description of the procedure to be followed if   
the shareholder desires to exercise the shareholder's right under such sections.
The statement of price constitutes an offer by the corporation to purchase at   
the price stated any dissenting shares as defined in subdivision (b) of Section 
1300, unless they lose their status as dissenting shares under Section 1309.    

(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, and who desires the          
corporation to purchase such shares shall make written demand upon the          
corporation for the purchase of such shares and payment to the shareholder in   
cash of their fair market value. The demand is not effective for any purpose    
unless it is received by the corporation or any transfer agent thereof (1) in   
the case of shares described in clause (i) or (ii) of paragraph (1) of          
subdivision (b) of Section 1300 (without regard to the provisos in that         
paragraph), not later than the date of the shareholders' meeting to vote upon   
the reorganization, or (2) in any other case within 30 days after the date on   
which the notice of the approval by the outstanding shares pursuant to          
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was   
mailed to the shareholder.                                                      

  (c) The demand shall state the number and class of the shares held of record
by the shareholder which the shareholder demands that the corporation purchase  
and shall contain a statement of what such shareholder claims to be the fair    
market value of those shares as of the day before the announcement of the       
proposed reorganization or short-form merger. The statement of fair market value
constitutes an                                                                  

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offer by the shareholder to sell the shares at such price.                      

1302. Within 30 days after the date on which notice of the approval by the      
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at   
its principal office or at the office of any transfer agent thereof, (a) if the 
shares are certificated securities, the shareholder's certificates representing 
any shares which the shareholder demands that the corporation purchase, to be   
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon     
subsequent transfers of the dissenting shares on the books of the corporation,  
the new certificates, initial transaction statement, and other written          
statements issued therefor shall bear a like statement, together with the name  
of the original dissenting holder of the shares.                                

1303. (a) If the corporation and the shareholder agree that the shares are      
dissenting shares and agree upon the price of the shares, the dissenting        
shareholder is entitled to the agreed price with interest thereon at the legal  
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.                   

(b) Subject to the provisions of Section 1306, payment of the fair market 
value of dissenting shares shall be made within 30 days after the amount thereof
has been agreed or within 30 days after any statutory or contractual conditions 
to the reorganization are satisfied, whichever is later, and in the case of     
certificated securities, subject to surrender of the certificates therefor,     
unless provided otherwise by agreement.                                         

1304. (a) If the corporation denies that the shares are dissenting shares, or   
the corporation and the shareholder fail to agree upon the fair market value of 
the shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested                                                        

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corporation, within six months after the date on which notice of the approval by
the outstanding shares (Section 152) or notice pursuant to subdivision (i) of   
Section 1110 was mailed to the shareholder, but not thereafter, may file a      
complaint in the superior court of the proper county praying the court to       
determine whether the shares are dissenting shares or the fair market value of  
the dissenting shares or both or may intervene in any action pending on such a  
complaint.                                                                      

 (b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be            
consolidated.                                                                   

  (c) On the trial of the action, the court shall determine the issues. If the
status of the shares as dissenting shares is in issue, the court shall first    
determine that issue. If the fair market value of the dissenting shares is in   
issue, the court shall determine, or shall appoint one or more impartial        
appraisers to determine, the fair market value of the shares.                   

1305. (a) If the court appoints an appraiser or appraisers, they shall proceed  
forthwith to determine the fair market value per share.                         

Within the time fixed by the court, the appraisers, or a majority of them,  
shall make and file a report in the office of the clerk of the court. Thereupon,
on the motion of any party, the report shall be submitted to the court and      
considered on such evidence as the court considers relevant. If the court finds 
the report reasonable, the court may confirm it.                                

  (b) If a majority of the appraisers appointed fail to make and file a report
within 10 days from the date of their appointment or within such further time as
may be allowed by the court or the report is not confirmed by the court, the    
court shall determine the fair market value of the dissenting shares.           

(c) Subject to the provisions of Section 1306, judgment shall be rendered 
against the corporation for payment of an amount equal to the fair market value 
of each dissenting share multiplied by the number of dissenting shares which any
dissenting shareholder who is a party, or who has intervened, is entitled to    
require the corporation to purchase, with interest thereon at the legal rate    
from the date on which judgment was entered.                                    

(d) Any such judgment shall be payable forthwith with respect to          
uncertificated securities and, with respect to certificated securities, only    
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.       

(e) The costs of the action, including reasonable compensation to the     
appraisers to be fixed by the court, shall be assessed or apportioned as the    
court considers equitable, but, if the appraisal                                

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exceeds the price offered by the corporation, the corporation shall pay the     
costs (including in the discretion of the court attorneys' fees, fees of expert 
witnesses and interest at the legal rate on judgments from the date of          
compliance with Sections 1300, 1301 and 1302 if the value awarded by the court  
for the shares is more than 125 percent of the price offered by the corporation 
under subdivision (a) of Section 1301).                                         

1306. To the extent that the provisions of Chapter 5 prevent the payment to any 
holders of dissenting shares of their fair market value, they shall become      
creditors of the corporation for the amount thereof together with interest at   
the legal rate on judgments until the date of payment, but subordinate to all   
other creditors in any liquidation proceeding, such debt to be payable when     
permissible under the provisions of Chapter 5.                                  

1307. Cash dividends declared and paid by the corporation upon the dissenting   
shares after the date of approval of the reorganization by the outstanding      
shares (Section 152) and prior to payment for the shares by the corporation     
shall be credited against the total amount to be paid by the corporation        
therefor.                                                                       

1308. Except as expressly limited in this chapter, holders of dissenting shares 
continue to have all the rights and privileges incident to their shares, until  
the fair market value of their shares is agreed upon or determined. A dissenting
shareholder may not withdraw a demand for payment unless the corporation        
consents thereto.                                                               

1309. Dissenting shares lose their status as dissenting shares and the holders  
thereof cease to be dissenting shareholders and cease to be entitled to require 
the corporation to purchase their shares upon the happening of any of the       
following:                                                                      

(a) The corporation abandons the reorganization. Upon abandonment of the  
reorganization, the corporation shall pay on demand to any dissenting           
shareholder who has initiated proceedings in good faith under this chapter all  
necessary expenses incurred in such proceedings and reasonable attorneys' fees. 

(b) The shares are transferred prior to their submission for              

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endorsement in accordance with Section 1302 or are surrendered for conversion   
into shares of another class in accordance with the articles.                   

(c) The dissenting shareholder and the corporation do not agree upon the  
status of the shares as dissenting shares or upon the purchase price of the     
shares, and neither files a complaint or intervenes in a pending action as      
provided in Section 1304, within six months after the date on which notice of   
the approval by the outstanding shares or notice pursuant to subdivision (i) of 
Section 1110 was mailed to the shareholder.                                     

(d) The dissenting shareholder, with the consent of the corporation,      
withdraws the shareholder's demand for purchase of the dissenting shares.       

1310. If litigation is instituted to test the sufficiency or regularity of the  
votes of the shareholders in authorizing a reorganization, any proceedings under
Sections 1304 and 1305 shall be suspended until final determination of such     
litigation.                                                                     

1311. This chapter, except Section 1312, does not apply to classes of shares    
whose terms and provisions specifically set forth the amount to be paid in      
respect to such shares in the event of a reorganization or merger.              

1312. (a) No shareholder of a corporation who has a right under this chapter to 
demand payment of cash for the shares held by the shareholder shall have any    
right at law or in equity to attack the validity of the reorganization or       
short-form merger, or to have the reorganization or short-form merger set aside 
or rescinded, except in an action to test whether the number of shares required 
to authorize or approve the reorganization have been legally voted in favor     
thereof; but any holder of shares of a class whose terms and provisions         
specifically set forth the amount to be paid in respect to them in the event of 
a reorganization or short-form merger is entitled to payment in accordance with 
those terms and provisions or, if the principal terms of the reorganization are 
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in 
accordance with the terms and provisions of the approved reorganization.        

(b) If one of the parties to a reorganization or short-form merger is     
directly or indirectly controlled by, or under common control                   

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with, another party to the reorganization or short-form merger, subdivision (a) 
shall not apply to any shareholder of such party who has not demanded payment of
cash for such shareholder's shares pursuant to this chapter; but if the         
shareholder institutes any action to attack the validity of the reorganization  
or short-form merger or to have the reorganization or short-form merger set     
aside or rescinded, the shareholder shall not thereafter have any right to      
demand payment of cash for the shareholder's shares pursuant to this chapter.   
The court in any action attacking the validity of the reorganization or         
short-form merger or to have the reorganization or short-form merger set aside  
or rescinded shall not restrain or enjoin the consummation of the transaction   
except upon 10 days' prior notice to the corporation and upon a determination by
the court that clearly no other remedy will adequately protect the complaining  
shareholder or the class of shareholders of which such shareholder is a member. 

(c) If one of the parties to a reorganization or short-form merger is     
directly or indirectly controlled by, or under common control with, another     
party to the reorganization or short-form merger, in any action to attack the   
validity of the reorganization or short-form merger or to have the              
reorganization or short-form merger set aside or rescinded, (1) a party to a    
reorganization or short-form merger which controls another party to the         
reorganization or short-form merger shall have the burden of proving that the   
transaction is just and reasonable as to the shareholders of the controlled     
party, and (2) a person who controls two or more parties to a reorganization    
shall have the burden of proving that the transaction is just and reasonable as 
to the shareholders of any party so controlled.                                 

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ANNEX IV

 ARTICLE 113

DISSENTERS' RIGHTS

PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES

SECTION 7-113-101.  Definitions.  For purposes of this article:                 

        (1) "Beneficial shareholder" means the beneficial owner of shares held
in a voting trust or by a nominee as the record shareholder.                    

      (2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring domestic or foreign  
corporation, by merger or share exchange of that issuer.                        

     (3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 7-113-102 and who exercises that right at the    
time and in the manner required by part 2 of this article.                      

         (4) "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effective date of the corporate action to  
which the dissenter objects, excluding any appreciation or depreciation in      
anticipation of the corporate action except to the extent that exclusion would  
be inequitable.                                                                 

        (5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the     
corporation on its principal bank loans or, if none, at the legal rate as       
specified in section 5-12-101, C.R.S.                                           

    (6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares    
that are registered in the name of a nominee to the extent such owner is        
recognized by the corporation as the shareholder as provided in section         
7-107-204.                                                                      

     (7) "Shareholder" means either a record shareholder or a beneficial
shareholder.                                                                    

SECTION 7-113-102.  Right to dissent.                                           

    (1) A shareholder, whether or not entitled to vote, is entitled to
dissent and obtain payment of the fair value of the shareholder's shares in the 
event of any of the following corporate actions:                                

                 (a) Consummation of a plan of merger to which the corporation
is a party if:                                                                  

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                          (I) Approval by the shareholders of that corporation
                is required for the merger by section 7-111-103 or 7-111-104
or by the articles of incorporation, or     

                         (II) The corporation is a subsidiary that is merged
        with its parent corporation under section 7-111-104;

             (b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired;                                                     

         (c) Consummation of a sale, lease, exchange, or other
  disposition of all, or substantially all, of the property of the
      corporation for which a shareholders' vote is required under section
7-112-102(1); and                                             

         (d) Consummation of a sale, lease, exchange, or other
        disposition of all, or substantially all, of the property of an entity
      controlled by the corporation if the shareholders of the corporation
  were entitled to vote upon the consent of the corporation to the
disposition pursuant to section 7-112-102(2).                 

    (1.3) A shareholder is not entitled to dissent and obtain payment,
under subsection (I) of this section, of the fair value of the shares of any    
class or series of shares which either were listed on a national securities     
exchange registered under the federal "Securities Exchange Act of 1934", as     
amended, or on the national market system of the National Association of        
Securities Dealers Automated Quotation System, or were held of record by more   
than two thousand shareholders, at the time of:                                 

                  (a) The record date fixed under section 7-107-107 to determine
  the shareholders entitled to receive notice of the shareholders'
meeting at which the corporate action is submitted to a vote; 

                  (b) The record date fixed under section 7-107-104 to determine
    shareholders entitled to sign writings consenting to the corporate
action; or                                                    

         (c) The effective date of the corporate action if the
      corporate action is authorized other than by a vote of shareholders.

         (1.8) The limitation set forth in subsection (1.3) of this action shall
not apply if the shareholder will receive for the shareholder's shares, pursuant
to the corporate action, anything except:                                       

               (a) Shares of the corporation surviving the consummation of
the plan of merger or share exchange;                         

              (b) Shares of any other corporation which at the effective
         date of the plan of merger or share exchange either will be listed on a
       national securities exchange registered under the federal "Securities
Exchange Act of 1934", as amended, or on the national         

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 market system of the National Association of Securities Dealers
        Automated Quotation System, or will be held of record by more than two
thousand shareholders;                                        

(c) Cash in lieu of fractional shares; or   

                 (d) Any combination of the foregoing described shares or cash
in lieu of fractional shares.                                                   

      (2.5) A shareholder, whether or not entitled to vote, is entitled to
dissent and obtain payment of the fair value of the shareholder's shares in the 
event of a reverse split that reduces the number of shares owned by the         
shareholder to a fraction of a share or to scrip if the fractional share or     
scrip so created is to be acquired for cash or the scrip is to be voided under  
section 7-106-104.                                                              

         (3) A shareholder is entitled to dissent and obtain payment of the fair
value of the shareholder's shares in the event of any corporate action to the   
extent provided by the bylaws or a resolution of the board of directors.        

  (4) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this article may not challenge the corporate action  
creating such entitlement unless the action is unlawful or fraudulent with      
respect to the shareholder or the corporation.                                  

SECTION 7-113-103.  Dissent by nominees and beneficial owners.                  

         (1) A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in the record shareholder's name only if the record   
shareholder dissents with respect to all shares beneficially owned by any one   
person and causes the corporation to receive written notice which states such   
dissent and the name, address, and federal taxpayer identification number, if   
any, of each person on whose behalf the record shareholder asserts dissenters'  
rights. The rights of a record shareholder under this subsection (1) are        
determined as if the shares as to which the record shareholder dissents and the 
other shares of the record shareholder were registered in the names of different
shareholders.                                                                   

      (2) A beneficial shareholder may assert dissenters' rights as to the
shares held on the beneficial shareholder's behalf only if:                     

            (a) The beneficial shareholder causes the corporation to
     receive the record shareholder's written consent to the dissent not
    later than the time the beneficial shareholder asserts dissenters'
rights; and                                                   

               (b) The beneficial shareholder dissents with respect to all
shares beneficially owned by the beneficial shareholder.      

 (3) The corporation may require that, when a record shareholder
dissents with respect to the shares held by any one or more beneficial          
shareholders, each such beneficial shareholder must certify to the corporation  
that the beneficial shareholder and the record shareholder or                   

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record shareholders of all shares owned beneficially by the beneficial          
shareholder have asserted, or will timely assert, dissenters' rights as to all  
such shares as to which there is no limitation on the ability to exercise       
dissenters' rights. Any such requirement shall be stated in the dissenters'     
notice given pursuant to section 7-113-203.                                     

PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS

SECTION 7-113-201.  Notice of dissenters' rights.                               

      (1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting, the notice 
of the meeting shall be given to all shareholders, whether or not entitled to   
vote. The notice shall state that shareholders are or may be entitled to assert 
dissenters' rights under this article and shall be accompanied by a copy of this
article and the materials, if any, that, under articles 101 to 117 of this      
title, are required to be given to shareholders entitled to vote on the proposed
action at the meeting. Failure to give notice as provided by this subsection (1)
shall not affect any action taken at the shareholders' meeting for which the    
notice was to have been given, but any shareholder who was entitled to dissent  
but who was not given such notice shall not be precluded from demanding payment 
for the shareholder's shares under this articles by reason of the shareholder's 
failure to comply with the provisions of section 7-113-202(1).                  

      (2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to   
section 7-107-104, any written or oral solicitation of a shareholder to execute 
a writing consenting to such action contemplated in section 7-107-104 shall be  
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this article, by a copy of this  
article, and by the materials, if any, that, under articles 101 to 117 of this  
title, would have been required to be given to shareholders entitled to vote on 
the proposed action if the proposed action were submitted to a vote at a        
shareholders' meeting. Failure to give notice as provided by this subsection (2)
shall not affect any action taken pursuant to section 7-107-104 for which the   
notice was to have been given, but any shareholder who was entitled to dissent  
but who was not given such notice shall not be precluded from demanding payment 
for the shareholder's shares under this articles by reason of the shareholder's 
failure to comply with the provisions of section 7-113-202(2).                  

SECTION 7-113-202.  Notice of intent to demand payment.                         

      (1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting and if      
notice of dissenters' rights has been given to such shareholder in connection   
with the action pursuant to section 7-113-201(1), a shareholder who wishes to   
assert dissenters' rights shall:                                                

            (a) Cause the corporation to receive, before the vote is
        taken, written notice of the shareholder's intention to demand payment
  for the shareholder's shares if the proposed corporate action is
effectuated; and                                              

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              (b) Not vote the shares in favor of the proposed corporate
action.                                                                         

      (2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to   
section 7-107-104 and if notice of dissenters' rights has been given to such    
shareholder in connection with the action pursuant to section 7-113-201(2) a    
shareholder who wishes to assert dissenters' rights shall not execute a writing 
consenting to the proposed corporate action.                                    

       (3) A shareholder who does not satisfy the requirements of subsection
(1) or (2) of this section is not entitled to demand payment for the            
shareholder's shares under this article.                                        

SECTION 7-113-203.  Dissenters' notice.                                         

      (1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized, the corporation shall give a written           
dissenters' notice to all shareholders who are entitled to demand payment for   
their shares under this article.                                                

       (2) The dissenters' notice required by subsection (1) of this section
shall be given no later than ten days after the effective date of the corporate 
action creating dissenters' rights under section 7-113-102 and shall:           

                (a) State that the corporate action was authorized and state
        the effective date or proposed effective date of the corporate action;

              (b) State an address at which the corporation will receive
   payment demands and the address of a place where certificates for
certificated shares must be deposited;                        

              (c) Inform holders of uncertificated shares to what extent
       transfer of the shares will be restricted after the payment demand is
received;                                                     

             (d) Supply a form for demanding payment, which form shall
         request a dissenter to state an address to which payment is to be made;

              (e) Set the date by which the corporation must receive the
     payment demand and certificates for certificated shares, which date
       shall not be less than thirty days after the date the notice required
by subsection (1) of this section is given;                   

     (f) State the requirement contemplated in section
7-113-103(3), if such requirement is imposed; and             

 (g) Be accompanied by a copy of this article.

SECTION 7-113-204.  Procedure to demand payment.                                

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         (1) A shareholder who is given a dissenters' notice pursuant to section
7-113-203 and who wishes to assert dissenters' rights shall, in accordance with 
the terms of the dissenters' notice:                                            

                (a) Cause the corporation to receive a payment demand, which
         may be the payment demand form contemplated in section 7-113-203(2)(d),
duly completed, or may be stated in another writing; and      

               (b) Deposit the shareholder's certificates for certificated
shares.                                                       

         (2) A shareholder who demands payment in accordance with subsection (1)
of this section retains all rights of a shareholder, except the right to        
transfer the shares, until the effective date of the proposed corporate action  
giving rise to the shareholder's exercise of dissenters' rights and has only the
right to receive payment for the shares after the effective date of such        
corporate action.                                                               

     (3) Except as provided in section 7-113-207 or 7-113-209(1)(b), the
demand for payment and deposit of certificates are irrevocable.                 

(4) A shareholder who does not demand payment and deposit the 
shareholder's share certificates as required by the date or dates set in the    
dissenters' notice is not entitled to payment for the shares under this article.

SECTION 7-113-205.  Uncertificated shares.                                      

         (1) Upon receipt of a demand for payment under section 7-113-204 from a
shareholder holding uncertificated shares, and in lieu of the deposit of        
certificates representing the shares, the corporation may restrict the transfer 
thereof.                                                                        

         (2) In all other respects, the provisions of section 7-113-204 shall be
applicable to shareholders who own uncertificated shares.                       

SECTION 7-113-206.  Payment.                                                    

         (1) Except as provided in section 7-113-208, upon the effective date of
the corporate action creating dissenters' rights under section 7-113-102 or upon
receipt of a payment demand pursuant to section 7-113-204, whichever is later,  
the corporation shall pay each dissenter who complied with section 7-113-204, at
the address stated in the payment demand, or if no such address is stated in the
payment demand, at the address shown on the corporation's current record of     
shareholders for the record shareholder holding the dissenter's shares, the     
amount the corporation estimates to be the fair value of the dissenter's shares,
plus accrued interest.                                                          

       (2) The payment made pursuant to subsection (1) of this section shall
be accompanied by:                                                              

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                 (a) The corporation's balance sheet as of the end of its most
    recent fiscal year or, if that is not available, the corporation's
   balance sheet as of the end of a fiscal year ending not more than
         sixteen months before the date of payment, an income statement for that
       year, and, if the corporation customarily provides such statements to
       shareholders, a statement of changes in shareholders' equity for that
      year and a statement of cash flow for that year, which balance sheet
       and statements shall have been audited if the corporation customarily
       provides audited financial statements to shareholders, as well as the
   latest available financial statements, if any, for the interim or
   full-year period, which financial statements need not be audited;

             (b) A statement of the corporation's estimate of the fair
value of the shares;                                          

           (c)  An explanation of how the interest was calculated;

              (d) A statement of the dissenter's right to demand payment
under section 7-113-209; and                                  

(e) A copy of this article.                 

SECTION 7-113-207.  Failure to take action.                                     

        (1) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 does not occur within sixty days after the date  
set by the corporation by which the corporation must receive the payment demand 
as provided in section 7-113-203, the corporation shall return the deposited    
certificates and release the transfer restrictions imposed on uncertificated    
shares.                                                                         

        (2) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 occurs more than sixty days after the date set by
the corporation by which the corporation must receive the payment demand as     
provided in section 7-113-203, then the corporation shall send a new dissenters'
notice, as provided in section 7-113-203, and the provisions of sections        
7-113-204 to 7-113-209 shall again be applicable.                               

SECTION 7-113-208. Special provisions relating to shares acquired after         
announcement of proposed corporate action 

  (1) The corporation may, in or with the dissenters' notice given
pursuant to section 7-113-203, state the date of the first announcement to news 
media or to shareholders of the terms of the proposed corporate action creating 
dissenters' rights under section 7-113-102 and state that the dissenter shall   
certify in writing, in or with the dissenter's payment demand under section     
7-113-204, whether or not the dissenter (or the person on whose behalf          
dissenters' rights are asserted) acquired beneficial ownership of the shares    
before that date. With respect to any dissenter who does not so certify in      
writing, in or with the payment demand, that the dissenter or the person on     
whose behalf the dissenter asserts dissenters' rights acquired beneficial       
ownership of the shares before such date, the corporation may, in lieu of making
the payment provided in                                                         

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section 7-113-206, offer to make such payment if the dissenter agrees to accept 
it in full satisfaction of the demand.                                          

         (2) An offer to make payment under subsection (1) of this section shall
include or be accompanied by the information required by section 7-113-206(2).  

SECTION 7-113-209.  Procedure if dissenter is dissatisfied with payment or offer

      (1) A dissenter may give notice to the corporation in writing of the
dissenter's estimate of the fair value of the dissenter's shares and of the     
amount of interest due and may demand payment of such estimate, less any payment
made under section 7-113-206, or reject the corporation's offer under section   
7-113-208 and demand payment of the fair value of the shares and interest due,  
if:                                                                             

                 (a) The dissenter believes that the amount paid under section
    7-113-206 or offered under section 7-113-208 is less than the fair
value of the shares or that the interest due was incorrectly  
calculated;                                                   

           (b) The corporation fails to make payment under section
      7-113-206 within sixty days after the date set by the corporation by
which the corporation must receive the payment demand; or     

                  (c) The corporation does not return the deposited certificates
       or release the transfer restrictions imposed on uncertificated shares
as required by section 7-113-207(1).                          

       (2) A dissenter waives the right to demand payment under this section
unless the dissenter causes the corporation to receive the notice required by   
subsection (1) of this section within thirty days after the corporation made or 
offered payment for the dissenter's shares.                                     

PART 3. JUDICIAL APPRAISAL OF SHARES

SECTION 7-113-301.  Court action.                                               

         (1) If a demand for payment under section 7-113-209 remains unresolved,
the corporation may, within sixty days after receiving the payment demand,      
commence a proceeding and petition the court to determine the fair value of the 
shares and accrued interest. If the corporation does not commence the proceeding
within the sixty-day period, it shall pay to each dissenter whose demand remains
unresolved the amount demanded.                                                 

(2) The corporation shall commence the proceeding described in
subsection (1) of this section in the district court of the county in this state
where the corporation's principal office is located or, if the corporation has  
no principal office in this state, in the district court of the county in which 
its registered office is located. If the corporation is a foreign corporation   
without a registered office, it shall commence the proceeding in the county in  
this state where the registered office of the domestic corporation merged into, 
or whose shares were acquired by, the foreign corporation was located.          

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         (3) The corporation shall make all dissenters, whether or not residents
of this state, whose demands remain unresolved parties to the proceeding        
commenced under subsection (2) of this section as in an action against their    
shares, and all parties shall be served with a copy of the petition. Service on 
each dissenter shall be by registered or certified mail, to the address stated  
in such dissenter's payment demand, or if no such address is stated in the      
payment demand, at the address shown on the corporation's current record of     
shareholders for the record shareholder holding the dissenter's shares, or as   
provided by law.                                                                

        (4) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section is plenary and exclusive. The court may    
appoint one or more persons as appraisers to receive evidence and recommend a   
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to such order. The parties to 
the proceeding are entitled to the same discovery rights as parties in other    
civil proceedings.                                                              

   (5) Each dissenter made a party to the proceeding commenced under
subsection (2) of this section is entitled to judgment for the amount, if any,  
by which the court finds the fair value of the dissenter's shares, plus         
interest, exceeds the amount paid by the corporation, or for the fair value,    
plus interest, of the dissenter's shares for which the corporation elected to   
withhold payment under section 7-113-208.                                       

SECTION 7-113-302.  Court costs and counsel fees.                               

  (1) The court in an appraisal proceeding commenced under section
7-113-301 shall determine all costs of the proceeding, including the reasonable 
compensation and expenses of appraisers appointed by the court. The court shall 
assess the costs against the corporation; except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to 
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under section 7-113-209.                     

    (2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:       

                 (a) Against the corporation and in favor of any dissenters if
       the court finds the corporation did not substantially comply with the
requirements of part 2 of this article; or                    

                 (b) Against either the corporation or one or more dissenters,
        in favor of any other party, if the court finds that the party against
         whom the fees and expenses are assessed acted arbitrarily, vexatiously,
  or not in good faith with respect to the rights provided by this
article.                                                      

       (3) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the     
court may award to said counsel reasonable fees to be paid out of the amounts   
awarded to the dissenters who were benefitted.                                  

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 PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.                            

Section 145 of the Delaware General Corporation Law empowers the    
Registrant to indemnify, subject to the standards therein prescribed, any person
in connection with any action, suit or proceeding brought or threatened by      
reason of the fact that such person is or was a director, officer, employee or  
agent of the Registrant or is or was serving as such with respect to another    
corporation or other entity at the request of the Registrant. Article VI of the 
Registrant's By-Laws provides that such Registrant shall, to the fullest extent 
permitted by Section 145 of the Delaware General Corporation Law, indemnify its 
directors and officers from and against any and all of the expenses, liabilities
or other matters referred to in or covered by said Article.                     

    As permitted by Section 102 of the Delaware General Corporation Law, the
Registrant's Certificates of Incorporation includes a provision eliminating, to 
the extent permitted by Delaware law, the personal liability of each director of
the Registrant to the Registrant or any of its stockholders for monetary damages
resulting from breaches of such director's fiduciary duty of care.              

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.                            

(a)  Exhibits                                                       

                                                        [Enlarge/Download Table]

NUMBER                                            EXHIBIT                                           
------                                            -------                                           

                                                                                                    
       2     Agreement and Plan of Reorganization and Merger, dated as of September 28, 1998, by and
             between Modtech, Inc. and SPI Holdings, Inc. (included as Annex I to the Joint Proxy   
             Statement/Prospectus)                                                                  

       3.1   Certificate of Incorporation of Modtech Holdings, Inc.                                 

       3.2   Bylaws of Modtech Holdings, Inc.                                                       

       3.3*  Articles of Incorporation of Modtech, Inc.                                             

       3.4*  Bylaws of Modtech, Inc.                                                                

       3.5   Articles of Incorporation of SPI Holdings, Inc.                                        

       3.6   Bylaws of SPI Holdings, Inc.                                                           

       3.7   Certificate of Designation of Modtech Holdings, Inc. Series A Preferred Stock          

       3.8   Designation of SPI Holdings, Inc. Series A-1, A-2, A-3, A-4, A-5 and A-6               
             Convertible Preferred Stock                                                            

       4     Registration Rights Agreement                                                          


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                                                        [Enlarge/Download Table]
                                                                                                  

 5**    Opinion of Haddan & Zepfel LLP regarding the validity of securities offered hereby        

 8.1**  Opinion of Gibson, Dunn & Crutcher LLP regarding certain tax matters                      

 8.2**  Opinion of Dorsey & Whitney LLP regarding certain tax matters                             

10.1    Transaction Advisory Agreement                                                            

10.2**  Employment Agreement-- Evan M. Gruber                                                     

10.3**  Employment Agreement-- Patrick Van Den Bossche                                            

10.4**  Employment Agreement-- Michael G. Rhodes                                                  

10.5*   Lease between Modtech, Inc. and Pacific Continental Modular Enterprises, relating to the  
        Barrett Street property in Perris, California                                             

10.6*   Lease between Modtech, Inc. and Gerald Bashaw, relating to the Morgan Street Property in  
        Perris, California                                                                        

10.7*   Lease between Modtech, Inc. and BMG2, relating to the property in Lathrop, California     

10.8*   Industrial Development Bond agreements                                                    

10.9    Lease between Office Master of Texas, Inc. and Bertgrand L. Taylor, relating to the Gibbs 
        Boulevard property in Glen Rose, Texas                                                    

10.10   Lease between Baron Homes, Inc. and David V. Homme and Mary B. Homme, relating to the     
        South Cucamonga Avenue property in Rancho Cucamonga, California, assigned to SPI          

10.11   Lease between Ronfran Incorporated d/b/a Standard Pacific Industries and Toth Enterprises,
        relating to the Hermosa Avenue property in Rancho Cucamonga, California, assigned to SPI  

10.12   Lease between Arizona Millwork, Inc. and The Rosenfield Family Trust, relating to the     
        Madison Avenue property in Phoenix, Arizona                                               

23.1    Consent of KPMG Peat Marwick LLP                                                          

23.2    Consent of Arthur Andersen LLP                                                            

23.3**  Consent of Haddan & Zepfel LLP (included in Exhibit 5)                                    

23.4**  Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 8.1)                          

23.5**  Consent of Dorsey & Whitney LLP (included in Exhibit 8.2)                                 

24      Powers of attorney (included on Page II-4 hereof)                                         

27      Financial Data Schedule                                                                   

99.1    Form of Modtech, Inc. proxy                                                               

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                                                                [Download Table]
                                            

99.2        Form of SPI Holdings, Inc. proxy

------------------                                                              

*        Incorporated by reference from Modtech's Annual Report on Form 10-K for
 the year ended December 31, 1997 (Commission File No. 0-18680).

**       To be filed by amendment.                                              

ITEM 22.  UNDERTAKINGS.                                                         

The undersigned Registrant hereby undertakes:                       

     (a) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:                        

        (i)  to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");                                  

         (ii) to reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent           
post-effective amendment hereof) which, individually or in the aggregate,       
represent a fundamental change in the information set forth in this Registration
Statement.                                                                      

(b) that, for the purpose of determining any liability under the    
Securities Act, each such post-effective amendment shall be deemed to be a new  
registration statement relating to the securities offered therein, and the      
offering of such securities at that time shall be deemed to be the initial bona 
fide offering thereof.                                                          

      (c) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.                                                                       

(d) to respond to requests for information that is incorporated by  
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, 
within one business day of receipt of such request, and to send the incorporated
documents by first-class mail or equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the            
registration statement through the date of responding to the request.           

(e) to supply by means of a post-effective amendment all information
concerning a transaction, and SPI being acquired involved therein, that was not 
the subject of and included in the registration statement when it became        
effective.                                                                      

    (f) that, for purposes of determining any liability under the Securities
Act of 1933, each filing of a Registrant's annual report pursuant to Section    
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable,   
each filing of any employee benefit plan's annual report pursuant to Section    
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference 
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities 
at that time shall be deemed to be the initial bona fide offering thereof.      

(g) insofar as indemnification for liabilities arising under the    
Securities Act of 1933 may be permitted to directors, officers and controlling  
persons of the Registrants pursuant to the foregoing provisions, or otherwise,  
the Registrant has been advised that in the opinion of the Securities and       
Exchange Commission such indemnification is against public policy as expressed  
in the Act and is, therefore, unenforceable. In the event that a claim for      
indemnification against such liabilities (other than the payment by the         
Registrant of expenses incurred or paid by a director, officer or controlling   
person of the                                                                   

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Registrant in the successful defense of any action, suit or proceeding) is      
asserted by such director, officer or controlling person in connection with the 
securities being registered, the Registrant will, unless in the opinion of its  
counsel the matter has been settled by controlling precedent, submit to a court 
of appropriate jurisdiction the question whether such indemnification by it is  
against public policy as expressed in the Act and will be governed by the final 
adjudication of such issue.                                                     

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SIGNATURES

      Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the   
undersigned, thereunto duly authorized in Newport Beach, California on October  
26, 1998.                                                                       

                    MODTECH HOLDINGS, INC.

            By:   s/Evan M. Gruber
                                     ---------------------------------------
                                     Evan M. Gruber, Chief Executive Officer

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Evan M. Gruber and Michael G.  
Rhodes, and each of them, with full power to act without the other, his true and
lawful attorneys-in-fact and agents to act for him or her in his or her name,   
place and stead, in any and all capacities, to sign a registration statement on 
Form S-4 and any or all amendments thereto (including without limitation any    
post-effective amendments thereto), and to file each of the same, with all      
exhibits thereto, and other documents in connection therewith, with the         
Securities and Exchange Commission, granting unto said attorneys-in-fact and    
agents, and each of them, full power and authority to do and perform each and   
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully, to all intents and purposes, as they  
or he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be    
done by virtue hereof.                                                          

Pursuant to the requirements of the Securities Act of 1933, this    
Registration Statement has been signed by each of the following persons in the  
capacities and on the dates indicated.                                          

                                                        [Enlarge/Download Table]

            Signature                         Title                       Date         
            ---------                         -----                       ----         
                                                                                       

s/Evan M. Gruber               Chief Executive Officer                 October 26, 1998
-----------------------------  and Director                                            
Evan M. Gruber                                                                         

s/Michael G. Rhodes            Chief Operating and Chief               October 26, 1998
-----------------------------  Financial Officer (principal financial                  
Michael G. Rhodes              and accounting officer)                                 

s/Patrick Van Den Bossche      President, Director                     October 26, 1998
-----------------------------                                                          
Patrick Van Den Bossche                                                                

s/Charles A. Hamilton          Director                                October 26, 1998
-----------------------------                                                          
Charles A. Hamilton                                                                    

s/Charles R. Gwirtsman         Director                                October 26, 1998
-----------------------------                                                          
Charles R. Gwirtsman                                                                   

s/Charles C. McGettigan        Director                                October 26, 1998
-----------------------------                                                          
Charles C. McGettigan                                                                  

s/Myron A. Wick III            Director                                October 26, 1998
-----------------------------                                                          
Myron A. Wick III                                                                      

s/Daniel J. Donahoe III        Director                                October 26, 1998
-----------------------------                                                          
Daniel J. Donahoe III                                                                  


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 EXHIBIT INDEX

NUMBER                                  NAME OF EXHIBIT                         
------                                  ---------------                         

2       Agreement and Plan of Reorganization and Merger, dated as of      
        September 28, 1998, by and between Modtech, Inc. and SPI Holdings,
        Inc. (included as Annex I to the Joint Proxy Statement/Prospectus)

3.1     Certificate of Incorporation of Modtech Holdings, Inc.            

3.2     Bylaws of Modtech Holdings, Inc.                                  

3.3*    Articles of Incorporation of Modtech, Inc.                        

3.4*    Bylaws of Modtech, Inc.                                           

3.5     Articles of Incorporation of SPI Holdings, Inc.                   

3.6     Bylaws of SPI Holdings, Inc.                                      

3.7     Certificate of Designation of Modtech Holdings, Inc. Series A     
Preferred Stock                                           

  3.8     Designation of SPI Holdings, Inc. Series A-1, A-2, A-3, A-4, A-5 and
A-6 Convertible Preferred Stock                           

4       Registration Rights Agreement                                     

 5**     Opinion of Haddan & Zepfel LLP regarding the validity of securities
offered hereby                                            

  8.1**   Opinion of Gibson, Dunn & Crutcher LLP regarding certain tax matters

8.2**   Opinion of Dorsey & Whitney LLP regarding certain tax matters     

10.1     Transaction Advisory Agreement                                     

10.2**   Employment Agreement-- Evan M. Gruber                              

10.3**   Employment Agreement-- Patrick Van Den Bossche                     

10.4**   Employment Agreement-- Michael G. Rhodes                           

10.5*    Lease between Modtech, Inc. and Pacific Continental Modular        
     Enterprises, relating to the Barrett Street property in Perris,
California                                                

  10.6*    Lease between Modtech, Inc. and Gerald Bashaw, relating to the Morgan
Street Property in Perris, California                     

10.7*    Lease between Modtech, Inc. and BMG2, relating to the property in  
Lathrop, California                                       

10.8*    Industrial Development Bond agreements                             

10.9     Lease between Office Master of Texas, Inc. and Bertgrand L. Taylor,
  relating to the Gibbs Boulevard property in Glen Rose, Texas

  10.10    Lease between Baron Homes, Inc. and David V. Homme and Mary B. Homme,
          relating to the South Cucamonga Avenue property in Rancho Cucamonga,
California, assigned to SPI                               

 10.11    Lease between Ronfran Incorporated d/b/a Standard Pacific Industries
      and Toth Enterprises, relating to the Hermosa Avenue property in
Rancho Cucamonga, California, assigned to SPI             

  10.12    Lease between Arizona Millwork, Inc. and The Rosenfield Family Trust,
 relating to the Madison Avenue property in Phoenix, Arizona

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23.1     Consent of KPMG Peat Marwick LLP                                

23.2     Consent of Arthur Andersen LLP                                  

23.3**   Consent of Haddan & Zepfel LLP (included in Exhibit 5)          

23.4**   Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 8.1)

23.5**   Consent of Dorsey & Whitney LLP (included in Exhibit 8.2)       

24       Powers of attorney (included on Page II-4 hereof)               

27       Financial Data Schedule                                         

99.1     Form of Modtech, Inc. proxy                                     

99.2     Form of SPI Holdings, Inc. proxy                                

------------------                                                              

*        Incorporated by reference from Modtech's Annual Report on Form 10-K for
 the year ended December 31, 1997 (Commission File No. 0-18680).

**       To be filed by amendment.